Chapter 5 Consumer Behavior

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Chapter 5 Consumer Behavior Powered By Docstoc
					OAD31863 Marketing

Dr Jenne Meyer
Week 2
Chapter 4
Managing the
Customer Experience
The Digital World

 Almost three-quarters of the U.S. population access
  the Internet at home, school, work, or public access
 What do people do online?
   —United States – Communication, information, and
   —China – Downloading, streaming music, online
    gaming, videogaming, and social networking

  —Web-enabled communication tools and their use as
   media for reaching prospective and existing customers
  —The gathering and use of demographic, product, and
   other information through Web contacts

 Strategic process of creating, distributing, promoting, and pricing goods
  and services to a target market over the Internet or through digital tools
 Application of electronic tools to contemporary marketing has the
  potential to:
   — Greatly reduce costs
   — Increase customer satisfaction
Web Business Models

 Corporate Web site - Designed to increase a firm’s
  visibility, promote its offerings, and provide
  information to interested parties
   —Build customer goodwill
   —Assist channel members in their marketing efforts
 Marketing Web site - Aim is to increase purchases by
B2B E-Marketing

 Use of the Internet for business transactions
  between organizations
 Generates sales revenue
 Provides detailed product description when required
 Increases efficiency of business transactions
B2C E-Marketing

 Selling directly to consumers over the Internet
 Also called e-tailing
 Driven by convenience and improved security for
  transmitting financial information
 Service providers such as banks are important
  participants in e-tailing
Electronic Storefronts

 Company Web site that sells products to customers
 Items for purchase are placed in an electronic
  shopping cart
   —Electronic shopping cart - File that holds items the
    online shopper has chosen to buy
 Increased capability of smartphones influence the
  growth of online shopping
Benefits of B2C E-Marketing

 Competitive pricing
  — An ideal method for savvy shoppers to compare prices
    from dozens of sellers
  — Easy price comparisons through bots such as
 Access and convenience
  — Allows customers to place orders from anywhere at
    anytime; product tracking
Source: Data from Nielsen Online, “Nielsen Provides Topline U.S. Web Data for February 2010,”; Data from
Nielsen Online, as cited in “Nielsen Online Reports Topline U.S. Data,” Market Wire, accessed on March 25, 2010.
Challenges in E-Business and E-Marketing

 Safety of online payment
   —Companies have developed secure payment systems
    to protect customer information
   —Encryption - Encoding data for security purposes
   —Secure Sockets Layer - Technology that encrypts
    information and provides authentication
Privacy Issues

 Customers’ top security concern is protection of their
  personal information
 Through electronic signatures, parties can enter into legal
  contracts online
 Cookies and spyware allow companies to personalize
  customers’ Internet experience but also invade users’ privacy
 To reassure customers, many online merchants have signed
  on with online privacy organizations such as TRUSTe
 Companies install firewalls to protect private corporate data
   —Firewall - An electronic barrier between a company’s
      internal network and the Internet that limits access into
      and out of the network
Frauds and Scams

 Complaints about Internet fraud are received by the
  Internet Crime Complaint Center (IC3)
 Phishing - High-tech scam that uses authentic-
  looking e-mail or pop-up messages to get
  unsuspecting victims to reveal personal information
 Vishing - Scam that collects personal information
  through voice response systems; stands for voice
Site Design and Customer Service

 Not all Web sites are well designed and easy to use
 Merchandise delivery and returns pose challenges
 Companies that have brick-and-mortar stores often
  have more experience satisfying customers than
  Internet-only retailers
Channel Conflicts and Copyright Disputes

 Channel conflicts - Conflicts among manufacturers,
  wholesalers, and retailers
 Conflicts in the area of copyright law
  — When a site hosts content to which someone else
    holds the rights
Marketing and Web Communication

 The Internet has four main functions:
   —Communication – most popular function
Promotions on the Web

   Banner ad - Strip message placed in high-visibility
    areas of frequently visited Web sites
   Pop-up ad - Separate window that pops up with an
    advertising message
   Preroll video ad - Marketing messages that play before
    an online video
   Search marketing - Paying search engines a fee to
    make sure that the company’s listing appears toward
    the top of the search results
   Companies use online coupons to promote their
    products Procter & Gamble
Questions to Consider in Developing a web
How Do you Build an Effective Web Presence

 What to consider?
Assessing Site Effectiveness

 Web-to-store shoppers - Consumers who use the
  Internet as a tool to aid them at brick-and-mortar
 Click-through rate - Percentage of people presented
  with a banner ad who click on it
 Conversion rate - Percentage of visitors to a Web site
  who make a purchase
 Engagement - Amount of time users spend on sites

                  Watch E-Business at Evo

o Aside from offering good prices, how does offer
  value to the consumer?
o Evo has opened a large brick-and-mortar store/community art
  space in Seattle, Washington. Go to
  category/seattle/ to learn more about what the store offers. Do
  you think this store will distract or enhance the Web site?
  Consider potential channel conflicts, pricing strategy,
  convenience, and consumer behavior in your answer.
Chapter 11
Product and Service
Marketing Mix
What is a Product?

 Product - Bundle of physical, service, and symbolic attributes
  designed to satisfy a customer’s wants and needs
 People buy want satisfaction, not objects
   —Example: Consumers buy televisions because they want
     entertainment, not because they want a box with a screen
 Services - Intangible tasks that satisfy the needs of consumer
  and business users
 Goods - Tangible products that customers can see, hear, smell,
  taste, or touch
 Goods–services continuum - Spectrum along which goods
  and services fall according to their attributes, from pure good
  to pure service
Characteristics of Services

 Intangible
 Inseparable from the service providers
 Perishable
 Cannot be standardized
 Buyers play important roles in the creation and
  distribution of services
 Wide variations in service standards
Classification of Consumer Products
Classifying Consumer Services
 Marketers rely on five questions to classify services:
   — What is the nature of the service?
   — What type of relationship does the service organization have with its
   — How much flexibility is there for customization and judgment on the
     part of the service provider?
   — Do demand and supply for the service fluctuate?
   — How is the service delivered?
Enhancing the Company’s Market Position

 Entire lines of products make a company more
  important to consumers and marketing
 Servicing the variety of products a company sells can
  enhance its position in the market
  — Example: L. L. Bean’s Outdoor Discovery Schools
    programs teach customers sports directly related to
    the company’s products
The Product Mix

   Assortment of product lines and individual product offerings
   Product mix width - Number of product lines a firm offers
   Product mix length - Number of different products a firm sells
   Product mix depth - Variations in each product that the firm
Managing Products over Their Life Cycles

 Total industry

    Total industry
  profit (initially loss)
The Product Lifecycle

 Introductory stage
   — Products in this stage might bring new technology to a product
   — Technical problems and financial losses are common
 Growth stage
   — Sales volume rises rapidly as new customers make initial purchases
      and early buyers repurchase the product
 Maturity stage
   — Sales of a product category continue to grow during the early part of
      this stage but eventually reach a plateau as the backlog of potential
      customers dwindles
 Decline stage
   — Innovations or shifts in consumer preferences bring about an absolute
      decline in industry sales
Extending the Product Lifecycle

 Increasing frequency of use
   —Convincing current customers to buy a product more
     frequently boosts total sales even if no new buyers enter
     the market
   —Example: Hershey now offers its famous Hershey’s Kisses
     with personalized messages such as “Congratulations,”
     “It’s a Boy,” and “Happy Birthday”
 Increasing the number of users
   —Attracting new customers who have not previously used
     the product
   —Example: The Australian Broadcasting Company recently
     announced plans to start a 24-hour news channel
Extending the Product Lifecycle

 Finding new uses
  — New applications extend a product’s lifecycle
  — Arm & Hammer cites a variety of alternative uses
    throughout the house for its baking soda
 Changing package sizes, labels, or product quality
   —New packaging and labels with updated images and
    slogans can help revitalize a product
   —Example: Bottles of Procter & Gamble’s Tide
    Coldwater detergent carry the Future Friendly label to
    remind consumers that they conserve energy when
    they wash clothes using cold water
Product Deletion Decisions

 Marketers prune product lines and eliminate
  marginal products to preserve limited resources
 Firms may carry unprofitable items to carry a
  complete product line
 Shortages or raw materials can prompt a firm to
  discontinue production
 Firm may drop products that don’t fit into the
  direction in which it plans to grow

    Watch Product and Service Strategy at Preserve

 Why is the development of an entire product line
  critical to Preserve’s growth and success?
 At which stage are most “green” products in the
  product lifecycle? As these products mature, what
  can be done to extend their product lifecycles?
Chapter 12
Developing and
Brand and Product
Managing Brands for Competitive Advantage

 Brand - Name, term, sign, symbol, design, or some
  combination that identifies the products of one firm
  while differentiating them from the competition’s
 Brands have a powerful influence on consumer
Brand Loyalty

 Measured in three stages:
   —Brand recognition - Consumer awareness and
    identification of a brand
   —Brand preference - Consumer reliance on previous
    experiences with a product to choose that product
   —Brand insistence - Consumer refusal of alternatives
    and extensive search for desired merchandise
Types of Brands

 Generic products - Products characterized by plain labels, no
  advertising, and the absence of brand names
 Manufacturer’s brand - Brand name owned by a
  manufacturer or other producer (Sony, Pepsi-Cola, Dell)
 Private brands - Brands offered by wholesalers and retailers
  (President’s Choice foods)
 Captive brands - National brands sold exclusively by a retail
  chain (Example: Target’s sale of products by Michael Graves)
 Family brand - Single brand name that identifies several
  related products
 Individual brand - Single brand that uniquely identifies a
Brand Equity

 Added value that a respected, well-known brand
  name gives to a product in the marketplace
 It is built sequentially on four dimensions:
  differentiation, relevance, esteem, and knowledge
Product Identification

 Products identified in the marketplace by brand
  names, symbols, and distinctive packaging
 Choosing how to identify a firm’s output represents a
  major strategic decision for marketers
Brand Names and Brand Marks

 Brand name - Part of a brand that can be spoken
 Brand mark - Symbol or pictorial design that
  distinguishes a product
 Effective brand names are easy to pronounce,
  recognize, and remember
Brand Names and Brand Marks

 A brand name:
  —Should give buyers the correct connotation of the
   product’s image
  —Must qualify for legal protection
 A brand name loses protection when a class of
  products generally comes to be known by that name
  —Examples include nylon, kerosene, and zipper
Protecting Trademarks

 Gives firms the exclusive legal right to use a brand
  name, brand mark, and any slogan or product name
 Example: Robert Burck, a New York street performer
  who gained fame as the Naked Cowboy, sued candy
  maker Mars for trademark infringement
 Firms can also seek protection for packaging
  elements and product features
Trade Dress

 Visual components that contribute to the overall look
  of a brand
   —Examples: McDonald’s golden arches, Merrill Lynch’s
Developing Global Brand Names and
 An excellent name or symbol in one country may be
  a poor choice in another
 A firm marketing a product in multiple countries has
  two choices:
   — Use a single brand name for universal promotions
   — Tailor names to individual countries

 Serves three major objectives:
   —Protection against damage, spoilage, and pilferage
   —Assistance in marketing the product
   —Cost effectiveness

 Label - Carries an item’s brand name or symbol, the
  name and address of the manufacturer or distributor,
  information about the product’s composition and
  size, and recommended uses
 Universal product code (UPC) - Numerical bar code
  system used to record product and price information
   —Reduce labor costs and improve inventory control
 RFID tags may replace some of the functions of UPC
Brand Licensing

 Practice that expands a firm’s exposure in the
 Brand name’s owner receives royalties, typically four
  to eight percent of wholesale revenues
 Can hurt a brand if the licensed product is poor
  quality or ethically incompatible with the brand
 Another risk is overextending the brand
Product Development Strategies

 Market penetration - Increase sales of existing products in
  existing markets
 Product positioning - Consumers’ perceptions of a product’s
  attributes, uses, quality, and advantages and disadvantages
  relative to competing brands
 Market development - Concentrates on finding new markets
  for existing products
 Product development - Introduction of new products into
  identifiable or established markets
 Product diversification - Focuses on developing entirely new
  products for new markets
 Cannibalization - Introducing a new product that adversely
  affects sales of existing products
Consumer Adoption Process

 Adoption process - Stages that consumers go through in
  learning about a new product, trying it, and deciding whether
  to purchase it again
  — Awareness
  — Interest
  — Evaluation
  — Trial
  — Adoption/Rejection
Identifying Early Adopters

 Firms who reach early purchasers can treat them as a
  test market
   —Evaluating the product and discovering suggestions
    for modifications
 Early purchasers can act as opinion leaders from
  whom others seek advice
   —Their attitudes toward new products quickly spreads
    to others
Rate of Adoption Determinants

 Relative advantage - Innovation that appears far
  superior to previous ideas
 Compatibility - Innovation consistent with the values
  and experiences of potential adopters
 Complexity - Relative difficulty of understanding the
  innovation can slow the speed of acceptance
 Possibility of trial use - Initial free or discounted trial
  of a good or service reduces adopters financial risk
 Observability - Observing an innovation’s superiority
  increases the adoption rate
Organizing for New Product Development

 New-product committees
  —Most common arrangement
  —Brings together functional experts
  —Tends to reach decisions slowly
  —Maintains conservative views
  —Members may compromise so they can return to their
   regular responsibilities
Organizing for New Product Development

 New-product departments
  —Separate and formally organized
  —Aims at generating and refining new product ideas
  —Encourages innovation as a permanent full-time
  —Responsible for all phases of a development project
   within the firm
New Product Development Process

  Watch Developing and Managing Brand Categories
            at Maine Media Workshops

 What are the main elements of the Maine Media Workshops
  brand equity? Analyze the workshop’s brand equity using the
  Young & Rubicam “dimensions of brand personality.”
 Would you consider the Maine Media College an extension of
  the Maine Media Workshops brand or a new-product
  development strategy—or both? Explain.

 Key learnings?
 Next weeks assignments.

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