PBL 3: Marketing:

Consumer Behaviour and What factors is it influenced by?

How individuals select, use and dispose of products that satisfy their needs and wants

• Cultural, Social and personal factors

What are the three subclasses of culture

Culture, Subcultures and Social Classes

• Culture is the fundamental determinant of peoples wants and behaviours because it influences views of self and relationships to others

What are the subclasses of Social Factors

Reference Groups (Cliques), Family, Social Status and Social Roles

What are Reference groups and Membership Groups?

Reference Groups: all groups that have direct or indirect influence on individuals attitudes and behaviours

• Membership Groups: direct influence of each other, consists of primary groups (interacts more and informally) and secondary groups (interacts less frequently and formally)

How do Reference Groups Influence you ? (3)

• Expose an individual to new behaviours

• Influence attitudes and self-concept

• Pressure of conformity

What other types of groups influence you (opinion leaders)

Aspirational and Dissociative Groups

• who informally shape the attitudes, opinions, and purchasing decisions of others

Cliques

Small groups whos members interact frequently causing isolated opinions and no new ideas

How Can Marketers try Create Openness in Cliques

through bridging: people who are part of one clique are linked to individuals in another clique

What are Methods to Ignite Public Interest: (Malcolm Gladwell)

• Law of the Few (Mavens (experts), Salesmen (motivate) and Connectors (bridging)), Stickiness and Power of Context (able to organise groups and communities around it)

• Stealth Marketing and Word of Mouth

What two groups of family are there

• Most influential social factor

Family Orientation and Family of Procreation

Roles and Status

define norms of behaviour, people choose products that communicates their actual or desired status in society

Personal Factors that affect Consumption Behaviour

Age and Status in Life Cycle, Occupation and Economic Circumstance, Personality and Self-Concept and Lifestyle and Values

How do Age and Status in Life Cycle affect Purchasing Behaviour

New life events lead to new needs

How do Occupation and Economic Circumstance affect Purchasing Behaviour

Marketing teams try to identify products that they can sell to specific occupational groups and spendable income

How do Personality and Self-Concept affect Purchasing Behaviour

driving consumers to choose products, brands, and experiences that reflect their inner traits, personal identity, and social aspirations

How do Lifestyle and Values affect Purchasing Behaviour

Lifestyle is shaped by time-constrained or money-constrained, marketers therefore search for relationships between their product and lifestyle groups

How do psychological processes affect marketing and what are the 4 sub groups

stimuli enters the consumers consciousness and a set of psychological processes combine with certain consumer characteristics resulting in purchasing decisions

• Motivation, Perception Learning and Memory

How does a need become a motive and lead to purchasing?

A need becomes a motive when it is aroused to a certain level of intensity leading to drive us to act

What are the three theories of motivation

• Freud (indepth interviews to uncover deep motivations), Maslow, and Herzberg Theory (satisfiers and dissatisfiers)

How does Perception affect Purchasing Decisions

Through sensory marketing using subconscious triggers to influence consumers judgements (selective attention, retention and distortion)

What stimuli do consumers notice in Selective Attention

• relate to a current need, they anticipate and whose deviations are large in relationship to the normal size

Selective Distortion

• Consumers give companies the benefit of the doubt because they fit new information into preconceived notions

What is Selective Retention and Subliminal Perception

Selective Retention: Retain information that supports our beliefs

Subliminal Perception: Undercover messages hidden in ads that affect consumers

- Marketers use repetition to make sure there message isn’t overlooked so people memorise good things about their product and forget them about competitors

What is Learning and what falls under it?

Changes in Behaviour Cuased by experiences

Generalisation: A positive experience with one product is transferred to similiar products

Discrimination: Consumers learn to recognise differences between similiar products and respond differently

Hedonic Bias: blame external factors for failure

How do Emotional Marketing Affect Consumers

• Emotional Brand stories encourage word of moth and online sharing

How does memory affect Consumers

Packaging, Display and other retrieval cues remind individuals of brands at the moment of purchasing

Memory Encoding: Information is remembered better when consumers pay attention and process its meaning (through positive brand associations)

Memory Retrieval: The process of recalling store brnd information

What is the Buying Five Stage Model:

Consumers go through five stages when buying products (unless its regular)

• identifying the problem (triggered by stimulus change), information search, evaluation of alternatives, purchase decision, post-purchasing behaviours

Information Search

Done through Levels of Engagement, Information Sources, Search Dynamics and Market Partitioning

What are Levels of Engagement and Different types of Information Sources

Heightened Attention (a person becomes more receptive to information about a product) and Information Search (learning about the products through information sources)

• Information Sources: Personal, Commercial, Public (Social Media) and Experimental (Using the Product)

What are Search Dynamics and The Importance

Start with a total set, awareness set, consideration set, choice set, decision

• Companies must strategise to enter consumers prospects awareness

Market Partitioning

Identifying the hierarchy of attributes that guide consumer decision making in order to understand different competitive forces (type/brand/price vs quality/service/type)

Evaluation of Alternatives (Expectancy Value Model)

Several processes consumers use to process competitors brands

Expectancy-Value Model: brand preference are determined by multiplying a consumer's belief that a product possesses specific attributes

Purchasing Decision

When purchasing an item, consumers make five decisions: brand, dealer, quantity, timing and payment method

Include Non-Compensatory Model of Consumer Choice and factors that can intervene in final purchasing decisions (attitudes of others and unanticipated situational)

Non- Compensatory Model of Consumers Choice: 3 Heuristics

decision making strategies in which a products weakness cannot be compensated by strength in another attribute

• Conjunctive Heuristic: a consumer sets a minimum acceptable cutoff level for every product attribute and only considers options that meet or exceed all of those cutoffs simultaneously

• Lexicographic Heuristic: choosing the option that performs best on your most important feature. You only look at your next most important feature if there’s a tie.

• Elimination-By-Aspects: you compare options one important attribute at a time. If an option fails your requirement for that feature, you remove it.

Post Purchase Behaviour (Dissonance, Satisfaction and Post Purchase actions)

Post Purchase actions can lead to an exit option, voice option or compaining to the company, lawyers or regulatory organisations

Marketers can reduce satisfaction through follow up communication

Elaboration Likelihood Model:

Central Route: High Involvement: Consumers carefully examine important product information (they have sufficient knowledge and motivation to evaluate product)

Peripheral Route: Low Involvement: consumers rely on simple cues like celebrity, packaging, promotions and credible sources (inexpensive and non-durable)

Variety Seeking Model

Occurs when involvement is low but consumers still see differences between brands

• Consumers switch brands for variety not because their dissatisfied

Behavioural Decision Theory

describes how individuals make choices

• reliant on decision heuristics, framing (mental accounting) and contextual effects

Decision Heuristics: (Availability, Representative and Anchoring/Adjustment)

Different from non-compensatory heuristics, these are used when trying to predict the likelihood of future outcomes

• Availability: Judge likelihood based on how quickly an example comes to mind

• Representativeness: Judge a product based on how similar it is to another product in the category

• Anchoring: Form an initial judgement and adjust it when new information appears

Framing (Mental Accounting)

Mental Accounting: describes the way consumers evaluate financial outcomes of choices

• There are 4 principles: Seperate gains, Combined losses, Combine small losses with larger gains and separate small gains from large losses

Prospect Theory:

Consumers evaluate choices as gains or losses and generally feel losses more strongly than equivalent gains

What are the stages companies act in before going abroad?

First companies must define their marketing objectives and principles

1 No regular export activities, 2 Export via independant representatives, 3 Establishment of one or two more sales subsidiaries, 4 Establishment of production facility

Psychic Proximity

Companies prefer markets with familiar languages, laws and cultures

However cultural similarity can be misleading as it causes companies to overlook more attractive markets

What do Ideal Markets Have?

High Market Attractiveness, Low Market Risk and Strong Company Competitive Advantage

Marketing Strategies in developing Countries

• Changing conventional marketing practises

• ‘low margin, low price, high volume’ tactic is good for lower class

• Digital strategies are crucial in developing markets given the rapid penetrations of smart phones as a means of communication

• Developed Companies can use affordable, more resource-efficient products developed for poorer markets and bring it home

Developing Countries entering Developed Countries

Developing Country companies buy Developed country companies to enter those markets quickly

Also identify neglect niches in larger markets

Best Mode of Entry:

Once a company decided to enter a country it must choose the best mode of entry with its brands

• Indirect Exporting, Direct Exporting, Licensing, Joint Ventures and Direct Investment

Indirect and Direct Exporting

Indirect Exporting: the company uses an intermediary to handle international sales

• Advantages: less investment and carries less risk

• Disadvantages: less profit and control

Direct Exporting: The company manages its own exports

Licensing

A company allows a foreign firm to use its brand, patent, technology or production method for a small fee

• Advantages: The licensor enters the foreign market with low investment and risk, while the licensee gains expertise or a recognised brand

• Disadvantages: may become future competitor, less control and sacrifices own profit

Joint Ventures (more control than indirect/direct export)

A foreign company and local partner share ownership, investment, control, profits and risks

• Main Risk: Partners may disagree about investment, marketing growth etc and sharing ownership limits the foreign company control

Direct Investment

The company buys a local business or builds its own facilities abroad

• Advantages: Lower labour, material/transportation costs, better local relationships

• Disadvantages: Requires major investment and faces political, economic and currency risks

• Most risk but Most Control: Sole owner but putting in your own resources (best potential)

Aquisition

Buying an existing local company or brand

• it provides fast access to consumers and facilities , distribution and market knowledge

• Local brands connect better with consumers than international brands