PRINCIPLES OF MARKETING NOTES Chapters 4-6

Chapter IV: Marketing Research and Analytics

The Importance of Marketing Research

Marketing Research: The systematic design, collection, interpretation, and reporting of information to help marketers solve specific marketing problems or take advantage of marketing opportunities

It is a process for gathering information that is not currently available to decision makers.

Its purpose is to inform an organization about:

•  Customers’ needs and desires

• Marketing opportunities for products

• Changing attitudes and purchase patterns of customers

Marketing research can:

• Help a firm better understand market opportunities

• Help a firm ascertain the potential for success for new products

• Help a firm determine the feasibility of a particular marketing strategy

• Help a firm develop marketing mixes to match the needs of customers

• Improve a marketer’s ability to make decision

Types of Research

Marketing research can involve two forms of data:

• Qualitative data yields descriptive nonnumerical information. (focus group, trials)

• Quantitative data yields empirical information that can be communicated through numbers. (data, graphs)

To collect this data, marketers conduct either exploratory research or conclusive research.

Exploratory Research

Exploratory Research: Research conducted to gather more information about a problem or to make a tentative hypothesis more specific

• The main purpose of exploratory research is to better understand a problem or situation and/or to help identify additional data needs or decision alternatives.

Customer Advisory Boards: Small groups of actual customers who serve as sounding boards for new-product ideas and offer insights into their feelings and attitudes toward a firm’s products and other elements of its marketing strategy

Focus Group: A small group of 8 to 12 people who are brought together to participate in an interview that is often conducted informally, without a structured questionnaire, to observe interaction when members are exposed to an idea or a concept

• This less-structured format is beneficial to marketers because it can yield more detailed information to researchers.

The Marketing Research Process

Five Steps of the Marketing Research Process

The research design must specify what types of data to collect and how they will be collected.

TYPES OF DATA

• Primary data: Data observed and recorded or collected directly from respondents

• Secondary data: Data compiled both inside and outside the organization for some purpose other than the current investigation

SOURCES OF SECONDARY DATA

• Marketers often begin the data-collection phase of the marketing research process by gathering secondary data.

• They may use available reports and other information from both internal and external sources to study a marketing problem.

• Internal information may have been gathered using customer relationship management tools for marketing, management, or financial purposes.

Survey Methods

Marketing researchers often employ sampling to collect primary data through: 

Mail Surveys, Telephone Surveys, Personal Interview Surveys, Online Surveys, and Social Networking Surveys

The survey method chosen depends on the:

• Nature of the problem or issue

• Data needed to test the hypothesis

• Resources, such as funding and personnel, available to the researcher

Gathering information through surveys is becoming increasingly difficult because fewer people are willing to participate

Comparison of the Four Basic Survey Methods

Online and Social Media Surveys

Online Survey: A research method in which respondents answer a questionnaire via e-mail or on a website

Marketers can also use digital media forums such as chat rooms, blogs, newsgroups, social networks, and research communities to identify trends in interests and consumption patterns.

Crowdsourcing:  Combines the words crowd and outsourcing and calls for

taking tasks usually performed by a marketer or researcher and outsourcing

them to a crowd, or potential market, through an open call

• Is a way for marketers to gather input straight from willing consumers and to actively listen to people’s ideas and evaluations on products

Observation Methods

Avoid direct contact with the subject to reduce bias due to the possible

awareness of the observation process.

• If the presence of a human observer is likely to bias the outcome or if human sensory abilities are inadequate, mechanical observation devices (cameras, recorders, scanners) may be used to record behavior.

Observation may include the use of ethnographic techniques, such as watching customers interact with a product in a real-world environment.

Observation may be combined with interviews.

Drawbacks of observation:

• Tends to be descriptive and may not provide insights into causal relationships

• Subject to the observer’s biases or limitations of the mechanical device

Marketing Analytics

Marketing Analytics: The use of databases, big data, and measurement methods enabled by technology to interpret the effectiveness of a firm’s marketing functions

• Provides frequent, data-driven insights related to all measurable marketing activities

• Can lead to the creation of marketing information systems and decision support systems that assist businesses in decision-making

Marketing analytics starts with big data and massive files of data available from multiple sources, which are then structured for access and retrieval in databases.

• Structured data can be organized by blockchain information systems.

• New technologies have enhanced the process of obtaining important consumer feedback.

Big Data: Involves massive structured and unstructured data sources that can be used by marketers to discover unique insights and make strategic decisions

(Often consists of high-volume data that marketers can use to discover unique insights and make more knowledgeable marketing decisions)

• Volume: Relates to the quantity of data

• Variety: Relates to up to 85 percent of the data being unstructured and needs to be converted into quantitative analysis

• Velocity: Relates to the speed of data entering the system

• Variability: Relates to data not being consistent or not having a fixed pattern

• Complexity: Relates to the difficulty of linking, matching, and transforming data across systems

Data Silo: A file of fixed data that is in one department isolated from the rest of the organization

To prevent data silos, management should:

• Determine business needs and target areas where data analytics could help improve on those needs

• Make sure data relevant to these areas are fully shared

• Ensure all teams and departments involved are on board and in sync

Though there are numerous benefits of big data for marketing, on the flip side is loss of consumer privacy.

• Consider how social media giants such as Facebook can monitor conversations about products and companies and subsequently display target ads in the Facebook feeds

Database: A collection of information arranged for easy access and retrieval

• Allows marketers to tap into abundant information useful in making marketing decisions

Customer relationship management (CRM) employs database marketing techniques to

identify different types of customers and develop specific strategies for interacting with

each customer.

A CRM incorporates three elements:

• Identifying and building a database of current and potential customers, including a wide range of demographic, lifestyle, and purchase information

• Delivering differential messages according to each consumer’s preferences and characteristics through established and new media channels

• Tracking customer relationships to monitor the costs of retaining individual customers and the lifetime value of their purchases

Implementing Marketing Analytics

Used to evaluate return on investment (ROI) on marketing strategies and make adjustments

Big data and tools such as marketing decision support systems are important to the success of marketing analytics.

The highest goal marketers appear to have with marketing analytics is identifying how to develop better-targeted marketing campaigns.

Investing in marketing analytics involves four steps:

The key metric of marketing analytics is performance, assessed through ROI, effectiveness, or reach.

Most marketers need to know how to use analytics in marketing decisions.

Sales, advertising, product development, distribution, and pricing decisions need the support of marketing analytics.

Dashboards can convert data analytics to easy-to-use key performance indicators (KPIs)

• In simple terms, key performance indicators are a goal that you work towards achieving.

Advances in technology related to cloud computing, new programming languages, and autonomous applications have helped the field grow substantially.

More than 30 percent of companies have integrated marketing analytics into the daily activities of the marketing function, and marketing professionals believe that an increasing percentage of the marketing budget should go toward analytics.

Research shows that a one-unit increase in marketing analytics deployment results in an 8 percent increase in a company’s return on assets.

Marketing Decision Support System (MDSS): Customized computer software that aids marketing managers in decision making

• Offers computational and modeling capabilities

• Has a broad range of advanced marketing analytics

• Often a major component of a company’s marketing information system

• May incorporate artificial intelligence and other advanced computer technologies

Marketing Information System (MIS): A framework for managing and structuring information gathered regularly from sources inside and outside the organization

• Provides a continuous flow of information about prices, advertising expenditures, sales, competition, and distribution expenses

• Can be an important asset for developing effective marketing strategies

Issues in Marketing Research

International Issues in Marketing Research

Marketers may have to modify data-gathering methods to allow for regional differences in sociocultural, economic, political, legal, and technological forces.

Most of the largest marketing research firms derive a significant share of their revenues from research conducted outside the United States.

Experts recommend a two-pronged approach to international marketing research:

• A detailed search for and analysis of secondary data to gain a greater understanding of a particular marketing environment and to pinpoint issues that must be taken into account in gathering primary research data

• Field research using the methods described earlier to refine a firm’s understanding of specific customer needs and preferences

Chapter V: Target Markets: Segmentation and Evaluation

What Are Markets?

A market is a group of individuals and/or organizations that have:

• A desire or need for products in a product class

• The ability, willingness, and authority to purchase such products

Markets fall into one of two categories:

• Consumer Market: Purchasers and household members who intend to consume or benefit from the purchased products and do not buy products to make profits or serve an organizational need

  • Also referred to as business-to-consumer (B2C) markets

  • Each of us belongs to numerous consumer markets for all the purchases we make.

• Business Market: Individuals or groups that purchase a specific kind of product for resale, direct use in producing other products, or use in general daily operations

  • Also referred to as business-to-business (B2B), industrial, or organizational markets

  • Can be sub-classified into producer, reseller, government, and institutional markets

Target Market Selection Process

Step 1: Identify the Appropriate Targeting Strategy

A target market is a group of people or organizations for which a business creates and maintains a marketing mix specifically designed to satisfy the needs of group members.

The strategy used to select a target market is affected by:

• Target market characteristics

• Product attributes

• The organization’s objectives and resources

Undifferentiated Targeting Strategy: A strategy in which an organization designs a single marketing mix and directs it at the entire market for a particular product

• Effective under two conditions:

  • A large proportion of customers in a total market must have similar needs for the product

  • The organization has the resources to develop a single marketing mix that satisfies customers’ needs in a large portion of a total market along with the managerial skills to maintain it

    

• Homogeneous Market: A market in which a large proportion of customers have similar needs for a product

Heterogeneous Markets: A market made up of individuals or organizations with diverse needs for products in a specific product class

• Market Segmentation: The process of dividing a total market into groups with relatively similar product needs to design a marketing mix that matches those needs

• Market segment: Individuals, groups, or organizations sharing one or more similar characteristics that cause them to have similar product needs

The majority of organizations use market segmentation to best satisfy their customers.

Concentrated Targeting Strategy: A market segmentation strategy in which an organization targets a single market segment using one marketing mix

Differentiated Targeting Strategy: A strategy in which an organization targets two or more segments by developing a marketing mix for each segment

Step 2: Determine Which Segmentation Variables to Use

Segmentation Variables: Characteristics of individuals, groups, or organizations used to divide a market into segments

• Several variables are often used in combination when segmenting a market

  • Segmentation variables should relate to the customers’ needs for, uses of, or behavior toward the product.

  • Segmentation variables must be measurable.

  • A company’s resources and capabilities affect the number and size of the segment variables used.

  • The type of product and degree of variation in customers’ needs dictate the number and size of segments targeted.

DEMOGRAPHIC VARIABLES

If considering segmenting by age, marketers need to be aware of:

• Age distribution

• How the age distribution is changing

• How the age distribution will affect the demand for different types of products

  

Americans in different age groups have different product needs because of their different lifestyles and health situations.

Gender is a demographic variable that is commonly used to segment markets, including clothing, magazines, soft drinks, nonprescription medications, food items, and personal care products.

• Although they represent only slightly more than half of the population, women disproportionately influence buying decisions. (influence/buy 85% of all purchases)

Marketers use race and ethnicity as variables for segmenting markets for such products as: food, music, clothing, cosmetics, banking, and insurance.

Income strongly influences people’s product purchases, so it often provides a way to divide markets.

• Product markets segmented by income include sporting goods, housing, furniture, cosmetics, clothing, jewelry, home appliances, automobiles, and electronics.

The family life-cycle (marital status and the presence and age of children) influences household income and product needs for housing, appliances, food and beverages, automobiles, and recreational equipment

GEOGRAPHIC VARIABLES

Consumer product needs are influenced by geographic variables, such as climate, terrain, city size, population density, and urban/rural areas.

Market density: The number of potential customers within a unit of land area

Geodemographic segmentation: A method of market segmentation that clusters people in zip code areas and smaller neighborhood units based on lifestyle and demographic information

Micromarketing: An approach to market segmentation in which organizations focus precise marketing efforts on very small geographic markets

PSYCHOGRAPHIC VARIABLES

Psychographic variables, such as personality characteristics, motives, and lifestyles, are sometimes used to segment markets.

Lifestyle analysis provides a broad view of buyers because it encompasses numerous characteristics related to people’s:

• Activities/how they spend their time (work, hobbies, entertainment, sports)

• Interests (family, home, fashion, food, technology)

• Opinions (politics, social issues, education, the future)

• PRIZM (software) is commonly used by marketers to segment by demographic variables. It can also be used to segment by lifestyles.

• PRIZM combines demographics, consumer behavior, and geographic data to help marketers identify, understand, and reach their customers and prospects, resulting in a highly robust tool for marketers.

BEHAVIORISTIC VARIABLES

Firms can divide a market according to consumer behavior toward a product, which commonly involves an aspect of product use.

• Heavy, moderate, or light use, and nonusers

Benefit Segmentation: The division of a market according to benefits that consumers want from the product

• The effectiveness of such segmentation depends on three conditions:

  • The benefits sought must be identifiable.

  • Using these benefits, marketers must be able to divide people into recognizable segments.

  • One or more of the resulting segments must be accessible to the firm’s marketing efforts.

Like consumer markets, business markets are frequently segmented for marketing purposes.

• Marketers segment business markets according to:

Geographic Location, Type of Organization, Customer Size, Product Use

Step 3: Develop Market Segment Profiles

A market segment profile:

• Describes similarities among potential customers within a segment

• Explains differences among people and organizations in different segments

• Assesses the degree to which products fit potential customers’ needs

• Helps a firm make marketing decisions relating to a specific market segment or segments

  

Step 4: Evaluate Relevant Market Segments

After analyzing the market segment profiles, a marketer should be able to narrow his or her focus to several promising segments that warrant further analysis.

Several factors associated with each of these segments should be analyzed, including:

• Sales estimates

• Competition (who are the primary competitors?)

• Estimated costs

Market Potential: The total amount of a product that customers will purchase within a specified period at a specific level of industry-wide marketing activity

• Affected by economic, sociocultural, and other environmental forces

• The specific level of marketing effort will vary from one firm to another, and each firm’s marketing activities together add up to the industry-wide marketing effort total.

• Marketers must also estimate whether and to what extent industry marketing efforts will change over time.

Competitive Assessment

Without competitive assessment, sales estimates can be misleading.

The following questions need to be answered for a competitive assessment:

• How many competitors exist?

• What are their strengths and weaknesses?

• Do several competitors already have major market shares and together dominate the segment?

• Can our company create a marketing mix to compete effectively against competitors’ marketing mixes?

• Is it likely that new competitors will enter this segment? If so, how will they affect our firm’s ability to compete successfully?

Step 5: Select Specific Target Markets

Assuming one or more segments offer significant opportunities to achieve organizational objectives, a marketer must decide which offers the most potential at reasonable costs.

• Marketing analytics is increasingly being used to mine information for useful insights into which segments have promising potential.

• The organization must have sufficient financial resources, managerial skills, employee expertise, and facilities to compete effectively in selected segments.

• Marketers must also consider long-term versus short-term growth.

Identifying the right target market is the key to implementing a successful marketing strategy.

Developing Sales Forecasts

Sales Forecast: The amount of a product a company expects to sell during a specific period at a specified level of marketing activities

Businesses use the sales forecast for planning, organizing, implementing, andcontrolling activities.

Overly ambitious sales forecasts can lead to overbuying, overinvestment, and higher costs that weaken a firm’s strength and position.

To forecast sales, a marketer can choose from a number of forecasting methods.

Common forecasting techniques fall into five categories: executive judgment,surveys, time series analysis, regression analysis, and market tests.

Executive Judgment: A sales forecasting method based on the intuition of one or more executives

• This approach is unscientific but expedient and inexpensive.

• It is not a very accurate method but may work well when product demand is relatively stable and the forecaster has years of market-related experience.

• Such forecasts may be too optimistic or pessimistic.

• The forecaster has only past experience as a guide for deciding where to go in the future.

Customer Forecasting Survey: A survey of customers regarding the types and quantities of products they intend to buy during a specific period

• May be useful to a business with relatively few customers

Sales Force Forecasting Survey: A survey of a firm’s sales force regarding anticipated sales in their territories for a specified period

• The sales staff is the company personnel closest to customers on a daily basis and, therefore, has first-hand knowledge about customers’ product needs.

Expert Forecasting Survey: Sales forecasts prepared by experts outside the firm, such as economists, management consultants, advertising executives, or college professors

• Using experts is a quick way to get information and is relatively inexpensive, but outsiders may be less motivated than company personnel to do an effective job.

Delphi Technique: A procedure in which experts create initial forecasts, submit them to the company for averaging, and then refine the forecasts

• The ultimate goal in using this technique is to develop a highly reliable sales forecast.

Time Series Analysis: A forecasting method that uses historical sales data to discover patterns in the firm’s sales over time and generally involves trend, cycle, seasonal, and random factor analyses

In a time series analysis, a forecaster performs four types of analyses:

• Trend Analysis: An analysis that focuses on aggregate sales data over a period of many years to determine general trends in annual sales

• Cycle Analysis: An analysis of sales figures for a three- to five-year period to ascertain whether sales fluctuate in a consistent, periodic manner

• Seasonal Analysis: An analysis of daily, weekly, or monthly sales figures to evaluate the degree to which seasonal factors influence sales

• Random Factor Analysis: An analysis attempting to attribute erratic sales variations to random, nonrecurrent events

Regression Analysis: A method of predicting sales based on finding a relationship between past sales and one or more independent variables, such as population or income

• Simple regression analysis uses one independent variable

• Multiple regression analysis includes two or more independent variables

Market Test: Making a product available to buyers in one or more test areas

and measuring purchases and consumer responses to marketing efforts

Most firms use several forecasting techniques for a variety of reasons:

• They are forced to use multiple methods when marketing diverse product lines.

• Multiple methods may be used for a single product line when the product is sold in different market segments.

• Variation in the length of forecasts may call for using several forecasting methods.

• Sometimes a marketer verifies results of one method by using one or more other methods and comparing outcomes.

Chapter VI: Customer Buying Behavior

Customer Buying Decision Process

Buying Behavior: The decision processes and actions of people involved in buying and using products

Consumer Buying Behavior: The decision processes and purchasing activities of people who purchase products for personal or household use and not for business purposes

Consumer Buying Decision Process: A five-stage purchase decision process that includes:

Problem Recognition, Information Search, Evaluation of Alternatives Purchase Post, Purchase Evaluation

Problem Recognition

When a buyer becomes aware of a difference between a desired state and an actual condition

• The speed of consumer problem recognition can be quite rapid or rather slow.

• Sometimes a person has a problem or need but is unaware of it.

Information Search

After recognizing the problem or need, a buyer will decide whether to pursue satisfying that need.

An information search has two aspects:

• Internal Search: An information search in which buyers search their memories for information about products that might solve their problem

• External Search:  An information search in which buyers seek information from sources other than their memories

Repetition, a technique often used by advertisers, increases consumers’ recall

Evaluation of Alternatives

Consideration Set (evoked set): A group of brands within a product category that a buyer views as alternatives for possible purchase

Evaluative Criteria: Objective and subjective product characteristics that are important to a buyer

Marketers may influence consumers’ evaluations by framing the alternatives— that is, describing the alternatives and their attributes in a certain manner.

• Framing can make a characteristic seem more important to a consumer and facilitate its recall from memory.

• Framing has a stronger influence on the decision processes of inexperienced buyers.

Purchase

In the purchase stage, the buyer:

• Chooses to purchase the product or brand yielded by the evaluation of alternatives

• Picks the seller from which they will buy the product

• Negotiates the terms of the sale

• Settles other issues, such as price, delivery, warranties, maintenance agreements, installation, and credit arrangements

•  Makes the actual purchases or terminates the buying decision process

Post-Purchase Evaluation

After the purchase, the buyer evaluates the product to ascertain if its actual performance meets expected levels.

The outcome of this stage is either satisfaction or dissatisfaction.

Cognitive Dissonance: A buyer’s doubts shortly after a purchase about whether the decision was the right one

• Most likely to arise when a person recently bought an expensive, high-involvement product that is found to be lacking some of the desirable features of competing brands

• A buyer who is experiencing cognitive dissonance may attempt to return the product or may seek out positive information, such as reviews, to justify choosing it.

Types of Consumer Decision Making and Level of Involvement

There are three types of consumer decision making, which vary in involvement level and other factors:

Routinized Response Behavior, Limited Decision Making, Extended Decision Making

Routinized Response Behavior: A consumer problem-solving process used when buying frequently purchased, low-cost items that require very little search-and-decision effort

Limited Decision Making: A consumer problem-solving process used when purchasing products occasionally or needing information about an unfamiliar brand in a familiar product category

Extended Decision Making: A consumer problem-solving process employed when purchasing unfamiliar, expensive, or infrequently bought products

Impulse Buying: An unplanned buying behavior resulting from a powerful urge to buy something immediately

Level of Involvement: An individual’s degree of interest in a product and the importance of the product for that person

• High-involvement products tend to be those that are visible to others (e.g., real estate, high-end electronics, or automobiles) and are more expensive.

• High-importance issues, such as health care, are also associated with high levels of involvement.

• Low-involvement products are much less expensive and have less associated social risk (e.g., grocery or drugstore items).

Enduring Involvement: Ongoing and long-term involvement with a product or product category

Situational Involvement: Temporary and dynamic involvement resulting from a particular set of circumstances

Situational Influences on the Buying Decision Process

Situational Influences: Influences that result from circumstances, time, and location that affect the consumer buying decision process

• Can influence the buyer during any stage of the decision-making process and may cause the individual to shorten, lengthen, or terminate the process

Five categories of situational influences:

Physical Surroundings, Social Surroundings, Time Perspective, Reason for Purchase, Buyer’s Momentary Mood and Condition

Physical surroundings include location, store atmosphere, scents, sounds, lighting, weather, and other factors in the physical environment in which the decision process occurs.

Social surroundings include characteristics and interactions of others who are present during a purchase decision, such as friends, relatives, salespeople, and other customers.

The time dimension influences the buying decision process in several ways:

• It takes varying amounts of time to progress through the steps of the buying decision process, including learning about, searching for, purchasing, and using a product.

• Time also plays a major role when consumers consider the frequency of product use, the length of time required to use it, and the overall product life.

• Other time dimensions that can influence purchases include time of day, day of the week or month, seasons, and holidays

The reason for purchase involves what exactly the product purchase should accomplish and for whom.

The buyer’s moods (such as anger, anxiety, or contentment) or conditions (such as fatigue, illness, or having cash on hand) may affect the consumer buying decision process.

• Such moods or conditions are momentary and occur immediately before the situation where a buying decision will be made.

• They can affect a person’s ability and desire to search for or receive information or to seek and evaluate alternatives.

• Moods can also significantly influence a consumer’s postpurchase evaluation.

Psychological Influences on the Buying Decision Process

Psychological Influences: Factors that in part determine people’s general behavior, thus influencing their behavior as consumers

• Operate on buyers internally, but are strongly affected by external social forces

• Six categories of psychological influences:

Perception, Motivation, Learning, Attitudes, Personality and Self-Concept, Lifestyles

Information Inputs: Sensations received through sight, taste, hearing, smell, and touch

Selective Exposure: The process by which some inputs are selected to reach awareness and others are not

The selective nature of perception may result in two conditions:

• Selective distortion: An individual’s changing or twisting of information that is inconsistent with personal feelings or beliefs

• Selective retention: Remembering information inputs that support personal feelings and beliefs and forgetting inputs that do not

The perception process:

Motivation: The inner driving forces or reasons behind an individual’s actions and behaviors

Maslow’s Hierarchy of Needs: The five levels of needs that humans seek to satisfy, from most to least important

• Physiological: Requirements for survival such as food, water, sex, clothing, and shelter

• Safety: Include security and freedom from physical and emotional pain and suffering

• Social: Human requirements for love and affection and a sense of belonging

• Esteem: Requirements of respect and recognition from others as well as self-esteem, a sense of one’s own worth

• Self-actualization: People’s needs to grow and develop and to become all they are capable of becoming

  

Learning

Learning: Changes in an individual’s thought processes and behavior caused by information and experience

Sources of learning:

Consequences of Behaviors, Information Processing, Experience

Attitudes

Attitude: An individual’s enduring evaluation of feelings about and behavioral tendencies toward an object or idea

Efforts to understand attitudes has resulted in two major academic models: the Fishbein model and the Theory of Reasoned Action.

Attitude Scale: A means of measuring consumer attitudes by gauging the intensity of individuals’ reactions to adjectives, phrases, or sentences about an object

Personality and Self-Concept

Personality: A set of internal traits and distinct behavioral tendencies that result in consistent patterns of behavior in certain situations

• An individual’s personality is a unique combination of heredity characteristics and personal experiences.

• There is a weak association between personality and buying behavior.

Self-concept: A perception or view of oneself

Research shows that:

• Buyers purchase products that reflect and enhance their self-concepts.

• Purchase decisions are important to the development and maintenance of a stable self-concept.

Lifestyles

Lifestyle: An individual’s pattern of living expressed through activities, interests, and opinions

• The ways people spend their time

• The extent of their interactions with others

• Their general outlook on life and living

Lifestyles Influence:

• Consumers’ product needs and brand preferences

• Types of media consumers use

• How and where consumers shop

Social Influences on the Buying Decision Process

Social Influences: The forces other people exert on one’s buying behavior

Roles: Actions and activities that a person in a particular position is supposed to perform based on expectations of the individual and surrounding persons

• Because every person occupies numerous positions, they have many roles.

Thus, multiple sets of expectations are placed on each person’s behavior.

• An individual’s roles influence both general behavior and buying behavior.

Consumer Socialization: The process through which a person acquires the knowledge and skills to function as a consumer

The extent to which family members take part in family decision making varies among families and product categories.

Traditionally, family decision-making processes have been grouped into four categories:

Different family members may play different roles in the family buying process:

Reference Group: A group that a person identifies with so strongly that they adopt the values, attitudes, and behavior of group members, regardless of group membership 

Types of reference groups:

• Membership: a group to which an individual actually belongs

• Aspirational: a group in which an individual aspires to belong

• Disassociative: A group to which an individual does not want to be associated with

Digital Influences

Opinions of those on social media, reviews on e-commerce sites, and review apps such as Yelp influence buyers.

Computers, smartphones, wearables, in-store kiosks and mobile payment devices affect both online and in-store shopping behaviors all around the world.

Opinion Leaders

Opinion Leader: A member of an informal group who provides information about a specific topic to other group members

• Is likely to be most influential when:

  • Consumers have high product involvement but low product knowledge

  • Consumers share the opinion leader’s values and attitudes

The product details are numerous or complicated

Social Classes

Social class: An open group of individuals with similar social rank

• People can move in and out of different groups.

• Criteria for grouping people into classes vary from one society to another.

Social class influences many aspects of people’s lives, including:

• Choice of religion, financial planning decisions, and access to education, occupation, and leisure-time activities

• Spending, saving, and credit practices

• Shopping patterns and types of stores patronized

Culture and Subcultures

Culture: The accumulation of values, knowledge, beliefs, customs, objects, and concepts that a society uses to cope with its environment and passes on to future generations

• Influences buying behavior because it permeates our daily lives

• People in other regions of the world have different attitudes, values, and needs, which call for different methods of doing business and different marketing mixes.

Subculture: A group of individuals whose characteristics, values, and behavioral patterns are similar within the group and different from those of people in the surrounding culture

• A person can be a member of more than one subculture, and the behavioral patterns and values attributed to specific subcultures do not necessarily apply to all group members.

The percentage of the U.S. population consisting of ethnic and racial subcultures has grown and is expected to continue to grow.

The three largest and fastest-growing ethnic U.S. subcultures are:

Consumer Misbehavior

Consumer Misbehavior: Behavior that violates generally accepted norms of a particular society, includes shoplifting, organized retail crime, consumer fraud, piracy, abusive, customers

Motivations for Unethical or Illegal Misbehavior