Download MBA-Marketing (Master of Business Administration) 3rd Semester Consumer Behaviour Notes
UNIT - I
CONSUMER BEHAVIOUR AND MARKETING ACTION
LEARNING OBJECTIVES
After studying this chapter, you will be able to understand:
The terms consumer` , customer`, industrial buyer` and motives`
Need of consumer behavioural study, differences between oganisational
buying behaviour and consumer buying behaviour
The nature and model of consumer involvement
Consumer and industrial decision making process and decision rules
Marketing implications of consumer behaviour
Study of consumer behaviour modelling
An Overview
Consumer behaviour is comparatively a new field of study which evolved just
after the Second World War. The sellers market has disappeared and buyers
market has come up. This led to paradigm shift of the manufacturer`s attention
from product to consumer and specially focused on the consumer behaviour.
The evaluation of marketing concept from mere selling concept to consumer-
oriented marketing has resulted in buyer behaviour becoming an independent
discipline. The growth of consumerism and consumer legislation emphasizes the
importance that is given to the consumer. Consumer behaviour is a study of how
individuals make decision to spend their available resources (time, money and
effort) or consumption related aspects (What they buy? When they buy?, How
they buy? etc.).
The heterogeneity among people makes understanding consumer behaviour a
challenging task to marketers. Hence marketers felt the need to obtain an in-
depth knowledge of consumers buying behaviour. Finally this knowledge acted
as an imperative tool in the hands of marketers to forecast the future buying
behavior of customers and devise four marketing strategies in order to create
long term customer relationship.
Consumer Behaviour
It is broadly the study of individuals, or organisations and the processes
consumers use to search, select, use and dispose of products, services,
experience, or ideas to satisfy needs and its impact on the consumer and society.
Customers versus Consumers
The term customer` is specific in terms of brand, company, or shop. It refers to
person who customarily or regularly purchases particular brand, purchases
particular company`s product, or purchases from particular shop. Thus a person
who shops at Bata Stores or who uses Raymonds clothing is a customer of these
firms. Whereas the consumer` is a person who generally engages in the
activities - search, select, use and dispose of products, services, experience, or
ideas.
Consumer Motives
Consumer has a motive for purchasing a particular product. Motive is a strong
feeling, urge, instinct, desire or emotion that makes the buyer to make a decision
to buy. Buying motives thus are defined as those influences or considerations
which provide the impulse to buy, induce action or determine choice in the
purchase of goods or service. These motives are generally controlled by
economic, social, psychological influences etc.
Motives which Influence Purchase Decision
The buying motives may be classified into two:
i.
Product Motives ii Patronage Motives
i. Product Motives
Product motives may be defined as those impulses, desires and
considerations which make the buyer purchase a product. These may still be
classified on the basis of nature of satisfaction:
a) Emotional Product Motives b) Rational Product Motives
Nature of Motive Purchase Decision
Desire for money
: Purchasing when price falls down
Vanity
: Getting costly Items, to be admired by others
Fear
: Purchasing Insurance policy
Pride
: Purchasing premium products
Fashion
: Rural people imitate urban
Possession
: purchasing antiques
Health
: Purchasing health foods .membership in health clubs
Comfort
: Purchasing micro-oven, washing machine, mixy
Love
and affection
: Purchasing gift items
Emotional Product Motives are those impulses which persuade the consumer
on the basis of his emotion. The buyer does not try to reason out or logically
analyse the need for purchase. He makes a buying to satisfy pride, sense of ego,
urge to initiate others, and his desire to be unique.
Rational Product Motives are defined as those impulses which arise on the
basis of logical analysis and proper evaluation. The buyer makes rational
decision after chief evaluation of the purpose, alternatives available, cost
benefit, and such valid reasons.
ii. Patronage Motives
Patronage motives may be defined as consideration or impulses which persuade
the buyer to patronage specific shops. Just like product motives patronage can
also be grouped as emotional and rational.
Emotional Patronage Motives those that persuade a customer to buy from
specific shops, without any logical reason behind this action. He may be
subjective for shopping in his favourite place.
Rational Patronage Motives are those which arise when selecting a place
depending on the buyer satisfaction that it offers a wide selection, it has latest
models, offers good after-sales service etc.
Knowledge of buyer motives of consumers is useful for marketers to anticipate
market trends and formulate effective marketing strategies.
Need for Study of Consumer Behaviour
The study of consumer behaviour helps everybody as all are consumers. It is
essential for marketers to understand consumers to survive and succeed in thes
competitive marketing environment. The following reasons highlight the
importance of studying consumer behaviour as a discipline.
Importance in day to day life
The purpose of studying a discipline is to help oneself to better appreciate its
contributions. The reason to study consumer behaviour is because of the role it
plays in the lives of humans. Most of the free time is spent in the market place,
shopping or engaging in other activities. The extra time is usually passed in
knowing and thinking about products and services, discussing with friends about
them, and watching advertisements related to them. The usage of them
significantly reveals our life styles. All these reasons suggest the need for study.
However, the purpose may be to attend immediate and tangible reasons.
Pertinence to Decision Making
Consumer behaviour is said to be an applied discipline as some decisions are
significantly affected by their behaviour or expected actions. The two
perspectives that seek application of its knowledge are micro and societal
perspectives.
The micro perspectives involve understanding consumer for the purpose of
helping a firm or organization to achieve its objectives. The people involved in
this field try to understand consumers in order to be more effective at their tasks.
Whereas the societal or macro perspective applies knowledge of consumers to
aggregate- level faced by mass or society as a whole. The behaviour of
consumer has significant influence on the quality and level of the standard of
living.
Organisational Buyer versus Individual Buyer
The obvious difference between industrial or institutional markets and consumer
markets is that, instead of purchases being made for individual consumption
industrial markets are made for business use. There are several factors that
differentiate consumer markets and their buying behaviour from organizational
market and their buying behaviour. The key factors of differentiation are:
i Market Structure and Demand
ii. Buyer Characteristics
iii. Decision Process and Buying Patterns
i Market Structure and Demand : The distinguishing factors of market
structure and demand are as follows:
In organizations buyers are more geographically concentrated than consumer
markets.
Organisational buyers are fewer in number but they are bulk buyers compared to
individual buyers.
Organisational buyer markets are either vertical or horizontal. In vertical
structures they cater only one or two industries, whereas in horizontal structure
the buyer base is too broad.
Organsational demand is derived from consumer demand. The nature of the
demand is fluctuational and inelastic.
ii. Buyer Chararteristics: The distinguishing factors of buyer characteristics
are as follws:
Many individuals or group involvement is seen in decision making process.
Organisational buyers are quite knowledgeable and professional.
The buying motive is mostly rational than individual buyer.
iii. Decision Process and Buying Patterns The major differences are as
follows:
In organizational buying lot of formalities like proposals, quotations, procedures
are to be followed unlike consumer buying.
Decision process is much complex with high financial risk, technical aspects,
multiple influencing factors etc.
Organizational buying requires more extensive negotiation over larger time
period than consumer buying.
LESSON-2
CONSUMER INVOLVEMENT
Some consumers are characterized as being more involved in products and
shopping than others. A consumer who is highly involved with a product would
be interested in knowing a lot about it before purchasing. Hence he reads
brochures thoroughly, compares brands and models available at different outlets,
asks questions, and looks for recommendations. Thus consumer involvement
can be defined as heightened state of awareness that motivates consumers to
seek out, attend to, and think about product information prior to purchase.
CAUSES OF CONSUMER INVOLVEMENT
The factors that influences consumer involvement include personal, product and
situational.
Personal Factors
Self-concept, needs, and values are the three personal factors that influence the
extent of consumer involvement in a product or service. The more product
image, the value symbolism inherent in it and the needs it serves are fitting
together with the consumer self- image, values and needs, the more likely the
consumer is to feel involved in it. Celebrities for example share a certain self-
image, certain values, and certain needs. They tend to use products and services
that reflect their life style. They get highly involved in purchasing prestigious
products like designer wear, imported cars, health care products etc.
Product Factors
The consumer involvement grows as the level of perceived risk in the purchase
of a good or service increases. It is likely that consumers will feel more involved
in the purchase of their house than in the purchase of tooth paste, it is a much
riskier purchase.
Product differentiation affects involvement. The involvement increases as the
number of alternatives that they have to choose from increases. This may be due
to the fact that consumers feel variety which means greater risk.
The pleasure one gets by using a product or service can also influence
involvement. Some products are a greater source of pleasure to the consumer
than others. Tea and coffee have a high level of hedonic (pleasure) value
compared to, say household cleaners. Hence the involvement is high.
Involvement increases when a product gains public attention. Any product that
is socially visible or that is consumed in public, demands high involvement. For
example, involvement in the purchase of car is more than the purchase of
household items.
Situational Factors
The situation in which the product is brought or used can generate emotional
involvement. The reason for purchase or purchase occasion affects involvement.
For example, buying a pair of socks for yourself is far less involved than buying
a gift for a close friend.
Social pressure can significantly increase involvement. One is likely to be more
self conscious about the products and brands one looks at when shopping with
friends than when shopping alone.
The need to make a fast decision also influences involvement. A consumer who
needs a new refrigerator and sees a one- day- only sale` at an appliances retailer
does not have the time to shop around and compare different brands and prices.
The eminence of the decision heightens involvement.
The involvement is high when the decision is irrevocable, for example when the
retailer does not accept return or exchange on the sale items.
Thus involvement may be from outside the individual, as with situational
involvement or from with in the individual as with enduring involvement. It can
be induced by a host of personal-product-and situation related factors, many of
which can be controlled by the marketer. It affects the ways in which consumers
see, process, and send information to others.
TYPES OF INVOLVEMENT
The two types of involvement are:
A) Situation B) Enduring
Involvement has various facets of consumer behaviour such as search for
information, information processing, and information transmission.
Situational Involvement
Situational involvement is temporary and refers to emotional feelings of a
consumer, experiences in a particular situation when one thinks of a specific
product.
Enduring Involvement
Enduring involvement is persistent over time and refers to feelings experienced
toward a product category across different situations. For example, holiday-
makers renting a resort for their trip are highly involved in their choice, but their
involvement is temporary. Whereas involvement of a person whose hobby is
bike racing endures overtime and affects his responses in any situation related to
pre-purchase, purchase and post- purchase of sport bikes. It is observed that
involvement is triggered by special situation in the case of holiday makers, but
in the second case, in comes from, and is a part of the consumer.
The contrast between situational and enduring involvement is important. When
marketers measure involvement they examine the extent to which it can be
induced by the product or selling situation. After noticing the type of
involvement they are facing, marketers work to control products or selling
situations.
EFFECTS OF CONSUMER INVOLVEMENT
Involvement with the product makes consumers process product-related
information more readily. This information is processed thoroughly, hence, it is
retained for a longtime. Because of this the consumers become emotionally high
and tend to engage in extended problem solving and word- of-mouth
communications. These result into three categories: search for information,
processing information, and information transmission.
Customers who are highly involved tend to search for information and shop
around more when compared with low involvement customers. For example, the
customer who is highly involved with cars and thinks about buying it is likely to
gather information. He sees for alternative models to figure the advantages and
disadvantages of each. The more they are involved, the more they learn about
the alternatives with in that category. To gather the information they use various
sources. One such behaviour is to shop around, where they visit various outlets
and talk to sales people. The customers of this kind should be encouraged buy
retailers to visit the outlets to know, and compare various models to meet
information needs.
Processing of Information
Processing of information means depth of comprehension, extent of cognitive
elaboration, and the extent of emotional arousal of information as discussed
below.
Depth of Comprehension
Highly involved customers tend to process product information at deeper levels
of understanding than the ones with low involvement. For example educated
parents in urban areas are highly involved in baby food purchase decisions than
rural uneducated parents. They also retain this information for long time. In this
case marketers need to provide information cues to help the consumers to
retrieve information from memory. But when the target is low involvement
consumers, marketers should make the necessary information as accessible as
possible at the time of selection and buying of the product.
Extent of Cognitive Elaboration
Highly involved customers think more about product choices than consumers
with low involvement. Their deep understanding involves support arguments
and / or counter arguments. That is, highly involved consumers tend to generate
cognitive responses either in support of the product information or against the
information provided by the marketers.
If we talk of the previous example, marketing baby food products, the product
all though effective may have significant side effects like obesity. Educated
parents are likely to give this the great deal of thought before giving it to their
children. To ensure that the parents generate positive thoughts, the marketers
have to mention a quality argument that the product benefits outweigh its
negative effects. If the arguments are less informed and not persuasive, it is
likely to produce negative thoughts resulting in an unfavourable attitude towards
the product.
Level of Emotional Arousal
Highly involved consumers are more emotional than less involved consumers.
The highly involved react more strongly to the product-related information
which may act for or against marketers. This is because the negative
interpretation is likely to be exaggerated more number of times causing the
customers to reject the product.
Information Transmission
Transmission of information is the extent to which greatly involved customers
send information about the product to others. This is done usually through word-
of-mouth communication. The researchers have shown that if consumers are
highly involved they talk about the product frequently than others. Satisfied
consumers are likely to speak favourable about the product, while unsatisfied
speak negatively. Therefore, marketers catering to highly involved consumers
should attempt to enhance consumer satisfaction and decrease dissatisfaction.
For example, customer happy with ONIDA television communicates the same to
others through word-of-mouth.
MODELS OF CONSUMER INVOLVEMENT
There are four prominent models of consumer behaviour based on involvement
which help marketers in making strategic decision particularly in marketing
communication related strategies. The four models are as follows.
1. Low Involvement Learning Model , 2.Learn-Feel-Do Hierarchy model,
3.Level of Message Processing Model, 4.Product versus Brand Involvement
Model
Low Involvement Learning Model
Low Involvement products are those which are at low risk, perhaps by virtue of
being inexpensive, and repeatedly used by consumers. Marketers try to sell the
products without changing the attitudes of consumers. New product beliefs
replace old brand perceptions. Marketers achieve low?involvement learning
through proper positioning. For example, writing pen with the uninterrupted
flow`, and tooth paste with mouth wash` positioning attracts new consumers.
Learn-Feel-Do Hierarchy Model
Buying decisions vary according to the way there are taken. Some decisions are
taken with lot of thinking, others are taken with great feelings. Some are made
through force of habit and others are made consciously. The learn-feel-do
hierarchy is simple matrix that attributes consumer choice to information (learn),
attitude (feel), and behaviour (do) issues. The matrix has four quadrants, each
specifying a major marketing communication goal to be informative, to be
effective, to be habit forming, or promote self-satisfaction. Thinking and feeling
are shown as a continuum - some decisions involve one or the other and many
involve elements of both. High and low importance is also represented as a
continuum.
HIGH
INVOLVEMENT
Thinking
Feeling
1. Informative 2. Affective
( Thinker ) ( Feeler )
Model : Model :
Learn-Feel-Do Feel-Learn-Do
3. Habit Formation 4.Self- Satisfaction
(Doer) ( Reactor )
Model : Model:
Do-Learn-Feel Do-Feel-Learn
LOW INVOLVEMENT
High Involvement / High Thinking
Purchases in first quadrant require more information, both because of the
importance of the product to the consumer and thinking issues related to the
purchases. Major purchases such as cars, houses and other expensive and
infrequently buying items come under this category. The strategy model is
learn-feel-do. Marketers have to furnish full information to get consumer
acceptance of the product.
High Involvement / High Feeling
The purchase decisions in second quadrant involve less of information than
feeling. Typical purchases tied to self-esteem- jewelry, apparel, cosmetics
and accessories come under this category. The strategy model is feel-learn-
do. To encourage purchases marketers must approach customers with
emotion and appeal.
Low Involvement / Low Feeling
The purchases in this quadrant are motivated primarily by the need to satisfy
personal tastes, many of which are influenced by self-image. Products like
news paper, soft drinks, Liquor etc., fall under this category. Group
influences often lead to the purchase of these items. The strategy model is
do-feel-learn. It helps marketers to promote products through reference
groups and other social factors.
Low Involvement / Low Thinking
It involves less in thinking and more of habitual buying. Products like
stationery, groceries, food etc., fall under this category. Over a period of
time any product can fall in this segment. The role of information is to
differentiate any point of difference` from competitors. Brand loyalty may
result simply from the habit. The strategy model is do-learn-feel. It suggests
that marketers induce trial through various sales promotion techniques.
Level of Message Processing Model
Consumer attention to advertisements or any other marketing
communication depends on four levels of consumer involvement: Pre-
attention, focal attention, comprehension and elaboration. Each calls for
different level of message processing. Pre-attention demands only limited
message processing - the consumer only identifies the product. Focal
attention involves basic information as product name on use. In
comprehension level the message is analysed, through elaboration the
content of the message is integrated with other information that helps to
build attitude towards the product. It is suggested that marketers make
advertisements which can induce elaboration.
Product versus Brand Involvement Model
Sometimes consumer is involved with the product category but may not be
necessarily involved with the particular brand or vice versa. For example,
house wives know more about kitchen ware but may not know the details of
various brands. According to the consumer involvement in either product or
particular brand, consumer types can be divided into four categories as
described below.
Brand Loyals: These consumers are highly involved with both the product
category and with particular brand. For example, cigarette smokers and
paper readers fall in this category.
Information Seekers: These buyers are involved more with product
category but may not have preferred brand. They are likely to see
information to decide a particular brand. For examples, air-conditioners and
washing machine buyers fall under this category.
Routine Brand Buyers: These consumers are not highly involved with the
product category but may be involved with the particular brand with in that
category. They have low emotional attachment with the product category
and tied mainly with their brand. For example users of particular brand of
soap for years, regular visitors to particular restaurant fall in this category.
Brand Switching: Consumers in this category have no emotional
attachment either with product category or any brand with in it. They
typically respond to price. For example stationery items, fashion products
come under this category.
Measuring Involvement on Semantic Differential Scale(Activity)
TO ME [INSERT PRODUCT OR PRODUCT CATEGORY] IS :
1 2 3 4 5
1. Important _ _ _ _ _
Unimportant
2. Interesting _ _ _ _ _
Boring
3. Relevant _ _ _ _ _
mvjft8gjbmjfufhccudnfncudncucfmcvjfimicbxtdbxc
Irrelevant
4. Exciting _ _ _ _ _
Unexciting
5. Meaningful _ _ _ _ _
Meaningless
6. Appealing _ _ _ _ _
Unappealing
7. fascinating _ _ _ _ _
Ordinary
8. priceless
9. Involving
10. Necessary
LESSON-3
CONSUMER DECISION MAKING PROCESS
The most important environment in which firms operate is their customer
environment because the basic belief of marketing oriented company ? that the
customer is the centre around which the business revolves. Therefore, marketing
people need to understand the processes that their customers go through when
making decision.
The consumer decision making process involves series of related and sequential
stages of activities. The process begins with the discovery and recognition of an
unsatisfied need or want. It becomes a drive. Consumer begins search for
information. This search gives rise to various alternatives and finally the
purchase decision is made. Then buyer evaluates the post purchase behaviour to
know the level of satisfaction. The process is explained below with the help of
diagram.
STEPS IN DECISION MAKING PROCESS
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Post-Purchase Behaviour
1. Need Recognition
When a person has an unsatisfied need, the buying process begins to satisfy the
needs. The need may be activated by internal or external factors. The intensity
of the want will indicate the speed with which a person will move to fulfill the
want. On the basis of need and its urgency, forms the order of priority.
Marketers should provide required information of selling points.
2. Information Search
Identified needs can be satisfied only when desired product is known and also
easily available. Different products are available in the market, but consumer
must know which product or brand gives him maximum satisfaction. And the
person has to search out for relevant information of the product, brand or
location. Consumers can use many sources e.g., neighbors, friends and family.
Marketers also provide relevant information through advertisements, retailers,
dealers, packaging and sales promotion, and window displaying. Mass media
like news papers, radio, and television provide information. Now a days internet
has become an important and reliable source of information. Marketers are
expected to provide latest, reliable and adequate information.
3. Evaluation of Alternatives
This is a critical stage in the process of buying. Following are important
elements in the process of alternatives evaluation
a)A product is viewed as a bundle of attributes. These attributes or features are
used for evaluating products or brands. For example, in washing machine
consumer considers price, capacity, technology, quality, model and size.
b)Factors like company, brand image, country, distribution network and after-
sales service also become critical in evaluation.
c)Marketers should understand the importance of these factors to consumers of
these factor to consumers while manufacturing and marketing their products.
4. Purchase Decision
Outcome of the evaluation develops likes and dislikes about alternative products
or brands in consumers. This attitude towards the brand influences a decision as
to buy or not to buy. Thus the prospective buyer heads towards final selection.
In addition to all the above factors, situational factors like finance options,
dealer terms, falling prices etc., are also considered.
5. Post- Purchase Behaviour
This behaviuor of consumer is more important as for as marketer is concerned.
Consumer gets brand preference only when that brand lives up to his
expectation. This brand preference naturally repeats sales of marketer. A
satisfied buyer is a silent advertisement. But, if the used brand does not yield
desired satisfaction, negative feeling will occur and that will lead to the
formation of negative attitude towards brand. This phenomenon is called
cognitive dissonance. Marketers try to use this phenomenon to attract user of
other brands to their brands. Different promotional-mix elements can help
marketers to retain his customers as well as to attract new customers.
CONSUMER DECISION RULES
These are generally referred to as information processing strategies. These are
procedures that help consumers to evaluate various options and reduce the risk
of making complex decisions by providing the guidelines. Decision rules have
been broadly classified into two categories :
1. Compensatory Decision Rules : Consumers evaluate brand or model in
terms of each attribute and computes a weighted score for each brand. The
computed score reflects the brand`s relative merit as a potential purchase choice.
The assumption is that consumer will select the brand that scores highest among
alternative brands. The unique feature of this rule is that it balances the positive
evaluation of a brand on one attribute to balance out a negative evaluation on
some other attribute. For example, positive attribute like high fuel efficiency is
balanced with the negative evaluation of high maintenance cost.
2. Noncompensarory Decision Rules: In contrast to the above rule
noncompensatory rules do not allow consumers to balance positive evaluation of
a brand on one attribute against negative evaluation on some other attribute.
There are three types of noncompensatory rules.
Conjunctive Decision Rule : In conjunctive decision rule the consumer
establishes a different, minimally acceptable level as a cut off point for each
attribute. In this the option is eliminated for further consideration if a
specific brand or model falls below the cut off point on any attribute.
Disjunctive Rule : It is the mirror image` of conjunctive rule. Here the
consumer establishes a separate minimally acceptable cut off level for each
attribute. In this case if an option meets or exceeds the cut off establishes for
any one attribute it is accepted.
Lexicographic Decision Rule : In this rule the consumer initially ranks the
attributes in terms of perceived relevance or importance. Later he compares
different alternatives in terms of the single attribute that is considered most
important. On this top ranked alternative, regardless of the score on any
other attribute, if one option scores sufficiently high it is selected and the
process ends.
LEVELS OF CONSUMER DECISION MAKING
The consumer decision making process is complex with varying degree. All
purchase decisions do not require extensive effort. On continuum of effort
ranging from very high to very low, it can be distinguished into three specific
levels of consumer decision making:
1) Extensive Problem Solving ( EPS ) 2) Limited Problem Ssolving ( LPS )
3) Routine Problem Solving ( RPS )
1.Extensive Problem Solving ( EPS ) : When consumers buy a new or
unfamiliar product it usually involves the need to obtain substantial information
and a long time to choose. They must form the concept of a new product
category and determine the criteria to be used in choosing the product or brand.
2.Limited Problem Solving ( LPS ) : Sometimes consumers are familiar with
both product category and various brands in that category, but they have not
fully established brand preferences. They search for additional information
helped them to discriminate among various brands.
3.Routine Problem Solving ( RPS ) : When consumers have already purchased
a product or brand , they require little or no information to choose the product.
Consumers involve in habitual and automatic purchases.
LESSON-4
CONSUMER BEHAVIOUR AND MARKETING IMPLICATIONS
The basic belief of marketing-oriented company is that the customer is the hub
around which the business revolves. Therefore, understanding what makes
people in general buy and what makes your customer in particular buy is a vital
part of business success. Market itself means ? customer, around whom all
marketing strategies are formulated and implemented. In order to meet
competition at the market place, the marketing managers are using various
methods to add value to the final product which will reach the hands of the
consumers. It means in ever changing marketing environment, there is a
growing concern or awareness among marketers to go for a careful study of the
consumer behaviour around which all marketing activities are made. Following
are the key marketing implications of consumer behaviour.
CONSUMER BEHAVIOUR AND MARKETING STRATEGIES
Understanding the consumer behaviour is the basic for marketing strategy
formulation. Consumers reaction to this strategy determines the organization
success or failure. In this competitive environment Organisations can survive
only by offering more customer value - difference between all the benefits
derived from a total product and all the costs of acquiring those benefits - than
competitors. Providing superior customer value requires the organization to do a
better job of anticipating and reacting to the customer needs than the competitor.
Marketing strategy is basically the answer to the question: How will company
provide superior customer value to its target market? The answer to this question
requires formulation of marketing - mix ? product, price, place and promotion
- strategies. The right combination of these elements meets customer expectation
and provides customer value. For example, marketer of a bike must know the
customers performance expectations, desired service, Price willing to pay,
information he seeks and after-sales service to provide superior customer
value.
CONSUMER BEHAVIOUR AND MARKET SEGMENTATION
The most important marketing decision a firm makes is the selection of one or
more segments to focus their marketing effort. Marketers do not create segments
but they find it in the market place. Market segmentation is the study of market
place in order to discover viable group of consumers who are homogeneous in
their approach in selecting and using goods or services. Since market segment
has unique needs, a firm that develops a product focusing solely on the needs of
that segment will be able to meet the target group desire and provides more
customer value than competitor. For example, right segment for Femina`
magazine is educated urban women. The success of this magazine depends on
their understanding of the urban woman.
CONSUMER BEHAVIOUR AND PRODUCT POSITIONING
Product positioning is placing the product, service, company, or shop in the
mind of consumer or target group. Through positioning marketers seek the right
fit between a product and desired customer benefits. The right positioning means
understanding the consumer perception process in general and perception of
company`s product in particular. For example, Samsung brand is perceived as
premium brand by few customers and value-driven brand by others in the
market, but marketer must find out what makes their target market to perceive
differently and position it accordingly.
CONSUMER BEHAVIOUR AND MARKETING RESEARCH
Studying consumer behaviour enables marketing researchers to predict how
consumers will react to promotional messages and to understand why they make
the purchase decision they do. Marketers realized that if they know more about
the consumer decision making criteria, they can design marketing strategies and
promotional messages that will influence consumers more effectively. The
importance of consumer behaviour made marketers to think of a separate branch
in marketing research - Consumer research, to deal exclusively for consumer
related issues. The current focus of consumer research is on study of underlying
needs and motives in taking purchase decisions, consumer learning process and
attitude formation process.
CONSUMER BEHAVIOUR AND NON-PROFIT AND SOCIETAL
MARKETING
A sound knowledge of consumer behaviour can help the organisations that sell
ideas and concepts of social relevance. Institutions that promote family
planning, AIDS free society, governmental agencies, religion orders and
universities also appeal to the public for their support in order to satisfy some
want or need in society. The knowledge about potential contributors, what
motivate their generosity, how these motives can be effectively appealed is
useful for the organizations involved in these activities.
CONSUMER BEHAVIOUR AND GOVERNMENTAL DECISION
MAKING
To major areas where consumer behaviour study helps government is in policy
making on various services, and in designing consumer protection legislation.
The knowledge of people`s attitudes, beliefs, perceptions and habits provides
adequate understanding of consumers.
LESSON-5
CONSUMER BEHAVIOUR MODELS
ECONOMIC OR MARSHALLIAN MODEL
This theory was first advanced by the economists. They gave formal explanation
of buyer behaviour. According to this theory the consumers are assumed to be
rational and conscious about economic calculations. They follow the law of
marginal utility. An individual buyer seeks to spend his money on such goods
which give maximum satisfaction (utility) according to his interests and at
relative cost. The buying behaviour is determined by the income ? its
distribution and level - affects the purchasing power. The economic factors
which affect the buyers behaviour are:
1. Disposable Personal Income
The economists attempted to establish relationship between income and
spending. Disposable personal income represents potential purchasing power
that a buyer has. The change in income has direct relation on buying habits.
Personal consumption spending tends both to rise and fall at a slower rate than
what disposable personal income does.
1. Size of family income
Size of family and size of family income affect the spending and saving patterns.
Usually large families spend more and small families spend less in comparison.
2. Income Expectation
The income expected to get in future has direct relation with the buying
behaviour. The expectation of higher or lower income has a direct effect on
spending plans.
3. Tendency to Spend and to Save
This goes to the habit of spending or saving with the disposable income of
buyers. If the buyers give importance to the present needs, they dispose of their
income. And buyers spend less if they give importance to future needs.
4. Liquidity of Funds
The present buying plans are greatly influenced by liquidity of assets readily
convertible into cash. For example, readily marketable shares and bonds, bank
balances come into this category. However, this convertable assets influence and
offer freedom to buyer, who actually buys with current income.
5. Consumer Credit
Facility of consumer credit system - hire purchase, installment purchase etc.,
play an important role in purchase decision. A buyer can command more
purchasing power. Buy now and pay later' plays its role effectively in the rapid
growth of market for car, scooter, washing machine, furniture, television and
so on.
The economic model of consumer behaviour is unidimensional. It is based on
certain predictions of buying behavoiur. They are:
a. Lower the price of the product, higher the sales
b. Lower the size of substitute product, lower the sale of this product
c. Higher the real income, higher the sales of this product
d. Higher the promotional expenses, higher are the sales
However, lower the price of a product, higher the sales` may not hold good, as
buyer may feel that the product is sub-standard one.
The behavioural researchers believe that this model ignores all the other aspects
such as perception, motivation, learning, attitude and personality, and socio-
cultural factors. Further, it is also observed that consumer also gets influenced
by other marketing variables such as products, effective distribution network
and marketing communication. Hence, it is felt that the economic model is
inadequate. It assumes that market is homogeneous where markets are assumed
to be heterogeneous.
LEARNING OR PAVLOVIAN MODEL
Psychology has contributed lot to the marketers to understand the buyers. It
explains how consumers learn about a product and the way they can recall from
the memory, and the development of buying habits. All theories of buyer`s
behaviour have been primarily based on a learning, viz., Stimulation-Response
or S-R model, this theory of learning is explained as a process of repetition,
motivation, conditioning and relationship. Repetition improves learning. For
example, when advertisements are repeated, people may be able to understand
further about the product. This is aimed at repeated advertisements for drawing
the attention and interest of the people. According to stimulus- response theory
learning involves the following steps.
a. Drive: It is a strong internal stimulus which impels action and when it is
directed towards a drive reducing object, it becomes a motive. A drive
thus motivates a person for action to satisfy the need. Drives may be
primary-thrust, hunger etc., and secondary - desire for money, pride etc.
b. Cues:These are weak stimuli. They determine when the buyer will
respond.
c. Response : Response is the feedback reaction of the buyer. It is an
answer given to drive or cue. The individual has to choose some
specific response in order to fulfill the drive or the need which was
acting as a stimulus. For example, a hunger drive can be satisfied by
visiting a shop known through an advertisement and buying the
readymade food product. If that experience is satisfactory, this response
of satisfaction is strengthened.
Drive
An Activated or
Unsatisfied want
The want must be
strong enough to
motivate
Cues
These are stimuli, coming from the
marketing and social environment of
the buyer- information suggestion etc
Reinforcement leads to
repeated purchase
Response
Learning takes place through trial and
error in a stimulus response situation
Drives, Cues, and Responses
Thus this learning of links which mean stimulus, cue and response results in
habits. Along with this attitudes and beliefs also learnt. As it becomes a habit,
the decision process for the individual becomes routine affair. Thus, learning
model has the following prediction:.
a. Learning refers to change in behaviour brought about by practice or
experience. Everything one does or thinks is learnt.
b. Product features such as price, quality, service, brand , package etc., acts
as cues or hints influencing consumer behaviour
c. Marketing communications such as advertising, sales promotion etc.,
also act as guides persuading buyer to purchase the product.
d. Response is decision to purchase.
PSYCHOANALYTICAL MODEL
Sigmund Freud developed this theory. According to him human personality has
three parts:
1. The Id, is the source of all mental energy that drives us to action
2. the super ego, the internal representation of what is social is approved
conscience
3. The Ego, the conscious director of id impulses for finding him
satisfaction in socially acceptable manner.
The buyer behaviour depends upon the relative strength of the three elements in
the personal ability. Motivational research has been involved in investigating
motives of consumer behaviour so as to develop suitable marketing implications
accordingly. This approach has been used to generate idea for developing-
design, features, advertising and other promotional techniques.
SOCIALOGICAL MODEL
According to this theory the individual decision and behaviour are quite often
influenced by the family and the society. He gets influenced by it and in turn
also influences it in its path of development. He plays many roles as a part of
formal and informal associations or organizations i.e., as a family member,
employee of a firm, member of professional forum, and as an active member of
an informal cultural organization. Hence he is largely influenced by the group in
which he is a member. For example, the decision may be made by one, actual
buying may be done by another, and the product is used by yet another member
of the family. Here, a mother takes a decision to buy a tiny cycle for her child,
the cycle is purchased by the father and the user is the child.
HOWARD - SHETH MODEL
The Howard - Sheth model shows the processes and variables influencing the
buyer behaviour before and during the purchase. It emphasizes three key
variables- perception, learning and attitude formation. It explains the way
consumers compare available products in order to choose the best which fits
their needs and desires. Consumers learn by finding out the relevant information
about products through two sources of information:
a. Social sources b. Commercial sources
The gathered information is used for comparison of alternative brands according
to various choice criteria. The basic structure of the model is given below
Social Class , Financial Status
Exogenous Variable
Dri ve
Stimuli
Perception
Learning
Outputs
Basic Structure of Buying Behaviour
The following predictions can be made about the model
i. Stimuli or perceived learning occurs and results in output
ii. Output occurs on the basis of the perception and learning- non
observable variables.
iii. Exogenous or outside variables such as social class, financial
status etc., are used to predict perception and learning
This model describes the buying behaviour in various stages
Stage 1: Motives are based on needs demanding satisfaction. They lead to goal
directed behaviour satisfaction. Motives ignite a drive to search and secure
information from alternatives. Stimulus- input variables are marketing
programme and social environment.
Input or stimuli:
i. Product themselves in the market
ii. Commercial information on them, say quality, price, availability
and distinctiveness
ii. Product information obtained from friends acquaintances and
reference groups.
Thus, a number of products or brands are perceived and considered by the
consumers mind. In this manner the resulting perception is selected.
Stage 2: While evaluating, many brands are eliminated or left out for further
consideration. Now, only few will receive further consideration. Each will have
plus / minus points. These choice considerations act as connecting links between
motives and selected brands choice consideration which provide a structure to
motives and the process of learning and experience. These considerations
develop as criteria / rule to decide on the goods that have the prospects of
yielding maximum satisfaction. The market must offer a good marketing-mix
that is used by the buyer to influence the choice criteria.
Stage3: The choice criteria gives rise to predisposition- the relative preference
in favour of particular brand. Sudden hindrances may sometimes stop the
process. This may be in form of price, inadequate supply of brand, external
variables such as financial status, time pressure etc. If they do not occur, the
preference results in a response output such as attention, comprehension,
attitude, buying intention and preferably actual purchase.
Stage 4: Feedback of purchase experience is sent to the buyer which shows if
the actual satisfaction was equal to the expected satisfaction. Satisfaction leads
to repurchase, and repeat orders indicate brand loyalty.
The marketer is interested in this outcome. Buying behaviour is influenced by
motives (rational / emotional curiosity) attitudes, perception, social factors and
personal factors.
Thus models of buyer behaviour are generally based on certain factors internal
to the consumer e.g., learning, personality, attitudes and perceptions. The
external factors may be in the form of group, cultural and inter-personal
influences and effects advertising and communications. The action of
individuals is the result of both internal / external factors and interactions to the
consumer decision making processes. The modern concepts of the buying
behaviour state that the behaviour is the result of interaction between people
centered factors and situation centered factors. The marketer is expected to be
aware of the person centered factors such as buyer motivation, learning,
perceptions, attitudes, values and beliefs. Similarly, marketers must be aware of
social environment and internal personal interactions influencing the buyer
behaviour.
Howard ? Sheth Brand Buyer Behaviour Model
NICOSIA MODEL
The buyer behaviour model is taken from the marketing mans point of view. It is
also called systems model as the human is analysed as a system, with stimuli as
the input to the system and the human behaviour as an output of the system.
Francesco Nicosia, an expert in consumer motivation and behaviour has
developed this in 1966. He tried to explain buyer behaviour by establishing a
link between the organization and its prospective consumer. Here the messages
from the company initially influence the predisposition of the consumer towards
the product and service. Based on the situation, the consumer will have a certain
Outside Variables
Personality
Social Class
Financial Status and Trial
Culture
Importance of Purchase
Time Pressure
Black Box of Buyer behaviour
Response
Marketing Poli cy
Output variable
Motives
Inhibitors
Stimulus in
put
Purchase
variable
Alternatives
Predisposi
tion
Brand in the
Intention
shop
Choice criteria
Attitude
Social
Information
Comprehension
of the brand
Commercial
Information
Attention
Selective
Evolved
Satisfaction
perception
Set
Marketing ? Mix of the product
evaluation of the product attributes by the consumer. If this step satisfies the
consumer, it may result in a positive response, with a decision to buy the product
or else the reverse may occur.
Nicosia Model
Field 1 From source of a message to consumers attitude
S
ub
F i
e l
d
Sub Field
1
2 ATTITUDE
F i r
m ` s
a t
tr i
b
ut e s MESSAGE Consumers
Attributes
EXPOSURE
EXPERIENCE Field 2
Search
Search for &Evaluation
Of means
Evaluation
Field 4 feed back
C o n s u
m
pt i o n MOTIVATION
Storage
Field 3
Decision (Action)
Purchasing Action
Purchasing Behaviour
The Nicosia model divides the above activity explanation into four basic areas:
Area 1: Field one has two sub areas-the consumer attributes and the firms
attributes. The advertising message from the company will reach the consumers
attributes. Certain attributes may develop sometimes depending upon the way
the message is received by the consumer. The newly developed attribute
becomes the input for area 2.
Area 2: This area is related to the search and evaluation undertaken by the
consumer of the advertised product and also to verify if other alternatives are
variable. If the above step motivates to buy the product / service, it becomes the
input for the third area.
Area 3: This area explains as how the consumer actually buys the product .
Area 4: This is related to the uses of the purchase items. This can also be used
as an out put to receive feedback on sales results to the firm.
SUMMARY
The heterogeneity among people across the world makes understanding
consumer buying behaviour an intricate and challenging task. Product motives
and patronage motives play a crucial role in consumer purchases. Like
individuals organisations also make many buying decisions. The major factors
that distinguish it from consumer decision are Market structure and Demand,
Buyer characteristics, and Decision process and buying patterns.
The degree of involvement has a lot of impact on search of information,
Information processing, and Transmission of information. The various models
of consumer involvement help marketers to study purchase behaviour across
product segments.
Consumers usually go through five stages in arriving at a purchase decision. In
the first stage, the customer identifies an unsatisfied need. In the second stage
consumer collect information about the product and brands. In a third stage, the
consumer evaluates all the alternatives with the help of available information.
Later in stage four, the customer makes a purchase decision. And finally in the
fifth stage, consumer experiences post-purchase satisfaction or dissatisfaction.
Organizational buyer has different decision making criteria. Decision making
rules ? Compensatory and Noncompensatory ? simplify the complex nature of
decision making to consumers.
Understanding consumer behaviour is the basis of the formulation of marketing
strategies. Consumer behaviour studies help in designing effective marketing
strategies like, Marketing-mix Strategy, Market Segmentation Strategy, Product
Positioning Strategy, and Marketing Research.
As consumer behaviour is very complex to understand, consumer models aid
marketer to put their effort to understand in right direction. The models ?
Economic. Learning, Psychoanalytic, sociological, Howard-Sheth and Nicosia
enables marketers to understand and predict consumer behaviour in the market
place.
KEY TERMS
Consumer Behaviour Organisational Behaviour
Consumer Motives Decision Making
Customer Value Marketing- Mix
Compensatory Noncompensatory
Conjunctive Rule Disjunctive Rule
Lexicographic Rule Market Segmentation
Product Positioning Consumer Involvement
Marketing Research
REVIEW QUESTIONS
1. Explain the nature of consumer behaviour
2. Justify the statement-The evaluation of marketing concept from mere
Selling concept to Consumer-oriented marketing has resulted in buyer behaviour
becoming an independent discipline.
3. What is a motive indicate the various roles it play in influencing Purchase
behaviour
4. Compare and contrast the buying behaviour of organization market and final
consumers.
5. What is Consumer Involvement? Discuss the factors that affect the
Consumer Involvement.
6. How does processing of information affect consumer involvement?
7. Discuss various consumer involvement models and their suitability to
different organisations?
8. What essential elements are required to understand consumer Decision
Making?
9. Hoe does decision making change because of change in purchase
Involvement?
10. How can a consumer arrive at a decision? Explain various stages in it.
11. What is customer value? And why is it important to marketers
12. What are the four major marketing implications to understand consumer
Behaviour?
13. List the inputs of various decisions making models and discuss their
limitations in the market place.
14. How do compensatory and noncompensatory decision rules vary?
15. Define extensive problem solving, limited ploblem solving and Routine
Problem Solving. What are the differences among the three decision-making
approaches? What type of decision process would you expect most consumers to
follow in their first purchase of a new product or brand in each of the following
areas (a) Cosmetics (b) Computer (c) Mobile (d) Edible oil (e) Air-conditioner.
Explain your answers.
APPLICATION ACTIVITIES
1. Conduct a focus group interview to discover the buying motives
influencing the purchases of following products and brands
a) Vacuum cleaner b) Purchases in Hyper-Markets
c) LG Refrigerator d) Sun Umbrella
2. Interview 15 students on your campus and determine their internet
shopping behaviours. Divide them into appropriate groups such as heavy,
moderate, light, and nonshoppers and explain why each group behaves as it
does.
3. Develop a short questionnaire designs to measure the information search
consumers engage in prior to purchasing an expensive recreational or
entertainment item or service. Your questionnaire should include measures
of types of information sought, as well as sources that provide this
Information. Also include measures of the relevant consumer characteristics
that might influence information search, as well as some measure of past
experience with the products. Then interview two recent purchasers of each
product, using the questionnaire you have developed. Analyse each
consumers response and classify each consumer in terms of information
search. What are the marketing implications of your results?
4. List the colleges you have considered when choosing which college or
university to attend and the criteria that you used to evaluate them. Describe
how you acquire information on different colleges along with different
attributes that were important to you and how you made your decision
specify whether you used, compensatory or noncompensatory decision rules.
5. Develop a short questionnaire to elicit the evaluative criteria consumer
might use in selecting the following. Also have each respondent indicate the
relative importance he or she attaches to each of the evaluative criteria.
Then, working with several other students, combined your information and
develop a segmentation strategy based on consumer evaluation criteria and
its importance. Finally develop an advertisement for the members of each
market segment to indicate that their needs would be served by your brand.
a) Shaving cream b) Stationery
b) Santro Car d) Panasonic Mobile
e) Whirlpool Refrigerator f) Durian Furniture
Glossary
Attitude. A Learned predisposition to behave in consistently favourable or
unfavourable manner with respect to given object
Behavioural Learning Theories. Theories based on the premise that learning
takes place as the result of observable responses to external stimuli.
Brand Loyalty. Consumers consistent preference and / or purchase of the same
brand in a specific product or service category
Cognitive Learning. The acquisition of new knowledge about the world.
Compensatory Decision Rule. A type of decision rule in which consumer
evaluates each brand in terms of each relevant attribute and then selects the
brand with the highest weighted score
Conditioned Learning. According to Pavlovian theory conditioned learning
results when a stimulus paired with another stimulus that elicits a known
response serves to produce the same response by itself
Conditioned Stimuli. When new products bear a well known symbol on the
belief that it embodies the same attributes with the name it is associated with
Conjunctive Decision Rule. Noncompensatory decision rule in which
consumers establish a minimally acceptable cut off points for each attribute
evaluated. Brands that fall below the cut off point on any one attribute are
eliminated from further consideration
Consumer Behaviour. The behaviour consumers display in searching for,
Purchasing, using, Evaluating and disposing of products, services, and ideas
Consumer decision making. cognitive and emotional aspects such as impulse,
family, friends, advertisers, role models, moods, and situations that influence a
purchase
Consumer Decision Rules. Procedures adopted by consumers to reduce the
complexity of making products and brand decisions
Consumer Research. Methodology used to study consumer behaviour
Consumer Socialization. The process, started in childhood by which an
individual first learns the skills and attitudes relevant to consumer purchase
behaviour
Cues. Stimuli that give direction to consumer motives ( i.e., that suggest a
specific way to satisfy a salient motive
Customer Life Time Value. Profiles based on the collection and analysis of
internal secondary data.
Customer Retention. Providing value to customers continuously so that they
will stay with the company rather than switch to another firm
Customer Satisfaction. An individual`s perception of the performance of the
product or service in relation to his or her expectation
Customer Value. The ratio between the customers perceived benefits and the
resources used to obtain those benefits
Differentiated Marketing. Targeting a product or service to two or more
segments, using specifically tailored product, promotional appeal, price, and/or
method of distribution for each
Disjunctive Rule. A noncompensatory decision rule in which consumers
establish a minimally acceptable cut off point for each relevant product attribute;
any brand meeting or surpassing the cut off point for any one attribute is
considered an acceptable choice
Emotional Motives. The selection of goals according to personal or subjective
criteria (e, g., the desire for individuality, pride, fear etc)
Evoked Set. The specific brands consumer considers in making a purchase
choice in a particular product category
Extensive Problem Solving. Decision making efforts by consumers that have
no established criteria for evaluating a product category or specific brands in
that category or have not narrowed the brands to a manageable subset
Feed Back. The response given by a receiver to the sender of the message
Focus Group. A Qualitative research method in which about eight to ten
persons participate in an unstructured group interview focused on a product or
service concept
Freud Theory. A theory of personality and motivation developed by the
psychoanalyst Sigmund Freud
Information Processing. A cognitive theory of human learning patterned after
computer information processing that focuses on how information is stored in
human memory and how it is retrieved
Involvement Theory. A theory of consumer learning which postulates that
consumers engage in a range of information processing activity from extensive
to limited problem solving depending on the relevance of the purchase
Lexicographic Decision Rule. A noncompensatory decision rule in which
consumers first rank product attributes in terms of their importance, then
compare brands in terms of the attribute considered most important. If one brand
scores higher than the other brands it is selected: if not the process is continued
with the second rank attribute, and so on
Noncompensatory Decision Rule. A type of consumer decision rule by which
positive evaluation of a brand attribute does not compensate for negative
evaluation of the same brand on some other attributes
Organisational Consumer. A business, government agency, or other Institution
that buys the goods, services, and/ or equipment necessary for the organization
to function
Purchase Behaviour. Behaviour that involves two types of purchases: trial
purchases and repeat purchase
Repeat Response Behaviour. A habitual purchase response based on
predetermined criteria
Word-Of-Mouth. Informal conversations concerning products or services
UNIT ? II
Section ? I
CULTURAL & ENVIRONMENTAL INFLUENCES ON CONSUMER
BEHAVIOUR
Introduction
Everybody in this world is a consumer. Everyday of our life we are buying and
consuming an incredible variety of goods and services. However, we all have
different tastes, likes and dislikes and adopt different behaviour patterns while
making purchase decisions. Many factors affect how we, as individuals and as
societies, live, buy, and consume. External influences such as culture, ethnicity,
and social class influence how individual consumers buy and use products, and
help explain how groups of consumers behave. The study of culture
encompasses all aspects of a society such as its religion, knowledge, language,
laws, customs, traditions, music, art, technology, work patterns, products, etc.
Culture is an extremely critical and all pervasive influence in our life.
Objectives
After studying this lesson, you should be able to:
Define culture
Identify the various influences on culture
Describe sub-cultures and its influences
Know the Environmental variations and cultural values.
Explain the cross-cultural influences on consumer behaviour.
CULTURE - Meaning
For the purpose of studying consumer behaviour, culture can be defined as the
sum total of learned beliefs, values and customs that serve to guide and direct
the consumer behaviour of all members of that society.
Howard and Sheth have defined culture as A selective, manmade way of
responding to experience, a set of behavioral pattern. Thus, culture consists of
traditional ideas and in particular the values, which are attached to these ideas. It
includes knowledge, belief, art, morale, law, customs and all other habits
acquired by man as a member of society. An accepted concept about culture is
that includes a set of learned beliefs, values, attitudes, habits and forms of
behaviour that are shared by a society and are transmitted from generation to
generation within that society.
Culture is learned through the following three ways:
1. Formal learning: parents and elders teach children the proper way to
behave. For instance, you have been taught that you need to study to be
successful and happy in life. This learning may influence your response
both as a student and individual towards education.
2. Informal learning: we learn by imitating the behaviour of our parents,
friends, or by watching TV and film actors in action
3. Technical learning: instructions are given about the specific method by
which certain things to done such as painting, dancing, singing etc.
Characteristics of Culture
Culture is learned.
Culture regulates society ?Norms, standards of behaviour,
rewards and punishments.
Culture makes life more efficient
All members follow same norms.
Culture is adaptive.
Culture is environmental.
Multiple cultures are nested hierarchically.
Culture also determines what is acceptable with product advertising. Culture
determines what people wear, eat, reside and travel. Cultural values in India are
good health, education, respect for age and seniority. But in our culture today,
time scarcity is a growing problem, which implies a change in meals. Some
changes in our culture:
1. Convenience: as more and more women are joining the work force there is
an increasing demand for products that help lighten and relieve the daily
household chores, and make life more convenient. This is reflected in the
soaring sale of Washing machines, microwaves, Pressure cookers, Mixer-
grinders, food processors, frozen food etc.
2. Education: People in our society today wish to acquire relevant education
and skills that would help improve their career prospects. This is evident
from the fact that so many professional, career oriented educational centers
are coming up, and still they cannot seem to meet the demand. As a specific
instance count the number of institutions offering courses and training in
computers that has opened in your city.
3. Physical appearance: Today, physical fitness, good health and smart
appearance are on premium today. Slimming centers and beauty parlours are
mushrooming in all major cities of the country. Cosmetics for both women
and men are being sold in increasing numbers. Even exclusive shops are
retailing designer clothes.
4. Materialism: There is a very definite shift in the people`s cultural value
from spiritualism towards materialism. We are spending more money than
ever before on acquiring products such as air-conditioners, cars CD players
etc, which adds to our physical comfort as well as status.
Types of Culture
National culture
o The culture prevalent in a nation, common to everyone
Popular culture
o The culture of the masses with norms of mass appeal
Subculture
o The culture of a group within the larger society
o Group identification based on nationality of origin, race, region,
age, religion, gender, etc.
Corporate culture
o The company`s values, rituals, customs, myths and heroes
Hofstede's Five Dimensions of Culture
Culture has a profound impact on the way consumers perceive themselves,
products they buy and use, purchasing processes, and the organisations from
which they purchase. Marketers, however, are giving more attention, to
understanding macro cultures and how they affect consumer behaviour.
Hofstede found five dimensions of culture that are common among 66 countries.
These dimensions serve as a foundation for characterizing, comparing and
contrasting specific national cultures, and they are helpful in identifying
environmentally sensitive segments of the market.
1. Individualism versus collectivism ( Pursuit of self- or group interest )
Individualism describes the relationship between an individual and fellow
individuals, or the collectivity that prevails in society. Table 1.1 below depicts
the attitudinal and behavioural differences associated with individualism and
collectivism.
2. Power distance ( Social inequality and submission to authority)
Power distance reflects the degree to which a society accepts inequality in
power at different levels in organisations and institutions. It can affect
preferences for centralization of authority, acceptance of differential rewards,
and the ways people of unequal status work together.
Individualism (E.g., United
Collectivism (E.g., Hong
States, Australia, Canada Etc)
Kong, Japan, India)
Self
Defined by internal attributes, Defined by important others,
construal
personal traits
family and friends
Role
of Self-evaluation e.g., standards Self-definition
e.g.,
others
of social comparison, sources of relationships
with
others
Values
appraisal
regarding
self. define self and affect personal
Emphasis
on
separateness, preferences.
Emphasis
on
individuality
connectedness, relationships
Motivational Focus differentiation, relatively Focus on similarity, relatively
drives
greater
need
to
unique greater need to blend in
Behaviour
Reflective
of
personal Influenced by preferences,
preferences and needs
needs of close others
Table 1.1 Individualism versus Collectivism
3. Uncertainty avoidance ( Tolerance/avoidance of ambiguity )
Uncertainty avoidance concerns the different ways in which societies react to
the uncertainties and ambiguities inherent in life. Some societies need well-
defined rules or rituals to guide behaviour, whereas others are tolerant of deviant
ideas and behaviour.
4. Masculinity/femininity (Segregation of male and female roles in society )
This factor determines the extent to which societies hold values traditionally
regarded as predominantly masculine or feminine. For instance, assertiveness,
respect for achievement, and the acquisition of money and material possessions
are identified with masculinity; and nurturing, concern for the environment and
championing the underdog are associated with a culture`s feminity
5. Abstract versus associative thinking
Creation of value in products based on cause/effect logic or association
among events without a logical link
CULTURAL INFLUENCES
Culture is that complex whole which includes knowledge, belief, art, law,
morals, customs and any other capabilities and habits acquired by humans as
members of society.
Culture influences the pattern of living, of consumption, of decision-making by
individuals. Culture is acquired. It can be acquired from the family, from the
region or from all that has been around us while we were growing up and
learning the ways of the world. Culture forms a boundary within which an
individual thinks and acts. When one thinks and acts beyond these boundaries,
he is adopting a cross-cultural behaviour and there are cross-cultural influences
as well.
The nature of cultural influences is such that we are seldom aware of them. One
feels, behaves, and thinks like the other members of the same culture. It is all
pervasive and is present everywhere. Material culture influences technology and
how it brings cultural changes like use of telephones, mobile phones, clothing
styles and fashions, gives the marketers a chance to improve the product,
packing, etc. to meet the needs of the customers.
Norms are the boundaries that culture sets on the behaviour. Norms are derived
from cultural values, which are widely told beliefs that specify what is desirable
and what is not. Most individuals obey norms because it is natural to obey them.
Culture outlines many business norms, family norms, behaviour norms, etc.
How we greet people, how close one should stand to others while conducting
business, the dress we wear and any other patterns of behaviour.
Culture keeps changing slowly over time; and is not static. Changes take place
due to rapid technologies. In case of emergency, war, or natural calamities,
marketers and managers must understand the existing culture as well as the
changing culture and culture of the country where the goods are to be marketed.
Major companies have adapted themselves to international culture and are
accepted globally.
Coca Cola is sold allover the world. Procter & Gamble and other companies
give cross-cultural training to their employees. By making cross-cultural
mistakes, many companies have difficulty in pushing their products for example,
(i) Coca Cola had to withdraw its 2 litres bottle from Spain, because it did not fit
in the local refrigerator; (ii) Many countries are very traditional and do not like
women displayed on the products. This acts as a detriment to business in those
countries.
Variation in Cultural Values
There are three broad forms of cultural values as shown in the following figure.
Fig. 1.1 Values Orientation influencing Behaviour
I. Other Oriented Values
This shows the relationship between individuals and the society. The
relationship influences marketing practices. If the society values collective
activity, decisions will be taken in a group. It gives rise to following questions
which affect consumer behaviour.
Individual/ collective: Whether individual initiation has more value than
collective activity?
Romantic orientation: This depicts whether the communication is more
effective which emphasises courtship or otherwise. In many countries a
romantic theme is more successful.
Adult/ child theme: Is family life concentrated round children or adults? What
role do children play in decision-making?
Masculine/ Feminine: Whether the society is male dominant or women
dominant or balanced.
Competitive/ Cooperation: Whether competition leads to success. This is
achieved by forming alliances with others.
Youth/ age: Are prestige roles assigned to younger or older members of the
society. American society is youth oriented and Korean is age oriented.
Decisions are taken by mature people in Korea.
II. Environment Oriented Values
Cleanliness: If a culture lays too much stress on cleanliness. There is scope for
the sale of beauty creams, soaps, deodorants, insecticides, washing powder,
vacuum cleaner, etc. In western countries, a lot of emphasis is placed on this
aspect and perfumes and deodorants are widely used.
Performance/ status: A status oriented society cares for higher standards of
living, and chooses quality goods and established brand names and high prices
items. This is true for the United States, Japan, Singapore, Malaysia, Indonesia,
Thailand and most Arabic countries.
In performance oriented societies, where rewards and prestige is based on an
individual's performance, less importance is given to brand names. Products
which function equally well and may not be big brand names are used. Germans
do not give the same amount of emphasis to brand names. The marketers adopt
strategies accordingly.
Tradition/ change: Traditional oriented societies stick to the old product and
resist innovation or new techniques. In traditional societies, there is less scope
for new products, and old traditional products are in greater demand. In some
societies which are upwardly mobile, consumers are looking for modern
methods, new products, new models and new techniques.
Risk taking/ security: An individual who is in a secure position and takes a risk
can be either considered venturesome or foolhardy. This depends on the culture
of the society. For developing new entrepreneurs risk taking is a must. It leads to
new product development, new advertising themes and new channels of
distribution. Security oriented societies have little chances of development and
innovation.
Problem solving/fatalist: A society can be optimistic and have a problem
solving attitude or, be inactive and depend on fate. This has marketing
implications on the registering of complaints when consumers are dissatisfied
with the purchase of the products. Advertising plays an important part and gives
guidance to the consumer, and removes these doubts to a great extent.
Nature: There are differences in attitude over nature and its preservation.
Consumers stress on packing materials that are recyclable and environment
friendly. Some countries give great importance to stop environmental pollution
and to recycling of products.
Companies like P&G, Colgate-Palmolive captured a great extent of the market
by offering products which are less harmful to the environment. They also use
ingredients in the products which are not harmful in any way.
III. Self-Oriented Values
Active/passive: Whether a physically active approach to life is valued more
highly than a less active orientation. An active approach leads to taking action
all the time and not doing anything. In many countries, women are also taking
an active part in all activities. This makes the society a highly active one, where
everybody is involved in work.
Material/ non-material: In many societies money is given more importance,
and a lot of emphasis is on being material minded. While in many societies
things like comfort, leisure and relationships get precedence over being
materialistic. Materialism can be of two types.
Instrumental materialism, which is the acquisition of things to enable one
to do something or achieve something. Cars are used for transportation.
People like to possess things of material value which would help them to
bring efficiency.
Terminal materialism, is the requisition of materialism for the sake of
owing it rather than for use-Art is acquired for owing it. Cultural
differences play art important role in this type of materialism.
Instrumental materialism is common in the United States of America,
where as Japanese advertisements are mostly dominating terminal
materialism.
Hard work/leisure: This has marketing implications on labour saving products
and instant foods. Some societies value hard work and consider it as a fuller life.
Others adopt labour saving devices and instant foods to have more leisure time
at their disposal.
Postponed gratification/ immediate gratification: Should one save for the rainy
day or live for the day? Sacrifice the present for the future, or live only for the
day? Some countries like The Netherlands and Germany consider buying against
credit cards as living beyond one's means, whereas credit cards are very popular
in America and other countries having a different cultural orientation, some
prefer cash to debt. Some societies save for tomorrow; others enjoy the present
and spend lavishly.
Sexual gratification/Abstinence: Some traditional societies curb their desires,
food, drinks or sex, beyond a certain requirement. Muslim cultures are very
conservative, and do not want their women to be seen in public or be exposed,
so the Polaroid camera which gives instant photographs can be purchased and
pictures can be taken by the family members without their women being
exposed to the developers in a photo lab.
Humour/ serious: Should we take life lightly and laugh it off on certain issues
or, take everything seriously? This is an- other aspect of culture. Advertising
personnel selling techniques and promotion may revolve around these themes
and the way the appeal for a product is to be made in various cultures.
SUBCULTURES AND CONSUMER BEHAVIOUR
Culture can be divided into subcultures. A subculture is an identifiable distinct,
cultural group, which, while following the dominant cultural values of the
overall society also has its own belief, values and customs that set them apart
from other members of the same society.
Sub-culture categories are:
(i) Nationality: Indian, Srilanka, Pakistan , (ii) Religion: Hinduism, Islam
(iii) Race: Asian, black, white (iv)Age: young, middle aged, elderly
(v) Sex: Male, Female (vi)Occupation: Farmer, teacher, business
(vii) Social class: upper, middle, lower (viii) Geographic regions: South
India, North-eastern India
1. Regional, Ethnic, and Religious Influences on Consumer Behavior
The three major aspects of culture that have important effects on consumer
behavior are regional, ethnic, and religious differences. Firstly, consumption
patterns may differ in various regions of India and the world, and marketing
strategy can sometimes be tailored specifically to these regions.
Secondly, our country has a number of different ethnic groups, and population
trends will dramatically alter the demographic profile of the country in the next
50 years. The very diverse Asian American subculture is described as young and
having higher socioeconomic status, placing strong value on the family and the
group, and being strongly brand loyal. In spite of its diversity, marketing
strategies can be developed for this group.
Finally, religious beliefs and values can influence consumer. Many marketers
are now becoming multicultural in their marketing activities by trying to appeal
to a variety of cultures at the same time. Although the diversity of the Indian
melting pot may be unique, there are many important ethnic groups in other
areas of the world.
2. Age, Gender, and Household Influences on Consumer Behavior
Among the four major age groups, Teens, who need to establish an identity, are
the consumers of tomorrow and have an increasing influence on family
decisions. The somewhat disillusioned Generation X consists of smart and
cynical consumers who can easily see through obvious marketing attempts.
Baby boomers grew up in a very dynamic and fast-changing world, and this has
affected their values for individualism and freedom. The 50 and older segment
can be divided into two groups-the young again and the gray market. Neither
group likes to be thought of as old. The affect of gender differences on
consumer behavior is examined next. Sex roles are changing. Women are
becoming more professional and independent, and men are becoming more
sensitive and caring. Also, men and women can differ in terms of traits,
information processing, decision styles, and consumption patterns.
Gender is consistent throughout lifetime, influencing customer values and
preferences. Gender shows different consumption patterns and perceptions of
consumption situations ?E.g. the wedding ceremony.
Households play a key role in consumer behavior. The proportion of
nontraditional households has increased due to factors such as
(1) later marriages, (2) Cohabitation, (3) Dual-career families,
(4)Increased divorce, and (5) Fewer children
Households also exert an important influence on acquisition and consumption
patterns. First, household members can play different roles in the decision
process (gatekeeper, influencer, decider, buyer, and user). Second, husbands and
wives vary in their influence in the decision process, depending on the situation-
husband-dominant, wife-dominant, autonomic, or syncratic.
3. Psychographics: Values, Personality, and Lifestyles
The roles of psychographics in affecting consumer behaviour are
detailed below.
Values are enduring beliefs about things that are important. They are learned
through the processes of socialization and acculturation. Our values exist in an
organized value system, with some values being viewed as more important than
others. Some are regarded as terminal values and reflect desired end states that
guide behavior across many different situations. Instrumental values are those
needed to achieve these desired end states. Domain-specific values are those that
are relevant within a given sphere of activity. Western cultures tend to place a
relatively high value on material goods, youth, the home, family and children,
work and play, health, hedonism, and technology. Marketers use tools like value
segmentation to identify consumer groups with common values.
Personality consists of the distinctive patterns of behaviors, tendencies,
qualities, and personal dispositions that make people different from one
another. Approaches to the study of personality include
1.The psychoanalytic approach, which sees personality arising from unconscious
internal struggles within the mind at key stages of development;
2.Trait theories, which attempt to identify a set of personality characteristics that
describe and differentiate individuals, such as introversion, extroversion, and
stability;
3.Phenomenological approaches, which propose that personality is shaped by an
individual`s interpretation of life events
4.Social-psychological theories, which focus on how individuals act in social
situations (e.g., compliant, detached, or aggressive); and
5.Behavioral approaches, which view an individual`s personality in terms of past
rewards and punishments.
Marketers also measure lifestyles, which are patterns of behavior (or activities,
interests, and opinions). These lifestyles can provide some additional insight into
consumers` consumption patterns. Finally, some marketing researchers use
Psychographic techniques that involve all of these factors to predict consumer
behavior. One of the most well known Psychographic tools is the Values and
Lifestyle Survey (VALS). The newer VALS2 identifies eight segments of
consumers who are similar in their resources and self-orientations.
CROSS CULTURAL CONSUMER BEHAVIOUR
Cross cultural marketing: Objectives and Policies
Cross-cultural marketing is defined as the effort to determine to what extent the
consumers of two or more nations are similar or different. This will facilitate
marketers to understand the psychological, social and cultural aspects of foreign
consumers they wish to target, so as to design effective marketing strategies for
each of the specific national markets involved.
A company can enter a foreign market as a
Domestic exporter
Foreign importer
Foreign government-solicit the firm to sell abroad
The firm`s objectives could be:
To determine how consumers in two or more societies are
similar/different and devise suitable, appropriate strategies
Devise individualized marketing strategy if cultural beliefs, values and
customs of a specific country are different
Characteristic features of a firm going global:
1. High market share in the domestic market
2. Advantageous economies of scale
3. Access to marketing/manufacturing bases across global borders
4. Availability of resources and capability to absorb huge losses
5. Product/technology clout
6. Cost and differentiation advantages
Problems in Cross Cultural marketing
1. Problems related to product selection: The marketer going for cross
cultural marketing has to select the customers/ market not on the basis of
the superficial similarities of age or income, but by using the real
motivating factors that prompt them to accept or reject products.
2. Problems related to promotion/marketing communication: e.g. Ariel in
the middle east and also Pepsi
3. Problems related to pricing: the marketer has to adjust his pricing
policies according to the local economic conditions and customs.
4. Problems related to selection of distribution channels: in Japan, P & G
used this to sell soap
Cross-Cultural Consumer Analysis
To determine whether and how to enter a foreign market, we need to conduct
some form of cross-cultural consumer analysis.
Cross-cultural consumer analysis can be defined as the effort to determine to
what extent the consumers of two or more nations are similar or different. Such
analysis can provide marketers with an understanding of the psychological,
social, and cultural characteristics of the foreign consumers they wish to target,
so that they can design effective marketing strategies for the specific national
markets involved.
Similarities and differences among people
A major objective of cross-cultural consumer analysis is to determine how
consumers in two or more societies are similar and how they are different.
Alternative Multinational Strategies
Some of us may argue as markets are becoming more and more similar,
standardized marketing strategies are becoming more and more feasible. But,
some more would argue back that differences between consumers of various
nations are far too great to permit a standardized marketing strategy. Whether to
use shared needs and values as a segmentation strategy or to use national
borders as a segmentation strategy? Shared needs and values would mean to
appeal to consumers in different countries in terms of their common needs,
values, and goals. Using national borders as a segmentation strategy would
mean to use relatively different local or specific marketing strategies for
members of distinctive cultures or countries.
Japanese Culture Traits
American Culture traits
Homogenous
Diverse
Harmony to be valid and
Fight for one`s
preserved
beliefs/positions
Group, not individual,
Individualistic
important
Clear-cut
Ambiguous
Specific
General
Display emotions in public
Hold back emotions in public
Result oriented
Process-oriented
Make a short story long
Make a long story short
Verbal communication
Nonverbal communication
important
important
Interested in what is spoken
Interested in who is speaking
Table 1.2. Japanese and American cultural traits difference
Product Strategy
Standardized Communications Localized Communications
Standardized
Global
strategy:
Uniform Mixed strategy: Uniform
Product
product/ Uniform Message
Product/ Customized message
Localized Product Mixed Strategy: Customized Local strategy: Customized
Product/ Uniform Message
Product/ Customized Message
Table 1.3 Alternative Global Marketing Strategies.
1. Favoring a World Brand: A lot of companies have created world brand
products that are manufactured, packaged, and positioned in exactly the
same way regardless of the country in which they are sold. For instance,
Sony sells its Walkman in this fashion.
2. Adaptive Global Marketing: In contrast to the above, some other
organisations imbibe a strategy that adapts their advertising messages to
the specific values of particular cultures. A very good example here
would be that of McDonald`s, which tries to localize its advertising to
consumers in each of the cross-cultural markets in which it operates.
Tangible Benefits of Global Brand Building
Global brand building drastically reduces marketing investments. A strong brand
needs lower and lower levels of incremental investment to sustain itself over
time. A new and unknown player will have to spend two to four times more than
the market leader to achieve the same share of mind. Given the huge difference
in business volumes, the pressure of the bottom-line is much higher for an un-
established player.
Strong global brands always account for more stable businesses. Global brand
building commands a premium. As long as there is a distinct value attached to
your offering, the consumer will always be willing to pay more for it. That is the
only reason why an unknown brand called Titan could command a substantial
premium over HMT. That is the same reason why a brand such as BPL at a
higher cost beat the stuffing out of companies such as Akai, Sony and Philips in
the CTV wars.
Global brand building builds entry barriers. Human beings as a species love
status quo. Therefore, a brand which is entrenched in the consumer`s mind is
very difficult to dislodge.
Global brand building increases cash flow efficiency: Global brand building also
increases value of the business due to the international presence. Phillip Morris
bought Kraft from General Foods in 1991 for $13 billion, more than three times
its book value. Coca-Cola paid $60 million to acquire Thumbs-Up from Parle.
Neither buyer had any lacunae in manufacturing, finance or human resources.
They merely bought business with very powerful brand equities and therefore
paid more than the net worth of the businesses.
Strategic Implications
There is an assumption that the world is becoming homogenised; yet national
and sub-regional cultures do exist. This makes global branding a tough
challenge and one that is handled differently from organisation to organisation.
Some companies pursue strategies based upon the identification of common
elements among countries, whilst others find it more profitable to adapt and
adjust according to specific conditions in various markets. There are five basic
propositions that a global brand manager has to take note of while developing
strategy at the global level.
Many marketers operate in global markets with a strategy still rooted in the
domestic market. The strategy needs to embrace the opportunities and the costs
of working in multiple countries. The marketer has to look for his competitive
advantage outside the country of origin. What will allow one to compete and
win in a strange country? Are the product and the brand in particular needed in
another culture? Only careful consideration of these questions will create the
right platform for a global branding strategy.
CULTURAL VARIATIONS & NON-VERBAL COMMUNICATION
In a culture we have many variations in non-verbal communications. Each
culture assigns a meaning to non-verbal signs utilised by it. There are some
variables in non-verbal communication. These are:
(a) Use of time (b) Use of space (c) Friendship (d) Agreements
(e) Things (f) Symbols (g) Etiquette
Time
Time is a resource which is distributed equally amongst everybody. Every
person has the same amount of time at his disposal. What view individuals and
societies take of time makes them different. Some can be classified under
monochromic culture and others in polychromic culture. Some of the important
differences between monochromic a polychromic culture are give in the table
below.
Monochronic culture
Polychronic culture
Do one thing at a time.
Do many things at once.
Concentrate on the job.
Highly distractible and subject to
interruption.
Take
deadlines
and Consider deadlines and schedules
schedules seriously.
secondary.
Committed to job.
Committed
to
people
and
relationships.
Adhere religiously to plans. Change plan often and easily.
Emphasise promptness.
Base promptness on relationship.
Accustomed to short term Prefer long term relationships
relationships.
Table 1.4. Differences between Monochronic and Polychronic Culture
The meaning of time may be different in different cultures. Some people take
time in making decisions according to the importance of decisions. Some insist
on coming to the point directly in business transactions and are well prepared.
Some keep appointments by the minute, others make people wait for a long
time.
Space
Space may be related to prestige rather than the need. The higher the office, the
bigger the office space and so on. Americans have the offices of executives on
the top floor and tend to separate the office of subordinates. Japanese have their
discount stores on the upper floor. Some cultures and individuals maintain a fair
distance while transacting, others co-mingle easily. Americans maintain a fair
distance while interacting with associates. Arabs stand very close to each other.
Friendship
Friendship plays an important role in business transactions. Good personal
relationship and feelings matter most in a long term agreement. Social contacts
developed by parties gain priority over technical specifications. Americans make
friends easily, and drop them easily as well, because of both social and
geographical mobility. Some cultures like Indian or Latin Americans have
lasting relationships that endure for a long time and so does the business.
Personal ties, personal trust leads to cooperation and a lot of transaction can take
place between parties. Some want to transact business only with those whom
they get along and, making money is secondary.
Agreements
All business when transacted is done under some agreements. These agreements
may be written or just on an understanding between the two parties. Most people
enter into an agreement, but friendship and kinship are also given a lot of
importance. Verbal commitments are also binding in some cultures, where
signing a contract is just a mere formality.
Things
Different cultures attach different meaning to things. Things include products as
well as gifts given in certain business and social situations. An appropriate
product in the form of a gift is to be carefully chosen. The gifts can be big or
small. They can be given openly or presented privately. This depends on the
practices followed in that particular country. Some want to make a show of the
gift, by giving it in front of others. Others are secretive about it.
Symbols and Colours
Different countries attach different meanings to symbols, numbers and colours.
Symbols can be flowers, triangles, pictures and animals, etc. Some numbers are
considered lucky, and others not so lucky, or even unlucky, like 13, 4, etc.
Colours have different interpretations. Pink is associated with a female, and blue
with the male in the US, whereas it is just the opposite in Holland.
A list of colours and their interpretations is given below:
White: Symbol of mourning or death in the Far East, happiness, purity and peace
in the United States.
Purple: Associated with death in many Latin American countries.
Blue: Symbolises feminity in Holland and masculinity in the United States,
Sweden, India, etc.
Red: Colour for brides and children in India. Sign of masculinity in the UK and
France, negative in Nigeria, Germany and positive in Denmark, Rumania and
Argentina.
Yellow: Sign of death in Mexico, infidelity in France, celebrations in many
countries including India.
White lilies: Suggestion of death in England.
Symbol of Numbers
7: Lucky in India, USA, Morocco, Nicaragua and Czechoslovakia.
13: Unlucky in many countries including India.
4: Symbol of death in Japan. Packing in 4s is avoided.
Triangle: Negative in Hong Kong and Taiwan, positive in Columbia.
Owl: Wisdom in the United States, bad luck in India.
Deer: Speed, grace in the United States; Homosexuality in Brazil.
Etiquette
These are accepted norms of behaviour. Some behaviour may be rude or abusive
in one culture and quite acceptable in other cultures, e.g. sitting with legs
crossed or sitting in a manner that shows the sole of a shoe. In Japan it is
considered impolite to say no directly to a business offer. They put it differently,
by saying it is very difficult, which means no. The exchange of business cards in
Japan is essential, and indicates the level of your status in your business.
Similarly, there are many different habits and ways of doing things socially that
affect the making of advertisement. Eating with the fork in the right hand and
the left hand kept under the table is quite common in America, whereas, in
European culture, the fork should be in the left hand and the right hand holding
the knife or spoon. These non-verbal communications in different countries or
different languages have a direct bearing on the marketing activity and must be
taken care of. As people recognise verbal languages, they act accordingly. In a
similar manner, non-verbal communication must also be recognised and
understood so that there is less misinterpretation. The advertisement of the
communication we want to give should be appropriate and match with the
culture of the country.
Key Terms
- Culture
- Ethnic Influences
- Materialism
- Religious Influences
- Individualism Vs.
- Psychographics
Collectivism
- Lifestyles
- Power Distance
- Cross-Cultural Consumer
- Uncertainty Avoidance
Behaviour
- Masculinity/Feminity
- Cross cultural marketing
- Abstract/Associative thinking
- Global Strategy
- Subcultures
- Mixed Strategy
- Regional Influences
- Local strategy
Self-practice Questions
1) Define culture and explain its characteristics.
2) Explain the functions of culture and its components.
3) What are the dimensions of culture and its influences?
4) What are the variations in the cultural values? Explain with illustrations.
5) How Environmental influences affect consumer behaviour?
6) What do you mean by a sub-culture? What are the components of it?
7) How do religious and ethnic groups influence consumer behaviour
decisions?
8) What cultural factors would you consider to name a product that would
be acceptable to consumers throughout the world?
9) Explain cross cultural marketing. Describe the strategies to adopt global
branding.
10) Describe the marketing implications of the cross cultural influences.
11) Give an account of the variables of non-verbal communication that
influences cultural variations?
12) How should marketers promote products and services to working
women? What appeals should they use? Explain.
13) How do symbols and colours affect the cultural values of consumers?
-----------------------
SECTION - II
GROUPS, SOCIAL CLASS & REFERENCE GROUPS
Introduction
With the exception of those very few people who can be classified as hermits,
people tend to be involved with others on a rather constant basis. Like almost all
behavior, an individual's social relationships are of- ten motivated by the
expectation that they will help in the satisfaction of specific needs. For example,
a person might become a volunteer ambulance driver to satisfy a need for
community recognition. Another person might join a computer club in an effort
to find compatible friends to satisfy social needs. A third person might join a
health food cooperative to obtain the benefits of group buying power. These are
just a few of the almost infinite number of reasons why people involve
themselves with others.
Objectives
After studying this section, you should be able to
- Discuss the basic concepts of social involvement and group dynamics.
- Define Social Class and its impact on consumer decisions.
- Emphasise the role of reference groups in influencing consumer behavior.
- Identify other social and societal groupings that influence consumer
buying processes.
WHAT IS A GROUP?
A group may be defined as two or more people who interact to accomplish some
goals. Within the broad scope of this definition are both an intimate "group" of
two neighbors who informally attend a fashion show together and a larger, more
formal group, such as a neighborhood.
Types of Groups
To simplify our discussion, we will consider four different types of group
classification: primary versus secondary groups, formal versus informal groups,
large versus small groups, and membership versus symbolic groups.
1. Primary versus Secondary Groups
If a person interacts on a regular basis with other individuals (with members of
his or her family, with neighbours, or with co-workers whose opinions are
valued), then these individuals can be considered as a primary group for that
person. On the other hand, if a person interacts only occasionally with such
others, or does not consider their opinions to be important, then these others
constitute a secondary group for that person.
From this definition, it can be seen that the critical distinctions between primary
and secondary groups are the frequency with which the individual interacts with
them and. the importance of the groups to the individual.
2. Formal versus Informal Groups
Another useful way to classify groups is by the extent of their formality; that is,
the extent to which the group structure, the members' roles, and the group's
purpose are clearly defined. If a group has a highly defined structure (e.g., a
formal membership list), specific roles and authority levels (a president,
treasurer, and secretary), and specific goals (to support a political candidate,
improve their children's education, increase the knowledge or skills of
members), then it would be classified as a formal group.
The local chapter of the American Red Cross, with elected officers and members
who meet regularly to discuss topics of civic interest, would be classified as a
formal group.
On the other hand, if a group is more loosely defined, if it consists, say, of four
women who were in the same college sorority and who meet for dinner once a
month, or three co-workers who, with their spouses, see each other frequently
then it is considered an informal group.
3. Large versus Small Groups
It is often desirable to distinguish between groups in terms of their size or
complexity. A large group might be thought of as one in which a single member
is not likely to know more than a few of the group's members personally, or be
fully aware of the specific roles or activities of more than a limited number of
other group members. Examples of large groups include such complex
organizations as General Motors, with its numerous subordinate divisions, and
the American Bar Association, with its many state, county, and city chapters.
In contrast, members of a small group are likely to know every member
personally and to be aware of every member's specific role or activities in the
group. For example, each staff member of a college newspaper is likely to know
all the other members and be aware of their duties and interests within the
group.
In the realm of consumer behavior, we are principally concerned with the study
of small groups, since such groups are more likely to influence the consumption
behavior of group members.
4. Membership versus Symbolic Groups
Another useful way to classify groups is by membership versus symbolic
groups. A membership group is a group to which a person either belongs or
would qualify for membership. For example, the group of women with whom a
young homemaker plays golf weekly or with whom she hopes to play golf when
an opening occurs would be considered, for her, a membership group.
In contrast, a group in which an individual is not likely to receive membership,
despite acting like a member by adopting the group's values, attitudes, and
behavior, is considered a symbolic group. Clearly, actual membership groups
offer a more direct, and thus a more compelling, influence on consumer
behavior.
In summary, we can say that small, informal, primary membership groups are of
the great interest to marketers because they exert the greatest potential influence
on consumer purchase decisions.
CONSUMER-RELEVANT GROUPS
To more fully comprehend the kind of impact that specific groups have on
individuals, we will examine six basic consumer-relevant groups: the Family,
Friendship groups, Formal social groups, Shopping groups, Consumer action
groups and Work groups.
The Family
An individual's family is the most important group to influence his or her
consumer decisions. The family's importance in this regard is due to the
frequency of contact that the individual has with other family members and that
the family has a greater extent of influence on the establishment of a wide range
of values, attitudes, and behavior.
Friendship Groups
Friendship groups are informal groups because they are, usually unstructured
and lack specific authority levels. In terms of relative influence, after an
individual's family, it is friends who are most likely to influence the individual's
purchase decisions.
Seeking and maintaining friendships is a basic drive of most people. Friends
fulfill a wide range of needs: they provide companionship, security, and
opportunities to discuss problems that an individual may be reluctant to discuss
with members of his or her own family. Friendships are also a sign of maturity
and independence, for they represent a breaking away from the family and the
forming of social ties with the outside world. Consumers are more likely to seek
information from those friends they feel have values or outlooks similar to their
own.
Formal Social Groups
In contrast to the relative intimacy of friendship groups, formal social groups are
more remote and serve a different function for the individual. A person joins a
formal social group to fulfill such specific goals as making new friends, meeting
"important" people (e.g., for career advancement), or promoting a specific cause.
Because members of a formal social group often consume certain products
together, such groups are of interest to marketers. For example, the membership
list of a men's club would be of interest to local men, Insurance agents,
automobile agents, tax accountants.
Membership in a formal social group may influence a consumer's behavior in
several ways. For example, members of such groups have frequent opportunity
to informally discuss products, services, or stores. Some members may copy the,
consumption behavior of other members whom they admire.
Shopping Groups
Two or more people who shop together-whether for food, for clothing, or simply
to pass the time, can be called a shopping group. Such groups are often offshoots
of family or friendship groups. People like to shop with others who they feel
have more experience with or knowledge about a desired product or service.
Shopping with others also provides an element of social fun to an often boring
but necessary task. In addition, it reduces the risk that a purchase decision will
be socially unacceptable. Relatively few marketing or consumer behavior
studies have examined the nature of shopping groups. However, one study of the
in-store behavior of shoppers revealed some differences between group and
individual shopping. The research found that shopping parties of at least three
persons deviated more from their original purchase plans (they bought either
more or less than originally planned) than did either single shoppers or two-
party groups. The study also found that shopping groups tended to cover more
territory in the store than individuals shopping alone, and thus had more
opportunity to see and examine merchandise and to make unplanned purchases.
A special type of shopping group is the in-home shopping group, which
typically consists of a group of women who gather together in the home of a
friend, to attend a "party" devoted to the marketing of a specific line of products.
The in-home party approach provides marketers with an opportunity to
demonstrate the features of their products simultaneously to a group of potential
customers. The undecided guests often overcome a reluctance to buy when they
see their friends make positive purchase decisions. Furthermore, some of the
guests may feel obliged to buy because they are guests in the home of the
sponsoring hostess.
Consumer Action Groups
A particular kind of consumer group-a consumer action group- has emerged in
response to the consumerist movement. This type of consumer group has
become increasingly visible since the 1960s and has been able to influence
product design and marketing practices of both manufacturers and retailers.
Consumer action groups can be divided into two broad categories: those that
organize to correct a specific consumer abuse and then disband, and those that
organize to address broader, more pervasive, problem areas and operate over an
extended or indefinite period of time. A group of tenants who band together to
dramatize their dissatisfaction with the quality of service provided by their
landlord, or a group of irate community members who unite to block the
entrance of a fast-food outlet into their middle-class neighborhood, are examples
of temporary, cause-specific consumer action groups.
Work Groups
The sheer amount of time that people spend at their jobs, frequently more than
thirty-five hours per week, provides ample opportunity for work groups to serve
as a major influence on the consumption behavior of members.
Both the formal work group and the informal friendship/work group have the
potential for influencing consumer behavior. The formal work group consists of
those individuals who work together as a team. Their direct and sustained work
relationship offers substantial opportunity for one or more members to influence
the consumer-related attitudes and activities of other team members. Members
of informal work groups may influence the consumption behavior of other
members during coffee or lunch breaks or after-hours meetings.
Social Class
Social class is more of a continuum, i.e., a range of social positions, on which
each member of society can be place. But, social researchers have divided this
continuum into a small number of specific classes. Thus, we go by this
framework, social class is used to assign individuals or families to a social-class
category.
Social class can be defined as The division of members of a society into a
hierarchy of distinct status classes, so that members of each class have relatively
the same status and the members of all other classes have either more or less
status.`
Characteristics of Social Classes:
The main characteristics of Social class
1. Persons within a given social class tend to behave more alike
2. Social class is hierarchical
3. Social class is not measured by a single variable but is measured as a
weighted function of one`s occupation, income, wealth, education, status,
prestige, etc.
4. Social class is continuous rather than concrete, with individuals able to move
into a higher social class or drop into a lower class.
Factors responsible for Social Stratification
Status,
Value &
Social
S. No
Factors affecting Social class
Prestige
Class
enjoyed
Lower level occupation with no authority,
Lower
less income, and no education or minimum
1
Low
Class
education, For example, labour class or
clerks etc.
Graduates, or postgraduates, executives`
managers of companies with authority,
Middle
drawing handsome salary of which certain
2
Medium
Class
amount can be saved and invested. For
example, executives or middle level
managers of companies.
Authoritative person, drawing handsome
salary, very often professionally qualified,
Higher
3
High
working in a very senior position or a
Class
person born into a rich family, with a good
background of education.
Table 2.1 Factors showing social class differences
Impact of social class
- Provides a sense of identity
- Imposes a set of normative` behaviours
- Classes share values, possessions, customs and activities
- Marketing response to customers of different economic means
- Marketing to the low-income consumer
- Some marketers ambivalent as not perceived as long-term customers
constitutes a substantial group
- Target with value-oriented strategies
REFERENCE GROUPS
Reference groups are groups that serve as a frame of reference for individuals in
their purchase decisions. This basic concept provides a valuable perspective for
understanding the impact of other people on an individual's consumption beliefs,
attitudes, and behavior. It also provides some insight into methods that Groups
can be used to effect desired changes in consumer behavior.
What is a Reference Group?
A reference group is any person or group that serves as a point of companion (or
reference) for an individual in the formation of either general or specific values,
attitudes, or behavior. The usefulness of this concept is enhanced by the fact that
it places no restrictions on group size or membership, nor does it require that
consumers identify with a tangible group (i.e., the group can be symbolic:
prosperous business people, rock stars, and sports heroes).
Reference groups that influence general values or behavior are called normative
reference groups. An example of a child's normative reference group is the
immediate family, which is likely to play an important role in molding the
child's general consumer values and behavior (e.g., which foods to select for
good nutrition, appropriate ways to dress for specific occasions, how and where
to shop, what constitutes "good" value).
Reference groups that serve as benchmarks for specific or narrowly defined
attitudes or behavior are called comparative reference groups. A comparative
reference group might be a neighboring family whose lifestyle appears to be
admirable and worthy of imitation (the way they maintain their home, their
choice of home furnishings and cars, the number and types of vacations they
take).
Both normative and comparative reference groups are important. Normative
reference groups influence the development of a basic code of behavior;
comparative reference groups influence the expression of specific consumer
attitudes and behavior. It is likely that the specific influences of comparative
reference groups are to some measure dependent upon the basic values and
behavior patterns established early in a person's development by normative
reference groups.
Broadening the Reference Group Concept
Like many other concepts borrowed from the behavioral sciences, the meaning
of reference group has changed over the years. As originally employed,
reference groups were narrowly defined to include only those groups with which
a person interacted on a direct basis (e.g., family and close friends). However,
the concept has gradually broadened to include both direct and indirect
individual or group influences. Indirect reference groups consist of those
individuals or groups with whom a person does not have direct face-to-face
contact, such as movie stars, sports heroes, political leaders, or TV personalities.
Referents that a person might use in evaluating his or her own general or
specific attitudes or behavior vary from an individual to several family members
to a broader kinship, from a voluntary association to a social class, a profession,
an ethnic group, a community, or even a nation.
TYPES OF REFERENCE GROUPS
Reference groups can be classified in terms of a person's membership or degree
of involvement with the group and in terms of the positive or negative
influences they have on his or her values, attitudes, and behavior. Four types of
reference groups that emerge from a cross-classification of these factors:
contactual groups, aspirational groups, disclaimant groups, and avoidance
groups.
1. A contactual group is a group in which a person holds membership or
has regular face-to-face contact and of whose values, attitudes, and
standards he or she approves. Thus a contactual group has a positive
influence on an individual's attitudes or behavior.
2. An aspirational group is a group in which a person does not hold
membership and does not have face-to-face contact, but wants to be a
member. Thus it serves as a positive influence on that person's attitudes
or behavior.
3. A disclaimant group is a group in which a person holds membership or
has face-to-face contact but disapproves of the group's values, attitudes,
and behavior. Thus the person tends to adopt attitudes and behavior that
are in opposition to the norms of the group.
4. An avoidance group is a group in which a person does not hold
membership and does not have face-to-face contact and disapproves of
the group's values, attitudes, and behavior. Thus 'the person tends to
adopt attitudes and behavior that are in opposition to those of the group.
Consider Ram, a senior majoring in advertising at the state university in the
southwestern United States. The school's Advertising Club, of which he is vice-
president, serves as one of Ram's contractual groups. Ram believes that
continuing his education to obtain an MBA will enhance his career
opportunities. It is clear that individuals who hold the MBA degree serve as an
aspirational group for him. Still further, although he enjoys his position as a
reporter on the university's newspaper, the recent editorials (endorsed by most of
the staff) urging students to adopt a more conservative political philosophy run
counter to his own views. Thus the newspaper staff is currently a disclaimant
group. Finally, Ram personally knows a number of students who have quit
college during their final year; these former students serve as an avoidance
group.
Factors that Affect Reference Group Influence
The degree of influence that a reference group exerts on an individual's behavior
usually depends on the nature of the individual and the product and on specific
social factors. This section discusses how and why some of these factors operate
to influence consumer behavior.
Information and Experience
An individual who has firsthand experience with a product or service, or can
easily obtain full information about it, is less likely to be influenced by the ad
vice or example of others. On the other hand, a person who has little or no
firsthand experience with a product or service, and does not expect to have
access to objective information about it (e.g., a person who believes that
relevant, advertising may be misleading or deceptive), is more likely to seek out
the advice or example of others. Research on imitative behavior provides some
interesting insights on how insufficient experience or information concerning a
product makes consumers more susceptible to the influence either positive or
negative, of others. For example, if a medical school student wants to impress
his new girl-friend, he may take her to a restaurant that he knows from
experience to be good or to one that has been highly recommended by the local
newspaper's Dining-Out Guide. If he has neither personal experience nor
information he regards as valid, he may seek the advice of friends or imitate the
behavior of others by taking her to a restaurant he knows is frequented by
physicians whom he admires.
Credibility, Attractiveness, and Power of the Reference Group
A reference group that is perceived as credible, attractive, or powerful can
induce consumer attitude and behavior change. For example, when consumers
are concerned with obtaining accurate information about the performance or
quality of a product or service, they are likely to be persuaded by those they
consider to be trustworthy and knowledgeable. That is, they are more likely to
be persuaded by sources with high credibility. When consumers are primarily
concerned with the acceptance or approval of others they like, with whom they
identify, or who offer them status or other benefits, they are likely to adopt their
product, brand, or other behavioral characteristics.
When consumers are primarily concerned with the power that a person or group
can exert over them, they might choose products or services that con- form to
the norms of that person or group in order to avoid ridicule or punishment.
However, unlike other reference groups that consumers follow either because
they are credible or because they are attractive, power groups are not likely to
cause attitude change. Individuals may conform to the behavior of a powerful
person or group but are not likely to experience a change in their own attitudes.
Different reference groups may influence the beliefs, attitudes, and behavior of
an individual at different points in time or under different circum- stances. For
example, the dress habits of a young female attorney may vary, depending on
her place and role. She may conform to the dress code of her office by wearing
conservative business suits by day and drastically alter her mode of dress after
work by wearing more conspicuous, flamboyant styles.
Conspicuousness of the Product
The potential influence of a reference group varies according to how visually or
verbally conspicuous a product is to others. A visually conspicuous product is
one that can be seen and identified by others, and that will stand out and be
noticed (e.g., a luxury item or novelty product). Even if a product is not visually
conspicuous, it may be verbally conspicuous it may be highly interesting or it
may be easily described to others. Products that are especially conspicuous and
status-revealing (a new automobile, fashion clothing, home furniture) are most
likely to be purchased with an eye to the reactions of relevant others. Products
that are less conspicuous (canned fruits, laundry soaps) are less likely to be
purchased with a reference group in mind.The success of a brand of status
running shoes like Reebok is aided by the fact that it is relatively easy to spot a
person wearing them-given the distinctive flag symbol on the side of each shoe.
Reference Group Impact on Product and Brand Choice
In some cases, and for some products, reference groups may influence both a
person's product category and brand (or type) choices. Such products are called
pro- duct-plus, brand-plus items. In other cases, reference groups influence only
the product category decision. Such products are called product-plus, brand-
minus items. In still other cases, reference groups influence the brand (or type)
decision. These products are called product-minus, brand-Plus items. Finally, in
some cases, reference groups influence neither the product category nor the
brand decision; these products are called product-minus, brand-minus items. The
idea of classifying products and brands into four groups in terms of the
suitability of a reference group appeal was first suggested in the mid-1950s,
along with an initial classification of a small number of product categories.
Reference Groups and Consumer Conformity
Marketers are particularly interested in the ability of reference groups to change
consumer attitudes and behavior (i.e., to encourage conformity). To be capable
of such influence, a reference group must
1. Inform or make the individual aware of a specific product or brand;
2. Provide the individual with the opportunity to compare his or her own
thinking with the attitudes and behavior of the group;
3. Influence the individual to adopt attitudes and behavior that are consistent
with the norms of the group;
4. Legitimize an individual's decision to use the same products as the group.
The ability of reference groups to influence consumer conformity is
demonstrated by the results of a classic experiment designed to compare the
effects.
Benefits of the Reference Group Appeal
Reference group appeals have two principal benefits for the advertiser: they
increase brand awareness and they serve to reduce perceived risk.
Increased Brand Awareness
Reference group appeals provide the advertiser with the opportunity to gain and
retain the attention of prospective consumers with greater ease and effectiveness
than is possible with many other types of promotional campaigns. This is
particularly true of the celebrity form of reference group appeal, where the
personality employed is generally well known to the relevant target segment.
Celebrities tend to draw attention to the product through their own popularity.
This gives the advertiser a competitive advantage in gaining audience attention,
particularly on television where there are so many brief and similar commercial
announcements.
Reduced Perceived Risk
The use of one or more reference group appeals may also serve to lower the
consumer's perceived risk in purchasing a specific product. The example set by
the endorser or testimonial-giver may demonstrate to the consumer that
uncertainty about the product purchase is unwarranted: Following are examples
of how reference group appeals serve to lower the consumer's perceived risk.
Celebrity. Consumers who admire a particular celebrity often have the
following reactions to the celebrity's endorsement or testimonial. For eg. "She
wouldn't do a commercial for that product if she didn't believe it was really
good."
Expert. When consumers are concerned about the technical aspects of a
product, they welcome the comments of an acknowledged or apparent expert.
For eg. "If he says it works, then it really must work."
Common Man. When consumers are worried about how a product will affect
them personally, they are likely to be influenced by a common man endorsement
or testimonial. For eg. "People just like me are using that product,"
Self Practice Questions
1) Explain the various types of groups giving examples.
2) What are the consumer relevant groups? How significantly do they
influence consumer behaviours?
3) What is a social class? What are its characteristics?
4) Explain social stratification and its impact on marketing?
5) Describe reference groups and its types.
6) Analyse the influence that a reference group exerts on an individual's
behavior.
7) Discuss the reference group impact on product and brand choices.
Key Terms
- Groups
- Lower class
- Group dynamics
- Medium class
- Friendship groups
- Higher class
- Formal social groups
- Reference groups
- Shopping groups
- Contactual groups
- Consumer action groups
- Aspirational groups
- Work groups.
- Disclaimant groups
- Social class
- Avoidance groups
-----------------------------
SECTION ? III
FAMILY INFLUENCES & DECISION MAKING
Introduction
The family is a major influence on the consumer behaviour of its members.
There are many examples of how the family influences the consumption
behaviour of its members. A child learns how to enjoy candy by observing an
older brother or sister; learns the use and value of money by listening to and
watching his or her parents. Decisions about a new car, a vacation trip, or
whether to go to a local or an out-of-town college are consumption decisions
usually made within the context of a family setting. As a major consumption
unit, the family is also a prime target for the marketing of many products and
services.
Objectives
After studying this Section, you will be able to
- Define a Family and its types
- Discuss Family life cycle and its implications on consumer
behaviour
- Define Family roles and consumption patterns
- Explain relationships and family marketing
THE FAMILY
The importance of the family or household unit in consumer behavior arises
for two reasons:
1. Many products are purchased by a family unit.
2. Individuals` buying decisions may be heavily influenced by other family
members.
How families or households make purchase decisions depends on the roles of
the various family members in the purchase, consumption, and influence of
products. Household products like food and soaps may be purchased by a person
but consumed by many, whereas personal care items, such as cosmetics or
shaving cream, might be purchased by an individual family member for his or
her own consumption. Homes and cars, on the other hand, are often purchased
by both spouses, perhaps with involvement from children or other member of
the extended family.
Visits to shopping malls often involve multiple family members buying clothing
and accessories, something with a heavy dose of influence by family members-
children may buy clothing paid for and approved of by parents, whereas
teenagers may influence the clothing purchase of a parent.
Regardless of how many family members are present when items are being
purchased, the other family members play an important role in the purchase.
Just because of being mother for two young children, it is her responsibility for
buying food for the family and act as an individual in the market. It does not
mean that her decisions are not influenced by the preferences and power of
other family members. Although marketing communications are usually
directed to individuals, marketers should consider the consumption
circumstances and the family structure before deciding on specific
communication or advertising methods to attract their segment.
What is a Family?
A family is a group of two or more persons related by blood, marriage, or
adoption who reside together. The nuclear family is the immediate group of
father, mother, and child(ren) living together. The extended family is the
nuclear family, plus other relatives, such as grandparents, uncles and aunts,
cousins, and parents-in-law. The family into which one is born is called the
family of orientation, whereas the one established by marriage is the family of
procreation. In a more dynamic sense, the individuals who constitute a family
might be described as members of the most basic social group who live together
and interact to satisfy their personal and mutual needs.
What is a Household?
The term household is used to describe all person, both related and unrelated,
who occupy a housing unit. There are significant differences between the terms
household and family even though they are sometimes used interchangeably. It
is important to distinguish between these terms when examining data.
The term household is becoming a more important unit of analysis for marketers
because of the rapid growth in nontraditional families and non-family
households. Among non-family households, the great majority consist of people
living alone. The remaining non-family households include those consisting of
elderly people living with non-family members. For example, persons of
Opposite Sex Sharing Living Quarters, friends living together, and same sex
couples.
Structural Variables Affecting Families and Households
Structural variables include the age of the head of household or family, marital
status, presence of children, and employment status. For example, consumer
analysts have enormous interest in whether families have children and how
many they have. Children increase family demand for clothing, food, furniture,
homes, medical care, and education, while they decrease demand for many
discretionary items, including travel, higher-priced restaurants, and adult
clothing.
Other structural changes affect the types of products that are manufactured. For
example, in Japan, high-tech companies have formed a consortium to
standardize technology that has been developed to monitor and manage
households.
Sociological Variables Affecting Families and Households
Marketers can understand family and household decisions better by examining
the sociological dimensions of how families make consumer decisions. Three
sociological variables that help explain how family`s function includes
cohesion, adaptability, and communication.
Cohesion is the emotional bonding between family members. It measures
how close to each other family members feel on an emotional level.
Cohesion reflects a sense of connectedness to or separateness from other
family members.
Adaptability measures the ability of a family to change its power structure,
role relationships, and relationship rules in response to situational and
developmental stress. The degree of adaptability shows how well a family
can meet the challenges presented by changing situations.
Communication is a facilitating dimension, critical to movement on the
other two dimensions. Positive communication skills (such as empathy,
reflective listening, supportive comments) enable family members to share
their changing needs as they relate to cohesion and adaptability. Negative
communication skills (such as double messages, double binds, criticism)
minimize the ability to share feelings, thereby restricting movement in the
dimensions of cohesion and adaptability. Understanding whether family
members are satisfied with family purchase requires communication within
the family.
To determine how the family makes its purchase decisions and how the family
affects the future purchase behaviour of its members, it is useful to understand
the functions provided and the roles played by family members to fulfill their
consumption needs.
FUNCTIONS OF THE FAMILY
Four basic functions provided by the family are particularly relevant to a
discussion of consumer behaviour. These include
(1) Economic well-being, (2) Emotional support, (3) Suitable family
lifestyles, and (4) Family-member socialization.
(1) Economic Well-Being
Providing financial means to its dependents is unquestionably a basic family
function. How the family divides its responsibilities for providing economic
well-being has changed considerably during the past 25 years. The traditional
roles of husband as economic provider and wife as homemaker and child rearer
are still valid. The economic role of children has changed. Today, even if some
teenage children work, they rarely assist the family financially. Their parents are
still expected to provide for their needs. But some of them get enough pocket-
money to decide their consumption of discretionary items.
(2) Emotional Support
The provision of emotional nourishment (including love, affection, and
intimacy) to its members is an important basic function of the contemporary
family. In fulfilling this function, the family provides support and
encouragement and assists its members in coping with personal or social
problems. To make it easier for working parents to show their love affection
and support for their children, greeting-card companies have been marketing
cards especially for parent to give to their children. For instance, in most
communities, many educational and psychological centers are available that are
designed to assist parents who want to help their children improve their
learning and communication skills, or generally, better adjust to their
environments.
(3) Suitable Family Lifestyles
Another important family function in terms of consumer behaviour is the
establishment of a suitable lifestyle for the family. Family lifestyle
commitments, including the allocation of time, greatly influence consumption
patterns. For example, the increase in the number of married women working
outside the home has reduced the time they have available for household chores,
and has created a market for convenience products and fast-food restaurants.
Also, with both parents working, an increased emphasis is placed on the notion
of quality time, rather than the quantity of time spent with children and
other family members. Realizing the scarcity of quality family time, Hotels
feature a variety of weekend packages targeted to couples and their children.
(4) Socialization of Children and Other Family Members
The socialization of family members, especially young children, is a central
family function. In large part, this process consists of imparting to children the
basic value and modes of behaviour consistent with the culture. These generally
include moral and religious principles, interpersonal skills, dress and grooming
standard, appropriate manners and speech, and the selection of suitable
educational and occupational or career goals. Socialization skills (manners,
goals, values, and other qualities) are imparted to a child directly through
instruction and indirectly through observation of the behaviour of parents and
older siblings. Marketers often target parents looking for assistance in the task of
socializing preadolescent children.
FAMILY LIFE CYCLES
Families pass through a series of stages that change them over time. This
process historically has been called the family life cycle (FLC). The concept
may need to be changed to household life cycle (HLC) or consumer life cycle
(CLC) in the future to reflect changes in society. However, we will use the term
FLC to show how the life cycle affects consumer behavior.
Family Life Cycle Characteristics
The traditional FLC describes family patterns as consumers marry, have
children, leave home, lose a spouse, and retire. These stages are described in
Table 3.1, along with consumer behaviors associated with each stage. But
consumers don`t necessarily have to pass through all these stages-thy can skip
multiple stages
Stages in
Family Life
Economic Circumstances
Likely Buying Behaviour
Cycle
Bachelorhood
Buy, basic kitchen equipment
Earning reasonable good salary,
(Young, single
basic furniture, two wheeler,
no financial burdens
staying alone)
vacation with friends
Parenthood
Better off financially, though
(young married home purchases at peak, less
Buys baby food, toys, diapers,
just attained
liquid assets, not able to save
chest & cough medicines
parenthood)
more.
Post parenthood
Concentrates on home
Financial position improved
(growing
improvements. Buy more
with wife working, probability
children or
tasteful furniture, car, home
of home ownership on the
grown up
appliances, and magazines.
higher side).
children)
Interested in vacation packages.
Dissolution
Buy more medicinal products ant
Income though good, not
(retired & lone
other products like the retired
interested in spending. At times
surviving
people. Seeks more of attention,
drastic cut in income is likely.
spouse)
affection and security conscious.
Table 3.1. Consumer Activities Occurring in Various Life Cycles
Young Singles
Young singles may live alone, with their nuclear families, or with friends, or
they may co-habitate with partners in this stage. Although earnings tend to be
relatively low, these consumers usually don`t have many financial obligations
and don`t feel the need to save for their futures or retirement. Many of them find
themselves spending as much as they make on cars, furnishings for first
residences away from home, fashions, recreation, alcoholic beverages, food
away from home, vacations, and other products.
Newly Married Couples
Newly married couples without children are usually better off financially than
they were when they were single, since they often have two incomes available to
spend on one household. These families tend to spend a substantial amount of
their incomes on cars, clothing, vacations, and other leisure activities. They also
have the highest purchase rate and highest average purchases of durable good
(particularly furniture and appliances) and appear to be more susceptible to
advertising.
Full Nest I
With the arrival of the first child, parents begin to change their roles in the
family, and decide if one parent will stay to care for the child or if they will
both work and buy daycare services. In this stage, families are likely to move
into their first home; purchases furniture and furnishings for the child; and
purchase new items such as baby food, toys, sleds, and skates. These
requirements reduce families` ability to save, and the husband and wife are
often dissatisfied with their financial position.
Full Nest II
In this stage, the youngest child has reached school age, the employed spouse`s
income has improved. Consequently, the family`s financial position usually
improves, but the family finds itself consuming more and in larger quantities.
Consumption patterns continue to be heavily influenced by the children, since
the family tends to buy large-sized packages of food and cleaning suppliers,
bicycles, music lessons, clothing, sports equipment, and a computer.
Full Nest III
As the family grows older and parents enter their min-40s, their financial
position usually continues to improve because the primary wage earner`s income
rises, the second wage earner is receiving a higher salary, and the children earn
from occasional and part-time employment. The family typically replaces some
worn pieces of furniture, buys some luxury appliances, and spends money on
education. Families also spend more on computers in this stage, buying
additional PCs for their older children. Depending on where children go to
college and how many are seeking higher education, the financial position of the
family may be tighter than other instances.
Married, No Kids
Couples who marry and do not have children are likely to have more
disposable income to spend on charities, travel, and entertainment than others
in their age range. Not only do they have fewer expenses, these couples are
more likely to be dual-wage earners, making it easier for them to retire earlier
if they save appropriately.
Older Singles
Single, age 40 or older, may be single again (ending married status because of
divorce or death of a spouse), or never married (because they prefer to live
independently or because they co-habitate with partners), either group of which
may or may not have children living in the household. This group now has more
available income to spend on travel and leisure but feels the pressure to save for
the future, since there is no second income on which to rely as they get older.
Empty Nest I
At this stage, the family is most satisfied with its financial position. The children
have left home and are financially independent allowing the family to save
more. In this stage discretionary income is spent on what the couple wants rather
than on what the children need. Therefore, they spend on home improvements,
luxury items, vacations, sports utility vehicles, food away from home, travel,
and product for their grand children.
Empty Nest II
But this time, the income earners have retired, usually resulting in a reduction in
income and disposable income. Expenditures become health oriented, centering
on such items as medical appliances and health, and medicines. But many of
these families continue to be active and in good health, allowing them to spend
time traveling, exercising, and volunteering. Many continue working part time
to supplement their retirement and keep them socially involved.
Solitary Survivor
Solitary survivors be either employed or not employed. If the surviving spouse
has worked outside the home in the past, he or she usually continues
employment or goes back to work to live on earned income (rather than saving)
and remain socially active. Expenditures for clothing and food usually decline
in this stage, with income spent on health care, sickness care, travel
entertainment, and services.. Those who are not employed are often on fixed
incomes and may move in with friends to share housing expenses and
companionship, and some may choose to remarry.
Retired Solitary Survivor
Retired solitary survivors follow the same general consumption patterns as
solitary survivors; however, their income may not be as high. Depending on how
much they have been able to save throughout their lifetimes, they can afford to
buy a wide range of products. These individuals have special needs for attention,
affection, and security based on their lifestyle choices.
Marketers use the descriptions of these FLC stages when analyzing marketing
and communication strategies for products and services, but they often add
additional information about consumer markets to analyze their needs, identify
niches, and develop consumer-specific marketing strategies.
FAMILY DECISION-MAKING
Families use products even though individuals usually buy them. Determining
what products should be bought, which retail outlet to use, how and when
products are used, and who should buy them is a complicated process involving
a variety or roles and actors.
Role Behavior
Families and other groups exhibit what sociologist Talcott Parsons called
instrumental and expressive role behaviors.
Instrumental roles, also known as functional or economic roles, involve
financial, performance, and other functions performed by group members.
Expressive roles involve supporting other family members in the decision-
making process and expressing the family`s aesthetic or emotional needs,
including upholding family norms.
Individual Roles in Family Purchases
Family consumption decisions involve at least five definable roles, which may
be assumed by spouses, children, or other members of a household. Both
multiple roles and multiple actors are normal. Marketers need to communicate
with consumers assuming each of these roles, remembering that different
family members will assume different roles depending on the situation and
product. Children, for example, are users of cereals, toys, clothing, and many
other products but may not be the buyers. One or both of the parents may be
the decider and the buyer, although the children may be important as
influencers and users.
Family Roles
For a family to function as a cohesive unit, roles or tasks-such as doing the
laundry, preparing meals, setting the dinner table, taking out the garbage,
walking the dog must be carried out by one or more family members. In our
dynamic society, etc. family-related roles are constantly changing.
Key Family Consumption Roles
The roles played by the different family members will vary from product to
product. While shopping in the market, a housewife comes across a new variety
of juice that she buys for the family. Her decision to purchase does not directly
involve the influence of other family members. She is the decider, buyer; but she
may or may not be the preparer and is not the only user. In case of products such
as television, car, music systems, furniture or any other product which is likely
to be used by some or all the family members, the purchase decision is likely to
be joint or group decision.
There are eight distinct roles in the family decision-making process. A look at
these roles provides further insight into how family members act in their
various consumption-related roles:
1. Influencers: Those family members who provide information and advice
and thus influence the purchase. The housewife tells her family about the
new eatery that has opened in the neighborhood and her favorable
description about it influences her husband and teenaged children.
2. Gatekeepers: Those family members who control the flow of information
about a product/service thus influencing the decisions of other family
members. The teenaged son who wants a racing bicycle, may withhold from
his father much of the relevant information on all brands except the one that
he fancies, thereby influencing his father`s decision in favour of his
preferred brand.
3. Deciders: Family members who have the power to unilaterally or jointly
decide whether or not to buy a product or service. The husband and wife
may jointly decide about the purchase of a new refrigerator.
4. Buyers: Those family members who actually buy a particular product or
service. A housewife may be the person who actually buys all the foodstuffs,
rations and toiletries, which are consumed by all the family members.
5. Preparers: Those family members who transform or prepare the product
into the form in which it is actually consumed. The housewife may prepare
the family meal using raw vegetables, lentils, spices, oil and other
ingredients.
6. Users: Those family members who use or consume a particular product or
service. All family members may use the car, watch the television, and listen
to the stereo music system
7. Maintainers: Family member(s) who service or repair the product so that it
will provide continued satisfaction.
8. Disposers: Family member(s) who initiate or carry out the disposal or
discontinuation of a particular product or service.
Influencing Spouses and Resolving Consumer Conflicts
When making consumer decisions, husbands and wives commonly attempt to
influence each other to arrive at what they feel to be the best outcome. Six
influence strategies for resolving husband/wife consumption-related conflicts
have been identified:
Expert: At attempt by a spouse to use his or her superior information about
decision alternatives to influence the other spouse.
Legitimacy: An attempt by a spouse to influence the other spouse on the
basis of position in the household.
Bargaining: An attempt by a spouse to secure influence now that will be
exchanged with the other spouse at some future date.
Reward: An attempt by a spouse to influence the behaviour of the other
spouse by offering a reward.
Emotional: An attempt by spouse to use an emotion-laden reaction to
influence the other spouse`s behaviour.
Impression: Any persuasive attempts by one spouse to influence the
behaviour of the other.
These influence strategies tend to be used by either husbands or wives when
they find themselves in disagreement or in conflict with the other spouse
regarding specific consumer decision. For instance, we all have experienced
occasions on which different restaurants to visit, see different movies, or go on a
different type of family vacation. These are only a few examples of the almost
endless possibilities of potential family consumption conflicts that might need to
be resolved.
Children
As any parent knows, young children attempt to influence family decisions as
soon as they possess the basic communication skills needed to interact with
other family members (Buy me a cookie, I want a Barbie doll, Let`s eat at
McDonald`s.). Older children are likely to participate more directly in family
consumption activities. In a study of children aged 6 to 14, more than half
indicated that they influenced family purchase decisions, such as choice of
vacations, stereo equipment, and home computers. Other research indicates that
children play relatively important roles when it comes to initiating interest in a
new computer and in the actual purchase decision.
The parent-child relationship, as it relates to consumer behaviour, can be viewed
as an influence versus yield situation. Specifically, children attempt to influence
their parents to make a purchase (to yield). In observing shoppers in a
supermarket, it is quite evident that children attempt to influence their parents to
make purchases of special interest (e.g., laundry detergents) for which they see
ads on TV.
Teenagers and Post teens
A significant number of teenagers have discretionary spending in terms of
spending patterns. High school students (those in grades 7 through 12) are most
interested in sports and fitness. Boys between the ages of 16 and 19 spend most
of their money on movies, dating, entertainment, vehicle expenses, and clothing,
while girls of that age spend most of their money on clothing, cosmetics, and
fragrances.
The teen market can be segmented in terms of lifestyle groups. Figure below
presents a four-category segmentation schema of the teenage market. Such
segmentation framework has value for marketers who wish to focus their
marketing efforts on a particular subgroup of teens.
Segment
Key Characteristics
Name
1. Socially Primarily female; active and extroverted. They are optimistic and
driven.
plan to attend College.
2. Versatile Slightly more females than males: responsible teens, but less
Participant
optimistic and less likely to plan to attend college than the Social
Driven. They are comfortable in social and solitary situations.
3. Passive Slightly more males than females: withdrawn, self-conscious, and the
Introverts
least comfortable in social situations. They are less optimistic about,
the future, and spend the least.
4.
Sports Primarily males: outgoing, active, and greatly interested in
Oriented
participating in and watching sports. Sports influence their self-image
and what they buy.
Table 3.2. Lifestyle segmentation of the teen market
Family marketing
Family marketing focuses on the relationships between family members based
on the roles they assume, including the relationship between purchaser and
family consumer and between purchaser and purchase decision maker. Family
marketing identifies scenarios where some purchase might have more than one
decision maker, whereas some have more than one consumer. The family
marketing model, as see in Figure 3.1, represents nine cells describing various
purchaser-consumer relationships. Depending on where in the matrix various
products fall, marketers can advertise and position products differently
according to their purchaser-consumer relationships.
The family purchase decision-making process can be complex, but answering
the following questions helps identify different purchaser-consumer
relationships.
1. Who`s buying for whom?
2. Who are the principal characters?
3. What`s the plot for the purchase?
4. Who wants what when?
5. What can we assume?
Figure 3.1. The Family Marketing Model
Although these answers may not identify all essential relationships marketers
should consider, they do identify a family marketing plan, which creates a
relationship between individuals and products based on the role each individual
has in the influence or purchase of products. In the restaurant industry, the trend
has been to focus on marketing to the family as a single unit. Admittedly, the
appeal to families arose from the restaurant industry`s desire to grow sales and
profits.
Influences on the Decision Process
How do husbands and wives perceive their relative influence on decision
making across the decision stages? And what does this mean for marketers?
Joint decisions tend to be made about vacations, televisions, refrigerators, and
living room furniture. Autonomic decision-making tends to be present in
decisions about categories that include women`s jewelry, men`s leisure clothing,
indoor paint and wallpaper, and luggage. By understanding where on this map
the decisions to buy particular products fall, marketers can being to determine
which aspects of specific product to advertise to different household members
and which media will reach the influential family member.
Influence by Decision Stage
Spouses exert different degrees if influence when passing through the different
stages of the decision-making process. This movement from information search
to final decision may be minimal in the case of many low-involvement goods
but more pronounced for goods that are risky or have high involvement for the
family. Movement is most pronounced for refrigerators, family autos,
upholstered living room furniture, and carpets or rugs. Vacations are perhaps the
most democratic of a family`s purchase decisions. Separate campaigns may be
timed to coincide with specialized interests, especially for products with a long
planning cycle.
Influence of employment
In the past, marketers were able to refer to the traditional role structure
categories to determine which family member was most likely to purchase a
specific product. Although traditional buying roles still apply, husbands in
dual-income marriages may be willing to stop at the grocery store to pick up a
few items, and working wives may drop the family car at the service station for
an oil change. However, contemporary couples are not inclined to shift
traditional joint buying responsibilities to only one spouse, but they are willing
to shop jointly for major items.
Influence of Gender
As the gender gap narrows, husband and wife decisions are increasingly made
jointly. Qualls studied family decisions concerning vacations, automobiles,
children`s education, housing, insurance, and savings. Prior studies showed that
decisions regarding these products were usually reported as wife or husband
dominant. Qualls found overwhelmingly that joint decisions are now the norm
for these products, with 80 percent of children`s education and housing
decisions made jointly. Increasing resources of women and shift toward
egalitarianism are producing more joint decision-making in product and service
categories of perceived high risk.
Key Terms
- Family
- Family marketing model
- Family Life Cycle
- Influencers
- Consumer Socialization
- Gatekeepers
- Families versus Households
- Deciders
- Cohesion
- Preparers
- Adaptability
- Maintainers
- Communication
- Disposers
- Socialization of Family
members
Self Practice Questions
1) What do you mean by a family? Explain its functions in marketing.
2) Discuss the variables that affect families and households.
3) Explain Family Life Cycle and its characteristics influencing consumer
behaviour.
4) Contrast between the family behaviour roles and the individual roles on
purchase decisions.
5) Describe the distinct roles in the family decision-making process.
6) How do spouse affects family decision making and how their conflicts
are resolved?
7) Explain the influence of children and teenagers on family buying
behaviour.
8) What is family marketing? What are the influences on family purchase?
9) Explain family marketing model with illustration.
10) How does the family influence the consumer socialization of children?
What role does television advertising play in consumer socialization?
Case discussion: Family Influences
A certain store was keeping a number of brands of washing machines. They had
washing machines to cater to the needs of all the segments of the society. They
were stocking IFB, Videocon, BPL, National, Godrej, and local made washing
machines as well. They had automatic, semi-automatic and manual machines.
The automatic machines were bought by the higher income group. The middle
income group was content with semi-automatic machines. Manual hand
operated machines were for the 'lower class of clientele, and also those living in
the rural areas, where electrification was not complete, or the electricity went off
for days together.
It was observed that when customers came to buy an automatic machine, they
usually came with their spouses and they looked mainly at the colour, style of
functioning, electric consumption, care for handling, price factors, etc. Many
customers would not buy on their first visit. They would come back after an
interval of time, and purchase the machine after careful considerations of the
attributes that they were .looking for. Many would lower their choice, and come
back to buy semi-automatic, instead of automatic machines.
The sale was observed to be highest during marriage seasons and at festival
times. There was a great influence of the house-wives in buying these, as they
were the ultimate users.
With a lot of information imparted by the media, and the children being exposed
to it for several hours, in a day, they seemed to have a good knowledge of the
attributes, and had a great say in the purchases and their opinions were also
given weightage by the parents.
Since a chain store is more interested in the sales to materialise, rather than
pushing any particular brand, the salesmen are directed to satisfy the customers
or the family. This should be their first consideration.
Questions for discussion
1) What should be the role of the marketer in the above case regarding
advertisement, promotion, persuasion, and closing the sales?
2) Who others could influence the purchase decisions in a family, in
relevance with the above case?
3) Do you feel that group interaction helps the buyer too, in his
decision-making process? Elaborate.
------------------------------
SECTION ? IV
OPINION LEADERSHIP & DIFFUSION OF INNOVATIONS
Objectives
After studying this lesson you should be able to:
- Define Opinion leadership and its characteristics
- Understand the situation of a overlap of Opinion
- Understand the concept of diffusion and adoption of new
products/innovation.
- Explain the process of diffusion.
- Apply the concepts of various adopter categories
OPINION LEADERSHIP
An issue of considerable importance to consumers and marketers alike- the
informal influence that others have on consumers` behaviour and the dynamic
processes that impact consumers` behaviour is the nature and dynamics of the
influence that friends, neighbors, and the acquaintances have on our-consumer
related decisions. This influence is often called word-of-mouth communications
or the opinion leadership process. We also consider the personality and
motivations of those who influence, i.e., opinion leaders and those who are
influenced, i.e., opinion receivers.
What is opinion Leadership?
Opinion Leadership is the process by which one person (opinion leader)
informally influences the actions or attitudes of others, who may be opinion
seekers or merely opinion recipients. The definition of opinion leadership
emphasizes on informal influence. This informal flow of opinion related
influence between two or more people is referred to as word-of-mouth
communication.
The person is the opinion leader and may become an opinion receiver.
Individuals who actively seek information and advice about products are often
called opinion seekers.
These opinion leaders are very often a part of the social groups and also have
social communication network. The biggest advantage of the informal word-of-
mouth communication is that it is informal and interpersonal in nature and this
takes place between people who are not directly associated with the commercial
selling source or the firm. Very often, we can see that the formal word-of-mouth
communication is more influential than mass advertising in determining which
product or brand is bought.
OPINION LEADERS
OPINION RECIEVERS
Self-Improvement Motivations ? Reduce
post purchase uncertainty or dissonance ? ? Reduce the risk of making a
Gain attention or status ? Assert superiority purchase commitment ? Reduce
and expertise ? Feel like an adventurer ? research time
Experience the power of Converting
others
Product-Involvement
Motivations
? ? Learn how to use or consume a
Express satisfaction or dissatisfaction with a product ? Learn what products are new
product or service
in the marketplace
Social Involvement Motivations ? Express
neighborliness and friendship by discussing ? Buy products that have the approval
products or services that may be useful to of others, thereby ensuring acceptance
others
Message Involvement Motivations ?
Express one`s reaction to a stimulating
advertisement by telling others about it
Table 4.1. Motivations of Opinion Leaders and Opinion Receivers
Characteristics of Opinion Leaders
Let us now take a look at the main characteristics of opinion leaders. Some of
the main features that all opinion leaders have are: Characteristics of Opinion
Leaders
Opinion leaders are more knowledgeable, and have a keen level of interest.
-
More involved in the product category
-
Have local friendship and social interaction
-
Can disseminate information
-
Have high credibility
-
Have more self-confidence, are more sociable and cosmopolitan,
can take risks.
Opinion leaders are activated greatly to reduce distance process for the products
they have bought; may want to influence neighbours and friends. They involve
themselves, to confirm their own judgment.They are younger, have more
education, have a higher income, and higher occupational status.They are
exposed to media. See more movies and television. Also read information
magazines and technical publication devoted to the product category. Having
greater knowledge about the product, they can disseminate more and true
information about the products and their usage.
Opinion leaders are therefore a case of study to marketers and their strategies are
evaluated and formed, keeping the opinion leaders and their roles in mind.
1. Opinion leaders are perceived to be highly credible sources of product
related information. Opinion leaders are persons who are considered to
be knowledgeable. They often voice their opinion based on first hand
information.
2. Opinion leaders are gregarious people and also have a lot of
experience: Their experience as a shopper and user sets them apart from
other people. Since most of their advice is based on first hand
experience, opinion receivers have a lot of confidence in their advice.
Besides, because of their gregarious nature, people enjoy interacting with
them.
3. Opinion leaders usually provide unbiased information, i.e., they
provide both favourable and unfavorable information to the opinion
seekers: This adds credibility to them and opinion seekers have faith that
they are receiving correct information.
4. Opinion leaders are both sources of information and advice
5. Opinion leaders have got greater exposure to the media, especially in
their area of leadership
6. Opinion leaders tend to be consumer innovators
7. Opinion leaders have got some personal product specific
characteristics like personality traits, social status and demographic
characteristics
A profile of Opinion Leaders
Now we need to study a profile of opinion leader so that we can identify them. It
would be a very difficult job to exactly identify the profile of opinion leader, but
we have a generalized profile as shown in table 4.2
General attributes across product
Category specific attributes
categories
Innovativeness
Interest
Willingness to talk
Knowledge
Self-Confidence
Special-interest
Gregariousness
Media exposure
Cognitive differentiation
Same age
Same social status
Social exposure outside group
Table 4.2. Profile of Opinion Leaders
Frequency and Overlap of Opinion
Often we can see that more than half of the people studied in any consumer
research project are classified as opinion leaders with respect to some self-
selected product category. The frequency of consumer opinion leadership
suggests that people are sufficiently interested in at least one product or product
category to talk about it and give advice concerning it to others.
Market research suggests the existence of a special category of opinion leaders,
the market maven. These are the consumers who possess a wide range of
information about many different types of products, retail outlets, and other
dimensions of markets.
Some important characteristics associated with market maven are:
a) They both initiate discussions with other consumers and respond to
requests for market information.
b) Although they appear to fit the profile of opinion leaders in that they
have high levels of brand awareness and tend to try more brands, unlike
opinion leaders their influence extends beyond the realm of high-
involvement products.
c) Market mavens are also distinguishable from other opinion leaders
because their influence stems not so much from product experience but
from a more general knowledge or market expertise that leads them to an
early awareness of a wide array of new products and services.
Fig. 4.1. Information Flow
The figure shows that the opinion leaders seek relevant information from the
mass media and other sources, and transmit the same to members of the group.
The dashed line shows the feedback from the group to the opinion leaders.
Interpersonal Flow of Communication
You might have observed that ideas often flow from radio and print media to
opinion leaders and from them to the general public. This is the concept behind
the two-step flow of communication This so-called two-step flow of
communication theory portrays opinion leaders as direct receivers of
information from impersonal mass-media sources, which in turn transmit (and
interpret) this information to the masses. This theory views the opinion leader as
a middleman between the impersonal mass media and the majority of society.
A more comprehensive model of the interpersonal flow of communication
depicts the transmission of information from the media as a Multistep flow. The
revised model takes into account the fact that information and influence often
are two-way processes in which opinion leaders both influence and are
influenced by opinion receivers.
Opinion Leadership and the Firm's Marketing Strategy
Marketers have long been aware of the power that opinion leadership exerts on
consumers` preferences and actual purchase behavior. Many marketers look for
an opportunity to encourage word-of-mouth communications and other
favorable informal conversations. New product designers take advantage of the
effectiveness of word-of-mouth communication by deliberately designing
products to have word-of-mouth potential. A new product should give customers
something to talk about.
Proof of the power of word-of-mouth is the cases in which critics hate a movie
and the viewing public like it and tell their friends. In instances where informal
word of mouth does not spontaneously emerge from the uniqueness of the
product or its marketing strategy, some marketers have deliberately attempted to
stimulate or to simulate opinion leadership.
There are different opinion leaders for different products. The marketer must
determine through research, experience or logic, the role an opinion leader plays
in the existing situation for a product or service. Consumers talk to each other
about their experiences and performance of the product. If their experiences do
not meet expectations then there is cause for concern, and the marketer must
take relevant steps to redress their complaints.
This can be reduced by utilising the knowledge of opinion leaders, which are
rather difficult to identify. Opinion leaders are gregarious and tend to belong to
clubs and associations. Some product categories have professional opinion
leaders who are also very influential.
Hairstylists serve as, opinion leaders for hair-care products. For healthcare
products-pharmacists are important opinion leaders. Computer professionals can
give an opinion about the purchase of personal computers. The idea is to identify
the opinion leaders, and then undertake a marketing research on them and
formulate a marketing strategy.
The marketing research conducted on opinion leaders gives ideas of the likes
and dislikes of the product users and their categories. Various tests should
include the product use test, the pre-testing of the advertising copy, the media
preferred for customers to respond favourably to the firm's marketing mix. The
sampling should be done from amongst the opinion leaders. In retailing and
personnel selling various techniques can be adopted to attract customers like,
one meal extra for every three meals or, pay for two and take three or, a "fashion
advisory board" can be constituted in clothing stores.
In advertising, people of prominence and, owners can be used and their
experiences and satisfaction received can be projected through conversation and,
by giving their impression to the general public and non-owners of the product.
Opinion leaders can be used effectively in commercials to promote the product
to the masses.
DIFFUSION OF INNOVATIONS
We as consumers always find a new innovation-idea or product or even new
service attractive. However, for the firm which is trying its hand at the new
innovation, there is always a question hanging around How fast will the
diffusion of the innovation take place? This is to say that any innovation has
got an element of risk involved. The firm will introduce a new concept or a new
product after an intensive research is carried out by it. Thus we see that the
process of diffusion of innovation is very critical to a firm.
Diffusion
Diffusion is a macro process concerned with the spread of a new product an
innovation from its source to the consuming public. Adoption is a micro process
that focuses on the stages through which an individual consumer passes when
deciding to accept or reject a new product.
Diffusion of innovations is the process by which acceptance of an innovation
(new products or new service or new idea) is spread by communication (mass
media, sales people, informal conversation) to members of the target market
over a period of time.
Some new product innovation, which were easily accepted by customers
New Product
Benefit Communicated
1. Vacuum cleaner (Eureka Compact, easy to use vacuum cleaner to keep home
Forbes)
clan and tidy, home delivery after demonstration.
2. Fire extinguisher (Real
Portal piece of safety equipment-fire extinguisher.
Value)
3. Plastic water tank
A convenient low cost alternative to the traditional
(Sintex)
metal or concrete water tank
4. Utensil cleaner cake
Premixed scouring solution in the form of bar instead
(Rin cake)
of waste prone powder.
5. Mosquito repellent matt A mosquito repellent-which has no smoke, no fumes,
(Good Knight)
no ash, no cream, no mosquitos
Drier, more comfortable than cloth, disposable diaper
6. Diaper (Huggys)
for babies.
Table 4.3. Examples of new products/services easily accepted by consumers
The Diffusion Process
The diffusion process follows a similar pattern, overtime, irrespective of the
social group or innovation. The typical diffusion process shows a slow growth
or adoption. It later rises rapidly, and then a period of slow growth is noticed. In
fast diffusion process, the product clicks immediately. The spread of innovation
is very quick. People patronise the product immediately, and later on there is
again slow diffusion. In slow diffusion process, the product takes a lot of time to
diffuse or spread, and the consumer follows a pattern of adoption slowly by
getting acquainted with the product.
Diffusion is the process by which the acceptance of an innovation (a new
product, a new service, new idea or new practice) is spread by communication
(mass media, salespeople, or informal conversations) to members of a social
system (a target market) over a period of time. The four basic elements of this
process are:
1. The Innovation
2. The channels of Communication
3. The Social System
4. Time
Fig.4.2. Diffusion Process
These studies show that the products take a certain amount of time, from when it
gets introduced to its saturation. The marketer therefore has to understand what
determines the spread of innovation in a given market segment, and how do the
early buying consumers differ from those of late purchasers.
1. The Innovation:
Various approaches which have been taken to define a new product or a new
service include
a) Firm-oriented definitions: A firm oriented approach treats the newness
of a product from the perspective of the company producing or
marketing it. When the product is new to the firm it is considered to be
new.
b) Product oriented definitions: Product-oriented approach focuses on the
features inherent in the product itself and on the effects these features are
likely to have on consumers` established usage patterns. Three types of
product innovations could be: Continuous innovation having the least
disruptive influence on established patterns involving the introduction of
a modified product, rather than a totally new product. E.g., latest version
of Microsoft Office; dynamically continuous innovation which may
involve the creation of a new product or the modification of an existing
product e.g., disposable diapers, CD players; discontinuous innovations
requiring consumers to adopt new behavior patterns e.g., TV, fax
machines, Internet
c) Market oriented definitions: Judges the newness of a product in terms
of how much exposure consumers have to the new product. The
definitions could be:
i. A product id considered new if it has been purchased by a relatively
small (fixed) percentage of the potential market.
ii. A product is considered new if it has been on the market for a
relatively short (specified) period of time.
d) Consumer oriented definitions: A new product is any product that a
potential consumer judges to be new.
2. The channels of Communication:
How quickly an innovation spreads through a market depends to a great extent
on communications between the marketer and consumers, as well as
communication among consumers i.e., word-of-mouth communication. Thus
this communication will include two types of communication:
a. Communication between marketers and consumers
b. Communication among consumers i.e., word of mouth.
Consumer information sources fall into four categories:
Personal sources : Family, friends, neighbors, and acquaintances.
Commercial sources : sales people, advertising, sales promotion techniques.
Public sources
: Mass media, consumer rating organisations
Experimental sources : Demonstration, handling samples.
Depending on the innovation or new product, and the prospective customers, the
firms try to adopt a cost effective way of communicating with them.
3. The Social System
The diffusion of a new product usually takes place in a social setting frequently
referred to as a social system. In our case, the terms market segment and target
segment may be more relevant than the term social system used in diffusion
research. A social system is a physical, social, or cultural environment to which
people belong and within which they function. For example, for new hybrid seed
rice, the social system might consist of all farmers in a number of local villages.
The key point to remember is that a social system`s orientation is the climate in
which marketers must operate to gain acceptance for their new products. For
example, in recent years, the World has experienced a decline in the demand for
red meat. The growing interest in health and fitness thought the nation has
created a climate in which red meat is considered too high in fat and calorie
content. At the same time, the consumption of chicken and fish has increased,
because these foods satisfy the prevailing nutritional values of a great number of
consumers.
4. Time
Time pervades the study of diffusion in three distinct but interrelated ways:
a) The amount of purchase time: Purchase time refers to the amount of
time that elapses between consumers` initial awareness of a new product
or service and the point at which they purchase or reject it. For instance,
when the concept of Home Land super market was introduced by Asha
Chavan in Pune, apart from offering a variety of quality products, also
give an unconditional guarantee of replacement or refund, home delivery
of all, even single item telephonic orders at no extra cost. And beyond
business, Homeland also offers free services like phone, electricity,
credit card and cell phone bill payments.
b) The identification of adopter categories: The concept of adopter
categories involves a classification scheme that indicates where a
consumer stands in relation to other consumers in terms of time. Five
adopter categories are frequently used viz., innovators, early adopters,
early majority, late majority, and laggards. Let us discuss about these
categories later in the chapter.
c) The rate of adoption: The rate of adoption is concerned with how long
it takes a new product or service to be adopted by members of a social
system i.e., how quickly it takes a new product to be accepted by those
who will ultimately adopt it.
Type of Time
Meaning
Examples
If you look at your car`s fuel meter
Time between awareness and
Purchase time
and it reads Empty you stop at
purchase
the next petrol pump you come to.
If you are shopping for your second
A classification scheme that car, you may take a while to make
Adopter
indicates where a consumer a purchase, as long as your present
categories
stands, in relation to others, car is working fine. Innovators are
when adopting a new product the first to adopt a new product,
and laggards are the last
Black-and-white TVs were adopted
How long it takes a new by consumers much more quickly
product or service to be than their manufacturers had
Rate of adoption adopted by members of a envisioned; in contrast, trash
social system
compactors have never been widely
adopted
Table 4.4. Importance of Time in the Diffusion process
Fig. 4.3. Adoption and Diffusion of Innovation Process
The marketing objective for launching new products is to gain wide acceptance
from the market as quickly as possible. So as to obtain huge market share with
the new product, marketers either adopt a Penetrating strategy, i.e., low
introductory price to discourage competitors from entering the market or go for
a Skimming strategy.
Influence of Product Characteristics on diffusion
The rate of spread of innovation depends on a number of factors listed below:
1. Type of group: Some groups, who are young, affluent and highly
educated, accept changes faster than the old, traditional and poor groups.
This shows that the target market is an important determinant of the rate
of diffusion.
2. Perceived risk: The more the risk associated with changing to new
innovation, the slower is the rate of diffusion. The risk consists of the
product not performing as expected, the risk of the consequences of
change-over, and the risk of reverting back to the old product, if not
satisfied with the innovative product.
3. Type of decision: An individual vs. a collective decision. Individual
decisions lead to faster diffusion than collective ones.
4. Marketing effort: This also affects the diffusion process. More
aggressive marketing effort, consisting of high and continuous
advertising expenditure, diffuses faster than otherwise.
5. Trial: The trial can be taken at low cost and low risk, the diffusion is
faster. Some products can be borrowed, rented or, their trial can be taken
at retail outlets. These products like medicines and other low priced
items have faster diffusion. These days even car outlets are giving free
trials and rides to prospective customers, to make their new models of
cars diffuse faster.
6. Fulfillment of felt need: The faster a need is satisfied or fulfilled by a
product, the greater is the rate of its diffusion.
7. Compatibility: The more the product is compatible with the beliefs,
attitudes and values of the individual or group the faster the diffusion -
vegetables soup for vegetarians, ordinary microwave no roasting.
8. Relevant advantage: The advantage could be of price, quality, ease of
handling, product quality. To have quick diffusion, the product must
offer either a price advantage or a performance advantage. Washing
machine is expensive, but a labour saving device.
9. Complexity: If the product is complex (difficult to understand and use)
the diffusion is slower. The product may be complex but its use must be
easy. Complexity may be because of many attributes (at- tributes
complexity which are difficult to under- stand). The other complexity
may be trade off complexity. The trade off takes place between cost of
purchase and economy. Convenience vs. space or speed of cooking, vs.
quality of cooking, as in microwave ovens.
10. Observability: The more easily the positive effects of the products can be
observed, the more discussion takes place and faster the diffusion
process, e.g. cell phones.
Classification of Adopters
Adopters can be classified into five groups based on the time when they adopt.
Innovators: The first 2.5 per cent to adopt innovation.
Early adopters: The next 13.5 per cent to adopt.
Early majority: The next 34 per cent to adopt.
Late majority: The next 34 per cent to adopt.
Laggards: The final 16 per cent to adopt.
Innovators
Innovators are venturesome risk takers. They are younger, more educated and
socially mobile. They have the capacity to absorb risk associated with the new
product. They are cosmopolitan in outlook, are aware and make use of
commercial media, and are eager to learn about new products, are progressive,
ready to use new products.
Early adopters
They take a calculated risk before investing and using new innovations. They
are opinion leaders and provide information to groups, but they are also
concerned about failure. Therefore, they weigh advantages and disadvantages of
the product before plunging in for a purchase.
Early majority
They tend to be more continuous and use the product after the innovators and
early adopters seem to be satisfied with it. They are elders, well educated and
less socially mobile. They rely heavily on inter-personal source of in- formation.
They constitute 34 per cent of the consumers.
Late majority
They are doubtful and skeptical about the innovation of new products. They tend
to use the product not so much because of innovation, but because of other
pressures, non-availability of the product and social pressures. They have less
social status, and are less socially mobile than the previous group.
Laggards
They are more traditional. They possess limited social interaction and are
oriented to the past. They adopt the innovations with great reluctance. They
constitute a small portion of 16 per cent of the consumers.
As depicted in figure 4.4 below adopter categories are generally depicted as
taking on the characteristics of a normal distribution i.e., a bell-shaped curve
that describes the total population that ultimately adopts a product.
Figure 4.4 ? Stages of Diffusion
Non adopter Categories
A classification of the non-adopter categories would include:
a. The unaware group: Those consumers who are not aware of the new
product
b. Symbolic rejectors: Who, though aware of the product, have decided
against buying it.
c. Symbolic adopters: Who know the product will be useful or them but
have not tried it.
d. Trial adopters: Who have tried the product and also rejected the
same.
e. Trial rejectors
Relative percentage
Adopter
within which the
Description
Category
population that
eventually adopts
Venturesome-very eager to try new ideas;
acceptable if risk is daring; more
Innovators
2.5%
cosmopolite
social
relationships;
communicates with other innovators
Respect- more integrated into the local
social system; the persons to check with
Early Adopters before adopting a new idea; category
13.5%
contains greatest number of opinion
leaders; are role models
Deliberate-adopt new ideas just prior to
the average time; seldom hold leadership
Early Majority
34.0%
positions; deliberate for some time before
adopting
Skeptical-adopt new ideas just after the
average time; adopting may be both an
Late majority
economic necessity and a reaction to peer
34.0%
pressures;
innovations
approached
cautiously
Traditional-the last people to adopt an
Laggards
innovation; most localite in outlook;
16.0%
oriented to the past; suspicious of the new
Table 4.5. Adopter categories
Role of Personal Influence
Personal influence is another important factor, which plays a role in the adoption
process of new products. This refers to what effect the statements made abut a
new product` by one person will have on another person`s change in attitude or
probability. This means that based on the comments or views expressed by ones
personal friend or acquaintance one may change the decision to adopt a new
product or innovation. It is usually observed that consumers and especially
women prefer to consult one another`s friends and value the opinions expressed
by them about new products, the quality differences among the different brands,
store at which to purchase to experience shopping and so on.
Market strategy related to diffusion.
There are differences in the early purchasers or innovators and late purchasers
(Laggards). The strategy for the target market adopted is a "moving target
market" approach. First the general target market is selected, and then the focus
shifts to innovators, early adopters, early majority, late majority and laggards.
This takes place as the product keeps getting acceptance from the consumers.
There is then a change in the media and advertising themes for different target
groups.
Diffusion enhancement strategies
The idea is to find out the diffusion inhibitors and to eliminate them for the
enhancement of diffusion. For this the diffusion determinants are analysed, and
diffusion strategies framed, as given in table below.
Diffusion
Diffusion enhancement
Diffusion Determinant
inhibitor
strategies
Try other markets modern
1. Type of group
Conservative
traditional and consumer
Give guarantees, reduce risk by
2. Perceived risk
High
endorsing with credible sources
Choose media to reach all
3. Type of decision
Group
decisions deciders and provide
conflict reduction themes
Extensive
and
aggressive
4. Marketing effort
Limited
marketing effort
Distribute free samples to early
5. Trial
Difficult
adopters. Use high service
outlets
Show importance of benefits use
6. Fulfillment of felt need
Weak
extensive advertising
Stress attributes consistent with
7. Competibility
Conflict
values and norms
Lower the price-redesign the
8. Relevant advantage
Low
product
Use extensive marketing effort.
9. Complexity
High
Use skilled sales force. Use
demonstration of product
Expose the product more
10. Observability
Low
through
promotion
and
advertising
Table 4.6. Diffusion enhancement strategies
These diffusion inhibitors have to be analysed, and strategies formulated
accordingly.
Key Terms
- Opinion Leader
- Discontinuous innovation
- Opinion receiver
- Dynamically continuous
- Opinion seeker
innovation
- Two-step flow of
- Continuous innovations
communication theory
- Innovators
- Multistep flow of
- Early adopters
communication
- Early majority
- Market mavens
- Late majority
- Diffusion of innovations
- Laggards
- Diffusion process
- Enhancement strategies
- Innovations
Self Practice Questions
1) Explain Opinion leadership. Distinguish between opinion leaders and
opinion receivers.
2) What are the characteristics of an opinion leader?
3) Give an account of the profile of opinion leaders.
4) Why is an opinion leader a more important source of product
information than an advertisement for the same product?
5) Describe about the frequency and overlap of opinions in information
flow.
6) How opinion leadership does define the marketing strategy of a firm?
7) Explain diffusion of innovations.
8) Describe the various elements in the process of diffusion.
9) Explain the influence of product characteristics on diffusion.
10) Explain the various categories of adopters of products.
11) Discuss the market strategies due to diffusion for consumer behaviour.
----------------------
UNIT - III
Lesson Outline
1. Consumer perception
2. Learning
3. Attitudes
4. Motivation
5. Personality ?
6. Psychographics, values and lifestyles.
Lesson Objectives ?
After studying this section you should be able to:
Define perception and its key elements
Explain the concept of Consumer Learning
Relate the concept of consumer attitudes to purchase behavior
Understand the role of motivation in consumption behaviour
Connect individual personality to purchase decisions
Suggest how psychographical segmentation can be effectively used in
marketing
1. CONSUMER PERCEPTIONS
Perception is the process of selecting, organizing and interpreting information
inputs to produce meaning. The above definition of perception of perception
lays emphasis on certain features:
information from the environment, organizes it and then draws
significance or meaning from it.
activities; emotions, feelings etc. are based on his or her perceptions of
their surroundings or environment.
ectual and cognitive process will be
subjective in nature.
1.2 The process of perception has three sub stages -
1. Sensation? Attending to an object/event with one of five senses
2. Organisation ? Categorising by matching sensed stimulus with similar
object in memory, .g. colour
3. Interpretation? Attaching meaning to stimulus, making judgments as to
value and liking, e.g. bitter taste
People can emerge with different perceptions of the same object because of
three perceptual processes:
1. Selective attention
2. Selective distortion and
3. Selective retention.
Selective Attention. People are exposed to a tremendous amount of daily
stimuli: the average person may be exposed to over 1500 ads a day. A person
cannot possibly attend to all of these; most stimuli will be screened out.
Selective attention means that marketers have to work hard to attract consumers`
notice. A stimuli is more likely to be attended to if it is linked to an event,
satisfies current needs, intensity of input changes (sharp price drop).
Selective Distortion. Stimuli do not always come across in the way the senders
intend. Selective distortion is the tendency to twist information into personal
meanings and interpret information in a way that will fit our preconceptions.
Unfortunately, there is not much that marketers can do about selective
distortion. Advertisers that use comparative advertisements (pitching one
product against another), have to be very careful that consumers do not distort
the facts and perceive that the advertisement was for the competitor.
Selective retention. People will forget much that they learn but will tend to
retain information that supports their attitudes and beliefs. Because of selective
retention, we are likely to remember good points mentioned about competing
products. Selective retention explains why marketers use drama and repetition in
sending messages to their target market. We remember inputs that support our
beliefs, forgets those that don`t.
1.3 Elements of Perception
We will examine some of the basic concepts that underlie the perception
process.
Sensation is the immediate and direct response of the sensory organs to stimuli
(an advertisement, a package, and a brand name). A stimulus is any unit of input
to any of the senses.
Sensory receptors are the human organs (i.e., the eyes, ears, nose, mouth, and
skin) that receive sensory inputs, sight, sound, smell, taste, or touch.
Human sensitivity refers to the experience of sensation.
Sensitivity to stimuli varies with the quality of an individual`s sensory receptors
and the amount or intensity of the stimuli to which he/she is exposed.
Sensation itself depends on energy change, the difference of input.
Thus, a constant environment, whether very busy and noisy or relatively quiet,
would provide little sensation because of the lack of change, the consistent level
of stimulation.
As sensory input decreases, the ability to detect changes increases. This
ability of the human organism to accommodate itself to varying levels of
sensitivity as external conditions vary not only protects us from damaging,
disruptive, or irrelevant bombardment when the input level is high but has
important implications for marketers.
The Absolute Threshold - The lowest level at which an individual can
experience a sensation is called the absolute threshold. The point at which a
person can detect the difference between something and nothing is that
person`s absolute threshold for the stimulus. Sensory adaptation is a problem
that causes many advertisers to change their advertising campaigns regularly.
Marketers try to increase sensory input in order to cut through the daily clutter
consumers experience in the consumption of advertising. Some increase sensory
input in an effort to cut through the advertising clutter. Other advertisers try to
attract attention by decreasing sensory input.
1.4 The Differential Threshold
The minimal difference that can be detected between two stimuli is called the
difference threshold or the JND (just noticeable difference). A 19th century
German scientist named Ernst Weber discovered that the JND between two
stimuli was not an absolute amount, but an amount relative to the intensity of the
first stimulus. Weber`s law states that the stronger the initial stimulus, the
greater the additional intensity needed for the second stimulus to be perceived as
different. Also, an additional level of stimulus, equivalent to the JND must be
added for the majority of people to perceive a difference between the resulting
stimulus and the initial stimulus. Weber`s law holds for all senses and almost all
levels of intensity. Retailers use the principle in reducing prices. Markdowns
must amount to at least twenty percent to be noticed by shoppers.
1.5 The Nature and Process of Perception
Information processing is a series of activities by which stimuli are perceived,
transformed into information and stored. There are four major stages in the
information-processing model, viz., exposure, attention, interpretation and
memory. It is the first three, which constitute the perception process. Exposure
occurs when a stimulus such as an advertisement comes within range of a
person`s sensory receptor nerves-vision. Attention occurs when the receptor
nerves pass the sensation on to the brain for processing. Target customer
allocates cognitive processing capacity ?i.e. pays attention to ad. Interpretation
is the assignment of meaning to the received sensations. Target customer
interprets the message ?i.e.` message sent = message received`
Memory is the short-term use of the meaning for the immediate decision-
making and the longer-term retention of the meaning. ?Target customer stores
the advertisement and message in memory so can be accessed when needed.
Process of Perception
There is normally a linear flow from exposure to memory.
Exposure ? Attention - Interpretation ? Memory
Perceptual process
As we can see in the perceptual process in figure there is a linear flow from
exposure to memory. But, these processes occur virtually simultaneously and are
clearly interactive. It implies that our memory influences the information we are
exposed to, attend to, and the interpretation we assign. At the same time,
memory itself is being shaped by the information it is receiving. Much of the
interpreted information will not be available to active memory when the
individual needs to make a purchase decision. The perceptual process consists of
many sub processes. We can understand this by taking a note of the input-
throughput ? output approach. This approach is based on the fact that there is an
input, which when processed gives outputs. That is, the perceptual inputs will
comprise of stimuli in the environment.
1.6 Perceptual processes
Perceptual Inputs: The first process in the perceptual processes the presence of
stimuli like people, objects, events, information etc.
Perceptual mechanism: We will discuss the mechanism of perception in the
next section.
Perceptual outputs: The perceptual outputs will be the behaviour or actions of
the individuals, i.e., the resultant opinions, feelings attitudes etc.
1.7 Biases in the Perceptual Process
Selective exposure- Customers only allow exposure to a small number of
the 3000 daily marketing communications e.g. zipping` and zapping`
TV commercials.
Selective attention -
inte
-
versus non-smoker interpretations of warnings on cigarette packs.
1.8 Dynamics of Perception
a. Physical stimuli from the outside environment, and internal stimuli based on
expectations, motives, and learning is based on previous experiences. Because
each person is a unique individual, with unique experiences, needs, wants,
desires, and expectations, it follows that each individual`s perceptions are also
unique.
There are three aspects to perceptions--selection, organization, and
interpretation of stimuli.
b. Individuals are very selective as to which stimuli they recognize.
c. They subconsciously organize the stimuli they do recognize according to
widely held psychological principles.
d. And they interpret such stimuli (i.e., they give meaning to them) subjectively
in accordance with their needs, expectations, and experiences.
1.8.1 Perceptual Selection
We as consumers subconsciously exercise selectivity as to the stimuli they
perceive. Which stimuli get selected depends on two major factors in addition to
the nature of the stimulus itself:
a. Consumers` previous experience as it affects their expectations.
b. Their motives at the time (their needs, desires, interests, and so on).
Each of these factors can serve to increase or decrease the probability that a
stimulus will be perceived.
The Nature of the Stimulus
Marketing stimulus contains an enormous number of variables. Examples
include:
a. Nature of the product.
b. Its physical attributes.
c. The package design.
d. The brand name.
e. The advertisements and commercials.
f. The position of a print ad or commercial.
g. The editorial environment.
Contrast is one of the most attention-compelling attributes of a stimulus.
h. Advertisers use extreme attention-getting devices to get maximum contrast
and penetrate the consumer`s perceptual screen.
i. Advertisers use color contrasts, size, etc., to create stopping power and gain
attention.
Expectations
People see what they expect to see. What they expect to see is usually based on
familiarity, previous experience, or preconditioned set expectations. Stimuli that
conflict sharply with expectations often receive more attention than those that
conform to expectations.
Motives
People tend to perceive things they need or want. The stronger the need, the
greater the tendency to ignore unrelated stimuli in the environment. An
individual`s perceptual process attunes itself more closely to those elements of
the environment that are important to that person. Marketing managers
recognize the efficiency of targeting their products to the perceived needs of
consumers.
Selective Perception
The consumer`s selection of stimuli (selective perception) from the
environment is based on the interaction of expectations and motives with the
stimulus itself. Selective exposure--consumers actively seek out messages they
find pleasant or with which they are sympathetic.
a. Consumers actively avoid painful or threatening messages. Selective
attention--consumers have a heightened awareness of the stimuli that meet their
needs or interests.
b. Consumers have a lower awareness of stimuli irrelevant to their needs.
c. People vary in terms of the kind of information in which they are interested
and the form of message and type of medium they prefer.
Perceptual defense--Threatening or otherwise damaging stimuli are less likely
to be perceived than are neutral stimuli. Individuals unconsciously may distort
information that is not consistent with their needs, values, and beliefs.
Perceptual blocking-- consumers screen out enormous amounts of advertising
by simply tuning out.
1.8.2 Perceptual Organization - People do not experience the numerous stimuli
they select from the environment as separate and discrete sensations. People
tend to organize stimuli into groups and perceive them as unified wholes.
Gestalt psychology (Gestalt, in German, means pattern or configuration) is the
name of the school of psychology that first developed the basic principles of
perceptual organization. Three of the most basic principles of perceptual
organization are figure and ground, grouping, and closure.
Figure and Ground
Stimuli that contrast with their environment are more likely to be noticed. The
simplest example is the contrast between a figure and the ground on which it is
placed. The figure is usually perceived clearly. The ground is usually perceived
as indefinite, hazy, and continuous. The figure is more clearly perceived because
it appears to be dominant--the ground appears to be subordinate and less
important. Advertisers have to plan their advertisements carefully to make sure
that the stimulus they want noted is seen as figure and not as ground.
Marketers sometimes run advertisements that confuse the consumer because
there is no clear indication of which is figure and which is ground.
Grouping
Individuals tend to group stimuli in chunks rather than as discrete bits of
information. Grouping can be used advantageously by marketers to imply
certain desired meanings in connection with their products.
Closure
Individuals have a need for closure.
a. As a result, people organize a perception so they see a complete picture.
b. If the pattern of stimuli to which they are exposed is incomplete, they tend to
perceive it as complete--they fill in the missing pieces. The very act of
completion serves to involve the consumer more deeply in the message.
1.8.3 Perceptual Interpretation
The interpretation of stimuli is uniquely individual because it is based on what
individuals expect to see in light of their previous experience. Stimuli are often
highly ambiguous.
a. When stimuli are highly ambiguous, individuals usually interpret them in such
a way that they serve to fulfill personal needs, wishes, and interests. How close a
person`s interpretations are to reality depends on the clarity of the stimulus, the
past experiences of the perceiver, and his or her motives and interests at the time
of perception.
Perceptual Distortion
With respect to perceptual distortion, individuals are subject to a number of
influences that tend to distort their perceptions.
Physical Appearances--people tend to attribute the qualities they associate with
certain people to others who may resemble them.
a. Attractive models are more persuasive and have a more positive influence on
consumer attitudes and behavior than do average-looking models.
Stereotypes--individuals tend to carry pictures in their minds of the meaning
of various kinds of stimuli.
First Impressions--these tend to be lasting but formed while the perceiver does
not know which stimuli are relevant, important, or predictive.
Jumping to Conclusions--many people tend to jump to conclusions before
examining all the relevant evidence--hearing the beginning of an ad and
drawing the incorrect conclusion.
Halo Effect--describes situations where the evaluation of a single object or
person on a multitude of dimensions is based on the evaluation of just one or a
few dimensions.
b. Consumers often evaluate an entire product line on the basis of the one
product within the product line.
c. Licensing also is based on the halo effect--associating products with a well-
known celebrity or designer name.
Consumer Imagery
Consumers attempt to preserve or enhance their self-images by buying products
they believe agree with that self-image and avoiding products that do not agree.
This is called consumer imagery. Consumers tend to shop in stores that have
images that agree with their own self-images.
Perceptual Mapping
Perceptual mapping allows marketers to determine how their products appear to
consumers in relation to competitive brands on one or more relevant
characteristics. Perceptual mapping enables the marketer to see gaps in the
positioning of all brands in the product class and to identify areas in which
consumer needs are not being adequately met.
1.9 Marketing Application of Perception.
1.9.1 Positioning of Services
Compared with manufacturing firms, service marketers face several unique
problems in positioning and promoting their offerings. Services are intangible;
image becomes a key factor in differentiating a service from its competition.
The marketing objective is to enable the consumer to link a specific image with
a specific brand name. Many service marketers have developed strategies to
provide customers with visual images and tangible reminders of their service
offerings.
1.9.2 Perceived Price
How a consumer perceives a price (perceived price)--as high, as low, as fair--
has a strong influence on both purchase intentions and purchase satisfaction.
Perception
1.9.3 Reference Prices
A reference price is any price that a consumer uses as a basis for comparison in
judging another price. Reference prices can be external or internal. An advertiser
generally uses a higher external reference price (sold elsewhere at...) in an ad
in which a lower sales price is being offered, to persuade the consumer that the
product advertised is a really good buy.
1.9.4 Perceived Quality
Consumers often judge the quality of a product (perceived quality) on the basis
of a variety of informational cues.
a) Intrinsic cues are physical characteristics of the product itself, such as size,
color, flavor, or aroma.
b) Extrinsic cues are such things as price, store image, service environment,
brand image, and promotional message.
1.9.5 Perceived Quality of Products
Intrinsic cues are concerned with physical characteristics of the product itself,
size, color, flavor, etc.
a) Consumers like to think they base quality evaluations on intrinsic cues, but in
reality, they are often unable to identify that product in a taste test.
b) In the absence of actual experience with a product, consumers often evaluate
quality on the basis of extrinsic cues, price, brand image, store image, etc.
Many consumers use country-of-origin stereotypes to evaluate products.
1.9.6 Perceived Quality of Services
It is more difficult for consumers to evaluate the quality of services than the
quality of products. Service characteristics include--intangibility, variability,
perishability, inseparability, simultaneously produced, and consumed.
Consumers are unable to compare services side-by-side as they do products, so
consumers rely on surrogate or extrinsic cues when purchasing services.
Marketers try to standardize their services in order to provide consistency of
quality. Service is consumed as it is being produced. As a result, defective
services are difficult to correct. Researchers have concluded that the service
quality that a customer perceives is a function of the magnitude and direction of
the gap between expected service and the customer`s assessment of the service
actually delivered.
1.9.7 Price/Quality Relationship
Perceived product value has been described as a trade-off between the product`s
perceived benefits (or quality) and perceived sacrifice required to acquire it. A
number of research studies support the view that consumers rely on price as an
indicator of product quality. Other studies suggest consumers are actually
relying on a well-known brand name as a quality indicator. Because price is so
often considered to be an indicator of quality, some products deliberately
emphasize a high price to underscore their claims of quality. Marketers have
used the price/quality relationship to position their products as the top-quality
offering in their product category.
b) There is a positive price/quality relationship.
c) Consumers use price as a surrogate indicator of quality if they have little
information or little confidence in their ability to make a choice.
1.9.8 Retail Store Image
Retail stores have their own images that influence the perception of the quality
of the products they carry. Studies show consumers perceive stores with small
discounts on a large number of products as having lower-priced items than
stores that offer large discounts on a small number of products. The width of
product assortment also affects retail store image. The type of product the
consumer wishes to buy influences his or her selection of retail outlet,
conversely, the consumer`s evaluation of a product often is influenced by the
knowledge of where it was bought.
1.9.9 Manufacturer's Image
Consumer imagery extends beyond perceived price and store image to the
producers themselves. Manufacturers who enjoy a favorable image generally
find that their new products are accepted more readily than those of
manufacturers who have a less favorable or even a neutral image. Today,
companies are using advertising, exhibits, and sponsorship of community events
to enhance their images.
2. CONSUMER LEARNING
Marketers are concerned with how individuals learn because they want to teach
them, in their roles as consumers, about products, product attributes, and
potential consumer benefits; about where to buy their products, how to use them,
how to maintain them, even how to dispose of them. Marketing strategies are
based on communicating with the consumer.
a) Marketers want their communications to be noted, believed, remembered, and
recalled.
b) For these reasons, they are interested in every aspect of the learning process.
There is no single, universal theory of how people learn.
There are two major schools of thought concerning the learning process: one
consists of Behavioral learning theories, the other of cognitive learning theories.
Cognitive theorists view learning as a function of purely mental processes,
although behavioral theorists focus almost exclusively on observable behaviors
(responses) that occur as the result of exposure to stimuli.
2.1 Consumer Learning
Consumer learning can be thought of as the process by which individuals
acquire the purchase and consumption knowledge and experience that they
apply to future related behavior. Several points in this definition are worth
noting.
a) First, consumer learning is a process; that is, it continually evolves and
changes as a result of newly acquired knowledge eor from actual experience.
b) Both newly acquired knowledge and personal experience serve as feedback to
the individual and provide the basis for future behavior in similar situations.
The role of experience in learning does not mean that all learning is deliberately
sought. A great deal of learning is also incidental, acquired by accident or
without much effort. The term learning encompasses the total range of learning,
from simple, almost reflexive responses to the learning of abstract concepts and
complex problem solving. c) Most learning theorists recognize the existence of
different types of learning and explain the differences through the use of
distinctive models of learning. Despite their different viewpoints, learning
theorists in general agree that in order for learning to occur, certain basic
elements must be present--motivation, cues, response, and reinforcement.
Motivation - Motivation is based on needs and goals.
a) The degree of relevance, or involvement, with the goal, is critical to how
motivated the consumer is to search for information about a product.
Uncovering consumer motives is one of the prime tasks of marketers, who try to
teach consumer segments why their product will best fulfill their needs.
Cues - If motives serve to stimulate learning, cues are the stimuli that give
direction to the motives.
a) In the marketplace, price, styling, packaging, advertising, and store displays
all serve as cues to help consumers fulfill their needs. Cues serve to direct
consumer drives when they are consistent with their expectations.
Response - How individuals react to a cue--how they behave--constitutes their
response. A response is not tied to a need in a one-to-one fashion. A need or
motive may evoke a whole variety of responses. The response a consumer
makes depends heavily on previous learning; that, in turn, depends on how
related responses were reinforced previously.
Reinforcement - Reinforcement increases the likelihood that a specific
response will occur in the future as the result of particular cues or stimuli.
2.2 Behavioral Learning Theories
Behavioral learning theories are sometimes called stimulus response theories. a)
When a person responds in a predictable way to a known stimulus, he or she is
said to have learned. Behavioral theories are most concerned with the inputs
and outcomes of learning, not the process. Two theories relevant to marketing
are classical conditioning and instrumental (or operant) conditioning.
2.2.1 Classical Conditioning
Early classical conditioning theorists regarded all organisms as passive
recipients.
a) Conditioning involved building automatic responses to stimuli. Ivan Pavlov
was the first to describe conditioning and to propose it as a general model of
how learning occurs.
b) For Pavlov, conditioned learning results when a stimulus that is paired with
another stimulus elicits a known response and serves to produce the same
response when used alone.
c) He used dogs to demonstrate his theories.
d) The dogs were hungry and highly motivated to eat.
e) Pavlov sounded a bell and then immediately applied a meat paste to the dogs`
tongues, which caused them to salivate.
f) After a sufficient number of repetitions of the bell sound, followed almost
immediately by the food, the bell alone caused the dogs to salivate.
In a consumer behavior context, an unconditioned stimulus might consist of a
well-known brand symbol (e.g., the Microsoft windows icon) that implies
technological superiority and trouble-free operation (the unconditioned
response).
Conditioned stimuli might consist of new products bearing well-known symbols.
2.2.2 Cognitive Associative Learning
Recent conditioning theory views classical conditioning as the learning of
associations among events that allows the organism to anticipate and represent
its environment. The relationship (i.e., contiguity) between the conditioned
stimulus and the unconditioned stimulus (the bell and the meat paste) influenced
the dogs` expectations, which in turn influenced their behavior salivation).
Classical conditioning is seen as cognitive associative learning not the
acquisition of new reflexes, but the acquisition of new knowledge about the
world.
Optimal conditioning--that is, the creation of a strong association between the
conditioned stimulus (CS) and the unconditioned stimulus (US)--requires
forward conditioning; that is, the CS should precede the US, repeated pairings of
the CS and the US, a CS and US that logically belong together, a CS that is
novel and unfamiliar, and a US that is biologically or symbolically salient.
Under neo-Pavlovian conditioning, the consumer can be viewed as an
information seeker who uses logical and perceptual relations among events,
along with his or her own preconceptions, to form a sophisticated representation
of the world.
2.2.3 Strategic Applications of Classical Conditioning
Three basic concepts derive from classical conditioning: repetition, stimulus
generalization, and stimulus discrimination.
1. Repetition works by increasing the strength of the association and by slowing
the process of forgetting.
a) After a certain number of repetitions retention declines.
b) This effect is known as advertising wear out and can be decreased by varying
the advertising messages.
c) Wear out may be avoided by varying the message through cosmetic variation
or substantive variation.
According to classical conditioning theorists, learning depends not only on
repetition, but also on the ability of individuals to generalize.
2. Stimulus generalization explains why imitative me too products succeed in
the marketplace: consumers confuse them with the original product they have
seen advertised.
a) It also explains why manufacturers of private label brands try to make their
packaging closely resemble the national brand leaders. The principle of stimulus
generalization is applied by marketers to product line, form, and category
extensions.
b) In product line extensions, the marketer adds related products to an already
established brand, knowing that the new product is more likely to be adopted
when it is associated with a known and trusted brand name.
i) Conversely, it is much more difficult to develop a totally new brand.
c) Marketers offer product form extensions that include different sizes, different
colors, and even different flavors.
d) Product category extensions generally target new market segments.
i) The success of this strategy depends on a number of factors.
ii) For example, if the image of the parent brand is one of quality, consumers are
more likely to bring positive associations to the new category extensions.
Family branding--the practice of marketing a whole line of company products
under the same brand name--is another strategy that capitalizes on the
consumer`s ability to generalize favorable brand associations from one product
to the next. Retail private branding often achieves the same effect as family
branding.
3. Stimulus discrimination is the opposite of stimulus generalization and results
in the selection of specific stimulus from among similar stimuli.
a) The consumer`s ability to discriminate among similar stimuli is the basis of
positioning strategy, which seeks to establish a unique image for a brand in the
consumer`s mind. The key to stimulus discrimination is effective positioning, a
major competitive advantage. b) The image, or position, that a product or
service has in the mind of the consumer is critical to its success.
c) Unlike the imitator who hopes consumers will generalize their perceptions
and attribute special characteristics of the market leader`s products to their own
products, market leaders want the consumer to discriminate among similar
stimuli. Most product differentiation strategies are designed to distinguish a
product or brand from that of competitors on the basis of an attribute that is
relevant, meaningful, and valuable to consumers. It often is quite difficult to
unseat a brand leader once stimulus discrimination has occurred.
d) In general, the longer the period of learning--of associating a brand name
with a specific product--the more likely the consumer is to discriminate, and the
less likely to generalize the stimulus. The principles of classical conditioning
provide the theoretical underpinnings for many marketing applications.
e) Repetition, stimulus generalization, and stimulus discrimination are all major
applied concepts that help explain consumer behavior.
2.3 Instrumental Conditioning
Like classical conditioning, instrumental conditioning requires a link between a
stimulus and a response. a) However, in instrumental conditioning, the stimulus
that results in the most satisfactory response is the one that is learned.
Instrumental learning theorists believe that learning occurs through a trial-and-
error process, with habits formed as a result of rewards received for certain
responses or behaviors. b) Although classical conditioning is useful in
explaining how consumers learn very simple kinds of behaviors, instrumental
conditioning is more helpful in explaining complex, goal-directed activities.
According to American psychologist B. F. Skinner, most individual learning
occurs in a controlled environment in which individuals are rewarded for
choosing an appropriate behavior. c) In consumer behavior terms, instrumental
conditioning suggests that consumers learn by means of a trial-and error process
in which some purchase behaviors result in more favorable outcomes (i.e.,
rewards) than other purchase behaviors.
d) A favorable experience is instrumental in teaching the individual to repeat a
specific behavior. Like Pavlov, Skinner developed his model of learning by
working with animals. ) In a marketing context, the consumer who tries several
brands and styles of jeans before finding a style that fits her figure (positive
reinforcement) has engaged in instrumental learning.
2.3.1 Reinforcement of Behavior
Skinner distinguished two types of reinforcement (or reward) influence, which
provided that the likelihood for a response would be repeated.
a) The first type, positive reinforcement, consists of events that strengthen the
likelihood of a specific response.
b) Negative reinforcement is an unpleasant or negative outcome that also serves
to encourage a specific behavior.
i) Fear appeals in ad messages are examples of negative reinforcement.
c) Either positive or negative reinforcement can be used to elicit a desired
response.
d) Negative reinforcement should not be confused with punishment, which is
designed to discourage behavior.
Forgetting and extinction--when a learned response is no longer reinforced, it
diminishes to the point of extinction; that is, to the point at which the link
between the stimulus and the expected reward is eliminated. a) Forgetting is
often related to the passage of time; this is known as the process of decay.
b) Marketers can overcome forgetting through repetition and can combat
extinction through the deliberate enhancement of consumer satisfaction.
Reinforcement schedules--marketers have found that product quality must be
consistently high and provide customer satisfaction with each use for desired
consumer behavior to continue. Marketers have identified three types of
reinforcement schedules: total (or continuous) reinforcement, systematic
(fixed ratio) reinforcement, and random (variable ratio) reinforcement.
Variable ratios tend to engender high rates of desired behavior and are
somewhat resistant to extinction--perhaps because, for many consumers, hope
springs eternal. Shaping--the reinforcement of behaviors that must be
performed by consumers before the desired behavior can be performed is called
shaping. a) Shaping increases the probabilities that certain desired consumer
behavior will occur.
2.4 Modeling or Observational Learning
Learning theorists have noted that a considerable amount of learning takes place
in the absence of direct reinforcement, either positive or negative, through a
process psychologists call modeling or observational learning (also called
vicarious learning). They observe how others behave in response to certain
situations (stimuli), the ensuing results (reinforcement) that occur, and they
imitate (model) the positively reinforced behavior when faced with similar
situations. a) Modeling is the process through which individuals learn behavior
by observing the behavior of others and the consequences of such behavior. b)
Their role models are usually people they admire because of such traits as
appearance, accomplishment, skill, and even social class. c) Children learn much
of their social behavior and consumer behavior by observing their older siblings
or their parents. Advertisers recognize the importance of observational learning
in their selection of models, whether celebrities or unknowns. Sometimes ads
depict negative consequences for certain types of behavior.
d) This is particularly true of public policy ads, which may show the negative
consequences of smoking, of driving too fast, or taking drugs.
2.5 Cognitive Learning Theory
Not all learning is the result of repeated trials. a) Learning also takes place as the
result of consumer thinking and problem solving. Cognitive learning is based on
mental activity. Cognitive learning theory holds that the kind of learning most
characteristic of human beings is problem solving, and it gives some control
over their environment.
Information Processing
The human mind processes the information it receives as input much as a
computer does.
a) Information processing is related to both the consumer`s cognitive ability and
the complexity of the information to be processed. Individuals differ in terms of
their ability to form mental images and in their ability to recall information. The
more experience a consumer has with a product category, the greater his or her
ability to make use of product information.
2.6 How Consumers Store, Retain, and Retrieve Information
The structure of memory--because information processing occurs in stages, it is
believed that content is stored in the memory in separate storehouses for further
processing; a sensory store, a short-term store, and a long-term store. Sensory
store--all data comes to us through our senses, however, our senses do not
transmit information as whole images. a) The separate pieces of information are
synchronized as a single image. b) This sensory store holds the image of a
sensory input for just a second or two.
c) This suggests that it`s easy for marketers to get information into the
consumer`s sensory store, but hard to make a lasting impression.
Short-term store--if the data survives the sensory store, it is moved to the short-
term store.
d) This is our working memory.
e) If rehearsal--the silent, mental repetition of material-- takes place, then the
data is transferred to the long-term store.
f) If data is not rehearsed and transferred, it is lost in a few seconds.
Long-term store--once data is transferred to the long-term store it can last for
days, weeks, or even years. Rehearsal and encoding--the amount of information
available for delivery from the short-term store to the long-term store depends
on the amount of rehearsal an individual gives to it.
g) Encoding is the process by which we select and assign a word or visual image
to represent a perceived object.
h) Learning visually takes less time than learning verbal information.
i) How much consumers encode depends on their cognitive commitment to the
intake of the information and their gender. Information overload takes place
when the consumer is presented with too much information.
j) It appears to be a function of the amount of information and time frame of that
information.
k) There are contradictory studies on what constitutes overload.
l) The difficulty is determining the point of overload. Retention--information
is constantly organized and reorganized as new links between chunks of
information are forged. m) In fact, many information-processing theorists view
the long-term store as a network consisting of nodes (i.e., concepts) with links
among them.
n) As individuals gain more knowledge they expand their network of
relationships, and sometimes their search for additional information.
o) This process is known as activation, which involves relating new data to old
to make the material more meaningful.
p) The total package of associations brought to mind when a cue is activated is
called a schema.
q) Research has found that older adults appear to be more reliant on schema-
based information processing strategies than younger adults.
r) Consumers` information search is often dependent upon how similar or
dissimilar (discrepant) presented products are to product categories already
stored in memory.
i) Consumers recode what they have already encoded to include larger amounts
of information (chunking).
s) The degree of prior knowledge is an important consideration.
t) Knowledgeable consumers can take in more complex chunks of information
than those who are less knowledgeable in the product category.
u) Information is stored in long-term memory in two ways: episodically (i.e., by
the order in which it is acquired) and semantically (according to significant
concepts).
v) Many learning theorists believe that memories stored semantically are
organized into frameworks by which we integrate new data with previous
experience.
Retrieval is the process by which we recover information from long-term
storage.
w) A great deal of research is focused on how individuals retrieve information
from memory.
x) Studies show that consumers tend to remember the product`s benefits, rather
than its attributes.
y) Motivated consumers are likely to spend time interpreting and elaborating on
information they find relevant to their needs; and are likely to activate such
relevant knowledge from long-term memory.
z) Research findings suggest that incongruent (e.g. unexpected) elements pierce
consumers` perceptual screens and improve the memorability of an ad when
these elements are relevant to the advertising message. a) Incongruent elements
that are not relevant to an ad also pierce the consumer`s perceptual screen but
provide no memorability for the product. Interference effects are caused by
confusion with competing ads and result in a failure to retrieve.
b) Advertisements for competing brands or for other products made by the same
manufacturer can lower the consumer`s ability to remember advertised brand
information.
c) There are actually two kinds of interference.
i) New learning can interfere with the retrieval of previously stored material.
ii) Old learning can interfere with the recall of recently learned material.
2.6.1 Limited and Extensive Information Processing
For a long time, consumer researchers believed that all consumers passed
through a complex series of mental and behavioral stages in arriving at a
purchase decision (extensive information processing).
a) These stages ranged from awareness (exposure to information), to evaluation
(preference, attitude formation), to behavior (purchase), to final evaluation
(adoption or rejection). This same series of stages is often presented as the
consumer adoption process. Some theorists began to realize that there were
some purchase situations that simply did not call for extensive information
processing and evaluation; that sometimes consumers simply went from
awareness of a need to a routine purchase, without a great deal of information
search and mental evaluation (limited information processing).Purchases of
minimal personal importance were called low involvement purchases, and
complex, search-oriented purchases were considered high-involvement
purchases.
2.7 Involvement Theory
Involvement theory developed from research into hemispherical lateralization or
split-brain theory.
a) The premise is that the right and left hemispheres of the brain specialize in the
kinds of information they process.
b) The left hemisphere is responsible for cognitive activities such as reading,
speaking, and attribution information processing.
c) The right hemisphere of the brain is concerned with nonverbal, timeless,
pictorial, and holistic information.
2.7.1 Involvement Theory and Media Strategy
Individuals passively process and store right-brain information.
a) Because it is largely pictorial, TV viewing is considered a right hemisphere
activity.
b) Passive learning was thought to occur through repeated exposures to low-
involvement information.
i) TV commercials were thought to produce change in consumer behavior before
it changed consumer attitudes.
c) The left hemisphere is associated with high-involvement information.
i) Print media (newspapers and magazines) are considered left hemisphere or
high-involvement activity.
Right-brain theory is consistent with classical conditioning and stresses the
importance of the visual component of advertising.
d) Recent research suggests that pictorial cues help recall and familiarity,
although verbal cues trigger cognitive functions, encouraging evaluation.
e) The right-brain processing theory stresses the importance of the visual
component of advertising, including the creative use of symbols.
f) Pictorial cues are more effective at generating recall and familiarity with the
product, although verbal cues (which trigger left-brain processing) generate
cognitive activity that encourages consumers to evaluate the advantages and
disadvantages of the product.
2.7.2 There are limitations to split-brain theory.
Research suggests the spheres of the brain do not always operate independently
of each other, but work together to process information. There is evidence that
both sides of the brain are capable of low- and high-involvement. It does seem
the right side is more cognitively oriented and the left side more affectively
oriented.
Involvement Theory and Consumer Relevance
A consumer`s level of involvement depends on the degree of personal relevance
that the product holds for the consumer.
a) High-involvement purchases are those that are very important to the
consumer in terms of perceived risk.
b) Low-involvement purchases are purchases that are no very important to the
consumer, hold little relevance, and little perceived risk.
Highly involved consumers find fewer brands acceptable (they are called narrow
categorizers); uninvolved consumers are likely to be receptive to a greater
number of advertising messages regarding the purchase and will consider more
brands (they are broad categorizers).
2.8 Central and Peripheral Routes to Persuasion
Central and peripheral routes to persuasion--the central premise is that
consumers are more likely to weigh information carefully about a product and to
devote considerable cognitive effort to evaluating it when they are highly
involved with the product category and vice versa.
a) Use of the central route to persuasion is more effective in marketing for high-
involvement purchases.
b) The peripheral route to persuasion is more effective for low-involvement
purchases.
The elaboration likelihood model (ELM) suggests that a person`s level of
involvement during message processing is the critical factor in determining the
most effective route of persuasion.
c) Thus, when involvement is high, consumers follow the central route and base
their attitudes or choices on the message arguments.
d) When involvement is low, they follow the peripheral route and rely more
heavily on other message elements to form attitudes or make product choices.
The marketing implications of the elaboration likelihood model are clear:
e) For high-involvement purchases, marketers should use arguments stressing
the strong, solid, high-quality attributes of their products--thus using the central
(i.e., highly cognitive) route.
f) For low-involvement purchases, marketers should use the peripheral route to
persuasion, focusing on the method of presentation rather than on the content of
the message(e.g., through the use of celebrity spokespersons or highly visual and
symbolic advertisements).
2.9 Measures of Involvement
Researchers have defined and conceptualized involvement in a variety of ways
including ego involvement, commitment, communication involvement, purchase
importance, extent of information search, persons, products situations, and
purchase decisions.
a) Some studies have tried to differentiate between brand involvement and
product involvement.
b) Others differentiate between situational, enduring, and response involvement.
The lack of a clear definition about the essential components of involvement
poses some measurement problems.
c) Researchers who regard involvement as a cognitive state are concerned with
the measurement of ego involvement, risk perception, and purchase importance.
d) Researchers who focus on the behavioral aspects of involvement measure
such factors as the search for and evaluation of product information.
e) Others argue that involvement should be measured by the degree of
importance the product has to the buyer. Because of the many different
dimensions and conceptualizations of involvement, it makes sense to develop an
involvement profile, rather than to measure a single involvement level.
2.10 Marketing Applications of Involvement
Involvement theory has a number of strategic applications for the marketer. f)
The left-brain (cognitive processing)/right-brain (passive processing) paradigm
seems to have strong implications for the content, length, and presentation of
both print and television advertisements. g) By understanding the nature of low-
involvement information processing, marketers can take steps to increase
consumer involvement with their ads.
Measures of Consumer Learning Market share and the number of brand-loyal
consumers are the dual goals of consumer learning.
a) Brand-loyal customers provide the basis for a stable and growing market
share.
b) Brands with larger market shares have proportionately larger groups of loyal
buyers.
Recognition and Recall Measures
Recognition and recall tests are conducted to determine whether consumers
remember seeing an ad, the extent to which they have read it or seen it and can
recall its content, their resulting attitudes toward the product and the brand, and
their purchase intentions. a) Recognition tests are based on aided recall,
although recall tests use unaided recall.
b) In recognition tests, the consumer is shown an ad and asked whether he or she
remembers seeing it and can remember any of its salient points.
c) In recall tests, the consumer is asked whether he or she has read a specific
magazine or watched a specific television show, and if so, can recall any ads or
commercials seen, the product advertised, the brand, and any salient points
about the product.
The learning processes among the customer roles
Learning
User
Buyer
Process
Payer
Cognitive
User learns about Payer learns about Buyers learn about
learning
the use of products used car prices from new stores by word
and services by the used car price of mouth and about
reading
about book
brand ratings from
them
choice etc
Classical
Food preferences Perceived fairness of Buyers are
conditioning are acquired in price
levels
is conditioned
early childhood
classically
through patronage
conditioned.
of the same
vendors.
Instrumental Users adopt new Payers buy cheap` Buyers learn they
conditioning products
and at
first,
then can get better terms
services if they experience shoddy by
changing
find
them performance
and vendors
beneficial.
learn to invest`
more.
Modeling
Users model their Budgeting decisions Buyers may switch
clothing and car mirror
those
of preferences
to
choice after people admired companies. stores and vendors
they admire.
Payers learn norms that are trendy.
for
tipping
by
observing others.
Adoption of Users
adopt Payers
adopt Buyers
adopt
innovation
product
and financing
purchase procedure
service
feature innovations
like innovations
like
innovations
credit cards, leasing buying through the
etc.
internet.
Comparison of Learning Theories
BEHAVIORIST
COGNITIVIST
Definition of Change in behaviour based on
Process of gaining or
learning
Experience.
changing insights, outlooks,
or through patterns
Conditions
Environment
Needs, interests, feelings,
that Influence
etc. of learner. S-R
learning
Learning
Conditioning in small steps.
Something must go on inside
process
Reinforcement
the learner that can't be
measured, but must be
inferred from observed
behavior. There is more to
learning than just observed
behavior
Central
We can't know students have
Something must go on inside
argument
learned unless we can measure the learner that can't be
changes in observed behavior.
measured, but must be
inferred from observed
behavior. There is more to
learning than just observed
behavior
3. CONSUMER ATTITUDES
Attitudes
An attitude describes a person`s relatively consistent evaluations, feelings, and
tendencies towards an object or an idea. Attitudes put people into a frame of
mind for liking or disliking things and moving toward or away from them.
Companies can benefit by researching attitudes toward their products.
Understanding attitudes and beliefs is the first step toward changing or
reinforcing them. Attitudes are very difficult to change. A person`s attitudes fit
into a pattern, and changing one attitude may require making many difficult
adjustments. It is easier for a company to create products that are compatible
with existing attitudes than to change the attitudes toward their products. There
are exceptions, of course, where the high cost of trying to change attitudes may
pay off.. We can now appreciate the many individual characteristics and forces
influencing consumer behaviour. Consumer choice is the result of a complex
interplay of cultural, social, personal, and psychological factors. We as
marketers cannot influence many of these; however, they help the marketer to
better understand Customer`s reactions and behaviour.
Attitudes are defined as a mental predisposition to act that is expressed by
evaluating a particular entity with some degree of favor or disfavor.
The value of attitude in marketing can be explained in terms of its importance in
prediction, diagnostic value and also as relatively inexpensive information that
is easily obtained.
3.1. Models of Attitude
We will now look at the various models of attitudes. But before looking at these
models, we have to understand the fact that many a times our attitudes depend
on the situations.
Structural models of attitudes: To understand the relationships between
attitudes and behaviour, psychologists have tried to develop models that capture
the underlying dimensions of attitude. To serve this purpose, the focus has been
on specifying the composition of an attitude to better explain or predict
behaviour.
3.1.1 Tri-component Attitude Model
According to the tri-component attitude model, attitude consists of three major
components, viz., a cognitive component, an affective component, and a
conative component.
a. The cognitive component: The cognitive component consists of a
person`s cognitions, i.e., knowledge and perceptions (about an object).
This knowledge and resulting perceptions commonly take the form of
beliefs, images, and long-term memories. A utility function representing
the weighted product of attributes and criteria would be used to develop
the final ranking and thus choice. This model represents the process used
by individuals with a strong Thinking Cognitive Style.
b. The affective component: The affective component of an attitude
comprises of the consumers emotions or feelings (toward an object).
These emotions or feelings are frequently treated by consumer
researchers as primarily evaluative in nature; i.e., they capture an
individual`s direct or global assessment of the attitude-object, which
might be positive, negative, or mixed reaction consisting of our feelings
about an object. Buying of any product or service would be
accomplished on the basis of how each product/service makes the
decision maker feel. The product that evokes the greatest positive
(pleasurable) affective response would thus be ranked first. The affective
response may be derived through association (i.e, category attributes) or
directly attributed to the interaction between the product or service and
the decision maker. It is believed that the manner in which the
product/service affirms or disaffirms the self-concept of the decision
maker has a strong impact to the decision maker`s affect response to the
candidate. This model represents the process used by individuals with a
strong Feeling Cognitive Style. Ordering of the three job candidates
would be accomplished on the basis of how each candidate makes the
decision maker feel. The candidate that evokes the greatest positive
(pleasurable) affective response would thus be ranked first. The affective
response may be derived through association (i.e, category attributes) or
directly attributed to the interaction between the candidate and the
decision maker. It is believed that the manner in which the candidate
affirms or disaffirms the self-concept of the decision maker has a strong
impact to the decision maker`s affect response to the candidate.
c. The conative component: The conative component is concerned with
the likelihood or tendency of certain behavior with regard to the attitude
object. It would also mean the predisposition or tendency to act in a
certain manner toward an object
3.1.2 Multi-attribute Attitude Models
Multi-attribute attitude models portray consumers` attitudes with regard to an
attitude object as a function of consumers` perceptions and assessment of the
key attributes or beliefs held with regard to the particular attitude objects. The
three models, which are very popular, are: the attitude-toward-object model, the
attitude-toward-behaviour model, and the theory of- reasoned-action model.
1) Attitude toward object model. The attitude-toward object model is suitable
for measuring attitudes towards a product or service category or specific brands.
This model says that the consumer`s attitude toward a product or specific brands
of a product is a function of the presence or absence and evaluation of certain
product-specific beliefs or attributes. In other words, consumers generally have
favorable attitudes toward those brands that they believe have an adequate level
of attributes that they evaluate as positive, and they have unfavorable attitudes
towards those brands they feel do not have an adequate level of desired
attributes or have too many negative or undesired attributes. For instance, you
may like BMWs
2) Attitude toward behavior model: This model is the individual`s attitude
toward the object itself. The crux of the attitude-towards-behaviour model is that
it seems to correspond somewhat more closely to actual behaviour than does the
attitude-toward-object model. So taking on from liking a BMW, we may say you
are not ready to buy/drive one because you believe that you are too young/old to
do so
3) Theory of reasoned-action-model: This model represents a comprehensive
integration of attitude components into a structure that is designed to lead to
both better explanations and better predictions of behaviour. Similar to the basic
tricomponent attitude model, the theory-of-reasoned-action model incorporates a
cognitive component, an affective component, and a conative component;
however these are arranged in a pattern different from that of the tricomponent
model.
To understand intention, in accordance with this model, we also need to measure
the subjective norms that influence an individual`s intention to act. A subjective
norm can be measured directly by assessing a consumer`s feelings as to what
relevant others would think of the action being contemplated; i.e., would they
look favorably or unfavorably on the anticipated action?
2.3 Theory of Trying to Consume
The theory of trying to consume has been designed to account for the many
cases where the action or outcome is not certain, but instead reflects the
consumer`s attempts to consume or purchase. In such cases there are often
personal impediments and/or environmental impediments that might prevent the
desired action or outcome from occurring. Here again, the key point is that in
these cases of trying, the outcome is not, and cannot be assumed to be certain.
The focus here is the trying or seeking part, rather than the outcome
(consumption)
3.1.3. Attitude-toward-the-ad models
The gist of this model can be explained by the following: 1) Normally, if you
like an ad, you are more likely to purchase the advertised brand. 2) For a new
product/brand, an ad has a stronger impact onbrand attitude and purchase
intention.
3.2 Attitude Formation And Change
1. How are attitudes formed?
We examine attitude formation by dividing into three areas: how attitudes are
learned, the sources of influence on attitude formation, and the impact of
personality on attitude formation.
1. How attitudes are learned:
1) The shift from having no attitude toward a given object to having an
attitude is learned. The learning may come from information exposure,
consumers` own cognition (knowledge or belief), or experience.
2) Consumers may form an attitude before or after a purchase. 2. Sources of
influence on attitude formation: personal experience, friends and family,
direct marketing, or mass media.
3) Personality factors: such as high/low need for cognition (information
seeking), and social status consciousness
3.2.1. Learning of Attitudes
By formation of attitude, we mean a situation, where there is a shift from having
no attitude towards a given object to having some attitude toward it. This shift
from no attitude to an attitude or the formation of attitude is a result of learning.
Attitudes are generally formed through: ? Repeated exposure to novel social
objects,
? Classical conditioning,
? Operant conditioning and
? Exposure to live and symbolic models.
Consumers generally purchase new products that are associated with a favorably
viewed brand name. Their favorable attitude toward the brand name is
frequently the result of repeated satisfaction with other products produced by the
same company. In terms of classical conditioning, an established brand name is
an unconditioned stimulus that has resulted in a favorable brand attitude through
past positive reinforcement. A new product, which is yet to be linked to the
established brand, would be the conditioned impulse. For example, by giving a
new anti-wrinkle lotion the benefit of its well-known and respected family
name, Johnson & Johnson may be counting on an extension of the favorable
attitude already associated with the brand name to the new product. They are
counting on stimulus generalization from the brand name to the new product. It
has been shown by research that the fit between a parent brand like in the case
of J&J and a brand extension, for instance, J&J`s anti-wrinkle, is a function of
two factors: (1) the similarity between the pre-existing product categories
already associated with the parent brand and the new extension, and (2) the fit
or match between the images of the parent brand and the new extension. At
times, attitudes follow the purchase and consumption of a product. For example,
a consumer may purchase a brand-name product without having a prior attitude
towards it, because it is the only product available like the last bottle of shampoo
in a hotel store). Consumers sometimes make trial purchases of new brands from
product categories in which they have little personal involvement. If they find
the purchased brand to be satisfactory, then they are likely to develop a
favorable attitude toward it. Life is too complicated to predict what attitudes will
persist and which will change but early socialization experiences do shape
attitudes.
3.2.2. Sources of Influence on Attitude Formation
The formation of consumer attitudes is strongly influenced by personal
experience, the influence of family and friends, direct marketing, and mass
media. Attitudes towards goods and services are primarily formed through the
consumer`s direct experience
Personality Factors
We know that the personality of each individual is different and it plays a very
crucial role in formation of attitude. Say for example, if you have a high need
for cognition, i.e., you crave for information and enjoy thinking. Then you are
likely to form a positive attitude in response to ads or direct mail that are rich in
product related information. On the other hand, your friend Ravi, who is
relatively low in need for cognition, is more likely to form positive attitudes in
response to ads that feature an attractive model or well-known celebrity.
2. Attitude Change and Persuasion
3. Strategies of Attitude Change
Bringing about a change in the consumer attitudes is a very important strategic
consideration for us marketing people. When the product or brand is the market
leader, the marketers will work at ensuring that their customers continue to
patronize their product with the existing positive attitude. Such firms also have
to ensure that their existing loyal customers do not succumb to their
competitor`s attitude change ploys. But it is the firm whose is not the brand
leader, which tries to adopt marketing strategies so as to change the attitudes of
the market leaders, customers and win them over. Among the attitude change
strategies that are available to them are:
1. Changing the consumer`s basic motivational function
2. Associating the product with an admired group or event
3. Resolving two conflicting attitudes
4. Altering components of the Multi-attribute model, and
5. Changing consumer beliefs about competitor`s brands.
Now let us look at each of these strategies in greater details.
1. Changing the basic motivational function:
This strategy calls for changing consumer attitudes towards a product or brand
by making a new need prominent. One such method changing motivation is
called the functional approach. As per this approach, attitudes can be classified
in terms of four functions, viz:
1. The utilitarian function
2. The ego defensive function
3. The value - expressive function
4. The Knowledge function.
The utilitarian function: A consumer develops a brand attitude because of its
utility. In other words; we develop a favorable altitude towards a product
because of its utility function. So marketers try to change consumer attitudes in
favor of their products or brand by highlighting its utilitarian purpose, which
they (the competitors consumers;) may not have considered.
Ego defensive function: Most individuals want to protect their self-image. They
want re-assurance about their self-image from inner feelings or doubts. Firms
marketing personal care and cosmetics try to appeal to this need and develop a
favorable attitude change towards their products or brands by communicating a
re-assurance to the consumers self concept
The value expressive function: A. consumer develops an attitude based on his
general value, life style and outlook. If the target consumers hold a positive
attitude towards being fashionable, then they will have a positive attitude
towards high fashion clothes
The knowledge function: Human nature is such that individuals prefer to know
and understand the people and things they are in contact. While product
positioning, marketers try to do this and improve the consumers attitude towards
their product or brand by highlighting its benefits over competing brands.
2. Associating the product with an admired group or event
At times attitudes come to be attached to certain groups, social events or causes.
So marketers could try strategies whereby their product or service comes to be
associated with certain events, social groups or causes.
3. Resolving two conflicting attitudes
Marketers also try to take advantage of actual or potential conflict between
attitudes. At times firms make consumers see that their attitudes towards a brand
is in conflict with another attitude, and then they maybe inclined to change their
evaluation of the brand.
4. Altering components of the Multi-attribute model
In the earlier lesson we discussed a number of Multi-attribute models, which
have implication for attitude change strategies. To be more precise, these models
provide us with additional insights as to how to bring about attitudinal change:
(1) Changing the relative evaluation of attributes
(2) Changing brand beliefs
(3) Adding an attribute, and
(4) Changing the overall brand rating
(1) Changing the relative evaluation of attributes
Consumer markets can be segmented in the same product category according to
brands that offer different features or beliefs.
(2) Changing brand beliefs
This calls for changing attitudes of consumers by changing beliefs or
perceptions about the brand itself.
(3) Adding an attribute
This means either adding an attitude that p previously has been ignored or one
that represents an improvement or technological innovation.
(4) Changing the overall brand rating
Altering the consumers overall assessment of the brand directly without
attempting to improve or change their evaluation of a single brand attribute.
Usually this strategy is used by using some form of global statement like this
is the largest selling brand
(5) Changing consumer beliefs about competitor's brands
Usually it is seen that the attitude change agent is a well respected agent
authority or peer group. The amount of attitude change is related to the
credibility of the source of the message. The major purpose of changing
attitudes is to eventually change consumer behavior. Thus an understanding of
consumer attitudes towards their product will enable the marketer to adopt
suitable strategies and create a positive image or attitude for that matter of their
products in the minds of the consumer. Behavior Can Precede or Follow
Attitude Formation
3.3 Cognitive Dissonance Theory
According to cognitive dissonance theory, discomfort or dissonance occurs
when a consumer holds confusing thoughts about a belief or an attitude object
(either before or after the purchase).
Post purchase dissonance occurs after the purchase.
The consumer is not happy with the purchase--so they adjust their attitudes to
conform to their behavior. Post purchase dissonance is quite normal. Attitude
change is frequently an outcome of an action or behavior. Dissonance propels
consumers to reduce the unpleasant feelings created by the rival thoughts.
Tactics that consumers can use to reduce dissonance include reduction:
By rationalizing the decision as being wise. By seeking out advertisements that
support the original reason for choosing the product. By trying to sell friends
on the positive features of the brand. By looking to known satisfied owners for
reassurance. Marketers can help reduce post purchase uncertainty by aiming
specific messages at reinforcing consumer decisions. Beyond these dissonance-
reducing tactics, marketers increasingly are developing affinity or relationship
programs designed to reward good customers and to build customer loyalty and
satisfaction.
3.4. Attribution Theory
What does attribution theory say about attitude? Attribution theory attempts to
explain how people assign causality to events on the basis of either their own
behavior or the behavior of others.
3.4.1. Self-Perception Theory
Self-perception theory addresses individuals` inferences or judgments as to the
cause of their own behavior. In terms of consumer behavior, self-perception
theory suggests that attitudes develop as consumers look at and make judgments
about their own behavior. Internal and external attributions--attitudes develop
as consumers look at and make judgments about their own behavior. These
judgments can be divided into internal, external, and defensive attributions.
Internal attribution--giving yourself credit for the outcomes-- your ability, your
skill, or your effort.
External attribution--the purchase was good because of factors beyond your
control--luck, etc.
Defensive attribution--consumers are likely to accept credit personally for
success, and to credit failure to others or to outside events.
For this reason, it is crucial that marketers offer uniformly high quality products
that allow consumers to perceive themselves as the reason for the success; that
is, I am competent.
3.4.2 Attributions Toward Others
Every time you ask Why? about a statement or action of another or others--
a family member, a friend, a salesperson, a direct marketer, a shipping
company-- attribution toward others theory is relevant.
3.4.3 Attributions toward Things
It is in the area of judging product performance that consumers are most likely
to form product attributions toward things. Specifically, they want to find out
why a product meets or does not meet their expectations. In this regard, they
could attribute the product`s successful performance (or failure) to the product
itself, to themselves, to other people or situations, or to some combination of
these factors.
How We Test Our Attributions
We as Individuals acquire conviction about particular observations by acting
like naive scientists, that is, by collecting additional information in an attempt
to confirm (or disconfirm) prior inferences. In collecting such information, we
often use the following:
Distinctiveness--The consumer attributes an action to a particular product or
person if the action occurs when the product (or person) is present and does not
occur in its absence.
Consistency over time--Whenever the person or product is present, the
consumer`s inference or reaction must be the same, or nearly so.
Consistency over modality--The inference or reaction must be the same, even
when the situation in which it occurs varies.
Consensus--The action is perceived in the same way by othe consumers.
4. MOTIVATION
Motivation is concerned with:
Needs-the most basic human requirement
Drives-tell show these needs translate into behaviour
Goals-what these behaviour aim to achieve
4.1 Types of Needs
a. Physiological (or primary) needs: Those needs, which are innate, or
biogenics needs and sustain life. E.g., food and air
b. Psychological needs: personal competence
c. Learned (secondary or cultural) needs: acquired needs
4.2. Needs Arousal
Needs are aroused by four distinct stimuli:
(a) Physiological
(b) Cognitive (c)
(d)
4.3. What determines customer needs?
1 Personal characteristics of the individual:
Genetics ? the branch of science dealing with heredity and
chemical/biological characteristics ? E.g. food allergies
Biogenics ? characteristics that individuals possess at birth ? E.g.
gender and race
Psychogenics ? individual states and traits induced by a person`s brain
functioning ? E.g. moods and emotions.
Physical characteristics of environment: Eg-
ding
temperature, attitude and rainfall.
4.4. What determines customer wants?
1. The individual context:
?
E.g. luxury versus budget cars
? the groups and organisations that a person
belongs ? E.g. teen clothing styles
? the influence of a customer`s culture and cultural
values ? E.g. ethnic foods
2. The Environmental Context:
4.5. Maslow's Hierarchy of Needs
Abraham Maslow hypothesized that within every human being there exists a
hierarchy of five needs:
1. Physiological , 2. Safety , 3.Social, 4.Esteem , 5.Self actualization
4.6. Sheth's Five Needs
Sheth had identified five levels of needs, which we are mentioning below, with
some examples:
Functional needs ?Those needs which ssatisfy a physical/functional
purpose, e.g. soap
?Needs that Allow identification with desired group, e.g.
logos
?Those needs which, create appropriate emotions,
e.g. joy on getting gift
?The Need for knowledge/information, e.g.
newspaper
s ?The needs, which are contingent on time/place, e.g.
emergency repairs
4.7 McCLELLAND'S Three Needs Theory
As we know, having studied this before McClelland had identified three types of
needs: Need for achievement, Need for Power, and Need for affiliation
? nACH:
need for achievement: drive to excel: drive to achieve in relation to a set of
standards; to strive to succeed.
? nPOW:
need for power: the need to make others behave in a way that they would not
have behaved otherwise.
? nAFF:
need for affiliation: the desire for friendly and close interpersonal relationships.
4.8 Motives and Motivation
Now that we know about needs and wants in details , we need to now move on
the motivation. But before going into an in-depth discussion on these, we will
first understand the distinct meanings of the three interrelated terms motives,
motivating, and motivation.
Motives: Motives give direction to human behaviour. Wecan say that a motive
is an inner state that energizes, activates, or moves and directs or channels
behaviour towards the goal.
Motivating: This implies an activity engaged into by an individual, by which he
or she will channelise the strong motives in a direction that is satisfactory.
Motivation: Motivating can be described as the driving force within individuals
that impels them into action. For instance, at the basic level, our body has a need
(say hunger), which will translate into a drive (here the drive will e to obtain
food) and the goal will be to satisfy the need (in this example to fee full in the
stomach).
4.9. Positive or negative Motivation
Motivation can be either positive or negative. A positive motivation happens
when an individual experiences a driving force towards an object or person or
situation. This is also called person motivation. On the other hand, a driving
force compelling the person to move away from someone or something will be
known as negative motivation.
4.10. Consumer Motivation
The study of consumer motivation essentially addresses the question: Why do
people shop? The answer, really, is that people shop for a variety of reasons
and it is very difficult to make generalizations. Shopping for food can, on one
level, is seen as satisfying some basic survival need. The problem with that,
however, is that most of us buy far more food than we would actually need for
basic subsistence and many of the items we purchase in a supermarket are
luxuries (relatively speaking).
Personal Motives
Role Playing ? some shopping activities are associated with a particular role in
society (housewife, mother, student, etc).
Diversion ? shopping can be a form or recreation, or an escape from daily
routine.
Self-Gratification ? shopping can be mood-related, for instance where people
engage in retail therapy to cheer themselves up or alleviate depression.
Learning ? shopping is an ideal way to learn about new fashions and trends.
Physical Activity ? for some people, a stroll around the mall can be their main
form of exercise.
Sensory Stimulation ? shoppers often report that they enjoy handling
merchandise, the sounds of background music, the scents of perfume counters,
etc, and visit stores or malls to indulge in this.
Social Motives
Social Interaction ? people enjoy the opportunities for social interaction with
friends, strangers, sales staff, etc.
Peer Affiliation ? certain shops allow customers mix with key reference groups;
e.g. people with shared interests, members of a social category they either
belong to or
aspire to, etc.
Status & Authority ? shopping experiences are sometimes seen as ways of
commanding respect and attention; e.g. during encounters with sales staff.
Pleasure of Bargaining ? some shoppers love to haggle, a way of obtaining
goods at a better price or of priding oneself on the ability to make wise
purchases. The above categories are by no means mutually exclusive. Some
70% of the population visits a shopping mall at least once per week and they are
liable to do so for a variety of reasons at any one time. Shopping is certainly far
more than merely going to a store to buy a product one needs or wants ? people
often go to the mall with no intentions of spending any money at all!
4.11. Customer Moods
Moods are emotions felt less intensely and are short-lived.
? Marketing stimuli can induce positive or negative moods:
? Ambience of store or service delivery facility
? Demeanour of salesperson
? Sensory features of the product
? Tone and manner of advertising
? Content of message from salesperson or ad.
4.12. Hedonic Consumption
? The use of products/services for intrinsic enjoyment rather than to solve a
problem in the physical environment
? Hedonic consumption creates pleasure through the senses:
? Sensory pleasure from a bubble bath
? Aesthetic pleasure from an original work of art
? Emotional experience from a scary movie
? Fun and enjoyment from playing sport.
How involved with the product are most prospective buyers in the target
market segment? Involvement is used here in a more precise way than in
everyday language and refers to the degree to which people regard the product
as important and personally relevant. As indicated in the class, the more
involved a person is with a product, the more likely they are to engage all the
stages of the PDP and expend time and effort on making a choice. Conversely
the less involved they are, the more likely it is that they will do less searching
and less evaluation of alternatives. The implications of this are significant. If
people will do only a small amount of searching for information you will have
an advantage if you provide them with relevant information and make it
available to them in an appropriate way and your competitors do not. For
instance, it may be highly beneficial to offer inducements to salespeople in retail
outlets to provide information about your brand if that information alone is
largely all that is going to be used to decide which to purchase. Alternatively
one might try to influence the degree of involvement people have with a
product. For instance the linkage between toothpaste and cavity prevention
created through advertising and the advice of dentists is an attempt to increase
the importance people attach to using toothpaste.
5. PERSONALITY
The word personality` derives from the Latin word persona` which means
mask`. The study of personality can be understood as the study of masks` that
people wear. These are the personas that people not only project and display, but
also include the inner parts of psychological experience, which we collectively
call our self`.
5.1. The Nature of Personality
In our study of personality, three distinct properties are of central importance:
a) Personality reflects individual differences.
b) Personality is consistent and enduring.
c) Personality can change.
Personality Reflects Individual Differences
1. An individual`s personality is a unique combination of factors; no two
individuals are exactly alike.
2. Personality is a useful concept because it enables us to categorize consumers
into different groups on the basis of a single trait or a few traits.
Personality is Consistent and Enduring
1. Marketers learn which personality characteristics influence specific consumer
responses and attempt to appeal to relevant traits inherent in their target group of
consumers.
2. Even though an individual`s personality may be consistent, consumption
behavior often varies considerably because of psychological, socio-cultural, and
environmental factors that affect behavior.
Personality can Change
1. An individual`s personality may be altered by major life events, such as the
birth of a child, the death of a loved one, a divorce, or a major career change.
2. An individual`s personality also changes as part of a gradual maturing
process.
a) Personality stereotypes may also change over time.
b) There is a prediction, for example, that a personality convergence is occurring
between men and women.
Personality Perspectives
The different approaches or perspectives to personality are:
? Biological
? Psychoanalytic
? Dispositional
? Learning
? Humanistic
? Cognitive
5.2 Theories of Personality
There are three major theories of personality we need to discuss in this lesson.
They are:
a) Freudian theory.
b) Neo-Freudian personality theory.
c) Trait theory.
5.2.1. Freudian Theory
Sigmund Freud`s psychoanalytic theory of personality is the cornerstone of
modern psychology. This theory was built on the premise that unconscious
needs or drives, especially biological and sexual drives, are at the heart of
human motivation and personality.
Id, Superego, and Ego
The Id is the warehouse of primitive and impulsive drives, such as: thirst,
hunger, and sex, for which the individual seeks immediate satisfaction without
concern for the specific means of that satisfaction. Superego is the individual`s
internal expression of society`s moral and ethical codes of conduct.
a) The superego`s role is to see that the individual satisfies needs in a socially
acceptable fashion.
b) The superego is a kind of brake that restrains or inhibits the impulsive
forces of the id.
Ego is the individual`s conscious control which functions as an internal monitor
that attempts to balance the impulsive demands of the id and the socio-cultural
constraints of the superego. Freud emphasized that an individual`s personality is
formed as he or she passes through a number of distinct stages of infant and
childhood development. These distinct stages of infant and childhood
development are: oral, anal, phallic, latent, and genital stages. An adult`s
personality is determined by how well he or she deals with the crises that are
experienced while passing through each of these stages.
Structure of Mind: Freud's Id, Ego, and Superego
As mentioned above Freud came to see personality as having three aspects,
which work together to produce all of our complex behaviors: the id, the ego
and the superego. As you can see, the Ego and Superego play roles in each of
the conscious, subconscious, and unconscious parts of the mind. All 3
components need to be well balanced in order to have good amount of psychic
energy available and to have reasonable mental health.
Freudian Theory and Product Personality
Those stressing Freud`s theories see that human drives are largely unconscious,
and that consumers are primarily unaware of their true reasons for buying what
they buy. These researchers focus on consumer purchases and/or consumption
situations, treating them as an extension of the consumer`s personality.
5.2.2 Neo-Freudian Personality Theory
Several of Freud`s colleagues disagreed with his contention that personality is
primarily instinctual and sexual in nature. They argued that social relations are
fundamental to personality development. Alfred Adler viewed human beings as
seeking to attain various rational goals, which he called style of life, placing
emphasis on the individual`s efforts to overcome feelings of inferiority. Harry
Stack Sullivan stressed that people continuously attempt to establish significant
and rewarding relationships with others, placing emphasis on efforts to reduce
tensions.
Karen Horney focused on the impact of child-parent relationships, especially the
individual`s desire to conquer feelings of anxiety. She proposed three
personality groups: compliant, aggressive, and detached. Compliant individuals
are those who move toward others--they desire to be loved, wanted, and
appreciated. Aggressive individuals move against others--they desire to excel
and win admiration. Detached individuals move away from others--they desire
independence, self-sufficiency, and freedom from obligations. A personality test
based on the above (the CAD) has been developed and tested. It reveals a
number of tentative relationships between scores and product and brand usage
patterns. It is likely that many marketers have used some of these neo- Freudian
theories intuitively.
5.2.3. Trait Theory
Trait theory is a significant departure from the earlier qualitative measures that
are typical of Freudian and neo-Freudian theory. It is primarily quantitative or
empirical, focusing on the measurement of personality in terms of specific
psychological characteristics called traits. A trait is defined as any
distinguishing, relatively enduring way in which one individual differs from
another. Selected single-trait personality tests increasingly are being developed
specifically for use in consumer behavior studies. Types of traits measured
include:
Consumer innovativeness -- how receptive a person is to new experiences.
Consumer materialism -- the degree of the consumer`s attachment to worldly
possessions.
Consumer ethnocentrism -- the consumer`s likelihood to accept or reject
foreign-made products.
Researchers have learned to expect personality to be linked to how consumers
make their choices, and to the purchase or consumption of a broad product
category rather than a specific brand.
5.4 Personality & Consumer Diversity
Marketers are interested in understanding how personality influences
consumption behavior because such knowledge enables them to better
understand consumers and to segment and target those consumers who are likely
to respond positively to their product or service communications.
5.5 Consumer Innovativeness and Related Personality Traits.
Marketing practitioners must learn all they can about consumer innovators--
those who are likely to try new products. Those innovators are often crucial to
the success of new products. Personality traits have proved useful in
differentiating between consumer innovators and non-innovators.
Personality traits to be discussed include:
Consumer innovativeness.
Dogmatism.
Social character.
Need for uniqueness.
Optimum stimulation level.
Variety-novelty seeking.
5.5.1. Consumer Innovativeness
How receptive are consumers to new products, new services, or new practices?
Recent consumer research indicates a positive relationship between innovative
use of the Internet and buying online.
5.5.2. Dogmatism
Dogmatism is a personality trait that measures the degree o rigidity an
individual displays toward the unfamiliar and toward information that is
contrary to their established beliefs. Consumers low in dogmatism are more
likely to prefer innovative products to established ones. Consumers high in
dogmatism are more accepting of authority- based ads for new products.
5.5.3. Social Character
Social character is a personality trait that ranges on a continuum from inner-
directed to other-directed. Inner-directed consumers tend to rely on their own
inner values or standards in evaluating new products and are innovators. They
also prefer ads stressing product features and personal benefits. Other-directed
consumers tend to look to others for direction and are not innovators. They
prefer ads that feature social environment and social acceptance.
5.5.4. Need for Uniqueness
These people avoid conformity are the ones who seek to be unique!
5.5.5 Optimum Stimulation Level
Some people prefer a simple, uncluttered, and calm existence, although others
seem to prefer an environment crammed with novel, complex, and unusual
experiences. Persons with optimum stimulation levels (OSL s) are willing to
take risks, to try new products, to be innovative, to seek purchase-related
information, and to accept new retail facilities. The correspondence between an
individual`s OSL and their actual circumstances has a direct relationship to the
amount of stimulation individual`s desire. If the two are equivalent, they tend to
be satisfied. If bored, they are under stimulated, and vice versa.
5.5.6. Variety-Novelty Seeking.
This is similar to OSL. Primary types are variety or novelty seeking. There
appear to be many different types of variety seeking: exploratory purchase
behavior (e.g., switching brands to experience new and possibly better
alternatives), vicarious exploration (e.g., where the consumer secures
information about a new or different alternative and then contemplates or even
daydreams about the option), and use innovativeness (e.g., where the consumer
uses an already adopted product in a new or novel way).
The third form of variety or novelty seeking--use innovativeness--is
particularly relevant to technological changes. Consumers with high variety
seeking scores might also be attracted to brands that claim to have novel or
multiple uses or applications. Marketers, up to a point, benefit from thinking in
terms of offering additional options to consumers seeking more product variety.
Ultimately, marketers must walk the fine line between offering consumers too
little and too much choice. The stream of research examined here indicates that
the consumer innovator differs from the non-innovator in terms of personality
orientation.
5.6. Cognitive Personality Factors
Market researchers want to understand how cognitive personality influences
consumer behavior. Two cognitive personality traits have been useful in
understanding selected aspects of consumer behavior. They are:
a) Need for cognition.
b) Visualizers versus verbalizers.
5.6.1. Need for Cognition
This is the measurement of a person`s craving for or enjoyment of thinking.
Consumers who are high in NC (need for cognition) are more likely to be
responsive to the part of an advertisement that is rich in product-related
information of description. They are also more responsive to cool colors.
Consumers who are relatively low in NC are more likely to be attracted to the
background or peripheral aspects of an ad. They spend more time on print
content and have much stronger brand recall. Need for cognition seems to play a
role in an individual`s use of the Internet.
5.6.2. Visualizers versus Verbalizers
Visualizers are consumers who prefer visual information and products that stress
the visual. Verbalizers are consumers who prefer written or verbal information
and products that stress the verbal. This distinction helps marketers know
whether to stress visual or written elements in their ads. From Consumer
Materialism to Compulsive Consumption
5.7. Consumer Materialism
Materialism is a trait of people who feel their possessions are essential to their
identity. They value acquiring and showing off possessions, they are self
centered and selfish, they seek lifestyles full of possessions, and their
possessions do not give them greater happiness.
5.8 Fixated Consumption Behavior
Somewhere between being materialistic and being compulsive is being fixated
with regard to consuming or possessing. Like materialism, fixated consumption
behavior is in the realm of normal and socially acceptable behavior. Fixated
consumers` characteristics: include ? 1. A deep (possibly: passionate) interest
in a particular object or product category. 2. A willingness to go to considerable
lengths to secure additional examples of the object or product category of
interest. 3. The dedication of a considerable amount of discretionary time and
money to searching out the object or product. This profile of the fixated
consumer describes many collectors or hobbyists (e.g., coin, stamp, antique
collectors, vintage wristwatch, or fountain pen collectors).
5.9 Compulsive Consumption Behavior
Compulsive consumption is in the realm of abnormal behavior. Consumers who
are compulsive have an addiction; in some respects, they are out of control, and
their actions may have damaging consequences to them and those around them.
5.10 Brand Personality
It appears that consumers tend to ascribe various descriptive personality-like
traits or characteristics--the ingredients of brand personalities--to different
brands in a wide variety of product categories. A brand`s personality can either
be functional (provides safety) or symbolic (the athlete in all of us).
5.11 Brand Personification
A brand personification recasts consumers` perception of the attributes of a
product or service into the form of a humanlike character. It seems that
consumers can express their inner feelings about products or brands in terms of
association with a known personality. Identifying consumers` current brand-
personality link or creating one for new products are important marketing tasks.
There are five defining dimensions of a brand`s personality (sincerity,
excitement, competence, sophistication, and ruggedness), and fifteen
facets of personality that flow out of the five dimensions (e.g., down-to-earth,
daring, reliable, upper class, and outdoors).
5.12. Personality and Color
Consumers also tend to associate personality factors with specific colors. In
some cases, various products, even brands, associate a specific color with
personality-like connotations. It appears that blue appeals particularly to male
consumers. Yellow is associated with novelty, and black frequently connotes
sophistication. Many fast-food restaurants use combinations of bright colors,
like red, yellow, and blue, for their roadside signs and interior designs. These
colors have come to be associated with fast service and food being inexpensive.
In contrast, fine dining restaurants tend to use sophisticated colors like gray,
white, shades of tan, or other soft, pale, or muted colors to reflect fine leisurely
service. Consumers` like or dislike for various colors can differ between
countries.
5.13 Self and Self-image
Self-images, or perceptions of self, are very closely associated with
personality in that individuals tend to buy products and services and patronize
retailers with images or personalities that closely correspond to their own self-
images. Such concepts as one or multiple selves, self-image, and the notion of
the extended self is explored by consumer behavior researchers.
5.13.1. The Makeup of the Self-Image
A person has a self-image of him/herself as a certain kind of person.
The individual`s self-image is unique, the outgrowth of that person`s
background and experience. Products and brands have symbolic value for
individuals, who evaluate them on the basis of their consistency with their
personal pictures or images of themselves. Products seem to match one or more
of individual`s self images; other products seem totally alien. Four aspects of
self-image are:
1. Actual self-image--how consumers see themselves.
2. Ideal self-image--how consumers would like to see themselves.
3. Social self-image--how consumers feel others see them.
4. Ideal social self-image--how consumers would like others to see them.
Some marketers have identified a fifth and sixth self-image.
5. Expected self-image--how consumers expect to see themselves at some
specified future time. Ought-to self--traits or characteristics that an
individual believes it is his or her duty or obligation to possess. In
different contexts consumers might select different self images to guide
behavior. The concept of self-image has strategic implications for
marketers.
Marketers can segment their markets on the basis of relevant consumer self-
images and then position their products or stores as symbols for such self-
images.
5.13.2. The Extended Self
Consumers` possessions can be seen to confirm or extend their self-images.
The above suggests that much of human emotion can be connected to valued
possessions. Possessions can extend the self in a number of ways: actually, by
allowing the person to do things that otherwise would be very difficult or
impossible to accomplish (e.g., problem-solving by using a computer).
Symbolically, by making people feel better or bigger (e.g., receiving an
employee award for excellence). By conferring status or rank (e.g., status among
collectors of rare works of art because of the ownership of a particular
masterpiece). By bestowing feelings of immortality, by leaving valued
possessions to young family members (this also has the potential of extending
the recipients` selves). By endowing with magical powers (e.g., a cameo pin
inherited from one`s aunt might be perceived as a magic amulet bestowing luck
when it is worn).
4. PSYCHOGRAPHICS, VALUES AND LIFESTYLES
Psychographic segmentation divides the market into groups based on social
class, lifestyle and personality characteristics. It is based on the assumption that
the types of products and brands an individual purchases will reflect that persons
characteristics and patterns of living. The following are examples of
psychographic factors used in market segmentation:
Social class Is the single most used variable for research purposes, and divides
the population into groups based on a socio-economic scale.
Lifestyle Involves classifying people according to their values, beliefs, opinions,
and interests. There is no one standardised lifestyle segmentation model, instead
market research firms, and advertising agencies are constantly devising new
categories, which will best help target possible consumers of their clients
products.
Personality ? The innate characteristics in an individual that make him or her
unique. It is a picture of how a person is looked upon by others around him.
4.1. Psychographic segmentation ?
? Provides information on ? personality, motives, lifestyles, geo-demographics
? Groups consumers based on
? Activities: work, hobbies, entertainment, shopping
? Interests: family, home, community, fashion, media
? Opinions: themselves, politics, economics, culture
4.2. What is a consumer lifestyle?
It is a constellation of individual characteristics that reflect certain
behaviors Participation in groups, activities, hobbies, volunteer activities
Commitments to certain behaviors Product constellations
4.2.1. Lifestyle impacts on Consumer Analysis
What type of buying behavior is preferred?
Foundation of time use and time preferences.
Patterns of consumption are based on lifestyle
People sort themselves into groups based on what they like to do - sports,
reading, fishing, music enthusiasts
VALS (Value & lifestyle) Segmentation based on value & lifestyle
orientation -
Actualizers - successful, many resources
Fulfilleds - career oriented, practical, principles
Achievers - career-oriented, predictability
Experiencers - impulsive, young, action
Believers - strong principles, proven brands
Strivers - like achievers, fewer resources
Makers - action, DIY Strugglers: difficult life
4.3 . Social Class
society.
This means:
continuum, i.e., a range of social positions, on which each member of society
can be place. But, social researchers have divided this continuum into a small
number of specific classes. Thus, we go by this framework, social class is used
to assign individuals or families to a social-class category. We can now define
social class as The division of members of a society into a hierarchy of distinct
status classes, so that members of each class have relatively the same status and
the members of all other classes have either more or less status.
Factors showing social class differences
1. Authority
2. Income
3. Occupations and Achievement
4. Education
Characteristics of Social Classes:
1. Persons within a given social class tend to behave more alike
2. 2. Social class is hierarchical
3. Social class is not measured by a single variable but is measured as a
weighted unction of one`s occupation, income, wealth, education, status,
prestige, etc.
4. Social class is continuous rather than concrete, with individuals able to
move into a higher social class or drop into a lower class.
5. Prominent Social Classes -
Upper-Uppers
Upper-Uppers are the social elite who live on inherited wealth
and have well known families. They maintain more than one
home and send their children to the best schools. They are in
the market for jewelry, antiques, homes, and foreign
vacations. While small as group they serve as a reference
group to others to the extent that other social classes imitate
their consumption decisions.
Lower Uppers
Lower Uppers are persons who have earned high income or
wealth through exceptional ability in their profession or
business. They usually come from the middle-class. They
tend to be active in social and civic affairs and seek to buy the
symbols of social status for themselves and their children,
such as expensive cars, homes and schooling. Their ambition
is to be accepted n the upper-upper status, a status that is
more likely to be achieved by their children than themselves
Upper Middles
Upper Middles possess neither family status nor unusual
wealth. The primarily concerned with career. They have
attained
positions
as
professionals,
independent
businesspersons, and corporate managers. They believe in
education and want their children to develop professional or
administrative skills so that they will not drop into the lower
stratum. They are civic minded and are a quality market for
good clothes, homes, furniture and appliances.
middle class
The middle class is average paid white and blue-collar
workers who try to do the proper things. Often they will buy
products to keep up with the trends. The middle class
believes in spending more money on worth-while
experiences for their children and aiming them towards
professional colleges.
Working class
Working class consists of average pay blue collar workers
and those who lead a working class life-style, whatever
income, school or job they have. The working class depends
heavily on relatives for economic and emotional support, for
tips on job opportunities, advice on purchase, and for
assistance in times of trouble. The working class maintains a
sharp sex-role division and stereotyping. They are found to
have larger families than the higher classes.
Upper Lowers
Upper Lowers are working, though their living standard is
just above the poverty line. They perform unskilled work and
are poorly paid. Often they are educationally deficient.
Although they fall near the poverty line, they manage to
maintain some level of cleanliness.
Lower Lowers
Lower Lowers are visibly poverty-stricken and usually out of
work. Some are not interested in finding permanent jobs and
most are dependent in charity for income. Their homes and
possessions are dirty, ragged, and broken-down.
Impact of social class
Marketing response to customers of different economic means
-income consumer
s not perceived as long-term customers
-oriented strategies
References
1. Consumer Behavior, 7th Edition, PHI ? Leon G Shiffman & Leslie Lazar
Kanuk.
2. Consumer Behavior Roger D Blackwell, James F. Engel Paul W.
Miniard.
Questions
1. Marketers don`t create needs, needs preexist marketers, discuss the
statement
2. how can marketers use consumers failures at achieving goals to develop
advertisement for products & services?
3. How would you explain the fact that although no no two individuals
have identical personalities, personality is sometimes used in consumer
research to identify distinct & sizeable market segments
4. Discuss the application of perception management in customer value
creation.
5. How is consumer innovation related to personality traits?
6. Explain how learning is related to brand loyalty
7. What are the strategies adopted for costumer attitude change
8. How can lifestyle be used effectively as a criterion in international
market segmentation?
9. How can Maslow`s theory of motivation be applied to individual
consumer behavior?
10.Explain the common perceptual errors.
UNIT ? IV
CONSUMER BEHAVIOUR APPLICATIONS & CONSUMERISM
Consumers have so many choices to make compared to ten or even twenty years
ago. Today as always, business growth depends heavily on loyal customers who
return because they are satisfied with the product and/or service they have
received. But first companies have to bring consumers into the stores. The
companies bring consumers into the store by marketing their product. Through
out in this book you would realize that Consumer is the end all and by all. He
reigns the market. It is necessary to discuss strategic market planning and
marketing early in the course. A strategic market plan gives direction to a firm's
efforts and better enables it to understand the dimensions of marketing research,
consumer analysis, and product, distribution, promotion, and price planning.
The basic objective of this Unit is :
Strategic Marketing Planning
- to understand the meaning of Strategic Marketing Planning and its
implications an insight into the various strategies
Segmentation, Targeting and Positioning of products
- To understand the importance of market segmentation and the bases in
which it is done
- to develop a target market strategy
-
To understand positioning of a product or service and its strategies
-
Re-positioning
Perceptual mapping
- What is perceptual mapping and why is it important?
Marketing Communication
o Model, Process,
o importance in marketing
o Promotion ? a vital component in marketing communication
o Pricing ? status sign
Store Choice & shopping Behaviour
- Consumer Outlet Selection
- Consumer Shopping Behaviour
o Stages of the Consumer Buying Process
o Purchase Timing Behavior
o
In-Store stimuli, store image and loyalty
- In-store stimuli
- Behavior Basis
- Visual merchandising
- Store loyalty
Consumerism
- The meaning of consumerism
o History
o Consumerism in India
o Consumer Rights
o Consumer protection
The study of consumers helps firms and organizations improve their marketing
strategies by understanding issues such as how
The psychology of how consumers think, feel, reason, and select
between different alternatives (e.g., brands, products);
The psychology of how the consumer is influenced by his or her
environment (e.g., culture, family, signs, media);
The behavior of consumers while shopping or making other marketing
decisions;
Limitations in consumer knowledge or information processing abilities
influence decisions and marketing outcome;
How consumer motivation and decision strategies differ between
products that differ in their level of importance or interest that they entail
for the consumer; and
How marketers can adapt and improve their marketing campaigns and
marketing strategies to more effectively reach the consumer.
Understanding these issues helps us adapt our strategies by taking the consumer
into consideration. For example, by understanding that a number of different
messages compete for our potential customers` attention, we learn that to be
effective, advertisements must usually be repeated extensively. We also learn
that consumers will sometimes be persuaded more by logical arguments, but at
other times will be persuaded more by emotional or symbolic appeals. By
understanding the consumer, we will be able to make a more informed decision
as to which strategy to employ.
There are four main applications of consumer behavior:
The most obvious is for marketing strategy--i.e., for making better
marketing campaigns. For example, by understanding that consumers are
more receptive to food advertising when they are hungry, we learn to
schedule snack advertisements late in the afternoon. By understanding
that new products are usually initially adopted by a few consumers and
only spread later, and then only gradually, to the rest of the population,
we learn that (1) companies that introduce new products must be well
financed so that they can stay afloat until their products become a
commercial success and (2) it is important to please initial customers,
since they will in turn influence many subsequent customers` brand
choices.
A second application is public policy. In the 1980s, Acutance, a near
miracle cure for acne, was introduced. Unfortunately, Acutance resulted
in severe birth defects if taken by pregnant women. To get consumers`
attention, the Federal Drug Administration (FDA) took the step of
requiring that very graphic pictures of deformed babies be shown on the
medicine containers.
Social marketing involves getting ideas across to consumers rather than
selling something.
As a final benefit, studying consumer behavior should make us better
consumers.
Strategic Market Planning
A Strategic marketing plan is an outline of the methods and resources required
to achieve organizational goals within a specific target market(s).
"Describes the direction [an organization] will pursue within its chosen
environment and guides the allocation of resources and effort" - Peter Bennett,
Dictionary of Marketing Terms, AMA 1988
Strategic planning requires a general marketing orientation rather than a narrow
functional orientation. According to Prof. Mohan Kuruvilla, visiting professor
IIM (B) - All functional areas must include marketing and must be coordinated
to reach organizational goals. It is a hierarchal process, from company wide to
marketing specific. (Marketing concept, implemented from top down.)
A firm can be broken down into several strategic business units. Each Strategic
Business Units (SBU) is a division, product line, or other profit center within the
parent company.
An SBU has its own strategic plan and can be considered a separate business
entity competing with other SBU's for corporate resources.
For example Pepsico Companies SBUs include:
KFC
Pizza Hut
Mountain Dew
Lipton Tea Brands
Lays
Eg. The College of Business and Economics is an SBU of the University of
Delaware.
A strategic plan gives:
Direction and better enables the company to understand market. function
dimensions
Makes sure that each division has clear integrated goals
Different functional areas are encouraged to coordinate
Assesses SW & OT (Strengths Weakness and opportunity & Threat)
Assesses alternative actions
It is a basis for allocating company resources
A procedure to assess company performance
The strategic planning process may include the following, although this differs
from one organization to another:
Develop a SWOT analysis
Develop Mission Statement that evolves from the SWOT analysis
Develop Corporate Objectives that are consistent with the organization's
mission statement.
Develop corporate strategy to achieve the organization's objectives. [If
the organization is made up of more than one SBU, then follow loop
again for each SBU, then proceed]
Marketing (and other functional objectives) must be designed to achieve
the corporate objectives
Marketing Strategy, designed to achieve the marketing objectives.
The strategic market planning process is based on the establishment of
organizational goals and it must stay within the broader limits of the
organizations mission, that is developed taking into consideration the
environmental opportunities and threats and the companies` resources and
distinct competencies.
A firm can then assess its opportunities and develop a corporate strategy.
Marketing objectives must be designed so that they can be accomplished
through efficient use of the firm`s resources.
Corporate strategy is concerned with issues such as diversification, competition,
differentiation, interrelationships between business units and environmental
issues. It attempts to match the resources of the organization with the
opportunities and risks of the environment (SWOT). Corporate strategy is also
concerned with defining the scope and roles of the SBU's of the firm so that they
are coordinated to reach the ends desired.
Types of marketing strategies
Every marketing strategy is unique, but if we abstract from the individualizing
details, each can be reduced into a generic marketing strategy. There are a
number of ways of categorizing these generic strategies. A brief description of
the most common categorizing schemes is presented below:
Strategies based on market dominance - Market dominance is a measure of
the strength of a brand, product, service, or firm, relative to competitive
offerings. There is often a geographic element to the competitive landscape. In
defining market dominance, you must see to what extent a product, brand, or
firm controls a product category in a given geographic area.
There are several ways of calculating market dominance. The most direct is
market share. This is the percentage of the total market serviced by a firm or
brand
In this scheme, firms are classified based on their market share or dominance of
an industry. Typically there are four types of market dominance strategies:
o Leader - The market leader is dominant in its industry. It has
substantial market share and often extensive distribution
arrangements with retailers. It typically is the industry leader in
developing innovative new business models and new products
(although not always). It tends to be on the cutting edge of new
technologies and new production processes. It sometimes has
some market power in determining either price or output. Of the
four dominance strategies, it has the most flexibility in crafting
strategy. ? Eg. Colgate dental care products
o Challenger - A market challenger is a firm in a strong, but not
dominant position that is following an aggressive strategy of
trying to gain market share. It typically targets the industry leader
(for example, Pepsi targets Coke), but it could also target smaller,
more vulnerable competitors. The fundamental principles
involved are:
Assess the strength of the target competitor. Consider the
amount of support that the target might muster from allies.
Choose only one target at a time.
Find a weakness in the target`s position. Attack at this point.
Consider how long it will take for the target to realign their
resources so as to reinforce this weak spot.
Launch the attack on as narrow a front as possible. Whereas a
defender must defend all their borders, an attacker has the
advantage of being able to concentrate their forces at one
place.
Launch the attack quickly, then consolidate.
Eg. When Coca Cola was the offciail sponsorer for the Cricket
world cup, they advertised as the Official drink. Pepsi
retaliated by advertising Nothing official about it.
o Follower ? A market follower is a firm in a strong, but not
dominant position that is content to stay at that position. The
rationale is that by developing strategies that are parallel to those
of the market leader, they will gain much of the market from the
leader while being exposed to very little risk. This play it safe
strategy is how Burger King retains its position behind
McDonalds. The advantages of this strategy are:
no expensive R&D failures
no risk of bad business model
best practices are already established
able to capitalize on the promotional activities of the market
leader
no risk of government anti-combines actions
minimal risk of competitive attacks
don`t waste money in a head-on battle with the market leader
o Nicher - In this niche strategy the firm concentrates on a select
few target markets. It is also called a focus strategy. It is hoped
that by focusing ones marketing efforts on one or two narrow
market segments and tailoring your marketing mix to these
specialized markets, you can better meet the needs of that target
market. The niche should be large enough to be profitable, but
small enough to be ignored by the major industry players. Profit
margins are emphasized rather than revenue or market share. The
firm typically looks to gain a competitive advantage through
effectiveness rather than efficiency. It is most suitable for
relatively small firms and has much in common with guerrilla
marketing warfare strategies. The most successful nichers tend to
have the following characteristics:
They tend to be in high value added industries and are able to
obtain high margins.
They tend to be highly focussed on a specific market
segment.
They tend to market high end products or services, and are
able to use a premium pricing strategy.
They tend to keep their operating expenses down by spending
less on R&D, advertising, and personal selling
Eg. Mercedes Benz
Porter generic strategies - Michael Porter assessed strategy on the
dimensions of strategic scope and strategic strength. Strategic scope
refers to the breadth of market penetration while strategic strength refers
to the firm`s sustainable competitive advantage. He felt three types were
important:
o Cost leadership
o Product differentiation
o Market segmentation
In this strategy the firm concentrates on a select few target markets. It is also
called a focus strategy or niche strategy. It is hoped that by focusing your
marketing efforts on one or two narrow market segments and tailoring your
marketing mix to these specialized markets, you can better meet the needs of
that target market. The firm typically looks to gain a competitive advantage
through effectiveness rather than efficiency. It is most suitable for relatively
small firms but can be used by any company.As a focus strategy it may be used
to select targets that are less vulnerable to substitutes or where a competition is
weakest to earn above-average return on investments
Innovation strategies - This deals with the firm's rate of new product
development and business model innovation. It asks whether the
company is on the cutting edge of technology and business innovation.
There are three types:
o Pioneers
o Close followers
o Late followers
Growth strategies - In this scheme we ask the question, How should
the firm grow?. There are a number of different ways of answering that
question, but the most common gives four answers:
o Horizontal integration - In microeconomics and strategic
management, the term horizontal integration describes a type of
ownership and control. It is a strategy used by a business or
corporation that seeks to sell a type of product in numerous
markets. To get this market coverage, several small subsidiary
companies are created. Each markets the product to a different
market segment or to a different geographical area. This is
sometimes referred to as the horizontal integration of marketing.
The horizontal integration of production exists when a firm has
plants in several locations producing similar products. Horizontal
integration in marketing is much more common than horizontal
integration in production. It is contrasted with vertical integration
o Vertical integration - In microeconomics and strategic
management, the term vertical integration describes a style of
ownership and control. Vertically integrated companies are
united through a hierarchy and share a common owner. Usually
each member of the hierarchy produces a different product or
service, and the products combine to satisfy a common need. It is
contrasted with horizontal integration. Vertical integration is one
method of avoiding the hold-up problem.
One of the earliest, largest and most famous examples of vertical
integration was the Carnegie Steel company. The company
controlled not only the mills where the steel was manufactured,
but the mines where the iron ore was extracted, the coal mines
that supplied the coal, the ships that transported the iron ore and
the railroads that transported the coal to the factory, the coke
ovens where the coal was coked, etc.
o Diversification (or conglomeration) - Diversification is a
means whereby a business builds up its revenue by recognising
chances to create or obtain businesses that are not precisely
linked to the company`s existing businesses. There are three main
types of diversification: concentric, horizontal and conglomerate.
Concentric diversification results in new product lines or services
that have technological and/or marketing synergies with already
accessible product lines, even though the products may attract a
new customer base.
Horizontal diversification happens when the company develops
new products that could attract its present customer groups even
though those new products may be technologically unconnected
to the existing product lines.
Conglomerate diversification happens where there is neither
technological nor marketing synergy and required reaching new
customer groups and individuals.
o Intensification
Aggressiveness strategies ? Business strategies can be categorized in
many ways. One popular method is to assess strategies based on their
degree of aggressiveness. Aggressiveness strategies are rated according
to their marketing assertiveness, their risk propensity, financial leverage,
product innovation, speed of decision making, and other measures of
business aggressiveness. Typically the range of aggressiveness strategies
is classified into four categories: prospector, defender, analyzer, and
reactor.
o Prospector - This is the most aggressive of the four strategies. It
typically involves active programs to expand into new markets
and stimulate new opportunities. New product development is
vigorously pursued and attacks on competitors are a common
way of obtaining additional market share. They respond quickly
to any signs of market opportunity, and do so with little research
or analysis. A large proportion of their revenue comes from new
products or new markets
o Defender - This strategy entails a decision not to aggressively
pursue markets. As a result, they tend to do none of the things
prospectors do. A defender strategy entails finding, and
maintaining a secure and relatively stable market. Rather than
being on the cutting edge of technological innovation, product
development, and market dynamics, a defender tries to insulate
themselves from changes wherever possible. In their attempt to
secure this stable market they either keep prices low, keep
advertising and other promotional costs low, engage in vertical
integration, offer a limited range of products or offer better
quality or service. They tend to be slower in making decisions
and will only commit to a change after extensive research and
analysis.
o Analyser - The analyzer is in between the defender and
prospector. They take less risk and make less mistakes than a
prospector, but are less committed to stability than defenders.
Most firms are analyzers. They are seldom a first mover in an
industry but are often second or third place entrants. They tend to
expand into areas close to their existing core competency. Rather
than develop wholly new products, they make incremental
improvements in existing products. Rather than expand into
wholly new markets, they gradually expand existing markets.
They try to maintain a balanced portfolio of products with some
stable income generators and some potential winners. They watch
closely the developments in their industry but don`t act until they
are sure that the time is right.
o Reactor - A reactor has no proactive strategy. They react to
events as they occur. They respond only when they are forced to
by macroenvironmental pressures. This is the least effective of
the four strategies. It is without direction or focus.
Warfare based strategies - are a type of strategies, used in business
and marketing, that try to draw parallels between business and warfare,
and then apply the principles of military strategy to business situations.
In business we do not have enemies, but we do have competitors; and we
do not fight for land, but we do compete for market share. It is argued
that, in mature, low-growth markets, and when real GDP growth is
negative or low, business operates as a zero-sum game. One person`s
gain is possible only at another person`s expense. Success depends on
battling competitors for market share. This scheme draws parallels
between marketing strategies and military strategies. There are many
types of marketing warfare strategies, but they can be grouped into:
Offensive marketing warfare strategies - Attack the target
competitor with an objective such as liberating some of its
market share
Defensive marketing warfare strategies - Strategies intended to
maintain your market share, profitability, sales revenue, or some
other objective.
Flanking marketing warfare strategies - Operate in areas of
little importance to the competitor.
Guerrilla marketing warfare strategies - Attack, retreat, hide,
then do it again, and again, until the competitor moves on to other
markets.
A basic tenet underlying marketing strategy is that there are distinct market
segments each of which has its own needs, wants, desires, and interests.
What is a Market?
A market is: An aggregate of people who, as individuals or organizations, have
needs for products in a product class and who have the ability, willingness and
authority to purchase such products (conditions needed for an exchange).
Types of markets:
1. Consumer Intend to consume or benefit, but not to make a profit.
2. Organizational/Business For:
o Resale
o Direct use in production
o or general daily operations.
MARKET SEGMENTATION
To get a product or service to the right customer, a marketer would firstly
segment the market, then target a single segment or series of segments, and
finally position within the segment's .
Segmentation is essentially the identification of subsets of buyers within a
market who share similar needs and who demonstrate similar buyer behavior.
The world is made up from billions of buyers with their own sets of needs and
behavior. Segmentation aims to match groups of purchasers with the same set of
needs and buyer behavior. Such a group is known as a 'segment'.
The requirements for successful segmentation are:
homogeneity within the segment
heterogeneity between segments
segments are measurable and identifiable
segments are accessible and actionable
segment is large enough to be profitable.....
Eg. The market for Laptops can be segmented into ? Students, Business
Executives, IT professionals ? both backend and front end.
Criteria needed for segmentation are:
1. Segments must have enough profit potential to justify developing and
maintaining a Marketing Mix
2. Consumer must have heterogeneous (different) needs for the product.
3. Segmented consumer needs must be homogeneous (similar)
4. Company must be able to reach a segment with a Marketing Mix.
Have you seen children making choice for themselves or for the family? How do
you think they know what they want? How do marketers reach children? Yes,
today they are an important part of our market. They not only make decisions
regarding their cloths, they actually help parents make decision regarding high
priced products and services such as televisions, clubs and hotels, car, shoes etc.
The marketers use various tools to reach them- some of the media channels they
focus on:-
o Cartoons Network
o Toon Disney
o POGO
o Nickelodeon
o Cereal boxes
o Sports illustrated for kids
Look at how media has changed recently due to changing demographics etc. and
therefore the need of marketers to reach these groups.
Media must respond because they are essentially financed by the marketers or at
least heavily subsidized
Bases for Marketing Segmentation:
Geographic variables - dividing the market into zones or geographical
regions
o region of the world or country
o country size
o climate
Eg. MTR chilly or any of their items price their products
region-wise. Within Karnataka Rs.15 /100grams AND
Outside Karnataka Rs. 18/100 grams
Demographic variables - is a shorthand term for 'population
characteristics'. Demographics include race, age, income, mobility (in
terms of travel time to work or number of vehicles available),
educational attainment, home ownership, employment status, and even
location. Distributions of values within a demographic variable, and
across households, are both of interest, as well as trends over time.
Demographics are primarily used in economic and marketing research.
o age
o gender
o sexual orientation
o family size
o family life cycle
o income
o occupation
o education
o socioeconomic status is the social science of the social and
economic impacts of any product or service offering, market
intervention or other event on an economy as a whole and on the
companies, organizations and factors that influence how an
intervention is likely to change a society will be unique to each
situation, but generally may include, for example:
Prevailing economic conditions
Race or ethnicity
The level of economic development and the extent of
disparities within a society
Political stability and the relationship between
government and judiciary
Levels of education, literacy and familiarity with
technology
Maturity and openness of markets
Propensity for entrepreneurial activity
Strength of tradition in terms of beliefs and behaviours
o religion
o nationality/race
Eg.Spice Telecom has a special plan for the Youth
segment called Spice youth, they have special benefits
like 100 sms free, zero balance recharge.
Psychographic variables are any attributes relating to personality,
values, attitudes, interests, or lifestyles. They are also called IAO
variables (Interests, Attitudes, and Opinions). They can be contrasted
with demographic variables (such as age and gender), and behavioural
variables (such as usage rate or loyalty).
When a relatively complete assessment of a person or group's
psychographic make-up is constructed, this is called a psychographic
profile. Psychographic profiles are used in market segmentation and
advertising. It only relates to one form not two as geodemographic which
would relate to the geographical spread of different age groups across the
India for example. The variables are-
o personality
o life style
o value
o attitude
Behavioural variables ? are any attributes relating to the behaviour or
pattern of use of a product by the consumers.
o benefit sought
o product usage rate
o brand loyalty
o product end use
o readiness-to-buy stage
o decision making unit
When numerous variables are combined to give an in-depth understanding of a
segment, this is referred to as depth segmentation. When enough information is
combined to create a clear picture of a typical member of a segment, this is
referred to as a buyer profile. When the profile is limited to demographic
variables it is called a demographic profile (typically shortened to "a
demographic"). A statistical technique commonly used in determining a profile
is cluster analysis.
Segmentation variables should be related to consumer needs for, and
uses of, or behavior toward the product. Eg. Stereo; age not religion.
Segmentation variable must be measurable. No best way to segment the
markets. Selecting inappropriate variable limits the chances of success.
Developing a Target Market Strategy
A Product will not sell by itself; It needs the best of strategies. After drawing a
strong strategy plan, we need to develop a target market .Developing a target
market strategy has three phases:
1. Analyzing consumer demand
2. Targeting the market(s)
o Undifferentiated
o Concentrated
o Multi-segmented
3. Developing the marketing strategy
1. Selecting Target Markets by Analyzing Demand
Demand is the quantity of a good that consumers are not only willing to
purchase but also have the capacity to buy at the given price. For example, a
consumer may be willing to purchase 2 Kgs of potatoes if the price is Rs.3 per
kg. However, the same consumer may be willing to purchase only 1 Kg if the
price is Rs.5.00 per Kg. A demand schedule can be constructed that shows the
quantity demanded at each given price. It can be represented on a graph as a line
or curve by plotting the quantity demanded at each price. It can also be
described mathematically by a demand equation. The main determinants of the
quantity one is willing to purchase will typically be the price of the good, one's
level of income, personal tastes, the price of substitute goods, and the price of
complementary goods.
The capacity to buy is sometimes used to characterise demand as being merely
an alternate form of supply.
As marketers we need to aggregate consumers with similar needs. We need to
identify demand patterns. Identification of demand could be done by asking the
following questions and analyzing the same.
Do all potential customers have similar needs/desires or are there clusters? What
are the demand patterns ?
A marketer can normally identify 3 demand patterns, they are:
Homogeneous Demand-uniform, everyone demands the product
for the same reason(s). eg. A prescribed textbook for a course
Clustered Demand-consumer demand classified in 2 or more
identifiable clusters. Eg. Automobiles:
o luxury
o cheap
o Sporty
o Spacious
Diffused Demand-Product differentiation more costly and more
difficult to communicate Eg. Cosmetic market; need to offer
hundreds of shades of lipstick. Firms try to modify consumer
demand to develop clusters of at least a moderate size.
2. Targeting The Market
After analyzing the demand pattern we as marketers, can identify how the
consumers can be targeted. This would include 3 approaches in which a
marketer can target its consumers.
a) Undifferentiated Approach (Total Market Approach) ? This
approach does not differentiate the market according to any
variable. In this case a Single Marketing Mix for the entire
market identified is laid out. All consumers have similar needs
for a specific kind of product. Homogeneous market, or demand
is so diffused it is not worthwhile to differentiate, try to make
demand more homogeneous. Eg. Nirma Detergent soap ? for any
kind of stain, for any kind of person or cloth one soap.
Single Marketing Mix consists of:
1 Pricing strategy
1 Promotional program aimed at everybody
1 Type of product with little/no variation
1 Distribution system aimed at entire market
The elements of the marketing mix do not change for different consumers; all
elements are developed for all consumers.
Examples include Staple foods-sugar and salt and farm produce. This approach
is popular when large-scale production began. In today`s competitive market
this approach is out-dated and could cause a product to fail, as the competition is
very high and the availability of alternatives are very extensive.
If this approach is incorporated into an organization it must be able to develop
and maintain a single marketing mix. In this case the major objective is to
maximize sales.
b)
Market Segmentation Approach.
Indians are very price conscious people. The would like the best of products at a
very economical price. Well there is another set of people who believe the
higher the price better he quality of product. It can be understood that
Individuals with diverse product needs have heterogeneous needs.
Market segmentation is the process of dividing a total heterogeneous market into
market groups consisting of people who have relatively similar product needs,
there are clusters of needs. The purpose is to design a Marketing Mix (s) that
more precisely matches the needs of individuals in a selected market segment(s).
A market segment consists of individuals, groups or organizations with one or
more characteristics that cause them to have relatively similar product needs.
There are two Market Segmentation Strategies (remember these are strategies
and not the basis of segmentation).
c) Concentration Strategy.
A firm that does targeting of only one segment with a unique marketing mix is
referred as concentrated marketing strategy. It the company is small or new to
the field, it may decide to go for concentrated strategy. Here the complete
market is not considered as one, but instead one homogeneous segment is
selected. Eg. RECOVA ? a facial cream for women who are in the age of 30
and above.
PROS include:
It allows a firm to specialize in one product/ one market group
can focus all energies on satisfying one group's needs
A firm with limited resources can compete with larger
organizations.
CONS include:
Puts all eggs in one basket.
Small shift in the population or consumer tastes can
greatly affect the firm.
May have trouble expanding into new markets
(especially up-market).
In this strategy the objective is not to maximize sales, it is efficiency, attracting a
large portion of one section while controlling costs.
i.
Multi-segment strategy (or also called as differentiated marketing strategy)
Here targeting is inclusive of many segments using individual marketing mixes
is called differentiated marketing strategy. Here two or more segments are
sought with a Marketing Mix for each segment, different marketing plan for
each segment. This approach combines the best attributes of undifferentiated
marketing and concentrated marketing. In this strategy, the firm will try to offer
a product suitable for every purse, purpose and personality by adoption this
strategy, it hopes to strengthen the overall identification of the company with the
product category.
Example: Titan- watches ranging from Rs. 250 to more than a lakh, executive
watches to sports watches, plastic to the hardest of metal, water proof.... etc.
Marriott International:
1. Marriott Suites...Permanent vacationers
2. Fairfield Inn...Economy Lodging
3. Residence Inn...Extended Stay
4. Courtyard By Marriott...Business Travelers
PROS include:
Shift excess production capacity.
Can achieve same market coverage as with mass
marketing.
Price differentials among different brands can be
maintained Contact Lens!!
Consumers in each segment may be willing to pay
a premium for the tailor-made product.
Less risk, as the marketer is not relying on one
market.
CONS include:
Demands a greater number of production
processes.
Costs and resources and increased marketing costs
through selling through different channels and
promoting more brands, using different packaging
etc.
Must be careful to maintain the product
distinctiveness in each consumer group and guard
its overall image
POSITIONING
In marketing, positioning is the technique by which marketers try to create an
image or identity in the minds of their target market for its product, brand, or
organization. It is the 'relative competitive comparison' their product occupies in
a given market as perceived by the target market.
Positioning is something (perception) that is done in the minds of the target
market.
A product's position is how potential buyers see the product. Positioning is
expressed relative to the position of competitors. The term was coined in 1969
by Al Ries and Jack Trout in the paper "Positioning" is a game people play in
today's me-too market place" in the publication Industrial Marketing.
Simply, positioning is how your target market defines you in relation to your
competitors.
A good position is:
1. What makes you unique
2. This is considered a benefit by your target market
Both of these conditions are necessary for a good positioning. So what if you
are the only red-haired singer who only knows how to play a G minor chord?
Does your target market consider this a good thing?
Positioning is important because you are competing with all the noise out there
competing for your potential fans attention. If you can stand out with a unique
benefit, you have a chance at getting their attention.
It is important to understand your product from the customer`s point of view
relative to the competition.
Product positioning strategy
The ability to spot a positioning opportunity is a sure test of a person's marketing
ability. Successful positioning strategies are usually rooted in a product's
sustainable competitive advantage. A company that is more profitable than its
rivals is exploiting some form of competitive advantage. The benchmark for
profitability is the company's cost of capital. To consistently make profits in
excess of its cost of capital - economic rent - the company must possess some
form of sustainable competitive advantage (SCA) to derive firm specific
distinctive strategic positioning.
The most common basis for constructing a product positioning strategy are:
Positioning on specific product features
Positioning on specific benefits, needs, or solutions
Positioning on specific use categories
Positioning on specific usage occasions
Positioning on a reason to choose an offering over the competition
Positioning against another product
Positioning through product class dissociation
Positioning by cultural symbols
Product positioning process
Generally, the product positioning process involves:
1. Defining the market in which the product or brand will compete (who the
relevant buyers are)
2. Identifying the attributes (also called dimensions) that define the product
'space'
3. Collecting information from a sample of customers about their
perceptions of each product on the relevant attributes
4. Determine each products' share of mind
5. Determine each products' current location in the product space
6. Determine the target market's preferred combination of attributes
(referred to as an ideal vector)
7. Examine the fit between:
o The position of your product
o The position of the ideal vector
8. Finally, Position.
One of the main objectives of advertising and promotion is to establish what is
called mind share (or share of mind). When people think of examples of a type
or category of product, they think of a limited list (referred to as an evoked set).
Any product included in an evoked set has mind share. For example, if you are
considering purchasing a college education, you have several thousand colleges
to choose from. However your evoked set, those that you will consider, will
probably be limited to about ten. Of these ten, the colleges that you are most
familiar with will have the greatest proportion of your mind share. Marketers try
to maximize their product's share. Mind share can be established to a greater or
lesser degree depending on market segment.
A similar concept is top of mind. The more easily you remember a brand, the
closer it is to your top of mind. This implies that you have not forgotten or
buried the information.
The process is similar for positioning your company's services. Services,
however, don't have the physical attributes of products - that is, we can't feel
them or touch them or show nice product pictures. So you need to ask first your
customers and then yourself, what value do clients get from my services? How
are they better off from doing business with me? Also ask: is there a
characteristic that makes my services different? Write out the value customers
derive and the attributes your services offer to create the first draft of your
positioning. Test it on people who don't really know what you do or what you
sell, watch their facial expressions and listen for their response. When they want
to know more because you've piqued their interest and started a conversation,
you'll know you're on the right track.
Six-step template for successful positioning:
1. What position do you currently own?
2. What position do you want to own?
3. Whom you have to defeat to own the position you want.
4. Do you have the resources to do it?
5. Can you persist until you get there?
6. Are your tactics supporting the positioning objective you set?
Re-positioning involves changing the identity of a product, relative to the
identity of competing products, in the collective minds of the target market.
De-positioning involves attempting to change the identity of competing
products, relative to the identity of your own product, in the collective minds of
the target market.
PERCEPTUAL MAPPING
Perceptual mapping is a graphics technique used by marketers that attempts to
visually display the perceptions of customers or potential customers. Typically
the position of a product, product line, brand, or company is displayed relative to
their competition.
Perceptual maps can have any number of dimensions but the most common is
two dimensions. Any more is a challenge to draw and confusing to interpret.
The first perceptual map below shows consumer perceptions of various
automobiles on the two dimensions of sportiness/conservative and
classy/affordable. This sample of consumers felt Porsche was the sportiest and
classiest of the cars in the study (top right corner). They felt Plymouth was most
practical and conservative (bottom left corner).
Fig 4: 1 - Perceptual Map of Competing Products
Cars that are positioned close to each other are seen as similar on the relevant
dimensions by the consumer. For example consumers see Buick, Chrysler, and
Oldsmobile as similar. They are close competitors and form a competitive
grouping. A company considering the introduction of a new model will look for
an area on the map free from competitors. Some perceptual maps use different
size circles to indicate the sales volume or market share of the various
competing products.
Displaying consumers` perceptions of related products is only half the story.
Many perceptual maps also display consumers` ideal points. These points reflect
ideal combinations of the two dimensions as seen by a consumer. The next
diagram shows a study of consumers` ideal points in the alcohol/spirits product
space. Each dot represents one respondents ideal combination of the two
dimensions. Areas where there is a cluster of ideal points (such as A) indicates a
market segment. Areas without ideal points are sometimes referred to as demand
voids.
Fig 4:2 - Perceptual Map of Ideal Points and Clusters
A company considering introducing a new product will look for areas with a
high density of ideal points. They will also look for areas without competitive
rivals. This is best done by placing both the ideal points and the competing
products on the same map.
Some maps plot ideal vectors instead of ideal points. The map below, displays
various aspirin products as seen on the dimensions of effectiveness and
gentleness. It also shows two ideal vectors. The slope of the ideal vector
indicates the preferred ratio of the two dimensions by those consumers within
that segment. This study indicates there is one segment that is more concerned
with effectiveness than harshness, and another segment that is more interested in
gentleness than strength.
Fig 4: 3 - Perceptual Map of Competing Products with Ideal
Vectors
Perceptual maps need not come from a detailed study. There are also intuitive
maps (also called judgmental maps or consensus maps) that are created by
marketers based on their understanding of their industry. Management uses its
best judgement. It is questionable how valuable this type of map is. Often they
just give the appearance of credibility to management`s preconceptions.
When detailed marketing research studies are done methodological problems
can arise, but at least the information is coming directly from the consumer.
There is an assortment of statistical procedures that can be used to convert the
raw data collected in a survey into a perceptual map. Preference regression i,
Multi dimensional scalingii will produce either ideal points or competitor
positions. Factor analysisiii, discriminant analysisiv, cluster analysisv, and logit
analysis vican also be used. Some techniques are constructed from perceived
differences between products, others are constructed from perceived similarities.
Still others are constructed from cross price elasticity of demandvii data from
electronic scanners.
MARKETING COMMUNICATION
To be a manager is to be a communicator ? the two are inextricably linked. A
great manager needs to communicate upwards, sideways and with his/her team
all the time. Employees have a stake in the business, so it is essential that they
are kept fully informed regularly and that their views and opinions are sought.
Communication is any process in which people share information, ideas, and
feelings. It involves not only the spoken and written word, but also body
language, personal mannerisms and style, and the physical environment -
anything that adds meaning to a message. Noise - is the interference that keeps
a message from being understood or accurately interpreted.
External noise: Comes from environment. i.e. loud music, hot sun, babies...
Internal noise: Occurs in the minds of the sender receiver when their thoughts
and feelings are focused on something other than the communication at hand
Fig 4:4 Diagram from Communicating Effectively by Hybels and
Weaver
Semantic: Caused by people's emotional reaction to words.
Simply stated, the communication process involves a sender who transmits a
message through a selected channel to the receiver. A simple communication
process model is given here
FEEDBACK
g
U
Channel to
n
de
transmit the
Thought
Encoding
message
reception
Decoding
r
s
t
a
n
di
n
NOISE
Fig 4: 5 -A simple communication process model
Most problems in business are caused by poor communication. What is more,
one of the two most common reasons why employees feel demotivated is that
they don`t know what`s going on and no-one`s interested in their views. Good
communication can improve the performance of your business, so take time to
do it well.
We will take you through the following essential pointers to effective
communication:
Two-way communication
Ensure it is two-way. Many managers focus only on communications
downwards ? giving information to their people. However, for communication
to be really effective it must be two-way. You need therefore, to give
information to others and to gain information from them by asking questions.
What?
Decide what to communicate. Many managers are far too secretive. If you are
keeping something from your team, ask yourself why. There may be a good
reason, but most issues relating to the business, its performance and its future
plans should be shared. This will create a greater sense of ownership and
involvement amongst your team.
When?
Decide when to communicate. Communication should be timely. Share
information as things happen. Avoid the temptation to store up your
communication until the next monthly meeting! By then, it may seem like
history and you may have lost the opportunity to gain the input of others.
Why?
Decide why you are communicating. This will influence how best to do it. Is it
to share information? Is it to persuade? Influence? Is it to gain feedback? Is it to
prompt action?
Tailor the communication
Make it relevant to your audience. The art of good communication is to tailor
the message to the recipient. Consider, for example:
What is their reaction likely to be?
How much detail do they like to have?
How easily and quickly can they absorb information?
Are they interested in hard facts, data and substantiation?
The best communicators are those who make the effort to get it right
for their audience.
How?
Choose your method. There are lots of ways to communicate. Select the right
combination for the right circumstances. Here are a few:
Method
Pros
Cons
Telephone
Quick and easy
Usually limited to
Two-way
one-to-one
No body language
Meeting
Good way of sharing the
Takes time to
same
arrange
information with many
Reliant on the skills
people
of the
Opportunity to explore
person chairing the
and discuss
meeting
Good for gaining
Takes the time of
consensus
each participant
Good for building teams
Letter
Provides the writer with
Slower than
the opportunity to draft,
telephone or email
re-write and re-write again
One-way
until it's right
Allows copies to be taken
and kept for the record
Quick and easy
Relies on the
Information can be kept
technology
and stored
being available
Lends itself to
Can lead to over-
communicating
communicating
the same information to
eg copying
a wide audience
everything to
everyone
Presentation
Formal
Cost
Can have great impact
Time
Communicates a
Relies on the skills
consistent
of the presenter
message to a wide
audience
Informal chats
Quick and easy
Can be disruptive
Timely ? you can speak
Can exclude
as and when things happen
employees
Requires little preparation
based elsewhere
Newsletters /
Good for business-wide
Cost and time of
bulletins
communications
production
Can mix business and
people information
Can engender a feeling of
belonging and establish an
organisation culture
Notice board
Immediate
Relies on
Can have impact
employees
Reaches lots of people,
taking the time to
including visitors
look at it
Needs regular
updating
Review
Review the effectiveness of each method from time to time, to ensure that you
are using the most effective combination. For example, at the end of a team
meeting, take five minutes to conduct a review ? what went well? What could
we do differently next time?
And finally
Good communicators make the message interesting by giving a human
twist, telling a story, using analogies, giving examples.... etc.
The recall rate of the spoken word improves when supported by good
visual aids, but is still only around 30%!
Importance of Marketing Communication
It is very important o have a communication flow between the firm and the
consumer. In the absence of a direct face-to-face contact with the consumer, the
marketer has to make provisions for developing a communication flow between
them and their customers.
The Traditional view, the marketer`s held, was that they can enter into a
communication with their consumer through the development of a promotion
mix`, which includes personal selling, advertising, sales promotion and
publicity. However, in the existing competitive scenario, firms have realized
that in order to woo and win over consumers, they have to develop a multi
dimensional flow of communication network between them on one hand and
with the consumers on the other side.
While the organization performs its role as an effective communicator, the firm
is also a sender of market message and also a receiver of the market response.
Marketing Communication through products
According to Philip Kotler A product is anything that can be offered to a
market for attentions, acquisition, use or consumption that might satisfy a want
or need. It includes physical objects, services, persons, places, organizations
and ideas. So a product is said to be the carrier of messages through its package,
colour, size shape physical attributes, label and above all its brand name. The
consumer does not consider the product as a non-living thing but instead he
would assign meaning and significance to a product because of its brand
personality or brand equity or image.
Eg. Margo soap ? conveys the message of a complete neem diet for the
consumer skin and Lux soap ? feel like a star.
Price ? Status
Pricing as viewed today is the analysis of the consumer`s perception of value
and sacrifice. In certain cases the consumer`s view price as a status sign. This
is very true in premium or higher priced products. Eg. Onida`s Plasma TV.
Promotion ? A vital Component in marketing communication
By using persuasive communication, the marketer seeks to transfer a set of
meanings, feelings and tones about a product to some target audience. Such
communication will affect the consumer`s attitudes and motivation levels and
can help in formulating conceptions of the advertised brand. Through
advertising a marketer reaches the consumers by advocating the use or the
usefulness of the product. It attracts consumers, increases their curiosity
towards the product or increases the usage level of the product. Effective
communication would convert competitor`s consumers and help retain their
own consumers.
Firms use consumer oriented franchise building promotions because they re-in
force the consumer`s brand understanding. Sales promotion tools like coupons,
premium, catalog, trade fairs, exhibitions, road shows and hoardings etc.,
convey a selling message along with the deal.
Both publicity and public relation can stimulate and provide support methods to
communicate about the company and its products. They also enjoy more
credibility with the public than advertising.
STORE CHOICE & SHOPPING BEHAVIOUR
Consumer Outlet Selection
Retail evolution and consumer choice. For many products, consumers frequently
have numerous choices as to where they are going to actually obtain the product.
Although we are used to thinking of buying automobiles only from dealerships,
for example, it is today possible to buy them through brokers or fleet sales
organizations that may both (1) offer a lower price and/or (2) provide the help of
a neutral third party which does not have a vested interest in the sales of one
make over the other.
In general, the evolution of diversity in the retail scene has provided consumers
with more choice. In the old days, most consumers had access only to "general"
stores for most products. Gradually, in urban environments, specialty and
discount stores evolved. Today, a consumer may generally choose to buy most
products either at a relatively high price, frequently with a significant amount of
service, in a specialty store, or with lower service in a discount store. A special
case of the discount store is the category killer--a store that tends to specialize in
some limited area (e.g., electronics), lacking the breadth of a traditional discount
store often undercutting the traditional discount store on price (which they are
able to do because of the bargaining power that results from high buying
volumes of a narrow assortment of merchandise from the same manufacturer).
"At home" shopping and electronic commerce. During the last several decades,
the incidence of "at home" shopping has increased. The growth of catalog sales
can be traced to advances in computer technology and subsequent list
availability (as we discussed in the section of direct marketing segmentation
methods). A more recent development is Internet based marketing. Although
sales are modest in this domain at the moment, it is too early to judge the total
potential of this medium. Although many of the concerns that consumers hold
about computer crime tend to be exaggerated and/or largely unwarranted, public
fears are a major holdback. Another problem is the demographics of computer
and Internet use--the majority of U.S. consumers, and certainly the great
majority of residents of even highly industrialized countries, are not regular
Internet users. Certain products specifically aimed at heavy Internet users (e.g.,
records, software) and products/services that require a high level of
customization (e.g., airline tickets) may find good opportunities. An interesting
problem with Internet commerce, which may well have spillover effects outside
the realm of the Net, is the relative ease with which consumers may compare
prices of different retailers, resulting in intense price competition. Note that
recent legislation has limited taxation of Internet sales in the U.S., in a sense
attempting to "jump start" this innovation.
Store positioning. Positioning of retail stores is essential. In general, stores
which excel on a significant dimension seem to perform better--for example,
RPG`s food world excels through its intense customer service, while Big Bazaar
excels through its efficiency and low prices. Stores which fall somewhere in
between--e.g., Nilgiris - tend to do less well since they get "stuck in the middle"
and have to compete against both. Obviously, there is a limit to how strongly
you can move toward one extreme. For example, if Food world were to double
its prices and even double its service, that position would be untenable, and
certain extreme discount stores that offer lower prices than Big Bazaar tend not
to be successful because they are ultimately not satisfactory to consumers.
A grocery retail chain faces the following consumer behaviour issues:
1. Should there be a reduction in number of stock keeping units (SKU) for a
particular category?
2. How should the sale of non-promoted categories be looked at in judging
promotional effectiveness?
3. Is there a need to classify variety seeking behaviour?
4. How should one monitor consumption rates for packaged goods?
5. What are the long term effects of promotion on consumer behaviour?
Consumer Shopping Behaviour
Definition of Buying Behavior:
Buying Behavior is the decision processes and acts of people involved in buying
and using products.
As Marketers we need to understand our Consumer for the following reasons:
why consumers make the purchases that they make?
what factors influence consumer purchases?
the changing factors in our society.
Consumer Buying Behavior refers to the buying behavior of the ultimate
consumer. A firm needs to analyze buying behavior for:
Buyers reactions to a firms marketing strategy has a great impact on the
firms success.
The marketing concept stresses that a firm should create a Marketing
Mix (MM) that satisfies (gives utility to) customers, therefore need to
analyze the what, where, when and how consumers buy.
Marketers can better predict how consumers will respond to marketing
strategies.
Stages of the Consumer Buying Process
There are Six Stages to Consumer Buying Decision Process (For complex
decisions). Actual purchasing is only one stage of the process. Not all decision
processes lead to a purchase. All consumer decisions do not always include all 6
stages, determined by the degree of complexity.
The 6 stages are:
1. Problem Recognition(awareness of need) It is actual difference between
the desired state and the actual condition. The stage where marketers
help identify the deficit in assortment of products. Simple example
Hunger stimulates your need to eat.
This can be stimulated by the marketer through product information, in case the
consumer did not know he was deficient? Eg. When we see a commercial for a new
pair of shoes, It can stimulates your recognition that you need a new pair of shoes.
2. Information search-- can be both internal and external.
o Internal search, search your memory. This basically your
experience or things that affect you which is stored in your
memory.
o External search if you need more information. Friends and
relatives (word of mouth), Marketer dominated sources like
magazines, catalogue ; comparison shopping; public sources etc.
A successful information search leaves a buyer with possible alternatives.
Hungry, want to go out and eat, evoked set is
o Chinese food
o Indian food
o McDonalds
o Pizza Hut etc
3. Evaluation of Alternatives--This is stage when you know that you have
quite a lot of alternatives and you need to establish criteria for
evaluation, features the buyer wants or does not want. We could
Rank/weight alternatives or resume search. May decide that you want to
eat
something
spicy,
Indian
gets
highest
rank
etc.
If not satisfied with your choice then return to the search phase. Can you
think of another restaurant, next time? Look in the yellow pages etc.
Information from different sources may be treated differently. Marketers
try to influence by "framing" alternatives.
4. Purchase decision--Choose buying alternative, includes product,
package, store, method of purchase etc.
5. Purchase--May differ from decision, time lapse between point 4 & 5,
product availability. Most of the time the consumers make their purchase
decision irrational or emotional. There need not be a rational process all
the time. Eg. Ann purchased Levi Jeans just because her neighbour
purchased it and she looks good in it. Ann never wears western clothes.
In this example you can understand that Ann has been emotional when
purchasing the jeans, as she might have assumed that she will also look
good or just out of sheer jealously she has done it.
6. Post-Purchase Evaluation--In this stage it is the outcome that is looked
into. There are two major outcomes, they are Satisfaction or
Dissatisfaction. Have you heard people asking for suggestions after the
purchase, True a lot of them need the security of others who would make
comments. It is like all human beings to have doubts on the purchase.
Eg. A woman buys a pink color saree and comes home, though she likes
it she will ask her husband, her friends and every one close to her, their
opinion about the saree. This is called Cognitive Dissonance, a inner
feeling if she has made the right decision. This can be reduced by
warranties,
after
sales
communication
etc.
Another example is after eating an Indian meal, may think that really you
wanted a Chinese meal instead.
Purchase Timing Behavior
The economic assumption underlying the analysis of brand switching and
purchase timing for a single product category is the reparability of consumers`
utilities across the different product categories that constitute the basket of
goods purchased by consumers. Most grocers generally store related categories
together with the assumption that a household`s choice in one category is not
independent of its choice in the other. The decision of when to purchase one
product category might depend on the decision for a related category.
Such an understanding is useful for the retailer because it helps in getting an
idea about what kind of promotions will click with the consumers. A critical
issue when studying household purchases of multiple categories is being able to
identify the related product categories. This requires a complete characterization
of the purchase behavior of households in several different categories. Inter-
purchase time also needs to be monitored. There are several sources of the
observed correlation in the inter-purchase times across households. One source
is related to the nature of the product categories themselves that induce the
dependence. Consumers typically consume these products together and therefore
purchase them together, for example, dhoop sticks and camphor. Other sources
of the estimated correlation across categories are from (1) consumers visiting the
store only on few occasions and consequently making purchases in all categories
at the same time, like monthly purchase, (2) the retailer promoting unrelated`
categories together, which results in the joint purchases of products in different
categories, for example, a free toothbrush with a deodorant, or (3) the household
exhausts its supply of both products at the same time, which prompts joint
purchase.Interestingly, purchase timing may also be affected by the variety
seeking behavior observed in consumers.
IN-STORE STIMULI, STORE IMAGE AND LOYALTY.
In-store Choice
Consumer store choice results from a process whereby information on various
alternatives is evaluated by the consumer prior to the selection of one of these
alternatives. In the application of store choice models it is often assumed that the
information-processing strategy underlying store choice is a simultaneous one in
which all possible alternatives are evaluated by an individual. A competing
assumption, increasingly recognized in a spatial choice, is that individuals
initially evaluate clusters of alternatives and then only evaluate alternatives
within a chosen cluster.
Fierce competition has always been a hallmark of the retail industry. In recent
years, it has become even more tough, as innovative new entrants have upset the
status quo and existing retailers have become more efficient. But perhaps the
greatest challenge faced by retailers is consumers` rising expectations.
Today`s consumers have evolved into elusive, finicky targets who have many
shopping options and are harder to please. Consumers are more highly informed
than ever before and more able to compare prices and products with little time,
effort or interaction with a retailer. In addition to being more informed,
consumers also shop differently than they have before--often using a
combination of going to a physical store and shopping online. It is safe to say
that never before have consumers expected more from retailers and exhibited so
little loyalty to specific brands.
Know your customer is one of the most widely quoted maxims of business--
and for good reason. However, companies often talk about the importance of
customer knowledge while failing to put action behind their words. Why? Some
companies remember the pain involved in failed data warehousing projects or
unsuccessful attempts to persuade sales personnel to document customer
comments. Other companies engage in modest efforts, such as studying
customer profitability or implementing limited CRM software, which may
provide some efficiencies, but yield little in the way of deep customer insight.
Behavior Basis
Leading retailers, however, recognize that they must go beyond their historical
product-focused operations and become more customer focused if they are to
remain successful. But what does customer focused mean? First, retailers need
to develop an understanding of the customer that is based on customer behavior
rather than on geography or demographics. Second, they must learn to use this
information across the entire organization-- including the C-suite--and not just
in the marketing department.
The opportunity for retailers to use customer data and information to build more
profitable, lasting customer relationships is tremendous. While gathering data
can be fairly easy, making sense of it is an entirely different matter.
One of the first steps to mastering multi-channel customers is to have the
technology needed to serve them, learn about them and make better decisions
about how to reach them. The merchants can no longer be satisfied with simple
demographics such as gender or age group. They also cannot be content with a
good picture of an in-store shopper or an online shopper. Instead, the merchant
has to have information about what price levels a customer group reacts to, how
discounts on various items affect the impulse to shop and buy, and how a target
shopper reacts to various stimuli in all the channels they use. The insight into
how a group of customers react to and use different channels can be the piece of
information that allows retailers to generate loyalty, improved margins and
profitability. Compiling, organizing, analyzing and using this type of complex
data takes powerful technology.
Tying It Together
Even more important than computing power, however, is integration. Successful
retailers cannot just build better silos of customer information. The greater the
number of channels, brands, categories and products involved, the more difficult
the task of integrating and analyzing the data. Thus, retailers must create a single
view of the customer by combining information from different silos into one
complete snapshot of the consumer.
Once retailers have the technology to support and propel their efforts, they must
adopt an analytical approach to customer insights. Analytics can take customer
information and turn it into information retailers can use across all channels to
make effective decisions about pricing, merchandising, advertising, promotions
and customer service levels. This approach is based on customer behavior and
differs significantly from traditional retail CRM methods. Specifically, this
analytical approach uses methods and associated tools to analyze customer
behavior in three ways:
1. Purchasing history, such as frequency of visits and market basket
2. Promotional response to merchandising and marketing levers,
such as changes in pricing, promotion and category locations
3. Store (physical and on-line) behavior, such as the stores at which they
shop and the areas of the store in which they shop.
These dynamic behavioral insights help retailers identify and predict which
merchandising and marketing levers cause each customer group`s behavior in
each store and each channel. This approach is very different from the customer
research and demographic segmentation approaches many retailers have
depended upon in the past. It is different because it is driven by actual customer
behavior--not how customers say they will behave--and it predicts the factors
that will motivate customers to make future purchases. With this information,
retailers are prioritizing customer segments and developing detailed strategies to
influence them to buy more products, more often, and in ways that are more
profitable to the retailer.
It is worth noting, however, that although purchasing and loyalty card data is
extremely valuable in the analysis, it is not absolutely essential. In its absence,
retailers can still take a much more fact-based approach to developing customer
insights through customer segment and attitudinal analysis using existing data
and customer observation.
With the appropriate technology and analytics working for a retailer, what`s
missing in leveraging the multi-channel customer? What will propel the retailer
to the top? Customer insight is necessary, location is still important, ease of
access is a differentiator, but the new mantra may well be innovation,
innovation, innovation
Visual Merchandising (VM) is the art of presentation, which puts the
merchandise in focus. It educates the customers, creates desire and finally
augments the selling process. This is an area where the Indian textile and
clothing industry, particularly, the SMEs lack adequate knowledge and
expertise. This inadequacy is best reflected in poor presentation/display and
communication in various national and international exhibitions. Organization
often tend not to realize that the store image plays a very important role in
communication and conveying messages to its customers Marketers are trying
to deliver greater value through adopting shelfing techniques. They follow
FIFO (first in first out) techniques.
VM helps in:
educating the customers about the product/service in an effective
and creative way.
establishing a creative medium to present merchandise in 3D
environment, thereby enabling long lasting impact and recall
value.
setting the company apart in an exclusive position.
establishing linkage between fashion, product design and
marketing by keeping the product in prime focus.
combining the creative, technical and operational aspects of a
product and the business.
drawing the attention of the customer to enable him to take
purchase decision within shortest possible time, and thus
augmenting the selling process.
Store loyalty
According to American Marketing Association ? Store Loyalty is defined as-
In context to Consumer Behaviour The degree to which a consumer
consistently patronizes the same store when shopping for particular types of
products.
In context to retailing A condition in which a customer regularly patronizes a
specific retailer.
CONSUMERISM
Consumerism is a term used to describe the effects of equating personal
happiness with purchasing material possessions and consumption. It is often
associated with criticisms of consumption starting with Karl Marx and
Thorstein Veblen, but can actually be traced back to the first human
civilizations.
In economics, consumerism can also refer to economic policies that place an
emphasis on consumption, and, in an abstract sense, the belief that the free
choice of consumers should dictate the economic structure of a society (cf.
Producerism, especially in the British sense of the term).
History
Although consumerism is commonly associated with capitalism and the Western
world, it is multi-cultural and non-geographical, as seen today in Tokyo,
Singapore, Hong Kong, Shanghai, Taipei, Tel Aviv and Dubai, for example.
Consumerism, as in people purchasing goods or consuming materials in excess
of their basic needs, is as old as the first civilizations (Ancient Egypt, Babylon
and Ancient Rome, for example). Since consumerism began, various individuals
and groups have consciously sought an alternative lifestyle through simple
living.
While consumerism is not a new phenomenon, it has only become widespread
over the 20th century and particularly in recent decades, under the influence of
neoliberal capitalism and globalization.
Popular media used "Consumerist" as a short-form for "Consumer-Activist".
Webster's dictionary added "the promotion of the consumer's interests"
alongside "the theory that an increasing consumption of goods is economically
desirable" under "Consumerism".
Consumerism in India
In India, as a developing economy, it is felt that the plight of the conusmers ar
not differnet from that of the counterparts in the rest of the world. Inspite of the
fact atht not all the Indian consuemrs are well educated and hence, unable to
comprehend and understand the complex methods of marketing, they are also
exploited and very often become victims of false chlaims for products, mislead
by decptive advertisements, misled by packaginf, poor after sales service and so
on. Because of ths above felt avuses, there is observed and seen a growing
consumer awareness leading to the growth of consumerism and an increasing
demand for consumer protection in India.
Consumerism can be said to be astill in its infancy stage. But the consumer
movement is slowly gaining momentum.
Rapid rise in the consumer earnings, fall in the savings rate resulting in
generating increasing amounts of disposable income to be spent on consuemr
prducts and services. With the advent of the information age brining with it real
time images of the global life style; and thus making high spender and budget
shoppers spend lawishly on products and services.
Consumer Rights
A perfect example that I would like to put forward
Manufacturers deliberately set out to fleece consumers by using tactics like
misleading or deceptive packaging.
Despite the government of India enforcing a law by the name of Standards of
Weight and Measures Act, 1977, manufacturers blatantly flout the rules and
tamper with the packaging of the products.
The Act requires definite and conspicuous declaration of name and address of
the commodity inside, the net quantity in standard unit of weight or measure, the
date of manufacture and the maximum retail price and the expiry date. It has laid
down the standards of weights and measures or the number for different
commodities so that the commodities are packaged in a rationalised standard
quantity by weight measures or number to facilitate the purchase transaction as
also the price comparison.
Extensive research in several departments reveals the deception in the
diminutive print. Packaging of some products do not carry the manufacturing
date; some do not have expiry date on them and some brands do not convey the
warning like best before or use by. For perishable stuff, such declarations
should clearly be conveyed to the consumers.
In reality, if you ask any shopkeeper, you get a curt It is a fast-moving item.
We don`t stock anything stale. Some manufacturers entertain the buyers by
incorporating a treasure hunt for the relevant label. They print the information in
colours that merge with the plastics, emboss it so you need to run your fingers
on it, or hide it under a decorative flap.
The manufacturing date on a toothpaste tube has to be dug out of the crimped
tail. As for the expiry date on a battery cell, the number on medium or large ones
are visible under a lens, but the script on the seat of a pencil cell is beyond the
power of magnifying glass.
A well-known manufacturer gets 20% off printed in big bold letters and in
mini print it says: On the recommended retail price. Taxes extra as applicable.
This is a surreptitious way to dupe consumers in buying the product.
A large number of unidentified consumers do not get what they pay for.
Packaging sizes and container shapes for many products deceive and confuse
consumers about the amount of product they contain, and some manufacturers
have
been
increasing
package
size
while
decreasing
content.
It`s a common practice for manufacturers to tactically reduce the weight
contained in a package while keeping the size of the box, bottle, or container the
same, and misrepresent the quantity of good sold. The quantity of the product
inside the packet is not consistent with what is specified on it. It is not just a
question of grams or a few rupees but an unjust enrichment to manufacturers
and a needless loss to consumers.
Very few buyers check if the packed commodities weigh less than weight
marked on the panel. If they do so, they don`t try to question the malpractice.
Shopkeepers often do not have electronic weighing machines that can detect
small discrepancies.
As a matter of fact, the packet should weigh more than the marked weight,
because the given weight is actually the net weight of the product inside, which
is its weight before packaging. On the contrary, the weight of product inside the
packet and that of the packet itself is less than marked weight on the panel of
packet.
The net result is that consumers are taken for a ride, with erring shopkeepers
going scot-free. What consumer should do to control such malpractices?
If you find the product suspicious in case of anomaly weight, get it weighed
at the shop itself. And write a short note in the form of complaint to the
manufacturer in corporation with the shopkeeper.
Bring it to the notice of weights and measures department, which is
supposed to take the sample and initiate legal proceedings against the
manufacturer.
If manufacturer refuses to fall in line, you ca approach the district-or state-
level consumer court for redressal.
Consumer protection is government regulation to protect the interests of
consumers, for example by requiring businesses to disclose detailed information
about products, particularly in areas where safety or public health is an issue,
such as food. Consumer protection is linked to the idea of consumer rights (that
consumers have various rights as consumers), and to consumer organizations
which help consumers make better choices in the marketplace
Some of the consumer issues that the Consumer law takes action are on
Antitrust
Class action
Competition policy
Competition regulator
Extended warranty
Fairtrade labelling
Food safety
Mandatory labelling
Product recall
Predatory mortgage lending
Transparency (market)
Summary
Let`s just remember one thing. India has been a poor country for a long, long
while now. Folks below the poverty line have numbered a strong platoon of
people. And despite it all, the population has grown, survived and continues to
thrive in its sheer numbers. People have found a way to survive. The fittest have
survived on high value brands, the less fit have thrived on brands of a lesser
calibre in the country. Those even lower in the hierarchy have survived on the
fringe of the commodity in every category of want and need. Consumption
needs have always found answers. Consumption solutions for all!
There is therefore a pyramid of consumption that lies all over the slopes of
Maslow`s hierarchy of needs. But then, everybody, rich or poor, has fallen
within the confines of this pyramid. And just as long as they do, there is indeed
potential for a robust market for commodities, quasi-brands, brands, super-
brands and of course at the ultimate level of the self-actualizing folk, no brands
at all!
Every one of these segments has a value though. And in value rests the potential
for the marketer. The one big true-blue competitive advantage for India of the
present and India of the future is indeed its large population base articulating
every basic need in consumption of products, services and utilities.
Time to change the paradigm of India`s population then! Every marketer of
whatever origin, be it from within India or outside, will queue up in the
consumer markets of the country, trying to woo the wallet of the willing. As
traditional source markets reach a plateau in their consumption, nascent markets
like the one in India will hold a great deal of allure to the marketing man in his
western straitjacket.
The competitive advantage of India will rest in both its own shores and in the
foreign lands of its source markets. As the WTO regime opens up markets that
do not discriminate and markets that don`t raise the usual high tariff walls that
have been the distinct characteristic of the past that has gone by, the Indian
product and the Indian brand has a challenge to seize and exploit to its
advantage.
Self-Assessment Questions
1.
What marketing strategy would you adopt if you were to introduce a
software in competition with Microsoft`s Office package? Why?
Response:
The market for MS Office is large and it`s a world player, as for you it
would be good if you could identify a niche, or an USP and play Nicher.
Defender too is a good strategy. As you cannot go aggressive Ms would
outright squash you or buy you. You could play defender.
2.
List the three stages in the consumption process. Describe the issues that
you consider in each of these stages when you made a recent important
purchase
Response
The three stages in the consumption process shown are (1) prepurchase,
(2) purchase, and (3) post purchase. The student selected should develop
fairly unique sets of issues related to each of these phases based on the
different products and purchases situation.
3.
Critics of targeted marketing strategies argue that this practice is
discriminatory and unfair, especially if such a strategy encourages a
group of people to buy a product that may be injurious to them or that
they cannot afford. For example, community leaders in largely minority
neighborhoods have staged protests against billboards promoting beer or
cigarettes in these areas. On the other hand, the Association of National
Advertisers argues that banning targeted marketing constitutes
censorship and is thus a violation of the First Amendment. What are
your views regarding both sides of this issue?
Response
It is important to guide discussion to the legitimate interests on both sides.
However, in this situation the discussion should also examine the legitimacy
of each side's basic point. For what groups should target marketing not be
allowed? Or under what specific circumstances should target marketing be
allowed? Is the argument that target marketing unduly influences those who
cannot resist its appeal reasonable? Is the counter-argument that banishing
target marketing amounts to censorship and is unconstitutional equally
specious? Discussion should initially focus on the validity of each
argument, and then evolve toward a compromise that will protect target
marketing efforts while recognizing the needs of society..
4.
Can you give an illustration of some product you purchase just for its
image?
Response
Some products purchased for the image (in some cases) Nike ? to
belong to a particular group. A few decades ago Car was a product
purchased for social status. Being seen in a Mercede`s Benz.
5.
Explain a product position and why positioning strategy is important
Response
A product position is the image that the product projects relative to
images presented by both competitive products and other products
marketed by the same company. Positioning is how you want the
customer to view your product compared with competition. Product
positioning is the process of identifying the most important beliefs,
attitudes, and product-use habits of the customer; assessing how the
marketer's product is perceived relative to these factors; and then placing
the product in its most advantageous light. A positioning strategy
incorporates what is known about the environment, the target market,
and the product differentiation. Before a product position strategy can be
determined, the marketer must identify key attitudes and perceptions
toward the attributes of a particular product relative to competitors.
6.
You company markets microwaveable dinners. Your research suggests
that 40 percent of your customers use coupons. What additional
information would you need from your research division to determine
whether this percentage is a potentially profitable market?
Response
Is the potential market segment the right size and does it have the
necessary growth characteristics? Does the segment have sufficient long-
term profitability? Considerations include: the threat that the segment
has too many competitors, the threat of a new competitor, the threat of
substitute products, the threat that the power of buyers becomes
oppressive, or the threat that the power of suppliers becomes oppressive.
7.
What is a market strategy and how does it differ from a marketing
strategy?
Response
A market strategy is an element of the marketing strategy. Marketing
strategy is the process of evaluating the options for achieving the
marketing goals. By looking at the options for attaining each objective,
the marketing manager can identify the major strategy alternatives.
Do it yourself
1.
Observe a consumer shopping and attempt to infer the variables involved
in the situation. Make a report of the observed behavior and the
inferences drawn.
2.
Interview a peer about the variables thought to be important influences
on consumer behavior in the purchase of a specific product (e.g. car,
stereo, house, vacation, camera, etc.). Then to do the same for an older
person and compare and contrast the responses.
CASE STUDY
Marketing Spotlight--Nike
The Nike story begins with its founder, running enthusiast Phil Knight. In 1962,
Knight started Blue Ribbon Sports, the precursor to Nike. At the time, the
athletic shoe industry was dominated by two German companies, Adidas and
Puma. Knight recognized a neglected segment of serious athletes who had
specialized needs that were not being addressed. The concept was simple:
Provide high-quality running shoes designed especially for athletes by athletes.
Knight believed that high-tech shoes for runners could be manufactured at
competitive prices if imported from abroad. Without much cash to do any
advertising for his products, Knight crafted his grass roots philosophy of
selling athletic shoes: Speaking to athletes in their language and on their level;
sharing their true passion for running; and listening to their feedback about his
products and the sport. Each weekend Knight would travel from track meet to
track meet--both high school and collegiate competitions--talking with athletes
and selling Tiger shoes from the trunk of his green Plymouth Valiant.
The company`s commitment to designing innovative footwear for serious
athletes helped it build a cult following that rapidly reached the American
consumer. By 1980, after just under two decades in the business, Nike had
become the number one athletic shoe company in the United States.
Unfortunately for the company, this wave of success was soon to crest as rival
companies positioned themselves to take advantage of the aerobics craze, which
Nike largely ignored. Companies like Reebok and L.A. Gear developed
fashionable and comfortable products aimed at women fitness enthusiasts that
sold remarkably well.
Nike refused to join a market it saw as low in quality and heavy on cosmetic
properties and continued making durable, performance-oriented products. The
company lost millions in sales and allowed Reebok to gain basically uncontested
market share points. By 1987, Reebok had nearly doubled Nike`s market share,
with 30 percentage points compared to Nike`s 18. Fortunately for Nike, the
company chose to fight back with product innovations and persuasive
marketing. The company`s Air technology revitalized the company with the
additional aid of successful advertising campaigns such as the 1987 Revolution
in Motion spot for the new Air Max shoes and the Air Jordan commercials.
When Nike unveiled its now-famous Just Do It campaign in 1988, just as
Reebok developed the Reeboks Let U.B.U slogan, the company was on its
way to a full recovery. By 1989, Nike had regained the market leader position in
America as market share rose three points above Reebok to 25 percent that year.
In the 1990s, Nike continued its consumer focus. Nike kept its finger on the
pulse of the shoe-buying public in part through the use of EKINs (Nike
spelled backwards) ? sports-loving employees whose job was to hit the streets to
disseminate information about Nike and find out what was on the minds of
retailers and consumers. Nike`s Brand Strength Monitor formally tracked
consumer perceptions three times a year to identify marketplace trends. In areas
where it felt less knowledgeable, e.g., outside of track and basketball, Nike was
more likely to commission customized research studies. Nike`s inventory
control system, called Futures, also helped it better gauge consumer response
and plan production accordingly.
Innovative product development had always been a cornerstone of the company.
By 1998, Nike was unveiling a new shoe style, on average, every day. In 1999,
the company put the power to design shoes in the hands of its customers with
the NIKEiD project. NIKEiD enabled customers to personalize a pair of selected
shoe models using online customization software. The software led consumers
through a step-by-step process: customers could choose the size and width of the
shoes, pick the color scheme, and affix their own 8-character personal ID to the
product. Early reviews of the NIKEiD project were full of criticism of the
limited selection and availability, so less than a year after its debut, Nike added
additional shoe models and more customization options while increasing site
capacity.
Though the company had become a household name throughout the world and,
more important, achieved the position of global sportswear leader, Nike was still
$3 billion shy of reaching the goal of $12 billion that Phil Knight initially
intended the company to reach by 2000. In a letter in Nike`s 2000 annual report,
Knight addressed the issue of how to jumpstart his company`s slowed growth
and offered the following formula :We need to expand our connection to new
categories and toward new consumers. This quotation is indicative of Nike`s
relentless drive to build with a strong consumer focus.
Questions
1. While Nike made significant changes to maintain its global leadership
position, there appear to be some problems in maintaining and growing that
position. Is Knight correct in his formula for jumpstarting Nike`s growth
(last paragraph), or is the matter more complicated?
2. Develop and evaluate the types of pro and con marketing environmental
changes that you see for Nike. Given the options and challenges that Nike
faces, how would you proceed with a strategic marketing plan for the firm?
Suggested Responses
1. Maintaining growth in their business sector requires more than just focus on
customers and positive attitudes toward sports and athletes. It also requires a
marketing awareness of where the economy and sports are changing and
where the future is going, as dictated by the attitudes and actions of the
next/younger generation of players. It would appear that Nike allowed the
general market to move away from their products, so if they are going to
remain in the game they are going to have to target the heavy-hitters in the
sports of today and the future. They cannot sell an unlimited number of
shoes to serious athletes, so unless they are willing to also sell some other
items (equipment), on a global basis, they will find that what made them
great (high tech athletic shoes, etc.) has become a commodity, and they
likely will not have a sustainable competitive advantage for the future.
2. It appears that there is only so much you can do with shoes in a highly
competitive environment. Nike is involved in certain high-profile sports
(basketball, running, and baseball in particular), but along with the growing
diversity of the country (and the world for that matter), there are other sports
(and consumers) worth looking at for the future. Knight could be arguing in
the last paragraph that they not only need to be more involved in other sports
such as hockey, soccer, and even skiing, but they also need to spread the
Nike franchise into other equipment for the various sports. Also, they need
to move into the sports where there are new consumer and new expenditure
opportunities. This could imply golf, hockey, and soccer, and others where
there is a significant future. Finally, if a main issue is distribution and the
channels, then Nike has to have products that will appeal to new channels
and provide new sales profits for those channels that they have not yet fully
developed.
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Porter, M. E. (1980), "Competitive Advantage: Techniques for
Analyzing Industries and Competitors". New York, Free Press.
Treacy, M., and Wiersema, F. (1993), "Customer intimacy and other
value disciplines". Harvard Business Review, Jan/Feb.
Preference regression is a statistical technique used by marketers to determine
consumers` preferred core benefits will produce ideal vectors
ii Multidimensional scaling (MDS) is a set of related statistical techniques often
used in data visualisation for exploring similarities or dissimilarities in data. An
MDS algorithm starts with a matrix of item-item similarities, then assigns a
location of each item in a low-dimensional space, suitable for graphing or 3D
visualisation
iii Factor analysis is a statistical technique used to explain variability among
observed random variables in terms of fewer unobserved random variables
called factors. The observed variables are modeled as linear combinations of the
factors, plus "error" terms. Factor analysis originated in psychometrics, and is
used in social sciences, marketing, product management, operations research,
and other applied sciences that deal with large quantities of data
iv Linear discriminant analysis (LDA) and the related Fisher's linear
discriminant are used in machine learning to find the linear combination of
features which best separate two or more classes of object or event. The
resulting combinations may be used as a linear classifier, or more commonly in
dimensionality reduction before later classification.
LDA is closely related to ANOVA and regression analysis, which also attempt
to express one dependent variable as a linear combination of other features or
measurements. In the other two methods however, the dependent variable is a
numerical quantity, while for LDA it is a categorical variable (i.e. the class
label).
LDA is also closely related to principal component analysis (PCA) and factor
analysis in that both look for linear combinations of variables which best explain
the data. LDA explicitly attempts to model the difference between the classes of
data. PCA on the other hand does not take into account any difference in class,
and factor analysis builds the feature combinations based on differences rather
than similarities. Discriminant analysis is also different from factor analysis in
that it is not an interdependence technique : a distinction between independent
variables and dependent variables (also called criterion variables) must be made
v Cluster analysis is a class of statistical techniques that can be applied to data
that exhibits natural groupings. Cluster analysis sorts through the raw data and
groups them into clusters. A cluster is a group of relatively homogeneous cases
or observations. Objects in a cluster are similar to each other. They are also
dissimilar to objects outside the cluster, particularly objects in other clusters.
The diagram below illustrates the results of a survey that studied
drinkers' perceptions of spirits (alcohol). Each point represents the
results from one respondent.
vi Logit analysis is a statistical technique used by marketers to assess the scope
of customer acceptance of a product, particularly a new product. It attempts to
determine the intensity or magnitude of customers' purchase intentions and
translates that into a measure of actual buying behaviour. Logit analysis assumes
that an unmet need in the marketplace has already been detected, and that the
product has been designed to meet that need. The purpose of logit analysis is to
quantify the potential sales of that product. It takes survey data on consumers
purchase intentions and converts it into actual purchase probabilities.
Logit analysis defines the functional relationship between stated purchase
intentions and preferences, and the actual probability of purchase. A preference
regression is performed on the survey data. This is then modified with actual
historical observations of purchase behavior. The resultant functional
relationship defines purchase probability.
This is the most useful of the purchase intention/rating translations because
explicit measures of confidence level and statistical significance can be
calculated. Other purchase intention/rating translations include the preference-
rank translation and the intent scale translation. The main disadvantage is that
the software is not easy to find.
vii In economics, the cross elasticity of demand or cross price elasticity of
demand measures the responsiveness of the quantity demanded of a good to a
change in the price of another good.
It is measured as the percentage change in demand for the first good that occurs
in response to a percentage change in price of the second good. For example, if,
in response to a 10% increase in the price of fuel, the quantity of new cars that
are fuel inefficient demanded decreased by 20%, the cross elasticity of demand
would be -20%/10% = -2.
In the example above, the two goods, fuel and cars, are complements - that is,
one is used with the other. In these cases the cross elasticity of demand will be
negative. In the case of perfect complements, the cross elasticity of demand is
negative infinity.
Where the two goods are substitutes the cross elasticity of demand will be
positive, so that as the price of one goes up the quantity demanded of the other
will increase. For example, in response to an increase in the price of fuel, the
demand for new cars that are fuel efficient (hybrids for example) will also rise.
In the case of perfect substitutes, the cross elasticity of demand is positive
infinity.
Where the two goods are independent the cross elasticity demand will be zero,
as the price increase the quantity demanded will be zero, an increase in price
'zero quantity demanded'. In case of perfect independence, the cross elasticity of
demand is zero.
UNIT - V
THE BORDERLESS CONSUMER MARKET AND BUYING BEHAVIOR
OBJECTIVES OF THE LESSON :
To understand the consumer behavior in the new millennium
To study the influence of internet on consumer behavior
INTRODUCTION :
Firms that choose not to understand their customers` purchasing behavior often
lose out. An excellently engineered product may fail just because the customer
does not identify himself or herself with it. It is therefore imperative that the
firm understands the structural changes taking place in its market and also the
long-term impact of these changes on its product and other elements of the
marketing mix. The firm must also understand the buyer`s purchasing behavior.
Specifically, it must understand how the buyer decides in favor of one brand or
product, what motivates him or her to select an alternative, and who influences
him or her to buy the brand or product.
The marketer needs to focus on the how and why of the total experience
consumers have with products and services. Unfortunately, most marketers tend
to look at only a few aspects of experience and build the complete strategy
around it. For example, one of the leading electrical appliances company crafted
its strategy around customers` experience at the dealer outlet. Hence the
strategy was on developing dealer outlets, enhancing dealer productivity, and
loyalty. It failed to understand other dimensions like service, price-performance
relationship, and esteem values of the brand which are as important in the
consumer`s mental space and hence influences his/her attitude towards the
brand. Likewise, one of the dotcom companies failed to understand that the
consumer valued security of transactions over all other dimensions of web-based
transactions. Hence marketers need to focus on discovering the why` of an
experience. They also need to understand that large samples based survey is no
guarantee of having discovered the truth. Quantity of data does not guarantee
quality. What is needed is a deep understanding of consumer behavior. Without
such an understanding, marketers cannot accurately anticipate consumer
responses to product designs, features and marketing ideas.
THE BORDERLESS CONSUMER MARKET:
a)Seamless Global Society : The internet has today reduced the gap between
different societies . This gap , which was on account of physical distance ,
information and knowledge, has now become redundant. Today we are seeing
the emergence of a global society and universal values. One such universal
value relates to the concept of time. It is no more perceived as infinite. And
hence time is an indicator of opportunity. An organization`s competitiveness is
greatly determined by its ability to respond within a given time frame. ,
determined by market forces and not by its own competencies. The Hindu
concept of time, which is eternal and continuing, seems to lose its meaning in
this era of information superhighways. Another impact of the Net revolution is
the new concept of value. More and more customers have and will come to
expect global products and services at local prices. In other words organizations
cost structures will have to be globally competitive. Only then will customers
get their value for money. Thus, the mere fact that an organization is offering a
premium quality product will not be a sufficient reason to motivate customers to
buy it. Developments in telecommunications will further contribute to the
emergence of these universal concepts, which will affect the customer`s
definition of time and value. Mobile telephony has altered the concepts of space,
time and location.
b)Basis for Competitive advantage:
The net is also likely to change the concept of nation state. It is not that these
states will not exist but their role will change. The governments of these
countries will continue to play a role in maintaining their cultural diversity and
sovereignty. They will co-operate with other societies like security, taxation,
censorship, and ownership. One of the direct outcomes of this seamless global
society, therefore, will be the culture of openness and transparency.
These technological changes are going to lead to significant shifts in competitive
leadership. Future market leaders will use computers to create new businesses,
change existing ones and even restructure many of today`s long established
marketing practices.
The basis for their sustainable competitive advantage will be knowledge
management. In the ongoing war for competitive advantage, information
technology has become the ultimate weapon. Hence creation, dissemination and
protection of knowledge in the organization is perhaps going to be the most
crucial armour for competitive survival.
c) Business at the speed of thought:
Today the internet give very little time to individuals and organizations to react
and respond. We have to learn to conduct our business operations at the speed of
the human mind. It should be possible for us to offer products and services even
as these are conceived in the customer`s mind. This obviously means that
conventional marketing management will no longer deliver. We are already
seeing the emergence of online help, which in many cases , has made
conventional forms of service redundant. Interactive technologies are already
eliminating several roles in the marketing of products and services. Fro example,
it is perceived that there will be no role for a service center of a consumer
durable firm in the 21st Century if its competitor markets a totally reliable
product and, in the extreme case of failure, provides online assistance through its
own website or service portal created by a group of service engineers. The
product life cycles will be far shorter. Products are further standardized, and
hence, the opportunities to differentiate will also no longer exist.
From the conventional generic tangible values of performance and reliability,
the marketers focus will have to be on tangible and intangible values.
Unfortunately the globalisation of products and markets will provide very little
scope for differentiation in regard to these specific product or corporate values.
The differentiator, therefore , will be the ability of the marketer to creatively
customize them for the buyer. Interactive technologies will come to the
marketers rescue. The key issues in these technologies will pertain to
continuously updating the customer database and proactively creating research
based product solutions and , in turn , moving the customer up the technology
path. . The marketing challenge lies in enabling customers overcome their
resistance to change. It will be the organisation`s ability to competitively pre-
empt others and build volumes that will make it a market leader.
d) Virtual enterprise:
The above changes, which have already made their presence felt emphatically in
the global scene, have led to the creation of virtual enterprises. We have already
seen the emergence of an era of Digital Darwinism. Amazon.com, Yahoo!
Hotmail and Rediff.com, Indiatimes.com, like many others , are facilitators in
the creation of a virtual enterprise. In this era of virtual reality , size and
location of an enterprise will have very little or no role to play.
e) Customer : Co-producer of products and services :
Another dimension of the new millennium , which we can see emerging today,
is that the customer will be a co- producer of products and services . No longer
will it be the responsibility of the manufacturer to produce the product in its
finality as the customer may demand. The producer will take the product upto a
certain level in the value chain and then leave it for the buyer to customize it to
his/ her requirement. A classical case is that of the Asian Paints facility that lets
the buyer have his choice of shade customized through the company` outlets, de-
ploying interactive technologies. Similar interactive technologies like the ATM
have made the customer a co-producer of products and services.
f) Customer : A Warehouse of Information :
In the internet age, the customer has access to huge bank of information from
various national and global resources. The challenge for the marketer will be
how to use this information for developing the marketing mix. In business ?to-
business marketing , the challenge will be one of integrating organizational
operations to the customers environment.e.g., an engineering company will
have to tailor its design, engineering and operations to suit the changing
requirements of the customer. Hence the era of standardization is today replaced
by mass customization.
g) The death of Business and consumer marketing :
The differentiation between business and consumer marketing , urban and rural
marketing , and domestic and global marketing will get more blurred. This will
also be the case with product and services marketing . The physical
differentiation between the product and service will cease to exist mainly
because of the standardization in manufacturing technologies. Hence ,
organizations will have to learn from the marketing practices of winning
organizations, irrespective of the nature of their products and markets.
h)The role of Distribution Channels:
The Conventional dealer and distributor will no longer viable. The
intermediary`s role will no more be that of physical delivery, sharing risks and
investment in stock movements. Rather , it will be service and customization of
the offer that will make an intermediary succeed.
i) The poor as a market segment :
Globalization has widened the gap between the rich and the poor. Today poor
nations are making an all out effort to bridge the gap. Not only so, poor people
all over the world are now a large segment. No marketer can afford to ignore it.
So, whether it is customization of products/ services , or price reduction or
enhancing accessibility , firms will have to come out with creative solutions for
this segment. We have to keep in mind that the focus here is on the poor
customers who may be located in urban or rural areas . Incidentally , this
segment offers a much more attractive opportunity than just the rich.
j) Environment Protection :
The biggest challenge for the new millennium marketer is protection of the
environment. So whether it is in product development , use or disposal , the
marketer will have to make a conscious effort to protect and maintain the
environment. This has led to the development of eco friendly hotels , watches,
food products and packaging material, etc.,
k) Diversity and Convergence Coexist :
Markets are diverse. This diversity is not just based on the demographic &
geographical location of the consumers, but also on their response to changes
especially to technological changes. While diverse markets are a reality ,
convergence of needs is also a fact. Given the spread of internet and satellite
television , it is not uncommon to see consumers all over the world demanding
same products and services.
Thus, the new millennium demands a paradigm shift from marketers to
customers who are treated as a resource that has an access to global sources of
information and purchase. In this environment, customers total experience with
the brand and the organization will be the differentiator between winners and
losers. This total experience is more than just product related. It is based on the
organizations culture and systems and hence reflects organizational quality.
BUYER ? AN ENIGMA
Although it is important for the firm to understand the buyer and accordingly
evolve its marketing strategy, the buyer or consumer continues to be an enigma-
sometimes responding the way the marketer wants and on other occasions just
refusing to buy the product from the same marketer. For this reason, the buyers`
mind has been termed as a black box. The marketer provides stimuli but he is
uncertain of the buyer`s response. The stimulus is a combination of product,
brand name, color, style, packaging, intangible services, merchandizing, shelf
display, advertising, distribution, publicity and so forth. Nothing better
illustrates this enigmatic buyer than the failure of a herbal anti-cold balm
launched by Warner Hindustan some time back. Though the balm market has
grown significantly and Vicks Vaporub had been dominating the anti-cold rub
segment for more than two decades now , Warner failed. Was it is the brand
name? Did the customer see no significant difference between Vicks and
Warner? This has remained an enigma.
Further, today`s customer is being greatly influenced by the media especially
electronic. Technological developments in the field of information,
biotechnology and genetics, and intensive competitions in all products and
services are also impacting consumer choices. Consider, for example, the case of
consumers who shop on the Internet for books from US-based Amazon.com,
music from Sony, banking from HDFC Bank India, airline services from Jet
Airways, or order roses from India to be delivered to loved ones in the US on
Valentine`s day through 1-800 flowers.com. Clearly the Internet has today
impacted the customer learning and shopping behavior. Multiple television
channels are also shaping the customer`s values. The customer is aware, more
than ever before, of the rights and choices available to him/her. Today the
Indian customer is at a crossroad-should he/she enjoy the pleasure (arising out of
such an act) of buying a consumer durable, service, a holiday or an automobile
or defer the experience? Today the customer is demanding more value for the
price that he/she pays. Social structures like family, role models, and peer
groups are under pressure largely because of the change created by media,
technology and competition. As shown in figure, these change drivers are today
impacting the customer`s awareness, values, social structures and even
individual customer personality.
Internet User Profile :
Indian consumers also have the opportunity to seek out goods and services
beyond their local, regional, and national boundaries. This universal access has
had a positive impact on the quality of life of some population segments.
Typically, an Indian Internet user is young, educated, generally a professional,
urban (mostly metro resident), who accesses the Internet either at office/cyber
caf?s/educational institution. Males use the Internet more than females.
Irrespective of sex, the Internet user generally uses the Net for accessing
information. Information products like newspapers and magazines from
different countries including India are already on the web. Although most of
them are free at the moment, information sellers like the Mumbai-based Centre
for Monitoring Indian Economy (CMIE) are running websites which surfers can
access for data on the Indian economy. Indian advertising agencies having
Websites that open up their detailed information bases and full range of services
to paid subscribers are pointing to the future.
E-buying is relatively much less. The International Finance Centre (IFC)
reported that Indians bought Rs.93 million (about $2.2m) worth of goods and
services over the Net in 1999. This was one sixth of the value of purchases
made over the Net by Chinese Internet Users ($13m) in 1999.
How the Internet is influencing Consumer Behavior :
The Net has virtually become a household name in India. This can be attributed
to the growth of the private ISP market in the country, offering the cyber voyage
at more and more competitive prices. Internet in India is now one of the most
vital mediums for information, entertainment and communication and the sole
means for electronic commerce.
According to the India Internet Log Book 2000, India has over 1.8million
subscribers (and more than 5.5 million users) and it is estimated to reach a
whopping 50 million by December 31, 2003.
A closer look at the Internet user profile shows that 41 per cent are large
business firms who use the Net for their operations. Corporate India has realized
the significance of e-commerce and the Net and has made it a part of its strategic
planning exercise. Time and cost savings because of the disintermediation
process further motivated large firms to embrace the Internet. SME (Small and
Medium firms) accounted for 19 per cent of the user base, while the household
segment accounted for 18 per cent. Education/research institutions and the
government accounted for 10 per cent and 12 percent respectively.
As we had mentioned earlier, access to, rather than ownership of, the
communication tool is important. It is not surprising to note that Internet usage
is not just restricted to a single individual in a household or business. More than
one family member in the Indian house-hold has used the Net for different
needs. Research shows that the top Internet user is an adult son/daughter or
male head of the family, thus adding up to 42 per cent of Net users in the age
group of 15-24 years, 31 per cent in the 25-34 years age group, and the rest
above 35 years, with a clear bias in favour of the male bread winner. Cyber
caf?s are most popular among the younger age groups of 16-20 years. 98 per
cent of the times the Net is used for email; 93 per cent users use it for Web
browsing, 59 per cent also engage in online chat and 55 per cent use it for
information and data transfer. Only 6.5 per cent of net users engage in e-
commerce. Figure and table gives details in this regard.
A direct implication of the above changes in consumer lifestyles has been that
customer expectations from suppliers have gone up significantly. Today the
customer`s decision-making parameters are significantly different from those in
earlier decades. Though an average Indian customer continues to be price
sensitive, he is increasingly moving away from just low-priced product to
quality products and services at the lowest prices. In other words, the Internet
has created awareness among the Indian consumers about global quality and
performance parameters that they can get an affordable price. The fact that an
average consumer can buy a newly published book within a week directly from
Amazon.com, or a holiday from the best-known tour operator on his
(customer`s) term through the Net has put pressure on the Indian industry.
Industry had to take another look at its costs, distribution models, and even
input-output ratios. Competition further aggravated the scenario for most Indian
companies, especially the older generation firms. One of the sectors where this
change was visible was the banking sector where new generation banks like
HDFC and ICICI snatched the lead from nationalized banks, including the State
Bank of India. HDFC Bank`s leadership today is principally because it
redefined banking paradigms for Indian consumers. It was the first to offer Net
banking and several other services on the Net. This made banking convenient
for the customer. The customer did not have to visit the bank but could do
his/her transactions on the Net. Likewise there were developments o the
industrial products and commodities front. Disintermediation is now emerging
fast in the Indian market. Time and location seem to no longer define customer
choices, especially in metros and major urban centers. This is increasingly true
for the younger customer group, which, as we saw earlier, is the major Internet
user. Also, the younger generation of consumers is less brand loyal, they are
shopping for value and it is in this context that the Internet has come as a big
boon. There is another interesting paradigm that is shaping the Indian market.
Increasingly, information and ownership of products and services is no more
concentrated at the top end of the Indian market. The Internet has made it
possible for all market segments to have access to the same information and
provide equal opportunity to all to buy products and services. Facilities like
online chats have increasingly created customer communities which have, in a
way, become pressure groups. A company can no more hide poor performance
or complaints in one market from its customers in another. It is in this context
that the Internet is a great leveler and facilitator that builds relationships between
buyers and sellers.
ACTIVITY ? A
1. Based on an understanding of the borderless Consumer Behavior , how
do you evolve a marketing strategy for marketing white goods?
________________________________________________________________
________________________________________________________________
SAQ`S:
1. Briefly discuss the influences of internet on the consumer Behavior?
2. A Customer is a Co-producer of products and services- Comment.
3. How do buying influences on a public sector firm differ from that of a
private
sector firm within the same industry, for example, petroleum?
REFERENCES :
1 . Marketing Management, Third Edition, The Mc Graw Hill Companies, Rajan
Saxena.
CONSUMER BUYING HABITS AND PERCEPTIONS OF EMERGING
NON ? STORE CHOICES:
OBJECTIVE:
1. To understand the significance of the consumer perceptions and its
influence on the buyer behavior.
2. To understand the formation of perceptions
3. To understand the marketers concern related to the consumer perceptions
INTRODUCTION:
As studied earlier in the chapters perception is the process by which an
individual interprets various stimuli received and forms picture of the world.
The stimuli are received through the sensory organs namely eyes, ears, nose,
mouth and skin and sorted out by the brain and stored as information. While
doing so the individuals brain colours and tags the information using its own
logic and the previous memory/experience if any. In fact the reality of the world
and everything that surrounds is merely the perception of the individual. There
is a possibility therefore that different individuals perceive different realities` of
a single event or object.
Importance of consumer perception :
Perceptions are being formed by the individual all the time and being stored
away for future references. Perceptions so formed will come into play when the
individual has to take any consumption decisions. Therefore perceptions about a
product or service that are formed in the mind of the consumer are vital factors
for the success of the product or service in the market.Astute marketers therefore
take extraordinary care to study how perceptions are formed and how they can
be changed.
Formation of Perceptions:
Though we have said that the individual constantly receives sensory stimuli
throughout his wakeful life, the stimuli do not always register. The stimuli that
do get picked up by the sensory organs but do not get registered are in fact the
larger portion.
The first reason for non-registration is any monotony and constancy of a given
stimulus. As an example we can show that a person may be conscious but not
take notice of light, sound, touch or movement if any of these stimuli is
constant on a time scale and unvaried in strength. The person can notice a light
touch on his skin by a feather but does not notice that his feet are touched and
pressed by the floor all the time. Similarly if a person is driving through a street
that has billboards of identical style and positioned all along the road, only the
first one may be noticed and later on eve that image may erased as the drive
continues.
The second reason for non-registration is that even if the stimulus increases or
decreases, the change or difference may not be substantial to merit notice. We
will examine this phenomenon in a little more detail later in the chapter under
the head JND (Just Noticeable Difference).
The third reason for non-registration is the shut-out or rejection by the
individual. This shut out or turn-off occurs automatically in the individual who
is exposed to an overdose of any sensation for a length of time. As an example,
an individual who is shown a TV commercial over and over may mentally block
it and may not notice it any longer. If such individual is forced to notice it by
mere changes in the strengths of stimuli like its sound or light without any
change in its content, may even develop an unfavourable perception about it.
Marketers can learn important lessons by observing the above phenomenon and
avoid counter productive communications and wasted efforts in advertisements.
MARKETER'S CONCERN
A company marketing its products constantly strives to make the consumers
form a positive and favourable perception about the company and its products.
For this the stimuli sent out by the company through its messages, the
packaging, advertisements and the very products themselves should stand out.
They should be designed to be noticeable among the din of other stimuli. Some
strategies to make the stimuli stand out are:
By contrasting :
Inviting attention to an advertisement by employing contrast with the
surroundings in size, colour, colour-reversal, or style is common. Newer
methods of contrasting are being found all the time. A short silence in an audio
commercial or a blank space in a closely printed page or a color spot in black
and white visual create contrast and can be used with advantage. Printing a
message upside down, using different language and symbols, printing a teasing
message, etc., are some of the others methods which fall broadly in this
category.
By Projecting the unexpected :
Delivering the blow where and when it is least expected is another strategy
tograb attention. Advertisements cleverly using phrases such as DONOT
BUY.... Or WE ARE SORRY... WHY WE CANNOT.... Do grab
attention. They succeed in making the target audience read the message fully to
solve the intrigue.
Stimuli that demolish certain prevailing myths or certain preconceived notions
are always better noticed. In fact one would tend to notice a message that
contradicts a belief than another message which goes along with the belief. For
example, if you notice a commercial that depicts Dubai as a cool and green
place or Bangkok as a place for family holiday an religious pilgrimage, you are
tempted to read the message fully.
By Motivating :
In the separate chapter on motivation it has been explained how the highlighting
of dissatisfaction and projecting of solutions can motivating a person. By a
proper design of the messages, the advertiser can grab the attention of the person
who are dissatisfied with a particular situation. Their perception of the cause of
dissatisfaction can be moulded and a positive perception about the solution
created.
As an example, we can mention the advertisements for HORLICKS, which
points the dissatisfactory condition of a convalescing patient and how the patient
can find a solution in HORLICKS. The promotional campaigns for soft drinks in
the tropical countries have always projected how one gets thirsty and how thirst
can be quenched by the soft drink.
CONSUMER PERCEPTIONS IN SERVICE SECTOR
The understanding and the handling of consumer perception become more
complex as one moves from the arena of goods to services.
It is universally accepted that consumers have more difficulty in evaluating
quality when it comes to service. Since services are intangible, perishable, and
have no preset physical standards, the customer may form perceptions based on
ideal expectations. The supplier too forms a perception of what is adequate.
Often there is no meting point even to start with Worse still is the fact that the
supplier and the consumer never sat together and created a common agreed
perception. The result is that after the service is actually delivered the consumer
gets a disappointment or shock ? a wholly avoidable thing.
As an example we can talk about a package holiday sold by a tour operator to a
first time consumer. The supplier did not inform the consumer of certain
exclusions and limitations in the specification of the package in the intervening
time before the tour commenced. The consumer in the meantime built his own
high expectations. He thought that,
Accommodation in hotels was single bedded.
Free bed tea and breakfast were included.
Visa charges and entrance tickets to museums were included in the fare.
None of the above were met. By the negation of the above three minor
expectations, the entire tour was perceived as lousy and unsatisfactory. Tourists
who had earlier experiences along these lines however did not have such
expectations and their perceptions were positive.
Perceptions and Brand :
Brand identity helps in making the consumer remember the association of the
brand with quality and speeds up the purchase decision. However, the consumer
presupposes that brand ensures an earlier perceived quality. In fact the
expectation in a brand purchase situation is higher and shortcomings are not
easily forgiven or forgotten. The golden principle in this for marketers is that
they should offer only quality products when a brand is invoked.
Consumer Perception of Risks :
Every consumer perceives some possible risks even with purchase decisions
already taken. Apprehensions about these risks are not openly expressed. Even
after a transaction is completed without any risks materializing, the consumer
may carry the perception that there were risks. These perceived risks are:
Functional risk of the product not performing as expected.
Financial risk of having paid a higher price than necessary.
Risk of effort and time being wasted consequent to a possible product
failure.Marketers can do a lot to reassure the consumers post-purchase,
on the correctness of the choice. More importantly they should follow up
every successful transaction and lay the foundation for repeat purchases
and erase perception of risks.
Playing Trumps:
At the store or on the Net or a home, you are bound to find consumers who are
having difficulty in making choices due to the risks they perceive. In such cases
the sales executive has the duty to guide the consumer. He could :
Ascertain their real needs and suggest products that can meet these
needs.
Encourage consumer to rely on the brand.
Give honest brand comparisons.
Explain the scope and limitations of after-sales-service and warranties.
When in doubt, play trumps. Recommend only the best, setting aside the
cost factors.
ACTIVITY ? A
1. Explain in detail how the study of the consumer perceptions help in
understanding the buying habits of the consumers . How does a marketer
frame the strategies accordingly. Narrate with an example.
_____________________________________________________________
_____________________________________________________________
SAQ'S
1. What do you mean by a Consumer perception. What are the factors
influencing the consumer perception about a particular brand?
2. Enumerate in detail the significance of the Consumer perceptions in the
Service sector?
REFERENCES :
1. Consumer Behavior ( 8th edition ) ? Leon Sciffman, Leslie Lazar Kanuk.
2. Consumer Behavior and Marketing Action ( 6th Edition ) ? Henry Assal.
RESEARCH AND APPLICATIONS OF RESPONSES TO DIRECT
MARKETING APPROACHES
OBJECTIVE:
To understand the significance of research in the direct marketing
approach
To understand the concept of Database marketing with relevance to
Direct marketing approach.
To understand the Direct marketing approaches through Marketing
Intelligence System.
To get exposed to the various scales and tools used in the data collection
methods of direct marketing research.
To understand the future of direct marketing in India and its influence in
the Consumer behavior.
INTRODUCTION:
Research is a key to the evolution of successful marketing strategies and
programmes. It is an important tool to study buyer behaviors, changes in
consumer lifestyles, consumption patterns, brand loyalty, and also forecast
market changes. Research is also used to study competition and analyze the
competitor`s product positioning and how to gain competitive advantage. Of
late, Marketing Research is also being used to help create and enhance brand
equity. This is a new role and decidedly different from the conventional one
where it was used for just studying buyer behavior or for conducting feasibility
studies. In fact, because of this conventional role, Marketing Research, until the
mid 1980s, was considered a luxury, which only multinationals like Lever and
Procter & Gamble and their like could afford. However, it is not so now. This
is because competition has increased manifold in all sectors since 1985, and
especially after 1991.
Following liberalization and decontrol, most firms today find that the
government does not take strategy decisions for them any more. Rather, the
arena has now shifted to their boardrooms, and they do not have answers to
several questions. More specifically, they do not have the answer to the
question: How to gain and retain competitive advantage? This is where MR
plays an important role. Realizing the contribution that MR makes, more and
more companies are now turning towards it. FMCG firms have now realized the
futility of product research without understanding the dynamics of customer
decision-making.
Marketing research has often been delinked from business strategy. When that
happens, most research reports become academic in nature and are filed.
Many a time, research or respondent bias makes the MR exercise a waste of
resources. Often the researcher has the temptation to conclude what the top
management may like to hear. For example, most chief executive and marketing
chiefs would like to believe that everything about their operations is good. The
researcher may find just the opposite. For example, he may find that the firm`s
distribution plan and strategy is not competitive and channel members do not
have faith in company`s policies. The trade has switched loyalties and the
company`s penetration is now reduced to only a few select outlets who are also
with the company due to their long-term association only. Should the researcher
choose to present these facts? If he or she does the management and, more so,
the marketing chief may not appreciate the facts and that may mean an end to
any other subsequent assignment or being relegated in the organization, a
dilemma that most researchers face. But a good researcher, like a good doctor,
knows that it is better to present facts and let the company decide the strategy,
rather than hide it, which subsequently may even affect its survival. Therefore
to make Research effective, it is important that it has a linkage wit business
strategy and should respond to future or emerging scenarios in the market place.
To understand the research and applications of responses to direct marketing
approaches one has to first understand what direct marketing is?
WHAT IS DIRECT MARKETING
Direct marketing is an interactive mode of marketing through which the
marketer reaches out his target market at any location. The Direct Marketing
Association of USA has defined direct marketing as an interactive system of
marketing which uses one or more advertising media to effect a measurable
response and/or transaction at any location. An analysis of this definition brings
out three key elements, namely:
a. It is an interactive system in the sense that there is a two-way
communication between the marketer and his/her target market; the
response or non-response of the customer completes the communication
loop in the direct marketing programme. For example, when the
customer fills in the response cupon in an advertisement or a catalogue
and mails it, he/she communicates to the marketer and hence completes
the communication loop.
b. Another element is measurability of response ? a mentioned above the
number of coupons received indicates the response rate to the marketer`s
communication.
c. Direct marketing activities are not location specific; it is not necessary
for the customer to physically interact with the marketer; he/she can
establish a contact through mail, phone, fax or the internet.
As mentioned above, direct marketing is an efficient way to promote and sell
products and services in a highly competitive market. The goal of direct
marketing is to always get a response from the customer. Direct marketing has
also been known by other terms like direct selling, mail order selling or
catalogue selling.
Today direct marketing uses all these tools and is based on a customer database.
In fact, the key to successful direct marketing is the development of this
database.
RESAEARCH AND DATABASE DEVELOPMENT
Database marketing is the most effective way to customize the marketing mix to
suit target market. This helps not only in customizing the offering but also its
delivery. Given the developments in the area of information technology
(Softwares like geographical information system ? GIS), today it is possible to
deliver the right product with the right message, at the right time to the right
person. This presupposes the creation of customer`s purchase and other related
information. It also includes the development of a database of potential
customers. Database marketing, therefore, is an interactive approach to
marketing that uses all communication tools and media vehicles through
research to reach to the target market. It is also the basis of all relationship
marketing efforts of the company. The information stored in the database is
used to develop customer loyalty and to identify all potential buyers for any new
product or service. It also helps in identifying the most cost effective media and
delivery vehicles.
Characteristics of a Good Database:
Although each firm may decide to develop its own database, there are certain
characteristics that help enrich it. These are:
a. Each customer or prospect should be treated as an individual entity and
hence a separate record for him/her should exist in the marketing
database. Market segments are an agglomeration of such individual
customers.
b. Each such marketing record should contain all the relevant information
and access details like name, address, telephone numbers, frequency of
product use, experience with the product, industry and decision making
units for organizational customer, response to any earlier direct
marketing campaign, and soon.
c. This information should be available to all departments and employees
of the company involved in the direct marketing programme to enable
them to be customer friendly.
d. The aim of the organization should be to replace routine usage surveys
with this database.
e. Information technology tools should be used to strengthen this database
and also develop corporate responses to the customer. These tools can
also be used to identify opportunities and threats in the customer
environment and craft appropriate responses which will help the
marketer to exploit opportunities and neutralize threats. The use of these
tools should also help in optimum resource utilization.
Increasingly, firms are realizing the importance of database in targeting and
creating competitive advantage. Today several organizations are also using this
database for their customer relationship management programmes. Cross-
selling can also be effectively managed through database marketing. This is
especially true for firms operating in several products/businesses that require the
same database. Citibank, for example, uses its credit card customers database to
market several other financial products, including banking services.
Once again, information technology has further augmented these strengths.
Database management, therefore, is a key to the development of an effective
direct marketing programme.
DIRECT MARKETING MIX
Marketing mix in the direct marketing mode, by and large, remains the same
except for communication programme and customer service, which have
acquired a new meaning. For example, if the marketer guarantees delivery of
the product within a defined time frame and promises to take it back in case it
fails to live up to customer expectations and return his/her money, then the
customer service executive cannot refuse a claim. This is opposed to general
marketing practices where marketing can put several disclaimer and refuse to
without any question may cost the marketer significant losses as he not only
loses that customer but subsequent prospects as well. In general marketing the
loss can be contained through other elements of the marketing mix. In addition
to marketing mix decisions, the direct marketer has to pay special attention to
the following factors in decision making.
Communication Programme
This involves (both) creative and media decisions. The creative decisions centre
around the copy platform, graphic design elements, mailers, stickers, and so
forth. Consider, for example, the campaigns of Orange (Hutchison Max
Telecom), a cellular phone service provider in the country. These were not only
crisp but also helped in positioning. Orange as one of the most customer
friendly cellular services in India. The communication of its various products
like the prepaid Sim card (just talk), roaming facilities and various air time
packages shared the same colors and motivate customer to buy the service.
The media used by direct marketers are mailers, telephone, television and the
Internet. Direct response print and television advertising are particularly
effective in generating response to the offer, especially if it is complex to
understand. Also, the direct marketer today uses various outdoor retail panels
(Just Talk and BPL MOTS brands of prepaid Sim card in Mumbai) and even
stickers to retain the brand at the top of customer`s mind.
These also serve the purpose of a remainder.
Customer Service:
As mentioned earlier, customer service is a key input in direct marketing. In
direct marketing physical contact with the customer is low and it is the quality of
service that facilitates customer decision-making. Service, therefore, is an
investment and cannot be ignored. The customer service mix today involves the
following:
a. Speed and Accuracy of Order fulfillment: This includes the speed at
which the customer is able to complete order form and the organization`s
ability to acknowledge and execute the order. This involves the
development of an appropriate order fulfillment process in which speed
and accuracy hold the key to purchase and retention. In online order
procurement, the company will have to pay special attention to its
bandwidth and server capacity. The same holds true for marketers who
use call centres to book, deliver, and service customers` orders.
b. Immediate customer complaint resolution: Today, customers demand on-
the-pot resolution of complaints. Given the Internet and call centres,
customers look for seamless complaint management.
c. Other important elements of customer service: Toll free telephone
numbers (1-600), money back guarantee, multiple modes of payment
(credit cards, cheque, money order, VPP and so on) are giving customers
flexibility.
The Jet Airways in-flight shopping mall (now withdrawn) offered all these
modes thereby making it easy for customer to buy a product. Dettol, a brand of
Reckitt Benckiser of India, ahs launched the Healthy Home Careline`.
Consumers can reach the company by dialing a toll free number and their
queries are answered instantly. This, in turn, builds the image of RB as a caring
company, increases the company`s interaction with customers, and also gives it
access to the name and phone numbers of consumers, thus expanding its
consumer database.
Timing and Sequencing:
This factor involves determination of whether the product or service is offered
once, as a part of the campaign, or continuously. This will obviously involve
campaign decisions like whether to have bursts, pulsing, or a continuous
campaign.
THE RESEARCH PROCESS:
Having known the concept of direct marketing, we also have to scan through the
marketing research process itself to know how this research is applied in the
direct marketing approach. . This process, has seven stages as mentioned below:
1. problem definition related to direct marketing
2. defining research objectives
3. working out a research design
4. deciding on the sources of data
5. planning and deciding on data collection techniques and tools
6. analyzing data
7. making a report and presenting it to the decision maker/s
Direct marketing approach through Marketing Intelligence system:
The purpose of any marketing research is to provide information at a specific
time on customers, trade, competition and future trends in each of these
segments. Most of these research exercises help strengthen an enterprise and
assist it in strategic decision making. But marketing is a war that requires
continuous surveillance of markets (customers), competition, and other
structural components like government policy. Based on this continuous
surveillance, successful enterprises evolve their tactics to win smaller battles
which help it win the war of market shares. The entire concept of market
intelligence is similar to military sciences, where it is a known fact that no army
can win a war without good, effective and timely information on enemy forces
and the terrain on which the war is going to be fought.
Components of Intelligence System:
In marketing the intelligence system has two components:
customer intelligence
competitor intelligence
Customer Intelligence: This provides useful information on a customer`s
business, preferences or loyalties, personal demographic details, and also
whims and fancies. A good intelligence system will even tell a marketer what
to do and not do when he or she is with the customer. Like what words to use
and which ones to avoid, the proper dress code, habits or tendencies to watch out
for, and so on. This information becomes useful in planning sales calls on
customers. It is also useful in evolving advertising and promotion programmes.
Most often this data is collected by sales people either as a separate stand-alone
exercise or as a part of their regular sales call.
Competition Intelligence:
This gives information on strengths and weaknesses of each competitor in the
territory, the strategy and tactics being used by them, and how the customer
procures competitor brands. This also provides inputs on the key persons in
competitor firms. This information is collected on a regular basis by sales
people and I continuously updated.
Most marketing researches involve studying consumer`s perceptions, beliefs,
preferences, and motivations. Some may involve studying the psychological
dimensions of the dealer, retailer, or sales person`s behavior. In a way, most
research exercises measure attitudes of individuals. An attitudinal study
involves specifying:
a. The class of persons, objects, events, or states to be observed.
b. The environmental conditions under which the observation takes place.
c. The operations to be performed in making the observations.
d. The instruments to be used to perform the operations and
e. The observations to be made.
Extending this concept to marketing, the attitude of a consumer towards a
particular brand of a product or service can be understood as a function of :
a. the number of consumers of that brand.
b. at a specific time and in a given geographical area, who are
c. personally interviewed, using a
d. specified attitudinal scale, to obtain
e. the response information provided by the attitude scale
In other words, consumer attitudes towards a brand, product, or service may be
understood as numerical ratings on a like-dislike scale.
SCALES USED TO MEASURE THE ATTITUDE OF THE CUSTOMERS
IN THE CUSTOMER INTELLIGENCE SYSTEM:
To measure the attitudes of a consumer, a researcher has to understand different
scales, situations in which they may be used, or the analytical tools that can be
used to analyze the responses. Scales are of four types: (a) nominal, (b) ordinal,
(c) interval, and (d) ratio.
Nominal Scales: These are the least restrictive of all the scales. Here numbers
are used for identification purposes only. A typical example of this scale is
telephone numbers allotted to subscribers. An other illustration is classification
of retail outlets carrying brand X and those not carrying brand X. These
scales permit only the most elementary mathematical analysis. For example,
mode is a common statistical tool used here. Let us consider the example of
different brands of toilet soaps being marketed in a given area. On the basis of
the number of shops keeping different brands of toilet soaps, we can find out the
most popular brand of soap in a particular geographical area, or the brand sold
by maximum number of shops in that area.
Ordinal Scales:
These are the ranking scales. These scales require the customer`s ability to
distinguish between elements according to a single attribute and direction.
Consider, for example, a person who may be asked to rank different brands of
cars on fuel efficiency.
Suppose the response is:
Maruti 800 CC
-
1
Indica
-
2
Santro
-
2
Zen
-
3
Esteem
-
4
Accent
-
5
In this situation an ordinal scale has been used. It may be understood that mere
ranking of different brands in a product class (in the above case, car brands)
does not permit the researcher to conclude about the differences separating
brands on a specific attribute. In the above example, the only conclusion that
can be drawn is that Maruti 800 is the most fuel efficient car in this area. But by
how much and how different it is from others on fuel efficiency cannot be
assessed by this scale.
An ordinal scale contains all the information of a nominal scale, as equivalent
entities receive the same rank. Ordinal scales lend themselves to statistical
analysis like median, quartile, percentile, and other summary statistics.
Interval Scales : These scales allow an individual to make meaningful
statements about differences separating two objects. However, it may be noted
that the zero point of this scale is arbitrary. The most common example of this
scale is a thermometer measuring temperatures in Fahrenheit and centigrade
scales. While an arbitrary zero is assigned to each scale, equal temperature
differences are found by scaling` equal volumes of expansion of mercury.
A typical example of interval scale is the preference for a brand of perfume
exhibited by a consumer on the following scale
a. I like it the most
b. I like it
c. I neither like nor dislike it
d. I dislike it
e. I dislike it the most
Here, each response refers to specific degree of consumer preference.
Responses measured on these scales can be analyzed using statistical tools like
mean, standard deviation, and correlation coefficient. Advanced statistical
analyses using t-test and f-test can also be done on responses measured on this
scale.
Ratio Scales : These are at the top end of scaling techniques as all arithmetical
operations are possible here. A ratio scale possesses a unique zero point. It
contains all the information of earlier-mentioned scales.
Having considered the choice of scales, the researcher should now understand
that all attitude measurement procedures are concerned with having people
respond to a specific stimuli according to a certain set of instructions. These
stimuli may be advertising copy, themes, packaging, shelf display, or even a
sales person`s presentation. The response may involve assessing attractiveness
of an advertisement, appeal of a package, or credibility of presentation. The
respondent`s task is to express his/her response on a scale (could be any, chosen
by the researcher). An important point to be considered by the researcher is
whether the emphasis in the analysis is to be on the respondents or the stimuli,
or both. Suppose the marketing research is on detergent powders (stimuli) and
the housewives have been asked to evaluate different brands on one attribute
gentleness on hands. Now three types of scaling might be identical.
(i)
Respondent-centered approach : Here the researcher
examines systematic variation across respondents.
(ii)
Response approach : Here the researcher examines both (i)
and (ii).Most marketing researches have scales and analysis
that measure based on response approach.
In measuring attitudes, several scaling techniques are used. Some of these are
Thurstones Case V, Osgood`s Semantic Differential, Likert`s Summated Scale,
and the Q-Soct. Among these, the most common are the Semantic Differential
and Likert`s Summated scales. The semantic differential is a type of
quantitative judgement method that results in (assumed interval) scales that are
often further analyzed by such techniques as factor analysis; (the procedure)
enables the researcher to probe both the direction and the intensity of
respondents` attitudes towards such concepts as corporate image, advertising
image and brand image. The most common approach is to ask respondents to
describe a firm on bipolar adjectives on a seven point scale, as shown in table.
Table : Customer`s Perception of Company X
Progressive --
--
--
--
X
--
--
Traditionalist
Reliable
--
--
--
--
--
--
X
Unreliable
Strong
--
X
--
--
--
--
--
Weak
Customer
--
--
--
--
--
X
--
Non-
focused
customer
focused
Responsive --
--
--
--
--
X
--
Non-
responsive
These seven points on the scale represent equal intervals. Each point measures
the intensity of the respondent`s perception or feeling and the more the
respondent moves towards a particular pole, the more positive or negative he or
she feels. Specifically, the two ends of the scale represent strong feelings, while
the middle or the 4th point reflects indifference. The scale is quantified as being
+3, +2, +1, 0, -1, -2, -3. In this example, the firm is perceived as being
traditionalist, highly unreliable, strong but non-customer focused, and non-
responsive. Likewise, a firm may measure its competitive image against its
major competitors. Figure shows a customer`s perception of firm X vis-?-vis
firms Y and Z. Here, we note that customers have a highly negative image of
firm X and a highly positive image of firm Y.
Today semantic differential scales are being used in image measurement,
comparing competitive brands and services, analyzing effectiveness of
advertising and other promotional inputs, and to determine the attitudinal
characteristics of buyers of a particular product class or brands within a product
class. These scales are most popular in marketing research.
Interview Schedule:
At times a questionnaire is not able to give an insight into the rationale of a
customer`s feeling, or factors that will lead to the success of a new technology
like e-mail and voice-mail or new products that a firm may consider introducing.
It is for these and several similar reasons that an interview schedule is
developed. The purpose of this schedule is to study in depth an object, event, or
a group of people. Unlike a questionnaire the responses here are unstructured.
The limitation of an interview schedule is that it does not lend itself to tabulation
and, generally, analysis of responses is difficult. It is for this reason that its use
is limited and the sample size, too, is much smaller than the one in a market
survey using questionnaires.
Association Tests:
Of late, the researcher`s focus has been on qualitative research, or researching
the psychological dimension of consumer behavior. We mentioned earlier that
in most direct questioning, using a questionnaire or an interview schedule, the
respondent is generally guarded and gives responses more from the conscious
part of his or her psyche. To get to the subconscious mind, marketing
researchers are using several psychological instruments like association tests,
sentence completion tests, and thematic appreciation tests (TAT). These tests are
believed to reveal the customer`s perception of a product, brand, or firm`s
image. These tests can also give information on the customer`s perception of
brand personality as also the personality and lifestyle of the target customer
group.
Some of the other commonly used tools in qualitative research, aimed at
discovering consumers hidden thoughts, are the use of metaphors and stories and
even asking them to recall their experiences with a brand or any other event.
Memories of experiences are often told through a story. Consumer reconstruct
them each time use them to communicate their earlier experiences. But
memories are also communicated in a metaphoric manner. The overload of
memories, metaphors and storytelling strongly influence consumers`
consumption experience and behaviors. By providing particular metaphors,
researchers can guide customers in weaving their stories of past, current and
future experiences in the market-place. Consumers, in turn, use their own
metaphors to express their thoughts, feelings, and emotions. Stories about
brands demonstrate how brands are represented in the consumer`s mind.
TOOLS FOR DATA COLLECTION
The researcher has to decide on the appropriate tool for data collection. These
tools are :
Questionnaire ? used for the survey method.
Interview schedule ? used mainly for exploratory research
Association tests ? primarily used in qualitative research
Questionnaire: This is the most popular tool for data collection. A
questionnaire contains questions that a researcher wishes to ask his respondents.
It is important that these questions be put in a language the customer
understands and finds easy to answer. As far as possible, all technical terms or
words that can have multiple meanings and interpretations should be explained.
This is essential so as to have consistency in responses from all sample
respondents. For example, words like regularly, frequently, occasionally,
need to be explained. A question like How regularly do you buy a detergent
powder? and having the choices always, frequently, occasionally, sometimes,
and never, will not get the desired response if not explained. So the researcher
may explain these words in the following manner :
Always
: every shopping cycle
Frequently
: every alternate shopping cycle
Occasionally
: Once in six shopping cycles
Sometimes
: not very often; once in a while
Never
: never buy in any of the shopping cycles
The shopping cycle means every time you go to buy groceries for your house.
This could be weekly, fortnightly, or monthly.
Steps in Questionnaire Design :
It is important that the questions are unloaded, to avoid any researcher bias. It is
also important that the information collected must be believable and unbiased.
Just as researcher bias has to be avoided, respondent bias must also be avoided.
Further, there must be a flow in a questionnaire. For example, How many
children do you have? and then asking your marital status is improper. The
question on marital status should logically precede the one of the number of
children.
A questionnaire should be pre-tested before final printing. The pre-testing
should be for the following :
a. are the questions clear to the respondents?
b. is the researcher getting answers to the questions? Or does the respondent
understand questions in the same way as the researcher does?
c. are there any terms or words requiring explanation?
d. are there any sensitive spots or questions which respondents would feel
uncomfortable with and would not want to respond to? Typically, these could
be questions relating to respondent`s income, age, or personal particulars. To
avoid such drawbacks, put these questions with multiple choices in different
ranges. Also, with regard to income, it is best to ask annual family income as it
is less threatening.
e. What is the time that an average respondent is taking to complete the
questionnaire? It is important to remember long questionnaires lead to fatigue
and also puts off the respondent. Non-response or inappropriate response is
very common in a long questionnaire. So the key is in avoiding respondent
fatigue by having a short questionnaire.
f. does the customer feel interested in the research project? Is his/her interest
sustained while responding to the questionnaire?
g. is there a logical flow among the questions?
h. are the investigators able to explain the purpose and questions, if required?
Thus through questionnaires the data are collected and analysed with the help of
the statistical tools and then the interpretations are reported.
FUTURE OF DIRECT MARKETING IN INDIA AND THE CONSUMER
BEHAVIOR
The future of direct marketing in India is dependent on the following:
a. Reaching out to non-metro/non-urban markets:
As metro and urban markets get saturated by products and services promoted in
both general and direct marketing models, the key to any direct marketing
campaign lies in expanding its reach to rural and semi-rural markets.
Infrastructural constraints have so far come in the way of the direct marketer.
But with rural cyber cafes, satellite televison reaching rural areas, telecom
booths, and mobile telephony gaining popularity, it should be possible for
marketers to reach out to their target market in these areas. Post offices are
located in the farthest corner of India and service village with a population as
low as 20 households. These offices can be used as an effective medium to
communicate, deliver and even service the rural customer. IDBI, ICICI, SBI
and other financial institutions are today directly marketing their mutual funds
and other financial products through the Indian postal system. Thus, the key to
success in the Indian market lies in the firm`s ability to access rural markets.
b. Enhancing Credibility of the Offer
The Indian customer generally does not buy a product or service until he/she has
seen it, touched it, and experienced it. Therefore, these are key ingredients in the
customer`s selection process and the direct marketer has to enhance his
credibility as he cannot offer these benefits. He thus needs to pay special
attention to ensuring that the customer`s experience with the product exceeds
his/her expectations. Also, he needs to focus on service to ensure speedy
settlement of any claims. Credibility is the key to success in direct marketing.
c. Wider use of debit and credit card
Direct marketing`s success in India will be dependent on the wider use of debit
and credit cards as mode of payment by both the customer and the marketer.
This involves a shift of transactions from cash to non-cash modes and hence a
change in the customers` and sellers` mindset.
d. Emergence of specialized database firms
Another key factor in the success of direct marketing is the evolution of
specialized database firms. It is an expensive proposition both in terms of money
and time to create customer database. This makes direct marketing feasible only
for large firms. A very large component of the Indian economy consists of
small- and medium-sized firms who cannot afford to create this database. Hence
the emergence and evolution of firms specialized in database management will
contribute to the success of direct marketing in India.
To conclude, direct marketing has arrived in India, but is still an urban and
metro phenomenon. It is gradually widening out to non-urban areas too. It is
important to remember that competitive marketing strategies involve using a
combination of general and direct marketing approaches.
ACTIVITY ? A
1.Explain in detail the application of the Research in the Direct marketing
process.
SAQ`S:
1. Discuss in detail the various types of scales that could be used to
measure the attitude of the consumers in the direct marketing process.
2. Briefly discuss the future of Direct marketing in India with relevance to
the consumer behavior.
3. You are the marketing manager for a manufacturer of speciality watches
designed for runners. Would you sell these items through retail stores or
would you try direct marketing ? What research techniques would you
adopt to understand your consumer`s behavior?
REFERENCES:
1. Consumer Behavior ( 9th Edition ) ? Roger. D.Blackwell, Paul
.W.Miniard.
2. Consumer Behavior and Marketing Action ( 6th Edition ) ? Henry Assal
ISSUES OF PRIVACY AND ETHICS :
OBJECTIVES OF THE LESSON :
To understand the concept of Consumer privacy.
To understand the concept of ethical purchasing
To frame strategies to increase the consumers' awareness of their moral
responsibility as consumers
CONSUMER PRIVACY :
The word Consumerism , has many connotations , depending on who is using
the term. Business, government , consumer groups and academic researchers
have each developed their own definition of the term . These definitions span the
gamut from challenging society`s goals for material goods to reflecting peoples
desire for better values. One succinct definition is that Consumerism is a social
movement of citizens and government to enhance the rights and powers of
buyers in relation to sellers.
One of the consumer rights relates to privacy , information , data banks , and
similar emerging issues. Consumer information collected, merged, and
exchanged through computer and communication technologies has become the
main resource that business and government use to facilitate the millions of
daily transactions engaged in by consumers. Timely, accurate , and complete
consumer information is needed by a variety of organizations , direct response
marketers, advertising agencies, insurance companies, and private utilities. The
purposes of consumer information may include such things as approving or
denying credit, issuing credit cards , writing insurance policies, selecting people
for direct mail solicitation , preventing fraud, determining eligibility for
government aid, investigating and law enforcement purposes and many other
activities.
To obtain the benefits of technology without losing basic privacy rights , six
basic computer ?age privacy rules were formulated :
1. Only relevant and socially approved personal information should be
collected by private or public organizations to determine people`s access
to rights , benefits and opportunities.
2. Individuals should be informed what information about them is to be
collected and how it will be used.
3. Individuals should have practical procedures for inspecting their records
and for raising issues as to the accuracy , completeness, and propriety of
information used to make evaluative decisions about them.
4. Sensitive personal information should be circulated within the collecting
organization only to those with a need to see it for legitimate purposes.
5. Disclosures of identified personal information should not be made by
collecting organizations to others outside the original area of activity
unless agreed to by the individual or required by legal process.
6. Organisations must create and apply effective data security measures so
that they can keep the promises of confidentiality that they have made to
individuals whose information they are holding in a trustee relationship.
But new consumer privacy issues have surfaced recently. For instance :
Feature stories in magazines , newspapers , and on TV informed the
public that information given for one purpose ? credit , insurance ,
employment , organizational memberships, publication subscriptions ,
charitable donations , etc., - was being widely used for other commercial
purposes without the individual`s knowledge or consent.
When the Society of Consumer Affairs Professionals in industry polled
ten leading consumer advocacy organizations in 1989 as to the issues
they believed would be consumer action priorities in the 90`s, a majority
cited better Consumer privacy protection.
A major survey of consumers and industry leaders in the privacy ? intensive
sector ( eg., banks and thrifts , insurance companies, direct marketers, credit
bureaus, etc., ) made the following conclusions regarding consumer privacy in
the information age:
1. The general concern over threats to privacy by 79 percent of the public
reflects the low trust in institutions that has become a hall mark .
2. Despite these high general concerns over privacy invasion , the public is
prepared to provide personal information for consumer services when
convinced that fair information practices are observed.
3. Concern about privacy varies by race, religion , political philosophy,
information level, age and computer use. For instance blacks , Jews ,
liberals and those aged
30 ? 49 are most pro-privacy.
4. Lowering general public concern over threats to privacy will not be easy
but there
Are three important ways to enhance consumer privacy interests :
a. Update consumer privacy laws such as the Fair Credit Reporting
Act.
b. Create new information property rights for consumers whereby
they could opt in or out of particular consumer- profile
information systems and receive some kind of compensation if
they participate.
c. Develop more proactive consumer privacy protection policies by
business and consumer advocacy groups.
This topic would be of continuing concern to the marketers because of the
potential for a consumer backlash on privacy issues. More education of
consumers will be required about why certain information is being collected and
about their consumer rights.
ETHICS IN BUSINESS AND ITS RELEVANCE TO CONSUMER
BEHAVIOR :
Understanding of consumer Behavior gives a clear advantage to the marketer
who would know all that is there to know about the target consumers personality
and choices. In fact almost all companies producing or marketing continuously
gather and update their information about their target consumers and form
strategies. In many circles it is felt that in depth understanding about the
behavior of the consumers gives scope to the marketer to manipulate the market
itself and that strategies are formed without regard to fundamental ethics of
being honest , truthful and fare. The principal aim of the strategies is to
somehow overcome the resistance of the consumers and sell more. This leads to
a situation where cleverness in the market place and selling success become
prized qualities of a market man when viewed from the angle of his employer or
the company. Unless the company draws the line and encourages the employees
to be within certain limits , ethics becomes the first casualty. In the long run it
does immense damage to the relationship between the company and its
customers. Therefore, more than anyone else companies doing marketing have
to make ethics their way of life not be compromised even under grave
provocation or threat from competition. Without ethics there can be no business.
ETHICS IS NOT A MATTER OF CHOICE :
It is difficult to precisely define what ethics is. However most people have no
difficulty in understanding the spirit of ethics. Most people do not question or
argue about the axiom that ethics is not a matter of choice. Just as you do not
question the right of other people to live you do not question their right to expect
ethical behavior from you. Having said that we must however admit that
unethical practices are seen and put up within every area including marketing. In
marketing- be it product design, packaging, pricing, promotion , distribution or
quality assurance , ethics gets a go-by many times. Seemingly honest business
persons educated and respectable sometimes allow unethical practices by the
companies to go on. Common explanations that they are caught up in a
competitive situation and therefore helpless is not acceptable. The real reason
could be that in their quest for commercial superiority they are closing an eye
and allowing unethical practices to continue. In short they are subverting what
should have been their fundamental principal and philosophy. The society
cannot accept such business because it affects the very fabric of life.
ETHICS FLOW FROM THE TOP :
A business place dishonesty or rot has described above could not be taking place
without some knowledge of the management. Management are in any case
expected to be constantly on the alert to detect and stem any rot at the first
instance. They are to educate their employees and pro actively install all policies
that would prevent unethical practices. Ethical practices should be instituted by
the companies to flow from the top and percolating to all levels below. Including
lofty statements about ethics in the company`s vision statement is good but not
enough. The corporate management should understand that Junior executives
constantly look upward their supervisors and top management for moral
guidance. Absence of guidance is taken by the working levels as a signal that the
company is not serious about ethics. In such company`s commercial success
becomes the paramount policy . All means, fare or foul, that brings success will
be viewed as strategies. One company`s unethical practices will induce the other
company`s to follow suit in the name of the competition. Using trick for trick,
fighting fire with fire , the competitors bring down the general image of the
industry. All because few managements did not have the foresight or gutts to
stand up and stick to ethics even at the cost of some short term set backs.
However history has shown that those company`s stand erect and instill ethics in
their employees get notices by consumers and become leaders.
ETHICS IS A JOURNEY :
Ethics is not a destination. It is a journey. Company`s and persons should
continuously practice it, question themselves periodically and take course
corrections to travel in correct directions . Induction of the code of ethics and
their maintenance should be proactively supervised by the entire organization be
it a government , business or a group on a continuous basis. Appreciation and
reward for followers of ethical codes is important and so also punishments for
breaking these codes.
What is ethical purchasing?
Ethical purchasing put simply is buying things that are made ethically by
companies that act ethically. Ethical can be a subjective term both for companies
and consumers, but in its truest sense means without harm to or exploitation of
humans, animals or the environment...
Understanding buying ethically
The ways in which you can act as an 'ethical consumer' can take on a number of
often subtle forms.
cruelty free. This option is arguably the most important since it directly supports
progressive companies.
h as
battery eggs or polluting cars.
-based purchasing involves targeting a business as a whole. For
example, the Nestl? boycott targets all its brands and subsidiaries in a bid to
force the company to change its marketing of baby milk formula in the Third
World.
all the companies and products together and evaluating which brand is the most
ethical...
10 shopping tips for the ethical shopper
1. Local shops
2. Health food shops
3. Fair trade
4. Products not tested on animals
5. Vegetarian products
6. Organic produce
7. Non-genetically altered food
8. Ethical money
9. Recycling & second hand
10. Wood Products
DEVIANT CONSUMER BEHAVIOR :
The deviant consumer behaviors include negligent and fraudulent behaviors.
Negligent Consumer Behavior : COMPULSIVE BUYING
Most consumers engage in buying as a normal and routine part of their everyday
lives. But when the buying becomes compulsive the goal shifts from obtaining
utility from the purchased item to achieving gratification from the purchasing
process itself. Compulsive buying is chronic. Repetitive purchasing that
becomes a primary response to negative events or feelings . It becomes very
difficulty to stop and ultimately results in harmful consequences to individuals
or others. Compulsive buying is undesirable because it has sever consequences
such as amassing huge amounts of debt that are difficult to retire and feelings of
remorse , lowered self esteem, and weekend inter personal relationships .
Shopaholics are addicted to purchasing and use it as a fix to offset emotional
deprivation. And when they are confronted over their spending habits they will
often switch to another type of chronic destructive habits such as over eating,
work holism or over exercising.
Studies show that as much as 10 percent of the American population can be
classified as hard core shoppers who shop for shopping sake rather that to fill
real needs. One factor facilitating the process is the easy availability of the credit
cards. It is probably no coincidence that there has been a rapid growth in the
bank cards issued during the rise in the problem of compulsive consumption.
One consumer was even able to obtain 1199 different types of credit cards to
win a bet with a friend. The result of easy credit can be staggering debt. Support
groups have been established to fight this type of addiction by helping people
who are trying to stop their compulsion to spend beyond their means for things
they don`t need.
FRADULENT CONSUMER BEHAVIOR :
Shop lifting is an example of fraudulent or a criminal type of deviant consumer
behavior that involves the theft of retail merchandise during the store hours by
someone who is shopping or pretending to shop. Shop lifting rose 35 per cent
between the mid ? 1980`s ? 1990 and equals about two per cent of all retail sales
excluding gas and car purchases.
Thus , it must be emphasized that consumers, just as business and other
organizations , have an obligation to act responsibly in the marketplace in
exchange relationships.
Ethical shopping and ethical trade initiatives:
Every day we choose between different products. Our purchase decisions do not
only affect us ourselves. The way the products have been produced can make a
big difference to other people, to nature, the environment and to animals. Ethical
purchase behavior is about taking responsibility for the influence which we
control ourselves.
Ethically questionable consumer behavior
The more one equals ethics with moral criticism and moral self-criticism, the
more natural it is to start with looking at unethical rather than ethical consumer
behavior. In addition to potential theory-traditional reasons, there are good
practical and economic reasons for explaining, influencing and prohibiting
ethically questionable consumer behavior. A red thread in this consumer ethics
research tradition has been it`s the development, validation and frequent
replication of the "consumer ethics scale" (often referred to as CES. This CES
scale offers a list of more or less ethically questionable consumer activities for a
vote. The activities can be grouped into four categories, ranging from clearly
questionable to little controversial categories:
Actively benefiting from illegal activity
1. Changing price tags on merchandise in a retail store.
2. Drinking a can of soda in a supermarket without paying for it.
3. Reporting a lost item as "stolen" to an insurance company in order to collect
the money.
4. Giving misleading price information to a clerk for an un-priced item.
5. Returning damaged merchandise when the damage is your own fault.
passively benefiting at the expense of others
6. Getting too much change and not saying anything.
7. Lying about a child's age in order to get a lower price.
8. Not saying anything when the server miscalculates the bill in your favor.
actively benefiting from questionable behavior
9. Breaking a bottle of salad dressing in a supermarket and doing nothing about
it.
10. Stretching the truth on an income tax return.
11. Using an expired coupon for merchandise.
12. Using a coupon for merchandise that you did not buy.
13. Not telling the truth when negotiating the price of a new automobile.
No harm/no foul
14. Tasting grapes in a supermarket and not buying any.
15. Using computer software or games that you did not buy.
16. Recording an album instead of buying it.
17. Spending over an hour trying on different dresses and not purchasing any.
18. Taping a movie off the television.
19. Returning merchandise after trying it and not liking it.
ACTIVITY ? A
1. Explain in detail the ways and means of being an ethical shopper?
_____________________________________________________________
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SAQ'S:
1. Enumerate the significance of Ethics in the study of Consumer Behavior.
2. Unethical Practices are seen and put up within every area of marketing ?
Comment.
3. Ethics is not a destination ,it is a journey ? Comment.
Reference :
1.Consumer Behavior- Concepts , applications and Cases, M.S.Raju, Dominique
Xardel
2. Consumer Behavior ( Fourth edition )- David L.Loudon and Albert J.Della
Bitta.
This post was last modified on 14 March 2022