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Consumer Behavior
how buyers make purchase decisions
Social Factors of Consumer Buying Process
Family- most important group influence (trends: wives-outside home, husbands-inside home, children-influence family purchases)
Reference Groups- groups that serve to influence buying behavior (opinion leaders- Warren buffet, aspirational group influence-buying shoes like Lebron James)
Role and Status- person's role in a group may influence buying behavior
Cultural Factors of Consumer Buying Process
Culture- the set of basic values and behaviors shared by members of society (U.S. health concerns)
Subculture- smaller groups within a culture (US latino market, US mature consumers trying to buy age-defying products)
Social Class- society's ordered divisions, determined by income, education, and wealth with occupation being the most important
Personal Factors of Consumer Buying Process
Age and Life-Cycle Stage- over people's lifetimes, their buying purchases change (bigger family, bigger car)
Occupation- (blue-collar workers)
Economic Situation- buying behavior depends on economy (great value brands during recession)
Personality- relatively enduring psychological characteristics (brands try to match consumers personalities, hard to determine)
Psychological Factors of Consumer Buying Process
Motivation- subconscious and difficult to uncover
Perception- process people use to select, organize, and interpret info (selective attention, selective distortion, selective retention)
Learning- changes in behavior arising from experience; a drive becomes a motive when it is directed toward a stimulus object; a cue determines when, where, and how a person might respond (marketers increase demand for products by associating it with strong drives, using motivating cues, and providing a good consumer experience that will reinforce another purchase)
Beliefs- a descriptive thought ("that's too expensive")
Attitudes- a person's relatively consistent evaluation toward some thing or idea ("you should pay more for good furniture") harder to change
Stages of Consumer Buying Process
1. Need Recognition
2. Information Search
3. Alternative Evaluation
4. Purchase Decision
5. Post-purchase Decision
1. Need Recognition
A need or want that needs satisfaction. A stimulus triggers this:
-Internal Stimulus/Innate Needs: hunger or thirst
-External Stimulus/Acquired Need: seeing or hearing an advertisement (two types: having a problem with product, or marketing mix elements stimulate this)
Most frequently used marketing mix stimulus
Promotion, specifically advertisements
2. Information Search
consumer engages in a search for information about alternative that may satisfy the need:
-internal search: memory
-external search: asking family or friends/reading reviews
Consumers have most confidence in internal sources
Most powerful marketing source of information
Trial- getting a potential customer to try a product
How marketers reduce the cost of information search
Provide trained sales help, point of purchase information, an informative website thats easy to use, and informative advertising
3. Alternative Evaluation
consumer evaluates their set of preferred alternatives (evoked set or consideration set)
-perfectly rational consumer: rate each alt. on every attribute, multiply each attribute importance by each rating, then sum up the totals for each
-typical consumer: partial process; rate top 3 attributes of each alt. or eliminate alt.'s if they don't rate above a certain point on the most important attribute
Hierarchical Heuristic
use one attribute to exclude alternatives , then make a comparison of remaining alternatives based on another attribute or two
4. Purchase Decision
includes whether to buy as well as where and how to buy
5. Post-purchase Evaluation
sometimes consumers have cognitive dissonance (anxiety or regret of purchase) which causes returns or negative relations to brand
To avoid: marketers can use personal selling or advertising communication
performance - expectations =level of satisfaction
expectancy gap theory is particularly important for service contexts
The imperative and difficulty for marketers
deliver on performance through quality products and services and attract customers without over-exaggerating
Three Categories of Involvement
-Routine
-Limited
-Extensive
the more expensive, the more time invested in the product decision (relative to consumer), also if perceived risk
Routine Decisions
low involvement
low-priced, everyday items (gum, magazines)
Limited Decisions
medium involvement
moderately priced items (small appliances, clothing)
Extensive Decisions
high involvement
high priced purchases (house, car)
Decision Making Models
Comparison by Alternative: weighted ratings summed for each alternative and compared
Comparison by Attribute: each alternative compared on each weighted attribute rating
takes a long time
Heuristics
time and effort saving trick in picking a product , but is pervasive
3 cognitive heuristic tendencies that lead to faulty decision making
-Availability Bias
-Anchoring and Adjustment
-Representativeness Heuristic
Availability Bias
(one explanation for so much advertising)
recency effect (tax evasion released before taxes are due), vividness (seeing plane crash)
-fast food or beer ad
Anchoring or Adjustment
(explanation for discounting) managers often use the cost of their product as an anchor for pricing, but do not adjust sufficiently to varying demand and competitive conditions
-JCPenney inflates sticker price and then discounts dramatically
Representative Heuristic
(why ads promote minor attributes and stereotypes) assuming similarity in 1 aspect leads to similarity in another (hotel is better if it has good shower facilities), ignore base rates (lawyer vs. engineer study)
-MLB player having hot blonde gf and nice car instead of male nurse
-Mom makes ovaltine for kid which means its good for them (its not)
marketing actions that attempt to take advantage of representativeness are common
Law of Small Numbers
assumption people make that a small sample is representative of a much larger population
A Trio of Needs
-Power: individual's desire to control environment (cars, guns, ac/heating)
-Affiliation: need for friendship, acceptance, and belonging (mizzou gear, country clubs, student orgs.)
-Achievement: need for personal accomplishment (college degree, engagement ring)
Maslow's Hierarchy of Needs
Psychological Needs (innate)
Safety and Security Needs
Social Needs
Ego Needs
Self-Actualization Needs
Correlational Inferences
associations (+ or -) between two attributes
+: the better looking the car, the better its performance
-:the higher the cost, the better performance (Haagan Das Ice Cream: the higher fat makes it more rich with flavor)
Country of Origin Effects
wherever a product is produced makes it good or bad
+: Germany makes good cars, sausage, beer
-:China makes bad toys, clothes, etc.
cities can have this effect too
International Marketing
marketing of one's products outside of domestic market
Global Marketing
focusing resources and competencies on global market opportunities and threats in a comprehensive manner
A Global Marketing Strategy (GMS)
developed in order to address the following:
-global market penetration
-coordination of marketing activities
-standardization vs. adaptation
-concentration of marketing activities
-integration of competitive moves
Global Market Penetration
the extent to which a company has operations in major world markets
Coordination of Marketing Activities
the degree to which global, marketing-mix activities are planned and executed interdependently
Standardization vs. Adaptation
whether each marketing mix should be used the same way or in different ways between country markets
Concentration of Marketing Activities
which activities related to marketing are performed in one or only a few countries
Integration of Competitive Moves
the extent to which a firm's competitive marketing tactics in different parts of the world are interdependent
The different world views of a company's management
-Ethnocentric
-Polycentric
-Regiocentric
-Geocentric
Ethnocentric
-believes home country is superior to the rest of the world
-routinely ignores opportunities outside of country
-standardized or extension approach (products sold without adaptation)
-headquarters knowledge everywhere, local knowledge unnecessary
Polycentric
-each country in which you do business is unique
-multinational company
-localized or adaptation view
Regiocentric
-develop a regional integrated strategy
Geocentric
-entire world as a potential market
-global or transnational company
-maintain association with a particular headquarters country
-try to be stateless
-seeks to be responsive to local needs and wants
"Think globally, act locally"
final place for companies that seek international growth
Hofstede's Cultural Typology
cultures of different nations can be compared in these dimensions:
1. Power Distance
2. Individualism
3. Individualist Cultures
4. Collective Cultures
5. Masculinity
6. Uncertainty Avoidance
while differences in national cultures is important, they ignore differences in subculture, demograohics, buying oreferences, etc.
Hofstede's: Power Distance
extent to which the less powerful members of a society accept power to be distributed unequally; the higher the power distance, the lower the level of trust, prefer sole ownership of subsidiaries
Hofstede's: Individualism
degree to which individuals in a society are integrated into groups
Hofstede's: Individualist Cultures
each member of society is concerned with their own interest and those of the immediate family (US and Europe)
Hofstede's: Collectivist Cultures
all of society's members are integrated into cohesive in-groups (Japanese and other Asian cultures)
Hofstede's: Masculinity
a society where men are expected to be assertive, competitive, and concerned with material success, and women are nurturers (Japan and Austria); femininity describes men and women's social roles overlap (Spain, Taiwan, Netherlands)
Hofstede's: Uncertainty Avoidance
extent members of society are uncomfortable with unclear, ambiguous, or unstructured situations; uncertainty accepting cultures are Denmark and US, non-accepting are Greece and Portugal
high levels of uncertainty- marketers stress warranties and other risk-reducing features
Cultural Dimensions in Asia (CVS)
long-term orientation vs. short-term orientation: whether gratification should be immediate or deferred
Long-term values- persistence
Ordering relationships by status and observing the order - societal hierarchies and acceptance of complementary relations
Thrift- high savings rate
Sense of shame- sensitivity in social contracts
"Gaman"
(persistence) Japanese concept of willingness to pursue research and development even when odds of short term success are low
Market Entry Strategies
ranked on a continuum representing increasing levels of investment, commitment, and risk; contain:
-Licensing
-Joint Ventures
-Direct Investment, Acquisition, or Ownership
Licensing
generates revenue flow with little new investment; good for company that possesses advanced technology, a strong brand image, or valuable intellectual property
+enables companies to circumvent tariffs, quotas, or similar export barriers
+considerable autonomy and able to adapt goods to local taste
-limited market control
-short life
-strong competitors in the local market and eventually industry leaders
Cooperative Alliances
"Global Strategic Partnerships" ambitious, reciprocal, cross-border alliances that may involve business partners in a number of different country markets. Have 3 characteristics:
-participants remain independent of alliance
-share benefits of alliance as well as control over the performance of assigned tasks
-participants make ongoing contributions in tech , products, and other key strategic areas
Joint Ventures
partners share equity investment in an independent entity; share risk and complementary strengths
+limit its financial risk and exposure to political uncertainty
+able to learn a new market environment
+achieve synergy
+may be the only way to enter a country or region if government is restrictive
-must share rewards as well as risks
-potential for conflict
- stronger partner evolves into strong competitor
Foreign Direct Investment
when there is a higher level of involvement outside the home country; can establish company operations outside the home country through greenfield investment (new operational facilities in foreign country), acquisition of a minority or majority equity stake in a foreign business, or taking ownership of an existing business
+provide instant market success
+offers greater control
-requires commitment
-may breed resentment in targeted market
Michael Porter's Model
The presence or absence of particular attributes in individual countries influences industry development. These attributes are:
-Factor conditions
-Demand conditions
-Related and Supporting Industries
-Firm Strategy, Structure, and Rivalry
Activity in any of these impact the others
Porter's: Factor Conditions
a country's endowment with resources;
-basic factors may be created or inherited without much difficulty
-specialized factors are more advanced and provide a more sustainable source
5 categories:
-human
-physical
-knowledge
-capital
-infrastructure
the greater availability of these, the greater the nation's advantage
Porter's: Demand Conditions
determines the rate and nature of improvement and innovation by the firms in the nation; 3 characteristics are important to creation of competitive advantage:
-market size (larger locally, more attention, core CA when exported)
-demanding customers (more demand locally, leads to national advantage)
-market sophistication (strong trend-setting local market helps local firms anticipate global trends)
Porter's: Related and Supporting Industries
local industries are competitive, firms enjoy more cost effective and innovative inputs
Porter's: Firm Strategy, Structure, and Rivalry
-local conditions affect firm strategy
-low rivalry makes a firm more attractive, local rivalry good (forces firms to move beyond basic advantages)
- forces them to succeed in a tougher environment
Limitations of Competitive Advantage Model
-it is much easier now to compete in strong markets globally with trade liberalization
-suggests firms should seek out the toughest rivalry and demand conditions
-Porter dismisses the risks of survival in the short term
Countries' Views on Trade Policies
-Liberal: New Zealand and Chile
Chile has open trade and no tariffs
-Conservative: China
Democratic vs. Autocratic Governments
A:
+ control
- bad leaders limit business
D:
+ freedom in development
- not enough control
Why International Business?
-increase sales
-gain new resources and knowledge
-reduce risk
What are the challenges of international trade?
-language
-currencies
-culture
-political values
-geographics
-legal differences
-trade policies and tarriffs
Product Decisions
most critical in determining marketing success
New-Product Development
-successful new products generally are more profitable than successful existing products (avoid intense competition)
-important from social perspective (change our lives and the world we live in)
-high risk/ high reward marketing activity
-has distinctive benefit (fills unmet need)
Product Positioning Maps
show competing brands position on relevant dimensions and allows companies to fill gaps with new product
The Product Life Cycle
used to understand and analyze product categories or industries, delineated on sales and profits (subjective)
-Introduction
-Growth
-Maturity
-Decline
PLC: Introduction
when a product is introduced
-marked by low sales and profits
-possible to never make it out of intro stage
-"pioneer": first product, stimulates primary demand
-"innovators": first adopters/buyers
PLC: Growth
-sales start to grow
-competitors enter
-communicate distinctive benefits of specific brand
-"early adopters": role models who provide influence over others to buy
PLC: Maturity
-product category slows
-lasts a long time
-competition at its highest in category, competition outside begins
-highest levels of promotional expenditure are made
-"Early and late majority": when most people adopt product
PLC: Decline
-decline in product's category of sales and profits
-promotional expenditure curtailed
-"laggards": last to adopt
Branding
identifies a particular product and differentiates it from competing products
-consistent level of quality that's different from other offerings = successful branding
Private Brands
owned by a wholesaler or retailer
accounting for more than 20% of sales at US mass merchandisers
-hard to establish and costly to stock and promote, but yield higher profit margins for the reseller and create a better image
Corporate Brand Licensing
the fastest growing licensing category
Co-branding
when two established brands of different companies are used on the same product
+creates broader consumer appeal
+greater brand equity
+easy entry into difficult category if done alone
-complex legal contracts
-careful coordination in advertising
-trust each other
Main Types of Brands
-Generic
-Private
-Manufacturer
Generic Brands
low priced products identified only by name
generic drugs often account for market shares >50%
Ex: canned fruits and vegetables
Manufacturer Brands
owned by the producers of a particular product
-individual branding: P&G (Tide, Bold, Cheer)
-family branding: Sony
-co-branding: Crest and Scope
Brand Equity
the differential effect that knowing the brand name has on customer response to the product or service
-underlying factor: customer equity (value of customer relationships the brand creates)
Brand Valuation
the process of estimating the total financial value of a brand (difficult to measure)
-powerful brand enjoys a high level of consumer brand awareness and loyalty
Desirable Qualities for a Brand Name
1. suggests benefits and qualities
2. easy to recognize and remember
3. distinctive
4. extendable
5. translates easily
6. capable of registration
Product Management
involves making decisions regarding the product line
4 Choices to Developing Brands
-Line Extension
-Brand Extension
-Multi-Branding
-New Brand Name
Line Extension
company introduces additional items in a given product category under the same brand name
i.e. new flavors, forms, colors, ingredients, package size, etc.
+low cost, low risk
-heavily extended brands can cause consumer confusion or frustration
-may come at an expense of other items in the line
Ex: Marriott Hotels (downmarket and up-market, core brand desired when up-market)
Brand Extension
use of successful brand name to launch new or modified products in a new category
+instant recognition
+faster acceptance
+saves high advertising costs
-may harm consumer attitudes toward the other products carrying the same brand name
-may not be appropriate to a particular new product
Ex: Law and Order >>> Law and Order SVU
Multi Branding
marketing for more than two competing and almost identical products, that belongs to a single organization and is filled under different and unrelated brands
+establish different features
+appeal to different buying motives
+allows a company to lock up more reseller shelf space
-each brand obtains only a small market share
-none may be very profitable
Ex: Unilever's (Dove, Axe, Suave)
Product Adaptation
-Straight Extension: don't change product, don't change communication
-Communication Adaptation: don't change product, adapt communications
-Product Adaptation: adapt product, don't change communications
-Dual Adaptation: adapt product, adapt communication
-Product Invention: develop new product
Pricing Strategies
-"one price fits all"
-adaptation or polycentric
-geocentric
Distribution Methods
-sell the product to a trading company
-set up a company's own distribution network
-joint venture (locate the company sales agent in the target market, contract with local interdependent sales agents)
Materialism
the things bought assumed to produce happiness
Effects of Overconsumption
-pollution
-global warming
Sustainable Development
-balancing economic growth and social needs with the natural environment
-ensuring that growth in the present does not adversely sacrifice future opportunities
-within local and global levels
Sustainable Development Challenges
1. Inherit complexity of the problem
2. Conflicting interests
3. Post-Modernization emerging factors
SD Challenge: Inherit Complexity
balancing short term private benefits with long-term interests
-tend to over focus on one area
Solution: long-term change, hard to see the impact though
SD Challenge: Conflicting Interests
vary because of own agendas
-corporate interest
-national interest
-personal interest
-interest groups
Ex: Rex Tillerson of Exon Mobil (only care about shareholders interest until they demanded change)
