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INDIVIDUAL

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E.g. for specialty coffee shops = Starbucks Second Cup Grabbajabba etc. ... Instant status 'Thrill of the hunt' Why do consumers shop? Moods ... – PowerPoint PPT presentation

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Title: INDIVIDUAL


1
INDIVIDUAL DECISION MAKING
2
  • The Purchasing Process
  • Why do we buy anything?

A Rational Problem Solver?
3
How do we solve our Problems Whats the process?
4
CONSUMER EFFORT IN MAKING DECISIONS
Your car is now 12 years old and in need of
constant repair. What decision process do you go
through in purchasing a new one?
5
  • Extended Problem Solving
  • collect as much info as possible
  • evaluate each product alternative carefully
  • decision perceived to carry a fair degree of
    risk
  • initiated by a motive central to the
    self-concept
  • engaged in when trying to satisfy an important
    need or when we have limited knowledge of the
    product or service

6
Your toaster is now toast. What process do you go
through in purchasing a new one?
7
  • Limited Problem Solving
  • Moderate amount of time and effort spent on
    information search and evaluation
  • buyers generally unaware of brands and their
    features.
  • people use decision rules to chose among
    alternatives
  • some prior experience or knowledge of the
    product or service
  • Most purchases fall into this category.

8
Your at the gas station paying for your gas when
you have an uncontrollable urge to buy a
chocolate bar. How do you decide which one to
buy?
9
  • Habitual Decision Making
  • Minimal search for, and evaluation of,
    alternatives.
  • Little or no conscious effort
  • Decisions are routine
  • Brand Loyalty consistently buy the same things
  • Store Loyalty consistently shop at same store

10
The Feelings Economy
  • in a market category oversupplied with
    interchangeable products or services customer
    feelings drive purchase decisions and
    profitability
  • customers can easily switch from you to a
    competitor and get just about the same benefits
  • Competition frequently based on price
  • The marketers imperative is to assess and appeal
    to customers feelings
  • The goal is to to increase customers pleasant
    feelings while minimizing their unpleasant ones.

11
PROBLEM RECOGNITION How do you recognize a need
for a product?
  • when there is a difference between an actual
    state and a desired state and that requires
    resolution.

In this case it was need recognition something
was lacking
12
opportunity recognition - something to be gained
13
Once Youve recognized you have a problem what
motivates you to resolve the problem?
  • how big the difference is between the desired
    and actual states
  • the relative importance of the problem

14
Marketing is all about creating a need in the
mind of the customer and then satisfying that
need. Philip Kotler
15
What is primary demand?
The total demand for all brands in a product
category. E.g. for specialty coffee shops
Starbucks Second Cup Grabbajabba etc.
16
  • Primary Demand Stimulation
  • Marketing activity intended to increase demand
    for the product category
  • When breaking open a new product category the
    marketers first job is to create primary demand
  • E.g. at one time there were no personal data
    assistants
  • Then Apple introduced its Newton MessagePad.
  • The task of Apple at that time was to create
    primary demand, not secondary demand because
    nobody knew what a PDA was or how it could be
    used to help them.
  • I.e. it is to educate a market about a product
    category - expensive

17
Primary demand stimulation
  • Primarily a possibility in new product
    categories
  • in mature product categories advertising most
    appropriately used by trade associations

18
Secondary demand
the demand for a given brand in a category
UK Grocery stores
19
  • Secondary (or Selective) Demand Stimulation
  • Marketing activity intended to increase demand
    for one organizations product or services over
    those of competitors. I.e. competitive position
  • Acquisition of new customers strategies
  • Head-to-head positioning
  • Superior quality
  • Price/cost leadership
  • Price promotions
  • Differentiated positioning
  • Customer-oriented niches
  • Benefit positioning

20
  • Secondary (or Selective) Demand Stimulation
  • Retention strategies
  • Maintenance of customer satisfaction
  • Meet competition
  • Relationship marketing
  • Product line strategies
  • Line extensions
  • Bundling
  • Systems selling

21
INFORMATION SEARCH
WHAT ARE WE SEARCHING FOR?
  • Existence of alternatives
  • Evaluative criteria
  • Performance of alternatives on the criteria

22
WHERE WILL WE SEARCH?
  • Internal Sources
  • Previous searches
  • Personal experiences
  • Passive, low-involvement learning
  • External Sources
  • Personal sources
  • Independent sources
  • Marketing sources
  • Experiential sources
  • (e.g. sales people, packaging)

23
WHAT DETERMINES THE EXTENT OF THE SEARCH?
  • Cost of Search vs. Benefits
  • Market Characteristics
  • Range of prices
  • Number of alternatives
  • Store distribution
  • Information availability
  • Product Characteristics
  • Price
  • Product Differentiation

24
DETERMINANTS CONTINUED
  • Situational Characteristics
  • Time Availability
  • Purchase for Others
  • Pleasant Surroundings
  • Social Surroundings
  • Consumer Characteristics

25
  • RISK FACTORS
  • More time and effort is spent in the buying
    process when there is a high risk factor
  • physical risk - to health - drugs, potentially
    dangerous items
  • financial risk - high priced items
  • social risk - to social status, symbolic
    products
  • functional risk - picking the wrong product that
    doesnt do the job or meet the need.
  • psychological risk - to self esteem, feeling
    guilty

26
Do consumers always search rationally?
27
  • Biases in Decision Making
  • Loss aversion
  • 1. You've just been given 1,000 -- and two
    options.
  • Option A guarantees you an additional 500.
  • Option B lets you flip a coin Heads, you get
    another 1,000 tails, you get nothing more.
  • Which would you choose?
  • 2. You've been given 2,000 -- and two options.
  • Option A guarantees that you will lose 500.
  • Option B lets you flip a coin Heads, you lose
    1,000 tails, you lose nothing.
  • Which would you choose?
  • People feel the pain of a loss more strongly
    than the pleasure of an equal gain.

28
  • Sunk cost fallacy
  • As the president of an airline company, you have
    invested 10 million of the company's money into
    a research project.
  • The purpose was to build a plane that would not
    be detected by conventional radar.
  • When the project is 90 percent completed,
    another firm begins marketing a plane that cannot
    be detected by radar.
  • Also, their plane is much faster and far more
    economical than the plane your company is
    building.
  • The question is should you invest the last 10
    percent of the research funds to finish your
    radar-blank plane?
  • NO - It makes no sense to continue spending
    money on the project.
  • YES - Since 10 mil. is already invested, I
    might as well finish it.
  • Rationality - The investment size is irrelevant
    to the
  • decision whether to continue or not

29
  • Surrogate indicator
  • readily observable attribute of a product used
    to represent the performance level of a less
    observable attribute
  • e.g., price and brand name are often used by
    consumers as surrogate indicators of quality

30
HEURISTICS
31
  • EVALUATION OF ALTERNATIVES
  • How do consumers narrow down the alternatives and
    choose one?

32
How Many brands of Mini vans can you think of?
  • evoked set
  • The set of choices/brands that come to mind for
    purchase (retrieval set)
  • Important for marketer to get into the evoked
    set - these are the brands that will be evaluated
    first
  • inept set
  • brands which consumer is unaware of
  • inert set
  • brands which person is aware of but considers
    unacceptable

33
  • New brands will be accepted into the evoked set
    but not brands which have been rejected.
  • Therefore important that it performs well when
    first introduced

Ford Edsel
34
  • Ford Edsel 1958 (63,110) 1959 (44,891)
    1960 (2,846)
  • Radical styling, chrome-laden and gadget-filled
    big car in a small car market
  • The pre-introduction publicity, which lasted for
    a year, created a super-car perception by
    consumers, which the Edsel failed to live up to.
  • gained a reputation as being unreliable,
    expensive and prone to breaking down every
    thousand miles.

http//edsel.net/multimedia/tv.html
35
MARKETING STRATEGIES
  • Habitual decision, brand in evoked set
  • Maintenance of this behaviour
  • Habitual decision, brand not in evoked set
  • Disrupt existing decision pattern
  • Limited decision, brand in evoked set
  • Capture when making purchase decision
  • Limited decision, brand not in evoked set
  • Intercept during information search
  • Extended decision, brand in evoked set
  • Preference based on features and benefits
  • Extended decision, brand not in evoked set
  • Acceptance of our brand

36
What is it?
HP OfficeJet G85 All-in-one scanner/copier/fax/pri
nter
37
  • Product Categorization
  • Consumers tend to put all products into mental
    categories based on similarities and differences.
  • Categorization is the process of understanding
    what something is by relating it to prior
    knowledge
  • For example, when combination phone/fax/printers
    came out, they were categorized by customers as a
    phone not a multifunction device.
  • This is because they dont have an established
    category for multifunction devices, so they just
    stick the new product in the phone category

38
Products are categorized in levels
39
Strategic Implications of Product Categorization
  • Locating Products
  • Where do you find wooden matches in the grocery
    store?
  • Where do you find soya sauce?
  • Stimulating Interest
  • Defining Competitors
  • Who are WestJets competitors
  • Positioning and Repositioning

40
PRODUCT POSITIONING
  • The place a product or service occupies in
    consumers' minds on important attributes relative
    to competitive offerings.

Which is more prestigious?
41
  • Positioning is the centerpiece of Marketing
    Strategy
  • The positioning identifies the way a firm wants
    customers to think about their product/brand to
    maximize their product interest
  • The positioning defines how the product will be
    differentiated to compete in an increasingly
    competitive marketplace

42
A Typical Positioning Has Several Pieces...
  • Actual Product or Service Description
  • Target Market
  • Benefits
  • Competitive Context and Advantage

43
What are some dimensions, or characteristics,
that you might use to assess business schools?
On each of these dimensions, where would you
position relative to one another U of Toronto,
U of Calgary, U of L, Mount Royal College
44
REPOSITIONING
  • changing the place an offering occupies in
    consumers' minds relative to competitive
    offerings.

Mount Royal College has decided to reposition
itself as a premier business school. What do you
suggest they do to achieve this?
45
EVALUATIVE CRITERIA
When comparing products or services what criteria
do you use?
HP Dell
IBM Compaq
functional attributes
46
  • determinant attributes
  • differentiators

How can Marketers influence what attributes are
important
47
  • Situational Influences on Consumer Behaviour
  • Antecedent states
  • Purchase task
  • Physical surroundings
  • Social surroundings
  • Temporal effects

48
Situational Effects
  • Three areas of focus
  • Antecedent states (situational effects)
  • Purchase environment
  • Post-purchase processes and issues

49
Antecedent States
  • Antecedent States are features of the individual
    person that are not lasting characteristics
  • Moods
  • Conditions
  • Moods are temporary feeling states that are
    generally not tied to a specific event.

50
Why do consumers shop?
  • Social experience
  • Sharing of interests
  • Interpersonal attraction
  • Instant status
  • Thrill of the hunt

51
Moods
  • How do specific moods affect your consumptions
    behaviors?
  • The Blues
  • The Blahs
  • The Bitches
  • The Bounces

52
Shopping orientations
  • Economic consumer
  • Rational, goal-oriented, value maximization
  • Personalized consumer
  • Focus on interpersonal relations with store
    personnel
  • Ethical consumer
  • Support local stores vs. national chains
  • Apathetic consumer
  • Shopping is not pleasurable, but must be done
    periodically
  • Recreational consumer
  • Fun, social activity, way to spend leisure time

53
Usage situation (who, what, when, where, how, why)
54
The Purchase Environment
55
Non-Store Shopping - Direct Marketing
Telemarketing
Home Catalog
Television Home Shopping
In 1902 the Sears catalog was as revolutionary in
marketing as Wal-Mart and the internet are today
56
 Non-Store Shopping E- COMMERCE
Advantages
  • can reach customers from around the world
  • cuts out the middleman --- Disintermediated
  • can boost sales by attracting people who dont
    normally shop in stores
  • increased convenience
  • Innovative methods

Disadvantages
  • competitors can reach customers from around the
    world
  • Some products difficult to sell over the
    Internet. E.g., clothes, food

57
Jupiter Research estimates that in 2005 online
grocery sales totalled 3.3 billion, up from 1.7
billion in 2003
58
Retailing as Theatre
West Edmonton Mall
59
Store Image
Location Merchandise Services Atmospherics
? ? Store Image
60
Spontaneous Shopping
Colorful point of purchase displays can increase
sales
61
The Sales Person
  • According to a 2003 Booz Allen Hamilton study,
    85 of brand loyalty is created at the point of
    sales contact and after
  • only 15 is generated by up-front promotions and
    the quality of the product itself.
  • Therefore a brand marketers greatest (and
    perhaps most overlooked) asset in creating brand
    equity and impact is the frontline sales person

62
Atmospherics
  • The sum total of (all) store stimuli, physical
    psychological characteristics
  • The atmosphere can have more influence than the
    service itself in the purchase decision

63
Atmosphere Components
  • Ambient factors
  • Lighting
  • Sounds
  • Smells

64
Atmosphere Components
Design factors
  • Floor coverings
  • Ceilings
  • Wall coverings
  • Displays
  • Fixtures
  • Aisles
  • Colors
  • Layout
  • Cleanliness
  • Signage

65
Atmospherics Continued
  • Lighting
  • Consumers examine and handle more items under
    bright lighting
  • Consumers spend more time at in-store displays
    with bright lighting
  • Increased levels of lighting increase arousal,
    pleasure, and approach behaviors of consumers.

66
Atmospherics Continued
  • Music
  • background music directly influences consumer
    buying behavior and affects sales.
  • Background music enhances customers perception
    of stores atmosphere.
  • Firms that played music in their facilities
    were thought to care more about consumers.
  • Slow tempo music encourages customers to stay
    longer.
  • Customers find music distracting in
    high-involvement decisions and soothing in
    low-involvement decisions.

67
  • Color
  • Warm colours (red, yellow, and orange hue) tend
    to evoke consumer feelings of comfort and
    informality.
  • Warm colors encourage quick decisions and work
    best for low-involvement purchase decisions.
  • Cool colors (blue, green, and violet hues) are
    favored when customers need time to make
    decisions.
  • Children appear to favor brighter colors while
    adults favor lighter tones.

68
Atmosphere Components
Social Factors
  • Courteous ? Rude behavior
  • Knowledgeable ? Low information
  • Service ? Insincere
  • Personal Service Climate
  • (Calls for a well paid, highly
  • motivated, experienced work force)
  • Employee dress norms

69
Social Factors
increasing numbers of consumers increase arousal
levels
70
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71
  • Post Acquisition Processes and Issues
  • Consumption and Evaluation
  • Customer satisfaction and dissatisfaction
  • Product disposal issues

72
Customer Satisfaction
Does Performance (in terms of quality,
functionality, aesthetics etc. )Live up to
Expectations?
73
Customer satisfaction and dissatisfaction
  • Implications of satisfaction
  • Repeat purchases
  • Positive WOM
  • Implications of dissatisfaction
  • No / fewer future purchase
  • Cost of retaining vs. replacing customers
  • Negative WOM
  • Public vs. private complaint behavior
  • Legal or regulatory action

74
  • POSTACQUISITION
  • What alternatives are there for disposing of
    products?

75
A toxic electronic wasteland In 2002, Canadians
tossed away 155,000 tonnes of high-tech toys
825,000
1.46 m
1.7m
1.46m
232.000
223,000
1.958 mil
523,000
575,000
76
Influences on Consumer Decision Making
  • Psychological
  • influences
  • Motivation
  • Personality
  • Perception
  • Learning
  • Values, beliefs, and attitudes
  • Lifestyle
  • Sociocultural
  • influences
  • Personal influence
  • Reference groups
  • Family
  • Social class
  • Culture
  • Sub-culture

Consumer purchase Decision-making process
  • Marketing mix influences
  • Product
  • Price
  • Promotion
  • Place (distribution)
  • Situational
  • influences
  • Purchase task
  • Social surroundings
  • Physical surroundings
  • Temporal effects
  • Antecedent states
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