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Buyer Behavior

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Title: Buyer Behavior


1
Buyer Behavior
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
2
Outline
  • Introduction
  • Goals of the course
  • Requirements
  • Grading
  • Honor code
  • My obligations
  • About me

3
Introduction
  • This course is an overview of concepts of
    consumer behavior
  • Drawing from psychology, our study of behavior
    will emphasize an understanding of consumer
    learning, memory, preference, choice and attitudes

4
Goals of the Course
  • Introduce you to key concepts and theories
    relating to consumer behavior
  • Demonstrate how an understanding of consumer
    behavior drives marketing strategy

5
Requirements
  • Readings
  • REQUIRED TEXT
  • Wayne D. Hoyer Deborah J. MacInnis, Consumer
    Behavior, 3rd ed., Houghton Mifflin, 2004.
  • Arbinger Institute, Leadership and
    Self-Deception Getting Out of the Box,
    Berrett-Koehler, 2002.
  • OPTIONAL TEXTS
  • Frank R. Kardes,Consumer Behavior and Managerial
    Decision Making, 2nd ed., Prentice Hall, 2001.
  • Dawn Iacobucci, ed., Kellogg on Marketing, John
    Wiley Sons, 2001.

6
Requirements
  • Class attendance is mandatory
  • Students with perfect attendance receive 5
    extra-credit award
  • Missing more than 3 classes results in drop in
    students overall grade by one letter grade (B
    to C)
  • Sign attendance sheet

7
Requirements
  • Group work
  • Groups will be assigned
  • Peer evaluation is component of overall grade
    (5)
  • Collaborative work has pedagogical purpose

8
Grading
  • Grading will be based on evaluations of
    individual effort and team work
  • Positioning analysis 10
  • Case analysis 10
  • Quantitative analysis 10
  • Exam I 20
  • Exam II 20
  • Team project 20
  • Team dynamics 5
  • Class participation 5
  • Team work Individual effort
  • Preparation for class discussion may be done in
    teams

9
Grading
  • Assignments
  • Positioning analysis
  • Case analysis
  • Quantitative analysis
  • Team project
  • Readings
  • Cold calling
  • Class discussion
  • Exams
  • Midterm I
  • Midterm II
  • Final

10
Honor Code
  • Team work
  • Duty to the team
  • Conflict in the team
  • Peer evaluation
  • Infractions and suspected violations are taken
    seriously
  • Applies to attendance, course requirements,
    preparation of assignments, exams

11
My Obligations
  • I will return assignments within one week of
    submission
  • I am available during office hours TTh 2-3 pm and
    by appointment
  • I will return all student phone calls and emails
    within 24 hours
  • Phone 303 492 5616
  • Email susan.jung.grant_at_colorado.edu

12
About Me
  • Education
  • University of Pennsylvania, BA
  • Kellogg School of Management, Northwestern
    University, MBA, PhD
  • Experience
  • Northwestern University, lecturer
  • Price Waterhouse Coopers LLP, consultant
  • Philadelphia Inquirer, editor
  • Boston Globe, reporter, editor

13
Review of Marketing Concepts
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
14
Outline
  • What is marketing?
  • What is consumer behavior?
  • Why focus on understanding behavior?
  • Review of marketing management
  • Analyzing the marketing environment marketing
    opportunities
  • Aspects of strategy

15
What is Marketing?
  • Marketing is a social and managerial process by
    which individuals and groups obtain what they
    need and want through creating, offering and
    exchanging products of value with others (Philip
    Kotler, 1991)

16
What is Consumer Behavior?
  • Consumer behavior reflects the totality of
    consumers decisions with respect to the
    acquisition, consumption, and disposition of
    goods, services, time, and ideas by
    decision-makers over time

17
Paradigm Shift
  • Selling focuses on the needs of the seller
    marketing on the needs of the buyer. Selling is
    preoccupied with the sellers need to convert his
    product into cash marketing with the idea of
    satisfying the needs of the customer by means of
    the product and the whole cluster of things
    associated with creating, delivering and finally
    consuming it. (Theodore Levitt)

18
Historic Overview
  • Selling concept has been historically dominant
  • Whatever was produced (crops, livestock, goods)
    had to be sold at market
  • Industrial Revolution shifted production from
    home to factory, prompting focus to be on the
    marketing concept

19
Selling versus Marketing
  • Selling Concept

Selling Promoting
Profits through sales volume
Products
Marketing Concept
Integrated Marketing
Profits through customer satisfaction
Customer needs
20
Selling versus Marketing
  • Selling concept
  • Focuses on selling what you can make
  • Marketing concept
  • Focuses on making what you can sell

21
Marketing Concept
Analyze Marketing Opportunities - Environmental
Analysis - Competitive Analysis - Consumer
Analysis
Select Target Markets - Segmentation - Targeting
- Positioning
Marketing Research
  • Formulate the Marketing Mix
  • Product - Promotion
  • - Pricing - Distribution/Place

Implementation Control
22
Marketing Management
  • Management of change, a necessary focus in a
    dynamic marketplace
  • Sensitivity to external changes is key in
    identifying opportunity
  • Competitors
  • Consumers
  • Sensitivity to internal changes is key in
    formulating a strategy

23
Marketing Management
  • How is marketing management distinct from plain
    old management?
  • Customer focus
  • Customer focus ? Customer is always right
  • Customer focus implies scrutinizing how strategic
    motivations are relevant to the customer
  • Involves keeping a disciplined vision of how to
    create the kind of value the customer is willing
    to pay for

24
Marketing Management
  • In essence, marketing management is about value
    creation and value delivery

25
Value Creation Delivery
Choose the value
Provide the value
Communicate the value
Product
Positioning
Pricing
Targeting
Segmentation
Sourcing
Sales force
Advertising
Distribution
Sales promotion
26
Marketing Strategy
  • Strategic planning is important management
    activity
  • What is strategy?
  • A fundamental pattern of present and planned
    objectives, resource deployment, and interactions
    of an organization with markets, competitors and
    other environmental factors

27
Marketing Strategy
  • 5 components within well-developed strategy
  • Scope
  • Where should firm compete?
  • Goals and objectives
  • Specify levels of accomplishments profit,
    revenues, ROI
  • Resource deployments
  • How resources are obtained, allocated
  • Synergy
  • Is total performance enhanced by sum of parts?
  • Identify sustainable competitive advantage
  • Strategic fit

28
Scope
  • Firm must decide where to compete
  • Product line decisions
  • Honda Motor Co. made small, cheap cars
  • Started to make motorcycles and lawn mowers
  • Honda became a small motor manufacturer
  • Clorox was seller of bleach
  • Expanded cleaning supplies business
  • Acquired Hidden Valley, Glad and Brita
  • Competitive field
  • Southwest chose not to go head-to-head against
    United, American

29
Goals Objectives
  • Firm must decide what the goals are
  • Profitability through market share
  • High volume strategy
  • Profitability through margins
  • High margins can be achieved through
  • Low costs
  • High prices

30
Resource Deployments
  • Firm must decide how to allocate resources
  • Allocation among businesses in portfolio
  • Cash cow? Rising star?
  • Allocation across marketing functions
  • Coupons or trade promotions?
  • Advertising or service?

31
Competitive Advantage
  • Firm must decide what is its sustainable
    competitive advantage
  • Achieving competitive advantage means
    outperforming the industry
  • 2 sources of advantage
  • Differentiation
  • Cost

32
Competitive Advantage
  • How can a firm sustain competitive advantage?
  • Isolating mechanisms (Rumelt, 1984)
  • Distinctive capabilities
  • Legal restrictions on imitation, patents
  • Superior access to inputs or customers
  • Economies of scale
  • Early-mover advantages

Barriers to entry
33
Company Core Competencies
  • How does a firm know what its core competency is?
  • Misidentifying core competencies results in
    missing attractive opportunities and chasing
    unprofitable ones

34
Core Competencies
  • 3 dimensions of core competencies
  • Operational excellence
  • Product leadership
  • Customer intimacy

35
Which Discipline to Choose?
Disciplines
Operational Excellence Sharpen distribution
system and provide no-hassle service Has strong,
central authority and a finite level
of empowerment Maintain standard
operating procedures Acts predictably and
believes one size fits all
Product Leadership Nurture ideas, translate them
into products, and market them skillfully Acts
in an ad hoc, organic, loosely knit,
and ever-changing way Reward individuals innovat
ive capacity and new product success Experiments
and thinks out-of-the-box
Customer Intimacy Provides solutions and help
customers run their businesses Pushes
empowerment close to customer contact Measure
the cost of service, maintaining customer
loyalty Is flexible and thinks have it your way
Core business processes that... Structure
that... Management systems that... Culture
that...
Company Traits
Source M. Treacy and F. Wiersema The Discipline
of Market Leaders Addison-Wesley Reading MA, 1995
36
Operational Excellence
  • When practicing the operational excellence
    discipline, it is necessary to balance the need
    to respond to consumer and competitor changes in
    the marketplace
  • A company must tradeoff consumer heterogeneity,
    slowing demand and product proliferation if the
    core discipline is to be maintained
  • Economies of scale, efficiency are crucial
  • Mass market is competitive space

37
Product Leadership
  • When practicing the product leadership
    discipline, the firm must be willing to
    cannibalize existing products, but the focus
    should be on providing consumers with a reason to
    trade up to the product innovation rather than
    trade down
  • Product innovation must be constant
  • Continual investment is necessary
  • Requires partners cooperation

38
Customer Intimacy
  • When practicing the customer intimacy discipline,
    the firm aims to serve a small segment who pay a
    high premium
  • Customer intimacy cannot be achieved on a large
    scale
  • The smaller the segment, the higher the price
    charged, the higher the quality of the product or
    service

39
Choosing a Discipline
40
Overview Marketing and Consumers
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
41
Outline
  • What is strategy?
  • Strategy starts with analysis
  • 3 Cs
  • SWOT
  • What is consumer behavior?
  • How does consumer behavior impact marketing?
  • STP
  • 4Ps

42
Marketing Strategy
  • What is the goal of strategy?
  • To develop and maintain strategic fit between the
    companys abilities and changing market
    opportunities
  • Strategy positions the firm to optimize
  • Strategy must consider alignments of internal,
    external factors
  • Internal company
  • External competitors, consumers

43
Marketing Management
Competition
Market Opportunity
Consumers
Company
44
SWOT Analysis
  • Basic approach starts with evaluating
  • Internally
  • Strengths
  • Weaknesses
  • Externally
  • Opportunities
  • Threats

45
What is Consumer Behavior?
46
What Affects Consumer Behavior?
Psychological Core
Process of Making Decisions
Consumers Culture
Consumer Behavior Outcomes
47
What Affects Consumer Behavior?
  • Having motivation, ability, and opportunity
  • Exposure, attention, and perception
  • Categorizing and comprehending information
  • Forming and changing attitudes
  • Forming and retrieving memories

Psychological Core
48
What Affects Consumer Behavior?
Psychological Core
  • Problem recognition and search for information
  • Making judgments and decisions
  • Making post-decision evaluations

Process of Making Decisions
49
What Affects Consumer Behavior?
Psychological Core
  • External processes
  • Regional and ethnic influences
  • Age, gender, and household influences
  • Reference groups

Process of Making Decisions
Consumers Culture
50
What Affects Consumer Behavior?
Psychological Core
  • Consumer behaviors can symbolize who we are
  • Consumer behaviors can diffuse within a market

Process of Making Decisions
Consumers Culture
Consumer Behavior Outcomes
51
Implications Segmentation
  • Developing a customer-oriented strategy starts
    with a segmentation scheme
  • What is known about the market?
  • How is the market segmented?
  • Different types of consumers
  • Different needs
  • Perception of value
  • Willingness to pay

52
Implications Targeting
  • Choose a target
  • How profitable is each segment?
  • What are the characteristics of consumers in each
    segment?
  • Are customers satisfied with existing offerings?

53
Implications Positioning
  • Positioning
  • How are competitive offerings positioned?
  • How should our offerings be positioned?
  • Should our offerings be repositioned?

54
Implications Product
  • Developing products or services
  • What are consumers ideas for new products?
  • What attributes can be added to or changed in an
    existing offering?
  • What about guarantees? Post-purchase service?
    Repeat-buying opportunities
  • Any consumer trends that can inspire development?

55
Implications Promotion
  • Making promotion decisions
  • Sales promotion objectives and tactics (push)
  • When should sales promotions happen?
  • Have our sales promotions been effective?
  • How many salespeople are needed to serve
    customers?
  • How can salespeople best serve customers?
  • Advertising (pull)
  • What should our advertising look like?
  • Where should advertising be placed?
  • When should we advertise?
  • Has our advertising been effective?

56
Implications Price
  • Making pricing decisions
  • What price should be charged?
  • How sensitive are consumers to price and price
    changes?
  • What is price elasticity?
  • When should certain price tactics be used?
  • How do price changes affect the firm?

57
Implications Place
  • Making distribution decisions
  • Where are target consumers likely to shop?
  • How should stores be designed?

58
Perception, Memory Learning
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
59
Outline
  • Perception
  • Memory
  • What are the types of memory?
  • How memory is enhanced
  • Organization of long-term memory
  • What is retrieval?
  • What are the types of retrieval?
  • How retrieval is enhanced
  • Learning

60
Perception
Hemispheric lateralization
61
Perception
  • When do we perceive stimuli?
  • Absolute and differential thresholds
  • Just noticeable difference
  • Webers law
  • Selective cocktail party
  • Subliminal perception
  • Does subliminal perception affect consumer
    behavior?

62
Perception
  • Does subliminal messaging make people buy?
  • 1956 N.J. movie theater flashed subliminal
    messages, Hungry? Eat popcorn. Drink Coca-Cola.
  • Increased popcorn sales 58 and Coca-Cola sales
    18, but results were not replicated
  • Erotic stimuli and sexual symbols in ads
    purported to increase receptivity to suggestions
    in the ad

63
A Model of Memory
  • Perceived information is encoded
  • Explicit
  • Implicit
  • Then stored in memory
  • Short-term store
  • Long-term store
  • Retrieval involves calling up stored bits from
    memory

64
A Model of Memory
Stimulus
Short-Term Memory
Recall
Consolidation
Retrieval
Long-Term Memory
65
A Model of Memory
  • Sensory
  • Short-term
  • Long-term

66
A Model of Memory
  • Sensory
  • Echoic
  • Iconic
  • Characteristics of sensory memory

67
A Model of Memory
  • Short-term memory (STM)
  • Imagery processing
  • Discursive processing
  • Characteristics of short-term memory
  • Short-term memory is limited (72)
  • Short-term memory is short-lived

68
A Model of Memory
  • Long-term memory (LTM)
  • Autobiographical (episodic) memory
  • Semantic memory
  • Characteristics of long-term memory
  • Stable memory of events of more distant past
  • Unlimited capacity
  • Organized by nodes

69
A Model of Memory
  • Converting short-term memories to long-term store
    is physically located in the hippocampus
  • Elaboration, or rehearsal, of information
    increases consolidation
  • Recall from long-term storage is a function of
    recency and availability
  • Availability is aided if memory is organized into
    a well-defined associative network of nodes
  • Categories
  • Hierarchies

70
A Model of Memory
Beverages
Carbonated
Non-carbonated
Mixers
Colas
Juices
Water
Pepsi
Coke
Evian
Poland Spring
71
A Semantic (or Associative) Network
72
How Memory Is Enhanced
  • Chunking
  • Rehearsal
  • Recirculation
  • Elaboration

73
What Is Retrieval?
  • Semantic network
  • Trace strength
  • Accessibility
  • Spreading of activation
  • Priming
  • Retrieval failures
  • Decay
  • Interference
  • Primacy and recency effects
  • Retrieval errors

74
What Are the Types of Retrieval?
  • Explicit memory
  • Recognition
  • Recall
  • Judgments
  • Implicit memory
  • Judgments

75
Retrieval
  • Perceptual
  • His name started with a J . . .
  • Conceptual
  • A brand of personal computers that competes with
    IBM . . .

76
How Retrieval Is Enhanced
  • Characteristics of the stimulus
  • Salience
  • Prototypicality
  • Redundant cues
  • The medium in which the stimulus is processed

77
How Retrieval Is Enhanced
  • What the stimulus is linked to
  • Retrieval cues
  • Where do retrieval cues come from?
  • The brand name as a retrieval cue
  • Other retrieval cues
  • Consumer implications
  • Consideration set

78
How Retrieval Is Enhanced
  • How a stimulus is processed in short-term memory
  • Dual coding
  • Consumer characteristics affecting retrieval
  • Network of associations
  • Expertise
  • Mood

79
Information Processing Selective
80
A Model of Learning
81
Information Processing Implications
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
82
Outline
  • A model of information processing
  • Role of attention, or cognitive resources
  • The structure of knowledge
  • How the structure of knowledge leads to
    understanding and persuasion
  • Implications for positioning

83
A Model of Information Processing
New Paradigm
Old Paradigm
84
Information Processing Selective
85
Relevance
  • Determining relevance is based on existing
    knowledge structures
  • Interpretation is subject to prior learning
  • Schemas and associations
  • Categorization
  • Images
  • Scripts

86
Taxonomic Category Structure
87
Knowledge Structure
  • Categories and their structure
  • Prototypicality
  • Correlated associations
  • Hierarchical structure
  • Superordinate level
  • Basic level
  • Subordinate level

88
Using Knowledge to Understand
  • Consumer inferences
  • Brand names and brand symbols
  • Inferences based on misleading names and labels
  • Inferences based on inappropriate or similar
    names
  • Product features and packaging
  • Inferences based on product attributes
  • Inferences based on country of origin

89
Implications for Positioning
Must be broad enough to support a meaningful
business, but sufficiently discriminating to
guide communication and strategy. This is where
segmentation strategies are relevant.
The category of competing offerings substitutes
against which the customer should evaluate the
relative merits of the brand
The brands competitive, differentiated reason
for being ideally an emotional benefit that
uniquely identifies the brand. This is where the
elevated value proposition is expressed/how
elevated value is delivered.
Differentiated Benefit
The key product attributes or benefits that
justifies the customers belief that the claimed
benefit is true and meaningful to them
Reason to Believe
90
Positioning
  • New brands or products must establish in
    consumers minds
  • Target
  • Frame of reference (or category membership)
  • Point of difference
  • Reason to believe

91
Positioning
Position 2
Position 1
  • For busy, health-conscious adults
  • Prepared, ready-to-eat packaged foods
  • Lower fat content, reduced calories
  • For dieters who want to lose weight
  • Dietetic food (Weight Watchers, Slimfast)
  • Tasty, more satisfying variety of foods

Target
Frame of reference
Point of difference
92
Positioning
Position 2
Position 1
Target
  • For leisure travelers seeking pampering
  • Resorts, spas, vacation getaways
  • Luxurious furnishings, upscale experience
  • For business travelers who need to be productive
  • Hotels catering to business travelers (Hyatt,
    Hilton)
  • Excellent service, attention to detail

Frame of reference
Point of difference
93
Positioning
Position 1
Position 2
Target
  • For upscale convertible lovers
  • Other luxury convertibles (BMW, Mercedes, Lexus)
  • Volvos reputation for safety first, rollover
    protection
  • For drivers who value Volvos safety heritage
  • Safety-oriented vehicles (station wagons)
  • A turbocharged convertible with 10-speaker sound

Frame of reference
Point of difference
94
Positioning
Position 1
Position 2
  • For customers who buy frozen pizza
  • Other frozen pizzas
  • Better quality
  • Rising crust
  • For customers who prefer delivery pizza
  • Delivery pizza
  • Better value
  • Lower price than delivery

Target
Frame of reference
Point of difference
Reason to believe
95
Attitude Theory Persuasion
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
96
Outline
  • What are attitudes?
  • The cognitive, affective, behavioral aspects of
    attitudes
  • Attitudes and motivation
  • Forming and changing attitudes
  • Models of attitudes and measurement
  • Instruments to measure attitude

97
What are Attitudes?
  • Attitude defined
  • Evaluative judgment
  • Valence
  • Extremity
  • Based on beliefs not necessarily data
  • Characteristics of attitudes
  • Favorability
  • Accessibility
  • Confidence or strength
  • Persistence or duration
  • Resistance

98
Attitudes
Affective
Cognitive
99
Attention
  • Characteristics of attention
  • Attention is selective
  • Attention can be divided
  • Attention is limited
  • Attention (or cognitive resources) is affected by
    motivation (or involvement)
  • Attention facilitates memory, learning, and
    ultimately persuasion

100
Methods of Enhancing Attention
  • Surprising
  • Using novelty
  • Using unexpectedness
  • Easy to process
  • Prominent stimuli
  • Concrete stimuli
  • Contrasting stimuli
  • Amount of competing information
  • Personal relevance
  • Relevant problem
  • Demographic
  • Pleasant
  • Using attractive spokespersons or models
  • Using music
  • Using humor
  • Aesthetics

101
Attitudes and Motivation
HIGH EFFORT ATTITUDES
LOW EFFORT ATTITUDES
102
What Affects Motivation?
103
What Affects Motivation?
  • Personally relevant
  • Affects self concept

Personal Relevance
104
What Affects Motivation?
  • Values
  • Goals
  • Needs
  • Types of needs

105
Maslows Hierarchy of Needs
106
What Affects Motivation?
  • Types of perceived risk
  • Performance
  • Financial
  • Physical (or safety)
  • Social
  • Psychological
  • Time

107
What Affects Motivation?
  • When inconsistency with attitudes occurs, we try
    to remove or at least understand the inconsistency

108
Approaches to Attitude Change
109
Forming and Changing Attitudes
  • The foundation of attitudes
  • The role of effort in attitude formation and
    change
  • Central-route processing
  • Systematic
  • Peripheral-route processing
  • Heuristic

110
Influences on Attitudes
  • Source
  • Trustworthiness
  • Expertise
  • Attractiveness
  • Likeability
  • Celebrity vs. anonymous
  • Message characteristics
  • Argument quality
  • 1-sided vs. 2-sided
  • Comparisons
  • Category-consistent information
  • Late id (a.k.a. mystery ads)
  • Music, humor
  • Dramas, story grammars
  • Sex
  • Relative complexity
  • Fear and threat

111
Measurement of Attitudes
  • Scales can elicit responses about overall
    attitudes, attribute weights, importance
  • Likert scales (agree-disagree)
  • Semantic differential scales (pretty-ugly)
  • Forced choice
  • Response latency can measure attitude
    accessibility
  • Conjoint analysis
  • Perceptual mapping

112
Psychological Foundations for Marketing
Applications
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
113
Outline
  • Psychological explanations
  • Judgment
  • Context effects assimilation and contrast
  • Consumer choice
  • Compromise effect
  • Advertising
  • Negation effect
  • Message fit
  • Pricing strategies
  • Self-perception theory
  • Perceptual fluency
  • Knock-off brands

114
Context Effects
  • Contrast effects
  • Exposure to a prime shifts judgment of a target
    away from a reference point because of comparison
  • Buy a 90 tie after spending 1000 on a suit
  • Honda Accord feels like a luxury car when
    compared with a Civic
  • Charlies Angels condition (Kenrick and
    Gutierres, 1980)

115
Context Effects
  • Assimilation effects
  • Exposure to a prime shifts judgment of a target
    toward a reference point because prime serves as
    interpretive frame
  • Clothing in upscale retail store may seem more
    fashionable
  • Country of origin (Germany vs. Mexico) helps to
    interpret product attributes, overall evaluation
    (Hong and Wyer, 1990)

116
Compromise Effect
  • Introduction of a 3rd option (decoy) may lead to
    selection of compromise when choice between 2
    products is difficult

Restaurant A is higher on convenience but lower
on quality restaurant B is higher on quality
but lower on convenience Which would you choose?
Restaurant A
Convenience
Restaurant B
Decoy
Quality
117
Compromise Effect
  • Williams-Sonoma increased sales of its bread
    machine by adding to its inventory a super
    premium machine

Economical
Quality
118
Compromise Effect
Sunbeam ExpressBake 2-Pound Bread Maker
  • 58-minute cycle with automatic keep-warm feature
  • Easy-to-use control panel with 13-hour delay-bake
    timer
  • 3 crust color settings light, medium and dark
  • Makes 2-pound horizontal loaf
  • Baking cycles include white, wheat, 58-minute
    ExpressBake,
  • French, sweet, dough, pasta, quick breads,
    jelly/jam and cake
  • Instructions and over 100 recipes included
  • For household use only
  • 14-1/2"L x 10"W x 13-1/2"H
  • Model No. 5833
  • 44.96
  • Was 49.96

119
Compromise Effect
Brushed Stainless-Steel Automatic Bread Baker
120
Compromise Effect
  • Williams-Sonoma increased sales of its bread
    machine by adding to its inventory a super
    premium machine

Economical
Quality
121
Negation Effects
  • Messages that contain negations require extra
    computational step to process affirmation
    negator
  • When cognitive resources are low, the negator may
    not be retrieved
  • McDonalds burgers do not contain worms
  • This is not your fathers Oldsmobile
  • Its not delivery its DiGiorno

122
Message Fit
  • Messages about safety or security more compelling
    to people with avoidance (or prevention)
    orientation
  • Vanguard reassures investors that portfolio will
    be safe
  • Milk ads talk about problems associated with
    calcium deficiency
  • Messages that promise benefits more compelling to
    people with approach (or promotion) orientation
  • Merrill Lynch promises to maximize financial
    returns
  • Milk ads talk about benefits of stronger bones,
    health

123
Self-Perception Theory
  • Suggests that people infer their own attitudes
    from their actions
  • Buying product on sale leads to inference that
    purchase was motivated by low price, not true
    preference (Dotson, Tybout and Sternthal, 1980)
  • May operate on automatic, subconscious level,
    e.g. nodding head produces more positive
    evaluations than shaking head (Bargh, 1985)

124
Perceptual Fluency
New Entry in Cola Wars Muslims in France who
wanted to boycott American brands created
Mecca-Cola to protest policies in the Middle
East.New York Times, Dec. 30, 2002
125
Brands and Consumers
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
126
Outline
  • What is a brand?
  • Brands add value
  • Case study Brand equity
  • How are brands built?
  • Laddering and goal-based positioning
  • Leveraging a brand
  • Brand extensions
  • Co-branding
  • Global branding

127
What is a Brand?
  • A name, term, sign, symbol or design (or
    combination of these) intended to identify the
    goods or services of one seller or group of
    sellers and to differentiate them from those of
    competitors
  • Well-established brands activate a network of
    associations in consumers minds

128
Brands Add Value
  • RANK BRAND 2004
  • 1 COCA-COLA
  • 2 MICROSOFT
  • 3 IBM
  • 4 GE
  • 5 INTEL
  • 6 DISNEY
  • 7 McDONALDs
  • 8 NOKIA
  • 9 TOYOTA
  • 10 MARLBORO
  • BRAND VALUE (billions)
  • 67.4
  • 61.4
  • 53.8
  • 44.1
  • 33.5
  • 27.1
  • 25.0
  • 24.0
  • 22.7
  • 22.1

Top 10 most valuable brands, as determined by
Interbrand Group, 2004, J.P. Morgan.
129
Laddering
  • Goal-based positioning deepens consumers
    understanding of a brand by showing brand helps
    to achieve goals
  • Concrete features imply functional benefits
  • Functional benefits imply emotional benefits
  • Emotional benefits imply brand essence
  • Brand essence implies goal attainment

130
The Consumer Connection Bridge
Product Feature - why I believe this
Functional Benefit - what it does for me
Emotional Benefit - how this makes me feel
Consumer Goals - how this allows me to achieve an
important, universal goal
Goals
EmotionalBenefit
FunctionalBenefit
ProductFeature
Consumer
Brand
131
Laddering
Physically attractive
Brand Essence
Emotional Benefits
Virtuous, lean
Low in calories
Fat free
Nutritious breakfast
Functional Benefits
132
Laddering
Adds life
Emotional Benefits
Functional Benefit
Refreshing
Features
133
Laddering
Healthy living
Emotional Benefits
Functional Benefit
Great taste
Features
134
Laddering
A family place
Brand Essence
Emotional Benefits
Friendly
Functional Benefits
135
Laddering
Good parent
Goal
Brand Essence
Caring
Emotional Benefits
136
Laddering
Elite establishment
Brand Essence
Emotional Benefits
Acceptance
Preppy styling
American casual
Quality material
Functional Benefits
137
Leveraging the Brand
  • Product line extensions
  • Diet Coke
  • Bayer Select
  • Country Time Cider
  • A1 Poultry Sauce
  • Crystal Pepsi
  • Cool Mint Listerine
  • Hersheys Hugs
  • Brand extensions
  • Marlboro Clothing
  • BIC Perfume
  • Jello Pudding Pops
  • Aunt Jemima Pancake Syrup
  • Jack Daniels Charcoal
  • Woolite Tough Stain Rug Cleaner
  • DuPont Stainmaster
  • Marquis by Waterford

138
Product Line Extensions
  • Opportunities
  • Way to serve a segmented market
  • Adapt to consumer variety seeking and update or
    expand the core brands image
  • Increase shelf-space and attract more consumer
    attention
  • Offer a broader range of price points and thereby
    serve a wider audience of consumers
  • Utilize excess capacity
  • Increase sales quickly
  • Create a barrier to entry by increasing control
    of shelf-space

139
Product Line Extensions
  • Threats
  • Blurring the rationale for each product in the
    line
  • Encouraging variety seeking
  • Diluting the core brand image
  • Increasing costs without increasing total sales,
    cannibalization
  • Reducing credibility with trade if extension
    sales are lower than promised
  • Offering competitors more opportunities to match
    products

140
Brand Extensions
  • Brands may launch extensions as a way to leverage
    strong brand equity
  • Starbucks coffee Starbucks ice cream
  • Hewlett Packard calculators Hewlett Packard PCs
    and printers

141
Brand Extensions
  • The extendibility of a brand is a function of
    its associations
  • Brands that have laddered-up and thus connect
    with broad values and goals often can be extended
    successfully to other categories that serve the
    same goal (e.g. Polo)
  • Brands that remain closely tied to their product
    category may only succeed with extensions to
    related categories (e.g., Aunt Jemima Pancake Mix
    and Aunt Jemima Syrup)

142
Co-Branding
  • Ingredient brands
  • Intel Inside
  • Nutrasweet
  • DuPont Stainmaster
  • Composite brands
  • Master Card and issuing bank
  • Healthy Choice from Kelloggs

143
Global Branding
  • Global target
  • Teens, business travelers, affluents/aspirers
  • Global needs simplicity, elegance, status
  • Global category needs
  • Yes high tech, high signal (style, fashion)
  • No local tastes, rituals, personal hygiene
  • Global equity
  • Country-of-origin imagery relevant (Coke, Levis,
    Harley-Davidson, Chanel, Evian, Nissan)
  • Weak, fragmented local competitors
  • Can leverage economies of scale

144
Segmentation and Targeting Demographics
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
145
Outline
  • What is market segmentation?
  • Why segment?
  • How to segment?
  • Demographics
  • Geographic
  • Psychographics
  • Ethnicity
  • Social class

146
Overview of the STP Process
Segmentation
1. Identify dimensions for segmentation 2.
Develop profiles of the resulting segments
Targeting
1. Evaluate attractiveness of each segment 2.
Select the target segment(s)
1. Identify positioning concepts for segment 2.
Select, develop and communicate the chosen
positioning
Positioning
147
Segmentation
  • Segmentation is the dividing of a market into
    subsets, on the basis of similar needs,
    characteristics or behavior, by which any subset
    can be selected as a marketing target to be
    reached with a distinct positioning and marketing
    mix

148
Market Segmentation
  • One size fits all?
  • Physician
  • General practitioner versus pediatric
    neurosurgeon
  • Business consultant
  • Specialist versus generalist

149
Commonly Used Variables
  • Demographic
  • Females vs. males
  • Teenagers vs. senior citizens
  • Geographic
  • East Coast vs. West Coast
  • Urban vs. rural
  • Psychographic
  • Lifestyle, individual differences
  • Ethnic
  • Class
  • Working class vs. middle class
  • Nouveau Riche vs. Old Money

150
Demographics
  • 289.9 million people in the US
  • 85 million households
  • Minorities make up more than 29 of the US
    population
  • Hispanic Americans 12.5
  • African Americans 12.3
  • Asian Americans 3.6
  • Native Americans 1
  • Almost half the work force is women
  • http//www.americandemographics.com/

151
Demographics
  • Generational segments
  • Baby Boom Generation
  • 78 million (born 1946-1964)
  • Generation X
  • 45 million (born 1965-1976)
  • Generation Y, or Echo Boomers
  • 72 million (born 1977-1994)

152
Demographics
  • Declining birth rate
  • Couples having fewer children
  • Segment of couples at child-bearing years is
    smaller (Generation X)
  • Causing a shift in age distribution

153
Demographics
  • Generation Y
  • 60 of children under 6 have mothers who work
    outside the home (compare to 18 in 1960)
  • 60 of households with children under 7 have PCs
    in home
  • Teenage population expected to peak in 2006 with
    30 million
  • Highest since 1975
  • 100 billion in annual purchasing power

154
Demographics
Depression World War II Post-War Boomers
I Boomers II Generation X Generation Y
155
Demographics
  • Depression/WWII
  • Orange juice
  • FDR
  • Flattops
  • No more butter
  • Sunday drives
  • Mom, Dad, Grandma, Grandpa
  • Dr. Spock
  • Baby Boomers
  • The Juice runs
  • Nixon
  • HAIR
  • No more war
  • Drive-thrus
  • Mom and Dad
  • Dr. Strangelove
  • Generations X Y
  • The Juice walks
  • Reagan
  • Skinheads
  • No more ozone layer
  • Drive-bys
  • Mom or Dad
  • Dr. Kevorkian

156
Geographics
  • Shifts in population
  • Pre-1950s people from rural, agricultural areas
    moved to urban areas
  • After World War II, urban dwellers began to move
    to the suburbs
  • In the 1980s, populations moved from the
    Northeast (New England, New York) and Midwest
    (Illinois, Ohio) to the South (Georgia), West
    (California, Washington) and Southwest (Arizona)

157
Geographics
Regions in the US have distinct character
though somewhat diminished because of migratory
culture, but still preserved
158
Psychographics
  • Psychographics is a quantitative investigation of
    consumers personalities, values and lifestyles
  • Assessing dominant values of individuals can help
    lead to better predictions of consumer behavior
  • http//courses.bus.ualberta.ca/consumer-behavior/L
    ectures/98-99LectureNotes/VALSPERS.htmlThe VALS
    Psychographic Inventories

159
Ethnicity
160
Ethnicity Hispanic
  • Largest minority group by 2010(ish)
  • Significant within group diversity
  • Acculturation levels vary
  • Acculturated
  • Bicultural
  • Traditional

161
Ethnicity Hispanic
  • Family orientation/extended family
  • Strong ethnic pride/work ethic
  • Importance of religion
  • Younger than national average
  • Brand loyal
  • Preference for literal messages

162
Ethnicity African Americans
  • Currently the largest minority group
  • Politically and morally charged role and place in
    US history

163
Ethnicity African Americans
  • Representation in highest and lowest income
    groups is increasing
  • Urban 15 largest cities
  • Higher within-group identification
  • Religious groups/Church membership important
  • Preservation of cultural identity
  • Pay more attention to ads/prestigious brands
  • Less trust in unadvertised brands
  • Sales force interaction important

164
Ethnicity Asian Americans
  • Highly significant within group diversity
  • On average, greater discretionary income
  • High value on education, upward mobility
  • Emphasis on family, tradition, cooperation
  • Strong work ethic
  • Buy for quality
  • Loyal to high quality (i.e.,expensive) brands

165
Middle Class
  • Do the right thing (i.e., the done thing)
  • Influenced by popularity and current trends
  • Organization and neatness important
  • Joiners
  • Mainstay of branded products

166
Working Class
  • Oftentimes struggling to survive
  • More locally oriented socially, intellectually,
    and geographically
  • Because of preoccupation with money, use price as
    cue to quality

167
Nouveau Riche vs. Old Money
  • Nouveau Riche
  • Intellectual (real or perceived)
  • Self-expression
  • Entrepreneurial
  • Status from achievement
  • Old Money
  • Liberal and socially conscious
  • Understated, but known status symbols
  • Careful search for information vs. price/brand as
    cue

168
Social Class
Status Float Downscale aspire to upscale
Trickle Down Upscale can do downscale
169
Segmentation and Targeting Usage
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
170
Outline
  • What is segmentation?
  • Why segment?
  • How to segment?
  • Traditional
  • Usage based
  • Non-users, current users, competitors users
  • Benefits

171
Goal of Segmentation
  • Why segment?
  • Segments seek different benefits and will,
    therefore, respond to different positionings
  • Segmenting allows a firm to identify which
    consumers can be most effectively reached instead
    of employing a broad reach
  • Appealing to a diverse set of users with a common
    product is difficult, prone to failure

172
Market Segmentation
  • Market segmentation allows firms to
  • Take into account consumers diverse needs and
    differing behaviors (heterogeneity)
  • Design marketing mix to be more closely matched
    with consumer needs and deliver value by
    precisely meeting consumer needs (i.e., consumer
    propositions not diluted by intra-target
    variance)
  • Improve the efficiency and effectiveness of
    resource allocation, boosting profitability

173
How to Segment
  • Segmentation divides diverse set of consumers
    into homogeneous groups that can be addressed
  • With common positioning
  • With common benefits
  • With common media vehicle

174
How to Segment
  • Criteria for selecting segments as your target?
  • Measurable (have to be able to find them)
  • Addressable (once you find them, must identify
    media to reach them)
  • Substantial enough to support a business

175
Traditional vs. Usage Segmentation
  • Traditional segmentation
  • Define segments on key descriptors (sex, age)
  • Measure response differences across segments
  • Usage-based segmentation
  • Identify segments that differ on key usage
    dimensions
  • Profile resulting segments on key demographic and
    psychographic descriptors

176
Why Segment by Usage?
  • Communicating with consumers about a category is
    facilitated when a pre-existing knowledge
    structure in place
  • Allows storage of information that is consistent
    with prior notions
  • Persuasion is difficult when you are
    contradicting beliefs

177
Why Segment by Descriptors?
  • No other information is available
  • Most useful way of addressing specific segments

178
Benefit Segmentation
Gentle
  • Segmentation acknowledges consumer heterogeneity
  • Heterogeneity is represented by different ideal
    points
  • Market segments are formed by clustering
    individual ideal points together

Ideal Point Segment 1
Tylenol
Ideal Point Segment 2
Effective
Bufferin
Bayer
Private Label
Excedrin
Anacin
179
Market Segmentation Example


















18 of buyers
16 of buyers
27 of buyers
21 of buyers
20 of buyers
Mobil Oil Company
180
Segmentation Schemes
  • Once the benefits underlying segments are
    understood, organizing segments according to
    usage is necessary for targeting
  • Current users
  • Heavy users
  • Moderate users
  • Light users
  • Competitors users
  • Non-users

181
Current Users
  • Current users are the most important segment to
    target
  • Current users have already favorable associations
    to the product
  • Customer retention pays off, much more cost
    effective than pursuing new users
  • Due to high cost of customer acquisition,
    relationship may be profitable only after 1 year

182
Current Users
  • Current users are most likely to sustain,
    increase consumption
  • Heavy users account for disproportionate share of
    brands volume
  • 80/20 rule applies to beer drinkers
  • Men, age 18-34, eat several meals a week at
    McDonalds
  • Heavy users of Campbells Soup purchase 300 cans
    per year
  • A brands first obligation is to address current
    users

183
Competitors Users
  • Success of a strategy that targets a competitors
    users depends on the brands ability to convince
    consumers of its superiority
  • Difficult to change beliefs
  • Making a challenging claim often encourages
    consumers to rehearse their own thoughts

184
Non-Users
  • Targeting non-users may be warranted if targeting
    other segments do not enhance opportunities for
    growth
  • Point-of-entry strategy
  • Consumers who may be considering using the
    category, e.g. new parents, diamond ring
  • Category build strategy
  • Consumers who buy category for uses other than
    conventional ones, e.g. baking soda

185
Segmentation Example 1
  • What is the most useful way to segment diaper
    market?
  • Traditional variables
  • Babys sex
  • Babys age
  • Babys weight
  • Usage variables
  • Benefits?

186
Segmentation Diapers
  • Pampers aims at parents who are expecting their
    first child
  • Premium diaper
  • Outstanding softness
  • Rash-care
  • Sesame Street
  • First-time parents have unique mindset
  • Nothing but the best
  • Cautious
  • Baby is precious

187
Segmentation Diapers
  • Luvs targets parents of 2nd or 3rd child
  • No leaks point of difference
  • Cheaper diaper
  • Live, learn and then get Luvs
  • Barney Rewards loyalty program

188
Segmentation Example 2
  • Makers of shower gels have complex segmentation
    schemes
  • Category Crazies buy all the latest products
  • Thrifty Concerned want gels, but price
    sensitive
  • Shower Freaks men seeking squeaky clean
  • Sensible Selectors older women seeking pH
    balance, buying for families
  • Promiscuous Practicals brand switchers
  • Unsophisticated Bathers prefer baths to showers
  • Cynical Pragmatists soap is soap

189
Segmentation Example 2
190
Consumers as Decision Makers
  • Professor S.J. Grant
  • Spring 2005

BUYER BEHAVIOR, MARKETING 3250
191
Overview
  • Stages in consumer decision making
  • Problem recognition
  • Information search
  • Evaluation of alternatives
  • Product choice

Problem recognition
Information search
Evaluation of alternatives
Product choice
192
Stages in Consumer Decision Making
Im hungry
Subway or McDonalds
Fat? Cost? Taste?
Choose McDonalds
193
Stages in Consumer Decision Making
  • Non-compensatory
  • Conjunctive
  • Disjunctive
  • Elimination by
  • aspects
  • Lexicographic
  • Compensatory
  • Multi-attribute
  • Additive difference
  • Compromise effect
  • Attraction effect
  • Contrast effect
  • Assimilation effect
  • Heuristics
  • Brand loyalt
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