4.6: Conducting a Segmentation

4.6.1: Determining Segmentation Variable(s)

Learning Objective

Break down market segmentation variables

Key Points

• Geography is probably the oldest basis for segmentation, and is often useful for marketers due to the amount of data available. However, there are drawbacks with focusing solely on geography.
• Demographic segmentation is also useful for certain products. However, marketers should be aware that demographics tend to change with society, and thus be aware of these changes and respond to them accordingly.
• Psychological segmentation, such as lifestyle and attitudinal variables, are also useful for particular types of products. However, obtaining information on such bases can often prove challenging.

Key Terms

psychological segments

Segmentation of markets based on psychological influences, such as personality, lifestyle choices, and attitudinal variables.

demographic segmentation

The division of the market into subsets based on characteristics of the population.

geographic segments

Segmentation of consumers based on geographical factors such as location, weather, topography, population density, etc.

Example

• As noted, religion is an interesting basis for demographic segmentation. Aside from the obvious higher demands for Christian-oriented products and services, differences in demand for secular products and services have been identified as well. For example, the Christian consumer attends movies less frequently than consumers in general. Population density can also place people in unique market segments. High-density cities such as New York City, Hong Kong, and London create the need for products such as security systems, fast-food restaurants, and public transportation.

Bases of Segmentation

There are many different ways by which a company can segment its market, and the chosen process varies from one product to another (see ). Also, since markets are very dynamic, and products change over time, the bases for segmentation must likewise change.

Bases for Segmentation

One way to segment markets is by consumer and industrial markets.

A table that shows bases for segmentation by choosing primary dimensions and breaking it down into consumer and industrial markets.

Geographic Segments

Regional differences in consumer tastes for products as a whole are well-known. Markets according to location are easily identified and large amounts of data are usually available. Also, many companies simply do not have the resources to expand beyond local or regional levels.

Closely associated with geographic location are inherent characteristics of that location: weather, topography, and physical factors such as rivers, mountains, ocean proximity, and population density.

Geography provides a convenient organizational framework. Products, salespeople, and distribution networks can all be organized around a central, specific location. However, there are drawbacks. Consumer preferences may bear no relationship to location. Other factors, such as ethnic origin or income, may overshadow location. The stereotypical Texan, for example, is hard to find in Houston, where one-third of the population has immigrated from other states. Another problem is that members of a geographic segment often tend to be too heterogeneous to qualify as a meaningful target for marketing action.

Demographic Segments

Demographics can be used to help companies develop products that meet current and future consumer needs. It can alert a company to a new segmentation, one that was not originally connected to the product. For example, women using power tools as home owners. Segmenting the consumer market by age groups is useful for several products. For example, the youth market (approximately 5 to 13) influences how their parents spend money, and when they make purchases on their own (e.g. toys and snacks). Presently, the senior market (age 65 and over) has grown in importance for producers of low-cost housing, cruises, and health care.

Gender has historically been a good basis for market segmentation. Many traditional gender-based boundaries are changing, and marketers must be aware of these changes. The emergence of the working woman, for instance, has made determining how the family income is spent more difficult. Thus, the simple classification of male versus female may be useful only if several other demographic and behavioral characteristics are considered. Income seems a better basis for segmenting markets as prices for a product increases. Income may also may uncover other buying behaviors.

Education affects product preferences and desired characteristics for certain products. Occupation is important: individuals who work in hard physical labor may demand a different set of products than a teacher or bank teller. Race, religion and national origin have also been associated with product preferences and media preferences.

Usage Segments

• The heavy user is an important basis for segmentation. This approach is very popular, particularly in the beverage industry (e.g beer, soft drinks, and spirits).
• Purchase occasion: determining the reason for an airline passenger’s trip, may be the most relevant criteria for segmenting airline consumers.
• User status: communication strategies must differ when directed at different use patterns, such as nonusers versus ex-users, or one-time users versus regular users.
• Loyalty: if companies can identify customer loyalty to their brand, and then delineate other characteristics these people have in common, they will locate the ideal target market.
• Stage of readiness: potential customers may be unaware, aware, informed, interested, desirous, and intending to buy. If a marketing manager is aware of where the specific segment of potential customers is, he or she can design the appropriate market strategy to move them through the various stages of readiness.

Psychological Segments

Segmentation should recognize psychological as well as demographic influences. For example, Phillip Morris has segmented the market for cigarette brands by appealing psychologically to consumers in the following way:

• Marlboro: the broad appeal of the American cowboy
• Benson & Hedges: sophisticated, upscale appeal
• Parliament: for those who want to avoid direct contact with tobacco

Attitudes of prospective buyers towards certain products influence their subsequent purchase of them. If people with similar attitudes can be isolated, they represent an important psychological segment.

Measurements of demographic, personality, and attitudinal variables are convenient measurements of less conspicuous motivational factors. People with similar physical and psychological characteristics may be similarly motivated. Motives can be positive (convenience), or negative (fear of pain). So marketers attempt to observe motivation directly and classify market segments accordingly.

Lifestyle segmentation has become very popular with marketers, because of the availability of measurement devices and instruments, and the intuitive categories that result from this process. Producers are targeting versions of their products and their promotions to various lifestyle segments. Lifestyle analysis begins by asking questions about the consumer’s activities, interests, and opinions. Research reveals vast amounts of information concerning attitudes toward product categories and user and non-user characteristics, which marketers can use in targeting their products.

4.6.2: Segmentation for B2B

Learning Objective

Analyze B2B marketing segmentation characteristics

Key Points

• There are five major ways to segment the B2B market, including: type of customer, Standard Industrial Classification codes, end uses, common buying factors, and buyer size/geography.
• SIC classification provides a useful way for marketers to segment the market.
• By determining how the end-use of a product differs according to different users, the manufacturer can modify the product so that it appeals to different segments.
• If the first four approaches are not useful, a marketer may still have success in segmenting by customer size and geography.

Key Term

Standard Industrial Classification (SIC)

A set of codes published by the United States government that classifies business firms by the main product or service provided.

Example

• Within each SIC code, the major groups of industries are identified by the first two digits. For example, SIC number 22 are textile mills, while SIC number 34 are manufacturers of fabricated metals.

B2B Segmentation

B2B firms sell not to ultimate consumers but to other businesses. While businesses and final consumers behave similarly at times, there are also several differences. Most business buyers view their function as a problem solving approach, and have formal procedures, or routines, for their purchasing.

A B2B marketer must be able to distinguish between the industries it sells to and the different market segments that exist in each of them. There are several basic approaches to segmenting organizational markets, including: type of customer, Standard Industrial Classification codes, end uses, common buying factors, and buyer size and geography.

Type Of Customer

Industrial customers can be classified into one of three groups:

• Original equipment manufacturers (OEMs), such as Caterpillar machinery or Gibson guitars
• End-users, such as farmers who use farm machinery produced by OEMs
• After market customers, such as those who purchase spare parts for a piece of machinery

Similarly, industrial products can be classified into one of three categories, each of which is typically sold only to certain types of customers:

• Machinery and equipment (e.g. computers, bulldozers) are end products sold only to OEM and end user segments.
• Components or subassemblies (e.g. pistons, spark plugs) are sold to build and repair machinery and equipment, and are sold in all three customer segments.
• Materials (e.g. chemicals, metals) are consumed in the end-user products, and are sold only to OEMs and end users.

Standard Industrial Classification

This approach employs the Standard Industrial Classification (SIC) codes published by the United States government. The SIC codes classify business firms by the main product or service provided. There are ten basic SIC industries which firms are classified into. Within each classification, the major groups of industries can be identified by the first two numbers of the SIC code (see example).

By using SIC codes, a marketer may identify the manufacturing groups that represent potential users of the products it produces and sells. takes the two digit classification and converts it to three-, four-, five-, and seven-digit codes.

SIC Classification

SIC codes have two-digit to seven-digit classifications.

A diagram that shows different SIC code classifications – basic industry (2 digits), major group (2 digits), industry group (3 digits), specific industry (4 digits), product class (5 digits), and product (7 digits).

End Uses

Industrial marketers may segment markets by looking at the different ways and situations in which a product is used. Here, the industrial marketer typically conducts a cost / benefit analysis for each end-use application. The manufacturer must ask: What benefits does the customer seek from this product?

For example, an electric motor manufacturer learned that customers operated motors at different speeds. After making field visits to gain insight into the situation, he divided the market into slow speed and high speed segments. In the slow-speed segment, the manufacturer emphasized a competitively priced product with a maintenance advantage, while in the high-speed market product, superiority was stressed. By determining how the end-use of the product differed according to different users, the manufacturer was able to modify the product, and the marketing of the product, to appeal to these different segments more effectively.

Common Buying Factors

Marketers may segment markets by identifying groups of customers who consider the same buying factors important. Five factors are typically found to be important in most industrial buying situations: product performance, product quality, service, delivery, and price. Identifying a group of customers who value the same buying factors as important is difficult, as industrial organizations’ and resellers’ priorities often change.

Buyer Size and Geography

If the previous approaches are not useful in a particular situation, market advantages may still be realized by segmenting based on account size or geographic boundaries. Sales managers have done this for years, but only recently have organizations learned to develop several pricing strategies for customers that are close and for those who are far away. Similarly, different strategies can be developed for customers of different sizes.

4.6.3: B2B Company Characteristics

Learning Objective

Differentiate between B2B, business to business and B2C, business to consumer characteristics

Key Points

• The volume of B2B sales is much greater than that of B2C sales.
• The purchase of B2B products is much risker than B2C products, because purchasing the wrong product or quantity, or at the wrong terms, can put the entire purchasing business at risk.
• B2B companies behave differently when buying. Purchases are usually made by committee, and decisions are specification-driven.
• B2B companies avoid mass media when promoting their brand, instead targeting their customers directly through trade shows, specialized magazines, etc.

Key Terms

B2C

The sale of goods and services from individuals or businesses to the end-user.

B2B

Commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.

Transactions Between Businesses

B2B, or business-to-business, describes commercial transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer. The volume of B2B transactions is much higher than the volume of B2C transactions, because in a typical supply chain there will be many B2B transactions involving sub components or raw materials, and only one B2C transaction, specifically sale of the finished product to the end customer. For example, an automobile manufacturer makes several B2B transactions such as buying tires, glass for windscreens, and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a single B2C transaction.

While almost any B2C product or service could also be a B2B product, very few B2B products or services will be used by consumers. For example, toilet paper, a typical B2C product, is a B2B product when sold to hotels. However, few people will buy a forklift for their private use. 

Microchips

A microchip is a classic B2B product. Electronic manufacturers buy microchips to put in their products. They sell the products to final consumers.

Differences between B2B and B2C

The main difference between B2B and B2C is who the buyer of a product or service is. The purchasing process is different in both cases. Below are some of the differences between the two types of purchase.

Risk

Buying one can of soft drink involves little money, and thus little risk. If the decision for a particular brand was not right, there are very few implications. The worst that could happen is that the consumer does not like the taste and discards the drink immediately. However, buying B2B products is much riskier. Purchasing the wrong product or service, the wrong quantity, the wrong quality, or agreeing to unfavorable payment terms may put an entire business at risk.

In international trade, delivery risks, exchange rate risks, and political risks exist and may affect the business relationship between buyer and seller. Strong brands imply lower risk of using them; buying unfamiliar brands implies financial risks. Products may not meet the requirements and may need to be replaced at high cost. There exists a performance risk, as there might be something wrong with an unfamiliar brand. When buying machinery or supplies for a company, peers may not approve the purchase of an unknown brand, thus posing a risk to a purchasing manager’s reputation.

Buying behavior in a B2B environment

Timescale

For consumer brands, the buyer is an individual. In B2B there are usually committees of people in an organization. Each of the members may have different attitudes towards any brand. In addition, each party involved may have different reasons for buying or not buying a particular brand. Since there are more people involved in the decision, and since technical details may have to be discussed in length, the decision-making process for B2B products is usually much longer than in B2C.

Brand Loyalty

Companies seek long-term relationships, as any experiment with a different brand will have impacts on the entire business. Brand loyalty in B2B is therefore much higher than in consumer goods markets. While consumer goods usually cost little in comparison to B2B goods, the selling process involves high costs. Not only is it necessary to meet the buyer numerous times, but the buyer may ask for prototypes, samples, and mock-ups. Such detailed assessment serves the purpose of eliminating the risk of buying the wrong product or service.

Brand Differentiation

B2B products are generally bought by a committee of buyers, and in many cases the purchases are specification driven. As a result, it is vital that brands are clearly defined and that they target the appropriate segment. Companies can use various strategies of differentiation, leveraging on the origin of the goods or the processes used in manufacturing them. Depending on the company’s history, the competitive landscape, occupied spaces and white spaces, there could be one or many strategies a company could use. Ultimately, a strong B2B brand will reduce the perceived risk for the buyer and help sell the brand.

Brand Promotion

B2B promotions work differently from B2C brand promotions. The former avoid mass market broadcasts and generally use media that can be targeted at a specific business audience, such as direct marketing distributed online or in trade magazines. B2B companies are also present where their potential customers are, at trade shows, exhibitions, and other trade-related events.

4.6.4: Evaluating Market Segments

Learning Objective

Illustrate the purpose and method of evaluating market segments

Key Points

• Market segmentation involves dividing a broad target market into multiple subsets of consumers with common desires and common applications for the product. Marketing campaigns are designed and implemented to target these specific customer segments.
• This premise of segmentation holds that people can be most effectively approached by recognizing their differences and adjusting to them. By emphasizing a segmentation approach, the exchange process should be enhanced, since a company can more precisely match the needs and wants of the customer.
• A company following a concentration strategy focuses on one specific market segment, allowing it to understand the segment and focus on it fully, lowering costs. A multisegment strategy targets multiple segments and thus a larger market, but incurs higher marketing costs.

Key Term

market segmentation

The process of dividing a broad target market into subsets of consumers who have common needs or desires, as well as common applications for the relevant goods and services.

Example

• The manufacturer of Rolex watches has chosen to concentrate on the luxury segment of the watch market: therefore, they follow a concentration strategy.

The Segmented Market

While product differentiation is an effective strategy to distinguish your brand from competitors, it also differentiates your own products from one another. For example, a company such as Franco-American Spaghetti has differentiated its basic product by offering various sizes, flavors, and shapes. The objective is to sell more product, to more people, more often. Kraft has done the same with their salad dressings; Xerox with its multitude of office products. The problem is not competition; the problem is the acknowledgment that people within markets are different and that successful marketers must respond to these differences (see for a recap of the different market approaches).

Markets

Because all markets are different, it is important to define and approach a market using certain steps. 

A table that shows how to define and approach markets – define the market (people, place, economic entity), types of markets (consumer, industrial, institutional, reseller), and approaching the market (undifferentiated market, product differentiation, and segmental market – based on strategies).

This premise of segmenting the market theorizes that people and/or organizations can be most effectively approached by recognizing their differences and adjusting accordingly. By emphasizing a segmentation approach, the exchange process should be enhanced, since a company can more precisely match the needs and wants of the customer. While it is relatively easy to identify segments of consumers, most firms do not have the capabilities or the need to effectively market their product to all of the segments that can be identified. Rather, one or more target markets (segments) must be selected. In reality, market segmentation is both a disaggregation and aggregation process. While the market is initially reduced to its smallest homogeneous components (perhaps a single individual), business in practice requires the marketer to find common dimensions that will allow him to view these individuals as larger, profitable segments. Thus, market segmentation is a twofold process that includes:

1. Identifying and classifying people into homogeneous groupings, called segments, and;
2. Determining which of these segments are viable target markets.

In essence, the marketing objectives of segmentation analysis are:

• To reduce risk in deciding where, when, how, and to whom a product, service, or brand will be marketed
• To increase marketing efficiency by directing effort specifically toward the designated segment in a manner consistent with that segment’s characteristics.

Criteria for Segmenting

Market segmentation involves dividing a broad target market into subsets of consumers who have common needs (and/or common desires) as well as common applications for the relevant goods and services. These subsets may be divided by criteria such as age and gender, or other distinctions, such as location or income. Marketing campaigns can then be designed and implemented to target these specific customer segments. An ideal market segment meets all of the following criteria:

• It is possible to measure.
• It must be large enough to earn profit.
• It must be stable enough that it does not vanish after some time.It is possible to reach potential customers via the organization’s promotion and distribution channel.
• It is internally homogeneous (potential customers in the same segment prefer the same product qualities).
• It is externally heterogeneous, that is, potential customers from different segments have different quality preferences.
• It responds consistently to a given market stimulus.
• It can be reached by market intervention in a cost-effective manner.
• It is useful in deciding on the marketing mix.

Segmentation strategies

There are two major segmentation strategies followed by marketing organizations: a concentration strategy and a multisegment strategy. An organization that adopts a concentration strategy chooses to focus its marketing efforts on only one market segment. Thus, only one marketing mix is developed. An organization that adopts a concentration strategy gains an advantage by being able to analyze the needs and wants of only one segment and then focusing all its efforts onthat segment. This can provide a differential advantage over other organizations that market to this segment but do not concentrate all their efforts on it. The primary disadvantage of concentration is related to the demand of the segment. As long as demand is strong, the organization’s financial position will be strong. If demand declines, the organization’s financial position will also decline.

The other segmentation strategy is a multisegment strategy. When an organization adopts this strategy, it focuses its marketing efforts on two or more distinct market segments. The organization does so by developing a distinct marketing mix for each segment. They then develop marketing programs tailored to each of thesesegments. Organizations that follow a multisegment strategy usually realize an increase in total sales as more marketing programs are focused at more customers. However, the organization will most likely experience higher costs because of the need for more than one marketing program.

4.6.5: Selecting Target Markets

Learning Objective

Recognize the importance of segmentation and how to translate data into smart decisions

Key Points

• Identifying optimal segments within the broader market can improve the efficiency of both paid and organic marketing initiatives.
• Selecting the right segments relies heavily on good data. The first step is collecting as much information as possible on the industry, competition, key metrics, and consumers.
• Once the data is collected, organizations must strategically query the data to identify correlations that are statistically significant. In the era of big data, this is more important (and more complex) than ever.
• Once the optimal segments are identified, the organization can match their available resources with the opportunities in the market itself.

Key Term

segmentation

The act of dividing a larger population or market into smaller groups.

Why Pursue Target Markets

The purpose of identifying various market segments within the broader market is to refine the targeting of paid and organic advertising. Simply put, it’s best to narrow down an organization’s targeting to the individuals most likely to be interested in the product or service. These groups of interested consumers within the broader market is usually referred to as a target market, and should be a much more strategic place to invest capital in terms of marketing distribution.

Target Market

A target market is part of a served available market. Both of these markets are part of the total available market.

This chart visualizes the concept of a target market within the context of a broader market.

How To Select Targeted Groups

Organizing Data

To start, the organization should collect as much data as possible on the industry, competition, consumer behavior, and expected growth trajectories. Once enough data is collected, it’s useful to frame the targeting strategy by querying the data using the right questions. Some things to consider include:

• How big is each segment?
• What are the demographic, psychographic, behavioral, and geographic characteristics of each segment?
• Which segments have the competition and/or our organization already captured?
• Where is the highest growth potential?
• Which market is most closely aligned with the organization’s brand and/or operating philosophy?
• Is is practically feasible to enter where the ideal segment is (i.e. geographically)?

While there are countless other questions to ask, which will vary by industry and situation, understanding these basic concepts can quickly simplify the segmentation decision.

Visualizing Segments

Visualizing data queries to understand how consumer groups look relative to various metrics is a useful technique in building clusters and segments.

Visualizing data queries to understand how consumer groups look relative to various metrics is a useful technique in building clusters and segments.

Selecting A Segment

At this point, with the available market data at hand, it’s fairly simple to assess internal resources and external opportunities to optimize the marketing plan. The key here is to get the greatest return on marketing spend by strategically selecting the appropriate channels and using the ideal messaging to reach the selected segment.

4.7: Competitive Perceptual Positioning

4.7.1: Perceptual Mapping

Perceptual mapping is a graphic display explaining the perceptions of customers with relation to product characteristics.

Learning Objective

Evaluate the concept of perceptual mapping as part of competitive perceptual positioning

Key Points

• Perceptual maps help marketers understand where the consumer ranks their company in terms of characteristics and in comparison to competing companies.
• Perceptual maps can display consumers’ ideal points that reflect their ideal combinations of product characteristics.
• When creating a new product, a company should look for a space that is currently unoccupied by competitors and that has a high concentration of consumer desire (ideal points).
• A perceptual map is usually based more on a marketer’s knowledge of an industry than market research.

Key Terms

price elasticity

The measurement of how changing one economic variable affects others. For example:”If I lower the price of my product, how much more will I sell? “”If I raise the price, how much less will I sell? “”If we learn that a resource is becoming scarce, will people scramble to acquire it? “

demand void

Areas without any significant consumer desires; typically found in ideal point maps of perceptual mapping.

Perceptual Mapping

Perceptual mapping is a diagrammatic technique used by marketers in an attempt to visually display the perceptions of customers or potential customers. Typically the position of a product, product line, brand, or company is displayed relative to their competition. Some perceptual maps use different size circles to indicate the sales volume or market share of the various competing products.

Perceptual Map Of Competing Products

Perceptual maps commonly have two dimensions even though they are capable of having several. For example, in this perceptual map you can see consumer perceptions of various automobiles on the two dimensions of sportiness/conservative and classy/affordable. This sample of consumers felt that Porsche cars were the sportiest and classiest of the ones in the study. They felt that Plymouth cars were the most practical and conservative. Cars that are positioned close to each other were seen as similar on the relevant dimensions by the consumer. For example, consumers saw Buick, Chrysler, and Oldsmobile as similar. They are close competitors and form a competitive grouping. A company considering the introduction of a new model will look for an area on the map free from competitors.

Perceptual Mapping

Perceptual mapping ranks companies based on customers’ perceptions of certain characteristics. 

A perceptual map that shows car manufacturers based on conservative, classy distinctive, sporty, and practical affordable.

Perceptual Map Of a Consumer’s Ideal

Many perceptual maps also display consumers’ ideal points. These points reflect ideal combinations of the two product characteristics as seen by a consumer. This diagram shows a study of consumers’ ideal points in the alcohol product space. Each dot represents one respondent’s ideal combination of the two dimensions. Areas where there is a cluster of ideal points (such as A) indicates a market segment. Areas without ideal points are sometimes referred to as demand voids.

Ideal Points Maps

Ideal points maps reflect ideal combinations of two product characteristics as seen by a consumer. Marketers are able to accurately target their message to consumers based on consumer desires.

An ideal points map for the alcoholic beverage industry based on quaintness, social appeal, status, and individuality.

Combining the Competing Products and Ideal Points Maps

A company considering introducing a new product will look for areas with a high density of ideal points. They will also look for areas without competitive rivals. This is best done by placing both the ideal points and the competing products on the same map. This map displays various aspirin products as seen on the dimensions of effectiveness and gentleness. It also shows two ideal vectors. This study indicates that there is one segment that is more concerned with effectiveness than harshness, and another segment that is more interested in gentleness than strength.

Combination Map

A combination map allows companies to find a space that has unmet consumer desires.

A combination map of competing products and ideal points. It compares pain medications based on whether they are more or less effective and more or less gentle.

Intuitive Maps

Perceptual maps need not come from a detailed study. There are also intuitive maps (also called judgmental maps or consensus maps) that are created by marketers based on their understanding of their industry. The value of this type of map is questionable, as they often just give the appearance of credibility to management’s preconceptions. When detailed marketing research studies are done, methodological problems can arise, but at least the information is coming directly from the consumer. There is an assortment of statistical procedures (preference regression, multi-dimensional scaling) that can be used to convert the raw data collected in a survey into a perceptual map.

Some techniques are constructed from perceived differences between products, others are constructed from perceived similarities. Still others are constructed from cross price elasticity of demand data from electronic scanners.

4.7.2: Positioning Bases

By using customer research and perceptual mapping, a marketer can create a positioning statement using one of the three main bases.

Learning Objective

Examine positioning and the strategy behind it relative to competitive perceptual positioning

Key Points

• Functional Positions deal with solving a problem, providing benefits and getting a favorable perception from investors, stockholders and consumers.
• Symbolic Positions deal with self-image enhancement, ego identification, belongingness, social meaningfulness and affective fulfillment.
• Experiential Positions deal with providing sensory or cognitive stimulation.
• By using customer research and perceptual mapping, a marketer can create a positioning statement using one of the three main bases.

Key Terms

perceptual mapping

Perceptual mapping is a diagrammatic technique used by asset marketers that attempts to visually display the perceptions of customers or potential customers.

Experiential

Of, related to, encountered in, or derived from experience

positioning

The act of positioning; placement.

Example

• The position statement of SouthWest Airlines is, “The short-haul, no frills and low-priced airline. “

Introduction

When a company presents a product or service in a way that is differentiating from the competition, they are said to be “positioning” it. Positioning relates to a process used by marketers to create an image in the minds of a target market. While positioning used to focus on consumer positioning, it now focuses more on competitive positioning.

The Positioning Concepts

There are three basic concepts for positioning:

1. Functional Positions deal with solving a problem, providing benefits and getting a favorable perception from investors, stockholders and consumers.
2. Symbolic Positions deal with self-image enhancement, ego identification, belongingness, social meaningfulness and affective fulfillment.
3. Experiential Positions deal with providing sensory or cognitive stimulation.

Positioning is facilitated by perceptual mapping to determine the ideal points of consumers.This helps to determine if positioning should be functional, symbolic, or experiential. Strong positioning will enable a single product to appeal to different customers for different reasons. For example, two people are interested in buying a new car; one wants a car that is powerful and stylish while the other buyer is looking for a car that is reliable and safe and yet they buy the same exact car. One purchase solved a problem and exemplifies functional positioning while the other purchase is an example of symbolic and/or experiential positioning.

The Positioning Statement and Strategy

By using customer research and perceptual mapping, a marketer can create a positioning statement using one of the three main bases.

A positioning statement explains the target market for the product, the benefit of the product, and how the product is different than the competitors.

When creating a positioning statement, it is important to determine a pain point of the customer. Customers often buy on a want, rather than a need, impulse. By talking to a customer’s pain point, it is often possible to address the need impulse and the want impulse at the same time. If both of these issues can be addressed then it is easier to overcome objections regarding a product.

Wants versus Needs

What consumers want may not be what they need, but it is important to understand both.

A woman stands on a stage and discusses a PowerPoint slide that breaks down customers wants and needs.

A company can create brand positioning strategies or product positioning strategies. It is important to understand the strengths and weaknesses of both the organization and the competition when creating a positioning strategy.

4.7.3: Repositioning

Repositioning involves changing the identity of a product relative to competing products.

Learning Objective

Indicate the characteristics and application of a re-positioning as it applies to competitive perceptual positioning

Key Points

• When a company initiates a re-positioning strategy, it needs to change the expectations of stakeholders, including employees, stockholders, and financial backers.
• A company may need to consider a re-positioning strategy if they have a weak brand, if they have not remained competitive in the market, or if there is a change in the economy.
• A company may re-position a specific product line, a brand, or the entire organization.

Key Term

repositioning

Changing the identity of a product or a company in the minds of stakeholders and competitors.

Repositioning involves changing the identity of a product relative to competing products. Many famous companies have saved failing products by repositioning them in the market. When a company initiates a repositioning strategy, it needs to change the expectations of stakeholders, including employees, stockholders, and financial backers.

Apple Inc.

Apple Inc. is an example of a company that achieved re-positioning

Brand Identity

Brand identity is often involved with the success or failure of a product. A company that has achieved brand recognition can often survive the challenge of new entrants in a market. The problem with being at the top of the market, however, is that someone is always trying to knock you off. Companies that have become complacent with brand strategies sometimes find themselves knocked off their pedestal by a competitor.

Lack of a Strong Brand

Some companies lack a strong product or brand. They perform well in the market, but not exceptionally. Any changes in the market can force these companies from maintaining business to failing.

Economic Volatility

A severe change in the economy can affect a company or a brand. The hospitality industry saw this when the United States went through a recent financial crisis. Many upscale hotels and restaurants suffered because people couldn’t afford the prices.

There are Different Levels of Repositioning

An organization can reposition a product line, a brand, or an entire company. Determining which type of repositioning is needed isn’t always easy; it is important to understand the changes in the current market and how competitors will react to the change. If a change is volatile and is unprecedented, there may not be enough information available to use to make a decision. Understanding the strengths and weaknesses of a company can help determine when repositioning may be necessary and how the change should occur. When Apple switched their focus to iPod and its successors, for example, the company was able to change its financial situation and achieve success. The complete dedication of stakeholders and the creation of a product that is in demand can help companies survive a repositioning strategy.

4.8: The Consumer Decision Process

4.8.1: Need Recognition

Need recognition occurs when a consumer identifies a need and thinks of a product that might meet this need.

Learning Objective

Identify need recognition as part of the consumer decision making process

Key Points

• The 5 stages which a consumer often goes through when they are considering a purchase: problem or need recognition, information search, evaluation of alternatives, purchase, and post-purchase behavior.
• Need or problem recognition is oftentimes recognized as the first and most crucial step in the process because if a consumer does not perceive a problem or need, he generally will not move forward with considering a product purchase.
• A need can be triggered by internal or external stimuli.
• Internal stimuli refers to a personal perception experienced by the consumer, such as hunger or thirst.

Key Terms

John Dewey

He was an American philosopher, psychologist, and educational reformer whose ideas have been influential in education and social reform. Dewey was an important early developer of the philosophy of pragmatism and one of the founders of functional psychology.

Abraham Harold Maslow

He was an American psychologist who was best known for creating Maslow’s hierarchy of needs, a theory of self-actualization.

need recognition

the first step in the buying decision process, where the problem or need is understood

Buyer Decision Processes

The Buyer Decision Processes are the decision-making processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or service.

Example

• For example, a consumer who just moved to Minnesota may not realize he needs a heavy winter coat until he sees a store advertising for it, which triggers the need in his mind.

Need Recognition

The Consumer Decision Processes (also known as Buyer Decision Processes) refer to the decision-making stages that a consumer undergoes before, during, and after they purchase a product or service.

John Dewey introduced 5 stages which consumers go through when they are considering a purchase:

• Problem or need recognition
• Information search
• Evaluation of alternatives
• Purchase
• Post-purchase behavior

Problem or Need Recognition

This is the first stage of the Consumer Decision Process in which the consumer is able to recognize what the problem or need is and subsequently, what product or kind of product would be able to meet this need. It is oftentimes recognized as the first and most crucial step in the process because if consumers do not perceive a problem or need, they generally will not move forward with considering a product purchase.

Making a Decision

When making a decision, a person first needs to identify and define the problem or need recognition.

Customers look at various pieces of jewelry.

A need can be triggered by internal or external stimuli. Internal stimuli refers to a personal perception experienced by the consumer, such as hunger, thirst, and so on. For example, an elderly, single woman may feel lonely so she decides that she wants to purchase a cat. External stimuli include outside influences such as advertising or word-of-mouth. For example, a consumer who just moved to Minnesota may not realize he needs a heavy winter coat until he sees a store advertising for it, which triggers the need in his mind.

Maslow’s Hierarchy of Needs

American Psychologist Abraham Harold Maslow believes that needs are arranged in a hierarchy. Only after a human has achieved the needs of a certain stage, does he move to the next one. None of his published works included a visual representation of the hierarchy. The pyramidal diagram illustrating the Maslow needs hierarchy may have been created by a psychology textbook publisher as an illustrative device.

Abraham Maslow

Abraham Harold Maslow was an American Psychology professor who created Maslow’s Hierarchy of Needs.

This now iconic pyramid frequently depicts the spectrum of human needs, both physical and psychological, as accompaniment to articles describing Maslow’s needs theory and may give the impression that the Hierarchy of Needs is a fixed and rigid sequence of progression. Yet, starting with the first publication of his theory in 1943, Maslow described human needs as being relatively fluid—with many needs being present in a person simultaneously.

According to Maslow’s theory, when a human being ascends the levels of the hierarchy having fulfilled the needs in the hierarchy, one may eventually achieve self-actualization. Maslow eventually concluded that self-actualization was not an automatic outcome of satisfying the other human needs. Human needs as identified by Maslow:

• At the bottom of the hierarchy are the “Basic needs or Physiological needs” of a human being: food, water, sleep and sex.
• The next level is “Safety Needs: Security, Order, and Stability”. These two steps are important to the physical survival of the person.
• Once individuals have basic nutrition, shelter and safety, they attempt to accomplish more. The third level of need is “Love and Belonging”, which are psychological needs; when individuals have taken care of themselves physically, they are ready to share themselves with others, such as with family and friends.
• The fourth level is achieved when individuals feel comfortable with what they have accomplished. This is the “Esteem” level, the need to be competent and recognized, such as through status and level of success.
• Then fifth is the “Cognitive” level, where individuals intellectually stimulate themselves and explore.
• Finally, there is the “Aesthetic” level, which is the need for harmony, order and beauty.

At the top of the pyramid, “Need for Self-actualization” occurs when individuals reach a state of harmony and understanding because they are engaged in achieving their full potential.

4.8.2: Information Search

Information Search is a stage in the Consumer Decision Process during which a consumer searches for internal or external information.

Learning Objective

Examine the “information search” stage of the consumer decision process

Key Points

• During the information search, the options available to the consumer are identified or further clarified.
• An internal search refers to a consumer’s memory or recollection of a product, oftentimes triggered or guided by personal experience.
• An external search is conducted when a person who has no prior knowledge about a product seeks information from personal sources (e.g. word of mouth from friends/family) and/or public sources (e.g. online forums, consumer reports) or marketer dominated sources (e.g. sales persons, advertising).

Key Terms

External Research

When a person has no prior knowledge about a product, which then leads them to seek information from personal or public sources.

Information Search

The second of five stages that comprise the Consumer Decision Process. It can be categorized as internal or external research.

Consumer Decision Process

Also known as the Buying Decision Process, the process describes the fundamental stages that a customer goes through when deciding to buy a product. Many scholars have given their version of the buying decision model.

Example

• An example of a marketer dominated personal sources is in-store advice. For instance, when a salesperson at Macy’s explains the benefits of a parka that can withstand sub zero temperatures or a friend who purchased the parka relates its warmth and comfort in very cold climates.

Information search is considered the second of five stages that comprise the Consumer Decision Process. During this stage, a consumer who recognizes a specific problem or need will then likely be persuaded to search for information, whether it be internally or externally. This is also when the customer aims to seek the value in a prospective product or service. During this time, the options available to the consumer are identified or further clarified.

Information search can be categorized as internal or external research:

Internal research refers to a consumer’s memory or recollection of a product, oftentimes triggered or guided by personal experience. This is when a person tries to search their memory to see whether they recall past experiences with a product, brand, or service. If the product is considered a staple or something that is frequently purchased, internal information search may be enough to trigger a purchase.

External research is conducted when a person has no prior knowledge about a product, which then leads them to seek information from personal sources (e.g. word of mouth from friends/family ) and/or public sources (e.g. online forums, consumer reports) or marketer dominated sources (e.g. sales persons, advertising) especially when a person’s previous experience is limited or deemed inefficient.

Seeking Information

A consumer seeks information by asking an employee about a product. Asking an employee is external research.

A customer talks to an employee in the garden section at a store.

• Examples of personal sources that are marketer dominated, include sales person advice in a retail store.
• Personal sources that are not marketer dominated include advice from friends and family.
• Television advertising and company websites are examples of non-personal sources that are marketer dominated
• Online forums are non-personal sources that are non-marketer dominated.

Non-Personal Source

An example of a non-personal source is a search on the Internet. The search engine provides information about a subject.

4.8.3: Evaluating Alternatives

During the evaluation of alternatives stage, the consumer evaluates all the products available on a scale of particular attributes.

Learning Objective

Examine the “evaluation of alternatives” stage of the Consumer Decision Process

Key Points

• During this stage, consumers evaluate all of their products or brand options on a scale of attributes which have the ability to deliver the benefit that they are seeking.
• In order for a marketing organization to increase the likelihood that their brand is part of the evoked set for many consumers, they need to understand what benefits consumers are seeking and specifically, which attributes will be most influential to their decision-making process.
• It is important to note that consumers evaluate alternatives in terms of the functional and psychological benefits that they offer.
• During this stage, consumers can be significantly influenced by their attitude as well as the degree of involvement that they may have with the product, brand, or overall category.
• Ultimately, consumers must be able to effectively assess the value of all the products or brands in their evoked set before they can move on to the next step of the decision process.

Key Terms

Evaluation of Alternatives

This is the third stage in the Consumer Decision Process. During this stage, consumers compare the brands and products that are in their evoked set.

Evoked Set

The number of alternatives that are considered by consumers during the problem-solving process.

Example

• For example, if the customer involvement is high, then he or she will evaluate several brands, whereas if it’s low, he or she may look at only one brand.

Evaluation of alternatives is the third stage in the Consumer Buying Decision process. During this stage, consumers evaluate all of their product and brand options on a scale of attributes which have the ability to deliver the benefit that the customer is seeking . The brands and products that consumers compare – their evoked set – represent the alternatives being considered by consumers during the problem-solving process.

Exhibition Hall

In an exhibition hall, customers have a range of options to explore and evaluate.

Sometimes known as a consideration set, the evoked set tends to be small relative to the total number of options available. When a consumer commits significant time to the comparative process and reviews price, warranties, terms and condition of sale and other features it is said that they are involved in extended problem solving.

Unlike routine problem solving, extended or extensive problem solving comprises external research and the evaluation of alternatives. Whereas, routine problem solving is low-involvement, inexpensive, and has limited risk if purchased, extended problem solving justifies the additional effort with a high-priced or scarce product, service, or benefit (e.g., the purchase of a car). Likewise, consumers use extensive problem solving for infrequently purchased, expensive, high-risk, or new goods or services.

In order for a marketing organization to increase the likelihood that their brand is part of the evoked set for many consumers, they need to understand what benefits consumers are seeking and specifically, which attributes will be most influential to their decision-making process. It is important to note that consumers evaluate alternatives in terms of the functional and psychological benefits that they offer. The company also needs to check other brands of the customer’s consideration set to prepare the right plan for its own brand.

During this stage, consumers can be significantly influenced by their attitude as well as the degree of involvement that they may have with the product, brand, or overall category. For example, if the customer involvement is high, then he or she will evaluate several brands, whereas if it’s low, he or she may look at only one brand. In low involvement buying, the activity is usually frequent, habitual to a certain extent and there is generally little difference between the brands. No strong attachment exists between the buyer and the brand. Promotions are simple and repetitive. Conversely, high involvement buying involves products with many differences. The behavior is more complex and the research is more detail oriented.

Ultimately, consumers must be able to effectively assess the value of all the products or brands in their evoked set before they can move on to the next step of the decision process.

4.8.4: Purchase

During the purchase decision stage, the consumer may form an intention to buy the most preferred brand or product.

Learning Objective

Examine the “purchase decision” stage of the Consumer Decision Process

Key Points

• During this time, the consumer may form an intention to buy the most preferred brand because he has evaluated all the alternatives and identified the value that it will bring him.
• The final purchase decision, can be disrupted by two factors: 1. Negative feedback of others and our level of motivation to comply or accept the feedback. 2. The decision may be disrupted due to a situation that one did not anticipate, such as losing a job or a retail store closing down.
• During this stage, the consumer must decide the following: 1. from whom he should buy, 2. when to buy, and 3. whether to buy.

Key Term

Purchase Decision

The fourth stage in the consumer decision process and when the purchase actually takes place.

Example

• Alternatively, they may also decide that they want to make the purchase at some point in the near or far future perhaps because the price point is above their means or simply because they might feel more comfortable waiting.

The purchase decision is the fourth stage in the consumer decision process and when the purchase actually takes place. During this time, the consumer may form an intention to buy the most preferred brand because he has evaluated all the alternatives and identified the value that it will bring him.

Making a Purchase

Making a purchase decision is the final stage in the decision process.

A man buys a watermelon at a fruit stand in Lebanon.

According to Philip Kotler, Keller, Koshy and Jha (2009), the final purchase decision, can be disrupted by two factors:

1. Negative feedback of others and our level of motivation to comply or accept the feedback. For example, after going through the need recognition, information search, and alternative evaluation stages, one might choose to buy a Nikon D80 DSLR camera, but a close photographer friend might share negative feedback, which could drastically influence personal preference.
2. The decision may be disrupted due to a situation that one did not anticipate, such as losing a job or a retail store closing down.

During this stage, the consumer must decide the following:

• From whom they should buy, which is influenced by price point, terms of sale, and previous experience with or awareness of the seller and the return policy.
• When to buy, which can be influenced by the store atmosphere or environment, time pressures and constraints, the presence of a sale, and the shopping experience.
• This is also a time during the which the consumer might decide against making the purchase decision. Alternatively, they may also decide that they want to make the purchase at some point in the near or far future perhaps because the price point is above their means or simply because they might feel more comfortable waiting.

4.8.5: Post-Purchase Behavior

Post-purchase behavior is when the customer assesses whether he is satisfied or dissatisfied with a purchase.

Learning Objective

Examine the “post-purchase behavior” stage of the Consumer Decision Process

Key Points

• How the customer feels about a purchase will significantly influence whether he will purchase the product again or consider other products within the brand repertoire.
• Cognitive dissonance is when the customer experiences feelings of post-purchase psychological tension or anxiety.
• Some companies like to engage their consumers with post-purchase communications in an effort to influence their feelings about their purchase and future purchases.

Key Term

cognitive dissonance

This term is used in modern psychology to describe the state of simultaneously holding two or more conflicting ideas, beliefs, values, or emotional reactions.

Example

• An example of cognitive dissonance is when a customer might feel compelled to question whether he has made the right purchase decision.

Post-purchase behavior is the final stage in the consumer decision process when the customer assesses whether he is satisfied or dissatisfied with a purchase. How the customer feels about a purchase will significantly influence whether he will purchase the product again or consider other products within the brand repertoire. A customer will also be able to influence the purchase decision of others because he will likely feel compelled to share his feelings about the purchase.

Cognitive dissonance, another form of buyer’s remorse, is common at this stage. This is when the customer may experience feelings of post-purchase psychological tension or anxiety. For example, the customer might feel compelled to question whether he has made the right decision. They may also be exposed to advertising for a competitive product or brand which could put into question the product that they have chosen. A customer may also have a change of heart and decide that he no longer has a need for this particular product.

Cognitive Dissonance

The anterior cingulate cortex is responsible for cognitive dissonance or “buyer’s remorse.”

An MRI that shows the anterior cingulate cortex.

Some companies now opt to engage their consumers with post-purchase communications in an effort to influence their feelings about their purchase and future purchases. Offering money back guarantees also serve to extend and enrich post-purchase communications between the company and its consumers. Other examples include VIP invitations to become part of a club or special and select group of consumers who buy a particular product. Another example is when customers are asked for their contact information at the point of purchase so they can be targeted later with a follow-up call that surveys the product’s performance and consumer satisfaction. This approach could help influence or alleviate feelings of cognitive dissonance or “buyer’s remorse” following a product purchase.

4.9: Influences of Personality on the Consumer Decision Process

4.9.1: Perception

Perception in marketing is described as a process by which a consumer identifies, organizes, and interprets information to create meaning.

Learning Objective

Describe the characteristics of perception as a part of the consumer buying decision process

Key Points

• Perception is a psychological variable involved in the Purchase Decision Process that is known to influence Consumer Behavior.
• elective Perception is the process by which individuals perceive what they want to in media messages and disregard the rest.
• Seymor Smith, a prominent advertising researcher, found evidence for selective perception in advertising research in the early 1960s, and he defined it to be “a procedure by which people let in, or screen out, advertising material they have an opportunity to see or hear.
• Selective perceptions is categorized under two types: Low level – Perceptual vigilance and High level – Perceptual defense.
• Perception can be shaped by learning, memory and expectations.

Key Terms

Perception

The organization, identification and interpretation of sensory information in order to represent and understand the environment.

Purchase Decision Process

The decision-making processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or service.

Consumer Behavior

The study of individuals, groups, or organizations and the processes they use to select, secure, and dispose of products, services, experiences, or ideas to satisfy needs; and the impacts that these processes have on the consumer and society.

Perception

Perception can have various meanings but in marketing, it is often described as a process by which a consumer identifies, organizes, and interprets information to create meaning . A consumer will selectively perceive what they will ultimately classify as their needs and wants.

Necker Cube and Rubin Vase

These are two optical illusions that illustrate how perception may differ from reality. On the left, we see a cube when in fact it is a flat image on our screen. On the right, the vase actually resembles two faces looking at each other.

Perception is a psychological variable involved in the purchase decision process that is known to influence consumer behavior. Other variables included in this consumer process include: motivation, learning, attitude, personality, and lifestyle. All of these concepts are crucial in interpreting the consumer buying process and can also help guide marketing efforts.

Selective Perception is the process by which individuals perceive what they want to in media messages and disregard the rest.

Seymor Smith, a prominent advertising researcher, found evidence for selective perception in advertising research in the early 1960s, and he defined it to be “a procedure by which people let in, or screen out, advertising material they have an opportunity to see or hear. They do so because of their attitudes, beliefs, usage preferences and habits, conditioning, etc.” People who like, buy, or are considering buying a brand are more likely to notice advertising than are those who are neutral toward the brand. This fact has repercussions within the field of advertising research because any post-advertising analysis that examines the differences in attitudes or buying behavior among those aware versus those unaware of advertising is flawed unless pre-existing differences are controlled for.

Selective perceptions is categorized under two types: a low level of perception, known as perceptual vigilance, and a higher level of perception, known as perceptual defense.

Perception can be shaped by learning, memory and expectations.

4.9.2: Motivation

Motivation is a psychological incentive or reason for doing something.

Learning Objective

Review the methodology of motivation as it applies to the consumer buying decision process

Key Points

• Consumer behavior is strongly influenced by many internal and external factors.
• Internal conditions include demographics, psychographics, personality, motivation, knowledge, attitudes, beliefs, and feelings.
• External influences include culture, sub-culture, locality, royalty, ethnicity, family, social class, past experience reference groups, lifestyle, and market mix factors.
• An individual’s motivation, perception, attitude, and beliefs are considered psychological factors.

Key Terms

motivation

The psychological feature that arouses an organism to action toward a desired goal and elicits, controls, and sustains certain goal directed behaviors.

External, or extrinsic Motivation

The performance of an activity in order to attain an outcome, which then contradicts intrinsic motivation.

Intrinsic Motivation

The incentive to undertake an activity based on the expected enjoyment of the activity itself, rather than external benefits that might result.

Example

• Motivation can originate from oneself (intrinsic) or from other people (extrinsic). Intrinsic motivation is based on taking pleasure in an activity, while common extrinsic motivations are rewards, like money.

Consumer behavior is strongly influenced by many internal and external factors, including:

• Internal conditions: demographics, psychographics (lifestyle), personality motivation, knowledge, attitudes, beliefs, and feelings
• External influences: culture, sub-culture, locality, royalty, ethnicity, family, social class, past experience reference groups, lifestyle, and market mix factors

An individual’s motivation, perception, attitude, and beliefs are considered psychological factors. Other factors such as income level, personality, occupation, and lifestyle are categorized as personal factors. Motivation is versatile enough that it spans multiple areas, including physiological, behavioral, cognitive, and social.

Motivation may be rooted in a basic human need to minimize physical pain and maximize pleasure, and it may include specific needs such as eating and resting. However, motivation is ultimately linked to emotion.

Intrinsic and Extrinsic Motivation

Motivation can originate from oneself (intrinsic) or from other people (extrinsic).

• Internal, or intrinsic motivation ismotivation that is driven by an interest or enjoyment in the task itself, and exists within the individual rather than relying on any external pressure. Intrinsic motivation is based on taking pleasure in an activity rather than working towards an external reward. Intrinsic motivation has been studied since the early 1970s.
• External, or extrinsic motivation comes from outside of the individual. Common extrinsic motivations are rewards, like money, and the threat of punishment. Competition is extrinsic because it encourages the performer to win, not simply to enjoy the intrinsic rewards of the activity. A cheering crowd and trophies are also extrinsic incentives.

Widely Recognized Motivational Theories

• Incentive Theory: A reward, tangible or intangible, is presented after the occurrence of a behavior, with the intent of causing the behavior to occur again. Incentive theory in psychology treats motivation and behavior of the individual as though they are influenced by beliefs, such as engaging in activities that are expected to be profitable.
• Escape-seeking dichotomy model: Escapism and seeking are major factors influencing decision making. Escapism is a need to break away from a daily life routine, whereas seeking is described as the desire to learn or gain some inner benefits through travelling.

Drive-Reduction Theory

Clark Hull was the behaviorist who developed the drive-reduction theory of motivation.

• Drive-reduction theory: Individuals have certain biological drives, such as hunger. As time passes the strength of the drive increases if it is not satisfied (in this case by eating). Upon satisfying a drive, the drive’s strength is reduced.
• Cognitive dissonance theory: Cognitive dissonance occurs when an individual experiences an inconsistency between their views of the world around them and their own personal feelings and actions.

4.9.3: Learning

Learning in marketing is known as a psychological variable that can significantly affect the purchase decision process for consumers.

Learning Objective

Review the characteristics of learning as it relates to the consumer buying decision process

Key Points

• Learning is the process of acquiring new, or modifying existing, knowledge, behaviors, skills, values, or preferences. This process may involve synthesizing different types of information.
• Learning is considered to have a psychological influence on consumer behavior, along with motivation and personality, perception, values, beliefs, and attitudes and lifestyle.
• There are three main categories of learning theory: behaviorism, cognitivism, and constructivism.

Key Terms

Purchase Decision Process

The decision-making processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or service.

Learning

The process of acquiring new, or modifying existing, knowledge, behaviors, skills, values, or preferences. This process may involve synthesizing different types of information.

Example

• Learning is considered to have a psychological influence on consumer behavior, along with motivation and personality, perception, values, beliefs and attitudes and lifestyle.

Learning

In consumer marketing, learning is known as a psychological variable that can significantly affect the purchase decision process for consumers. Learning is the process of acquiring new, or modifying existing, knowledge, behaviors, skills, values, or preferences. This process may involve synthesizing different types of information. The ability to learn is possessed by humans, animals, and some machines.

Learning is considered to have a psychological influence on consumer behavior, along with motivation and personality, perception, values, beliefs, and attitudes and lifestyle.

Types of learning include:

• Simple non-associative learning (habituation and sensitization)
• Associative learning
• Imprinting
• Observational learning
• Episodic learning
• Multimedia learning
• E-learning
• Rote learning
• Informal learning
• Formal learning
• Tangential learning
• Dialogic learning

There are three main categories of learning theory: behaviorism, cognitivism, and constructivism. Behaviorism focuses only on the objectively observable aspects of learning. Cognitive theories look beyond behavior to explain brain-based learning. Constructivism views learning as a process in which the learner actively constructs or builds new ideas or concepts.

Merriam and Caffarella (1991) highlight four approaches or orientations to learning: behaviorist, cognitivist, humanist, and social or situational. These approaches involve contrasting ideas as to the purpose and process of learning and education, in addition to the role that educators should take.

David Kolb’s model

David Kolb’s model

The David A. Kolb styles model is based on the experiential learning theory.

The David A. Kolb styles model is based on the experiential learning theory, which was explained in his book Experiential Learning: Experience as the Source of Learning and Development (1984). The ELT model outlines two related approaches toward grasping experience: concrete experience and abstract conceptualization, as well as two related approaches toward transforming experience: reflective observation and active experimentation.

According to Kolb’s model, the ideal learning process engages all four of these modes in response to situational demands. As individuals attempt to use all four approaches, however, they tend to develop strengths in one experience-grasping approach and one experience-transforming approach. The resulting learning styles are combinations of the individual’s preferred approaches. These learning styles include:

1. Converger;
2. Diverger;
3. Assimilator;
4. Accommodator.

Convergers are characterized by abstract conceptualization and active experimentation. They are good at making practical applications of ideas and using deductive reasoning to solve problems.

Divergers tend toward concrete experience and reflective observation. They are imaginative and are good at coming up with ideas and seeing things from different perspectives.

Assimilators are characterized by abstract conceptualization and reflective observation. They are capable of creating theoretical models by means of inductive reasoning.

Accommodators use concrete experience and active experimentation. They are good at actively engaging with the world and actually doing things instead of merely reading about and studying them.

Kolb’s model gave rise to the Learning Style Inventory, an assessment method used to determine an individual’s learning style. An individual may exhibit a preference for one of the four styles—accommodating, converging, diverging, and assimilating—depending on his or her approach to learning via the experiential learning theory model.

4.9.4: Attitude

Attitude is a psychological variable that is known to affect the purchase decision process of consumers.

Learning Objective

Illustrate how attitude impacts the consume buying decision

Key Points

• An attitude can generally contain a positive or negative evaluation of people, objects, event, activities, ideas, or anything in the environment.
• Carl Jung’s definition of attitude is a “readiness of the psyche to act or react in a certain way”.
• Attitudes can be difficult to measure because attitudes are ultimately a hypothetical construct that cannot be observed directly.
• Attitudes can be measured by the use of physiological cues like facial expressions, vocal changes, and other body rate measures.

Key Terms

Carl Jung

(26 July 1875 – 6 June 1961) was a Swiss psychologist and psychiatrist who founded analytical psychology. Jung proposed and developed the concepts of the extraverted and the introverted personality, archetypes, and the collective unconscious. His work has been influential in psychiatry and in the study of religion, literature, and related fields.

attitude

an expression of favor or disfavor toward a person, place, thing, or event (the attitude object). Prominent psychologist Gordon Allport once described attitudes “the most distinctive and indispensable concept in contemporary social psychology. “

Example

• Attitudes can be measured by the use of physiological cues like facial expressions, vocal changes, and other body rate measures. For instance, fear is associated with raised eyebrows, increased heart rate and increase body tension.

Attitude is a psychological variable that is known to affect the purchase decision process of consumers. Other variables are perception, learning, personality, and lifestyle.

An attitude generally contains a positive or negative evaluation of people, objects, event, activities, ideas, or anything else in the environment. However, people can also be conflicted or ambivalent toward an object, meaning that they might at different times express both positive and negative attitudes toward the same object.

Attitude is one of Carl Jung’s 57 definitions in Chapter XI of Psychological Types. Jung’s definition of attitude is a “readiness of the psyche to act or react in a certain way.”

Carl Jung

Carl Jung developed a definition of attitude as it relates to the field of Psychology.

Attitudes can be difficult to measure because attitudes are a hypothetical construct that cannot be observed directly. Attempted measures may include the use of physiological cues like facial expressions, vocal changes, and other body rate measures. For instance, fear is associated with raised eyebrows, increased heart rate and increase body tension.

Attitudes can be changed through persuasion in response to communication. Experimental research into the factors that can affect the persuasiveness of a message include:

1. Target Characteristics: These are characteristics that refer to the person who receives and processes a message. One such trait is intelligence – more intelligent people seem to be less easily persuaded by one-sided messages. Another variable that has been studied in this category is self-esteem.
2. Source Characteristics: The major source characteristics are expertise, trustworthiness, and interpersonal attraction or attractiveness. The credibility of a perceived message has been found to be a key variable here; if one reads a report about health and believes it came from a professional medical journal, one may be more easily persuaded than if one believes it is from a popular newspaper.
3. Message Characteristics: The nature of the message plays a role in persuasion. Sometimes presenting both sides of a story is useful to help change attitudes. When people are not motivated to process the message, simply the number of arguments presented in a persuasive message will influence attitude change, such that a greater number of arguments will produce greater attitude change.
4. Cognitive Routes: A message can appeal to an individual’s cognitive evaluation to help change an attitude. In the central route to persuasion, the individual is presented with the data and motivated to evaluate the data and arrive at an attitude-changing conclusion. In the peripheral route to attitude change, the individual is encouraged to look not at the content but at the source. This is commonly seen in modern advertisements that feature celebrities.

4.9.5: Lifestyle

In consumer marketing, lifestyle is considered a psychological variable known to influence the buyer decision process for consumers.

Learning Objective

Indicate how lifestyle or personality influences buying decisions

Key Points

• Lifestyle is also referred to as a buyer characteristic in the Black Box Model, which shows the interaction of stimuli, consumer characteristics, decision process, and consumer responses.
• The Black Box Model considers the buyer’s response as a result of a conscious, rational decision process, in which it is assumed that the buyer has recognized the problem.
• The Black Box Model is related to the Black Box Theory of Behaviorism, where the focus is not set on the processes inside a consumer, but the relation between the stimuli and the response of the consumer.

Key Terms

Black Box Model

shows the interaction of stimuli, consumer characteristics, decision process and consumer responses.

Buyer Decision Process

the decision making processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or service.

Lifestyle can be broadly defined as the way a person lives. In sociology, a lifestyle typically reflects an individual’s attitudes, values, or world view. A lifestyle is a means of forging a sense of self and to create cultural symbols that resonate with personal identity.

Television and Obesity

Lifestyle choices, like increasing sedentary behaviors, can lead to obesity.

A family sits in the living room and watches television.

Not all aspects of a lifestyle are voluntary. However, in consumer marketing, lifestyle is considered a psychological variable known to influence the buyer decision process of consumers.

Lifestyle is also referred to as a buyer characteristic in the Black Box Model, which shows the interaction of stimuli, consumer characteristics, decision process, and consumer responses. The Black Box Model is related to the Black Box Theory of Behaviorism, where the focus is set not on the processes inside a consumer, but the relation between the stimuli and the response of the consumer.

In this theory, the marketing stimuli (product, price, place and promotion) are planned and processed by companies, whereas the environmental stimuli are based on the economical, political, and cultural circumstances of a society. The buyer’s “black box” contains the buyer characteristics (e.g., attitudes, motivation, perception, lifestyle, personality, and knowledge) and the decision process (e.g., problem recognition, information research, alternative evaluation, purchase decision, and post-purchase behavior) which determine the buyer’s response (e.g., product choice, brand choice, dealer choice, purchase timing, and purchase amount).

The Black Box Model considers the buyer’s response as a result of a conscious, rational decision process, in which it is assumed that the buyer has recognized the problem. However, in reality, many decisions are not made in awareness of a determined problem by the consumer.

4.9.6: Shaping Public Policy and Educating Consumers

Companies can use marketing to educate consumers on a particular issue in an effort to help shape public policy.

Learning Objective

Discuss the elements of public policy and the education of customers

Key Points

• The study of consumer behavior can be applied to improving marketing strategies, shaping public policies, influencing society, and improving consumer knowledge.
• Public policy, as government action, is generally known as the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs.
• Shaping public policy is a complex and multifaceted process that involves the interplay of numerous individuals and interest groups competing and collaborating to influence policymakers to act in a particular way.
• Social marketing applies a “customer oriented” approach and uses the concepts and tools used by commercial marketers in pursuit of social goals like anti-smoking campaigns or fund raising for NGOs.
• Health promotion is broadly defined as the process of enabling people to increase control over and improve their health. It occurs through developing healthy public policy that addresses the prerequisites of health such as income, housing, food security, employment, and quality working conditions.

Key Terms

Social Marketing

the systematic application of marketing, along with other concepts and techniques, to achieve specific behavioral goals for a social good.

public policy

the set of policies (laws, plans, actions, behaviors) of a government; plans and methods of action that govern that society; a system of laws, courses of action, and priorities directing a government action.

Example

• For example, social marketers, dealing with goals such as reducing cigarette smoking or encouraging condom use, have more difficult goals. They must make potentially difficult and long-term behavioral change in target populations by educating them.

The study of consumer behavior can be applied to improving marketing strategies, shaping public policies, influencing society, and improving consumer knowledge.

Public policy, as government action, is generally known as the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs. In the United States, this concept refers not only to the result of policies, but more broadly to the decision making and analysis of governmental decisions. Public policy is commonly embodied in constitutions, legislative acts, and judicial decisions.

Shaping public policy is a complex and multifaceted process that involves the interplay of numerous individuals and interest groups competing and collaborating to influence policymakers to act in a particular way. These individuals and groups use a variety of tactics and tools to advance their aims, including advocating their positions publicly, attempting to educate supporters, opponents and consumers, and mobilizing allies on a particular issue.

Social marketing can help persuade and educate consumers on societal issues with the ultimate goal of helping to shape public policy. For example, social marketers, dealing with goals such as reducing cigarette smoking or encouraging condom use, have more difficult goals. They must make potentially difficult and long-term behavioral change in target populations by educating them. Social marketing applies a “customer oriented” approach and uses the concepts and tools used by commercial marketers in pursuit of social goals like anti-smoking campaigns or fundraising for NGOs.

Anti-Smoking Campaign 

The purpose of an anti-smoking campaign is to educate consumers about health risks associated with smoking.

An anti-smoking message painted on a pedestrian crossing in the Orchard Road area in Singapore.

Health promotion is broadly defined as the process of enabling people to increase control over and improve their health. It occurs through developing healthy public policy that addresses the prerequisites of health such as income, housing, food security, employment, and quality working conditions. There is a tendency among public health officials and governments—and this is especially the case in liberal nations such as Canada and the USA—to reduce health promotion to health education and social marketing focused on changing behavioral risk factors.

4.10: Social Influences on the Consumer Decision Process

4.10.1: Roles

Consumers have different roles in purchasing products and services, and these roles can influence their buying behavior.

Learning Objective

Describe the different types of consumer roles

Key Points

• Influencers are people who have a relatively large audience in which to tout their beliefs. In the consumer world, influencers can impact the success or failure of a product by using it or shunning it.
• A prosumer is usually a serious hobbyist, with similar interests and skills of professionals. The prosumer generally uses professional (or nearly professional) equipment and has a relatively high disposable income.
• Marketers often create a “persona” for their products and services in order to represent the different user types in a target market.

Key Terms

influencer

A person who or a thing which influences.

prosumer

A serious, enthusiastic consumer: not professional (earning money), but of similar interest and skills to a (generally lower level) professional, or aspiring to such. The target market of prosumer equipment.

persona

A social role.

The Influence of Roles on Consumer Purchasing

Consumers have different roles in purchasing products and services. Here, a role is defined as the expected behavior of an individual in a society. These roles can be as part of the consumer’s family, employment, or social status, among other things. For example, the role of father can be different than the role of mother in purchasing consumer goods. Although there are many different roles that can influence how a consumer behaves, three in particular are presented here: influencers, prosumers, and personas.

Influencers

Influencers are people who have a relatively large audience in which to tout their beliefs. In the consumer world, influencers can impact the success or failure of a product by using it or shunning it. A marketer often targets influencers rather than the entire target market, because these influencers can alter the behavior of other people. Influencers can be influential buyers, retailers, or people, such as journalists or industry professionals (among others). Influencers are sometimes ranked according to six criteria: market reach (how many people the influencer will connect with), independence (no vested interest in product), frequency of impact, expertise, persuasiveness, and thoroughness (the extent to which influence is exerted across the decision lifecycle).

J.J. Abrams, “Apple Fanatic”

TV series creator J.J. Abrams can influence other people to buy certain products by saying how much he likes the product.

Prosumers

In its most common usage, a prosumer is usually a serious hobbyist, with similar interests and skills of professionals. For example, the availability and relatively low cost of photography equipment have given rise to many people who are serious about photography but are not usually paid for their work. This is an important role for marketers to consider, as the prosumer generally uses professional (or nearly professional) equipment and has relatively high disposable income. Other examples of prosumers are found in home improvement and cooking segments.

Personas

A persona is a social role. Marketers often create a “persona” for their products and services in order to represent the different user types in a target market. A marketer may decide his product is best suited for a specific demographic and will define that demographic as clearly as possible. For example, “soccer mom” might be the target market for minivans. A persona may be created to capture the “soccer mom,” perhaps by giving her a name or other defining characteristics. A persona simply helps a marketer get a clearer picture of who will be buying his product.

4.10.2: Family

Families have a tremendous influence on consumer purchasing.

Learning Objective

Describe how family dynamics and the family life cycle can influence purchasing decisions

Key Points

• One way to understand the consumer behavior of a family is to identify the decision maker for a purchase.
• Families’ influence on buying habits includes how parents play a significant role and, eventually, how a spouse and children play an even more significant role.
• People go through a family life cycle composed of different stages of purchasing patterns.

Key Term

life cycle

The useful life of a product or system; the developmental history of an individual or group in society.

Many factors influence purchasing. A consumer’s family is one of the most significant factors because a family helps shape an individual’s attitudes and behaviors. One way to understand the family’s impact on consumer behavior is to identify the decision maker for a purchase. A decision maker for a purchase can be a husband, wife, or even a child, and sometimes decisions are made in collaboration. Often, the decision maker changes based on the type of purchase or the size of the purchase. A new refrigerator, for example, is likely to be a joint decision, while a week’s groceries might be selected by a single member of the family.

Grocery Shopping

Families are a major influence on shopping patterns and consumer habits.

A man pushing his children in a shopping cart.

Influence of Family on Consumer Behavior

Families influence purchases in many ways. At first, the influence of parents is significant because of how parents help their children to develop political and religious beliefs, lifestyle choices, and consumer preferences. Most people are who they are because of their parents. A spouse and children, however, can exert an even more significant force on a consumer’s purchases. Interaction between spouses and the number and ages of children play a particularly powerful role on buying behaviors. These family influences affect how consumers look at purchases more directly than most other social influences on consumer purchasing.

Family Life Cycle

Another aspect of understanding the impact of families on buying behavior is the family life cycle. Most, though certainly not all, individuals and families pass through an orderly sequence of life stages that can be used to understand their purchasing patterns. A typical adult starts in the bachelor stage of being young and single and then moves to being part of a married couple without children. Then the married couple transition to Full Nest stages, where the family has dependent children living at home. Once the children leave, the family enters the Empty Nest Stage, which is typically where older married couples (working or retired) no longer have dependent children living with them. Finally, the individual reaches the “solitary survivor” stage of being an older single person. Consumer behavior and purchasing is different in each of these stages. Understanding the family life cycle is beneficial for marketers because it helps in defining target customers.

4.10.3: Reference Groups

Reference groups are groups that consumers will look to for help in making purchasing decisions.

Learning Objective

Distinguish between an opinion leader and reference group

Key Points

• Reference groups are groups that consumers compare themselves to or associate with. They can heavily influence purchasing patterns.
• Friends, clubs, religious groups, and celebrities can all act as reference groups.
• If a reference group endorses a product, either through use or statements about the product, those that look to the group will often purchase that product.

Key Terms

opinion leader

The agent who is an active media user and who interprets the meaning of media messages or content for lower-end media users.

target market

A group of people whose needs and preferences match the product range of a company and to whom those products are marketed.

Reference groups are groups that consumers compare themselves to or associate with. Reference groups are similar to opinion leaders in that they can have a profound influence on consumer behavior. Reference groups are considered a social influence in consumer purchasing. They are often groups that consumers will look to to make purchasing decisions. So if a reference group endorses a product, either through use or statements about the product, those that look to the group will often purchase that product. On the other hand, if a reference group disapproves of a product, those that associate with that group will probably not purchase the product.

Types of Reference Groups

Reference groups can be either formal or informal. Schools, friends, and peers are examples of informal reference groups . Clubs, associations, and religious organizations are usually formal reference groups. Individuals can also be reference groups (usually known as opinion leaders). Additionally, celebrities can be used as a reference group. A company might use a celebrity it feels will match its target market to get that market to purchase its product. For example, a few years ago Shaquille O’Neal was used to endorse Pepsi because Pepsi felt he represented the spirit of teenagers of the time.

Friends

Friends are one of the most powerful reference groups because they influencing our consumer behavior.

Two women talking to each other.

Influence of Reference Groups

Reference groups can and do have a tremendous influence on purchasing decisions. This is evident in a number of ways, such as through roles. Everyone is expected to behave in a certain way based on the reference group we belong to. Students act like students. In keeping with this idea, people will often modify their own behavior to coincide with group norms (even those that profess non-conformity are in some ways conforming with other people who want the same thing). Reference groups communicate through opinion leaders, who influence what others do, act, and buy. In the consumer world, this means that if a reference group purchases a product, those that associate with the group likely will as well.

4.10.4: Opinion Leaders

Opinion leaders are people consumers look to for guidance in making purchase decisions, usually someone with more knowledge of the subject.

Learning Objective

Discuss the importance of opinion leaders in marketing and how they can influence the success of a product or service

Key Points

• Consumers seek out help in making consumer purchases. One source of help is an opinion leader.
• Opinion leaders are usually seen as being honest and impartial. They have the standing to be able to influence others.
• Finding opinion leaders can be vital to the success of a marketing plan, as they can then influence others to purchase the product or service.
• Celebrities are often used as opinion leaders in promoting a product.

Key Terms

reference group

A reference group refers to a group to which an individual or another group is compared.

clout

Influence or effectiveness, especially political.

Our purchase decisions are influenced by any number of people or groups. We often look to opinion leaders for help in our consumer decisions. Opinion leaders are usually people who are more knowledgeable about a certain product or service than the average consumer. As such, opinion leaders can shape how a product is viewed. Consumers are constantly seeking out the advice of knowledgeable friends or acquaintances who can provide information, give advice, or actually make the decision. For some product categories, there are professional opinion leaders who are quite easy to identify–for instance, auto mechanics , beauticians, stock brokers, and physicians. All these professionals can influence the decisions consumers make within their area of expertise. Sometimes, these opinion leaders can actually be groups, known as reference groups.

Secondary Groups

Mechanics can be considered opinion leaders in the automotive industry.

Characteristics of Opinion Leaders

Opinion leaders are generally people who have the ability to influence others. They usually have deeper expertise in a certain area, and are often looked to for help in making consumer decisions. For example, a local high school teacher may be an opinion leader for parents in selecting colleges for their children. Often, an opinion leader is among the first to use a new product or service, and can then pass on his or her opinions of the product to others. Opinion leaders are often trusted and unbiased and have the social network of friends, family, and coworkers necessary to disperse information.

Opinion Leaders in Marketing

Opinion leaders are particularly useful in marketing. If a marketer can identify key opinion leaders for a certain group, she can then direct her efforts towards attracting these individuals. In marketing, celebrities are often used as opinion leaders. Although they may not actually know more about a product or service, there is usually the perception that they do. Celebrity endorsements in marketing are a way to give clout to a product or service . Opinion leaders can have a profound influence on the success of a product, and on one’s own consumer purchases.

Dale Earnhardt, Jr.

Celebrities are opinion leaders for the products or services they promote.

4.10.5: Social Classes

Marketers should understand that a person’s social class will have a major influence on the types and quantity of consumer goods purchased.

Learning Objective

Illustrate how social class impacts consumer behavior and buying patterns

Key Points

• People are usually grouped in social classes according to income, wealth, education, or type of occupation.
• There is a major difference in the consumer behavior of different social classes. The upper class, for example, has more disposable income and can thus spend more on most products.
• Each social class has distinct characteristics and approaches to consumer purchases. A marketer should understand the dynamic of the social class he or she is targeting.

Key Terms

social class

A class of people, based on social power, wealth or another criterion.

disposable income

The amount of a person’s or group’s monetary income which is available to be saved or spent (on either essential or non-essential items), after deducting all taxes and other governmental fees.

Social Class

A major influence on one’s purchasing habits and consumer behavior is the social class in which one finds him or herself. Social class is considered an external influence on consumer behavior because it is not a function of feelings or knowledge. Social class is often hard to define; in fact, many people dispute the existence of social classes in the United States. Usually, however, people are grouped in social classes according to income, wealth, education, or type of occupation. Perhaps the simplest model to define social class is a three-tiered approach that includes the rich, the middle class, and the poor. Other models have as many as a dozen levels. People in the same social class tend to have similar attitudes, live in similar neighborhoods, dress alike, and shop at the same type of stores.

Influence on Consumer Behavior

Social class can have a profound effect on consumer spending habits. Perhaps the most obvious effect is the level of disposable income of each social class. Generally, the rich have the ability to purchase more consumer goods than those with less income, and those goods are of higher quality . There is also a distinction in the type of goods purchased. For example, the upper class tend to be the primary buyers of fine jewelry and often shop at exclusive retailers. The lower class, in contrast, are much more concerned with simply getting by; they focus more on necessities.

Upper Class 

Social class has a profound effect on the types and quantity of consumer goods purchased.

A dining room table with upper class dinnerware.

Effect on Marketing

Marketers must be very aware of the social class of their target market. If a marketer wishes to target efforts toward the upper classes, then the market offering must be designed to meet their expectations in terms of quality, service, and atmosphere. A marketer should understand the dynamic of the social class as well. For example, the upper-middle class are generally ambitious, future-oriented people who have succeeded economically and now seek to enhance their quality of life. Material goods often take on major symbolic meaning for this group. Effective marketers will understand that and be able to tailor their approach accordingly.

4.10.6: Culture

Culture can have a profound effect on consumer behavior and purchasing, and can affect how a product is marketed.

Learning Objective

Discuss the three components of a culture and how they impact consumer behavior.

Key Points

• There are three components of a culture: beliefs, values, and customs. Each plays a role in influencing consumer purchasing.
• Culture can be further divided into subcultures. One’s race, religion and class are all ways subcultures can be established.
• The marketing strategy should show the product or service as reinforcing the beliefs, values and customs of the targeted culture.

Key Term

socio-economic

Of or pertaining to a combination of social and economic factors.

Culture

Culture can have a profound effect on consumer behavior and impact how a product is marketed. In this sense, culture is defined as the distinct way peoples’ experiences, customs and beliefs define how they behave . American culture, for example, values hard work, thrift and achievement. There are generally three components of a culture: beliefs, values, and customs.

Cultural Practices

Cultural practices can have a huge impact on consumer behavior.

Cultural performers take part in a show on a large stage.

• A belief is a proposition that reflects a person’s particular knowledge and assessment of something.
• Values are general statements that guide behavior and influence beliefs. The function of a value system is to help a person choose between alternatives in everyday life.
• Customs are modes of behavior that constitute culturally approved ways of behaving in specific situations. For example, taking one’s mother out for dinner and buying her presents for Mother’s Day is an American custom.

Culture can be further divided into subcultures. One’s race, religion and class are all ways subcultures can be established. For example, a person can be a part of the larger “American” culture and still be a member of other subcultures based on his or her socio-economic background. Each of these subcultures will have specific influences on consumer behavior.

Culture as an Influence on Consumer Behavior

Culture is considered an external factor in influencing consumer behavior. Since different cultures have different values, they will have different buying habits. Marketing strategies should reflect the culture that is being targeted. The strategy should show the product or service as reinforcing the beliefs, values and customs of the targeted culture. Failing to do so can result in lost sales and opportunities.

4.10.7: Consumer Misbehavior

Consumer misbehavior refers to the common occurrence of consumers acting outside the norm.

Learning Objective

Give examples of common types of consumer misbehavior and common retailer tactics for addressing consumer misbehavior issues.

Key Points

• Consumer misbehavior is specifically related to retail and other markets, and includes things from cutting in line to fights between customers to credit card fraud.
• Common types of consumer misbehavior include shoplifting, abusive behavior, credit card fraud, and black markets.
• Since the cost of consumer misbehavior can be very high, many retailers feel it is worth fighting, and use a variety of tactics to do so.

Key Terms

Black Friday

The day following Thanksgiving Day in the United States, traditionally the beginning of the Christmas shopping season.

credit card fraud

A wide-ranging term for theft and fraud committed using a credit card or any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account.

Consumer Misbehavior

Consumer misbehavior refers to the common occurrence of consumers acting outside the norm. It is generally recognized that there are social behaviors that are acceptable in a given situation. Anything outside of those accepted behaviors is considered misbehavior. Consumer misbehavior is specifically related to retail and other markets, and includes things from cutting in line to fights between customers to credit card fraud. Combating consumer misbehavior is an expensive, time-consuming activity. Some economists estimate the total monetary value of consumer misbehavior to be in the hundreds of billions of dollars.

Common Types of Consumer Misbehavior

Shoplifting

Shoplifting is the theft of goods from a retail establishment. Although a very common crime, it is still considered consumer misbehavior. Researchers divide shoplifters into two categories: “boosters,” professionals who resell what they steal, and “snitches,” amateurs who steal for their personal use. Researchers generally agree that shoplifters are driven by either economic or psychosocial motives. Psychosocial motivations may include peer pressure, a desire for thrill or excitement, impulse, intoxication, or compulsion.

Credit Card Fraud

Credit card fraud is a wide-ranging term for theft and fraud committed using a credit card or any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Estimates put the cost of credit card fraud to billions of dollars.

Fraud

Credit card fraud is a form of consumer misbehavior that can cost billions of dollars a year.

Black & Grey Market Economies

A black market or underground economy is a market in goods or services which operates outside the formal one supported by the established state power. It often involves illegal, smuggled, or counterfeit goods. In many parts of the world, black markets operate side by side with legal markets, sometimes openly. Worldwide, the underground economy is estimated to have provided 1.8 billion jobs. Similar is a gray market economy where a company makes their products available even they are not authorized to do so.

Combating Consumer Misbehavior

Although fairly expensive to do, many retailers have begun fighting consumer misbehavior. Retailers often employ more security and staff during times where the propensity for consumer misbehavior increases, such as during “Black Friday” sales. Many also use electronic tracking devices on products and closed-circuit television to fight shoplifting and fraud. Since the cost of consumer misbehavior can be so high, many retailers feel it is worth fighting.

4.11: Consumer Experience

4.11.1: Factors Influencing Experience, Involvement, and Satisfaction

The main factors that influence experience, involvement, and satisfaction with a product are personal, social, object and situational.

Learning Objective

Explain the factors influencing the consumer experience, involvement and satisfaction

Key Points

• A person’s perceptions, beliefs, attitudes, and values can substantially influence his or her experience and involvement with products.
• Personal or individual factors can also serve as strong influences, including gender, age, income level or social class, ethnicity, and sexual orientation.
• A consumer’s social network has a strong influence on the level of involvement with many products because individuals tend to rely on the opinions and advice of friends and family.
• Products that can easily conform to and enrich a consumer’s lifestyle tend to be consumed with more frequency and involvement.
• The degree of information that a consumer has about a product, including how well he or she can distinguish its characteristics, can also effect experience, involvement, and satisfaction.
• Other social influences can include opinion leaders and reference groups.

Key Terms

reference group

A concept referring to a group to which an individual or another group is compared. It is the group to which the individual relates or aspires to relate himself or herself psychologically.

culture

The arts, customs, and habits that characterize a particular society or nation. The beliefs, values, behavior and material objects that constitute a people’s way of life.

Perception

The organization, identification and interpretation of sensory information in order to represent and understand the environment.

Example

• Certain cultures highly discourage women from exposing some of their body parts as part of their religious beliefs, which inevitably affects their consumption of clothing.

In general, four main factors influence a consumers’s experience, involvement, and satisfaction with a product:

• Personal
• Object
• Situational
• Social

Personal Factors: A person’s perceptions, beliefs, attitudes, and values can substantially influence his or her experience and involvement with products. For example, certain cultures highly discourage women from exposing some of their body parts as part of their religious beliefs, which inevitably affects their consumption of clothing. Other examples of cultural influences include language, myths, customs, rituals, and laws. Consumers tend to be more involved with products that they believe can fill their own needs, which in turn are regarded as holding importance and relevance in their lives. Personal or individual factors can also serve as strong influences, including gender, age, income level or social class, ethnicity, and sexual orientation.

Personal Beliefs

Religious beliefs can impact consumers’ clothing choices. Muslin women must be covered at all times so they cannot wear bathing suits.

Woman wearing “burqini” swimwear in Egypt.

Object Factors: The degree of information that a consumers have about a product, including how well they can distinguish its characteristics, can also effect their experience, involvement, and satisfaction. Typically, the higher a consumer’s product knowledge, the more involved with it he or she will be. Deeper knowledge about a product also translates into higher involvement because the consumer perceives it as more important, especially if some of that knowledge pertains to characteristics that hold personal meaning.

Situational Factors: Products that can easily conform to and enrich a consumer’s lifestyle tend to be consumed with more frequency and involvement. For example, a busy working mother might rely heavily on her smart phone to keep her organized and effective in an effortless manner.

Social Factors: Social influence can deeply affect consumer behavior, especially as related to the products they consider and consume. A consumer’s social network has a strong influence on the products he or she uses, since individuals tend to rely on the opinions and advice of friends and family. Other social influences can include opinion leaders and reference groups.

4.11.2: Marketing Changes Due to Involvement

A company should consider the level of involvement a consumer has with a product in order to guide its marketing strategy.

Learning Objective

Examine the impact of customer involvement in consumer marketing and experience

Key Points

• In general, consumer involvement tends to be higher for products that are very expensive or are considered highly significant in the consumer’s life.
• Print advertising is considered high-involvement because newspapers and magazines provide information that can be processed clearly and can help shape attitudes and influence decisions.
• TV advertising is considered low-involvement because it presents information that is considered passive.

Key Term

consumer involvement

The level of interaction and regard that a consumer has with a given product.

Example

• Low-involvement products (e.g., some consumer packaged goods) in a category where brands are not distinctly different require that marketers provide sales and promotions as part of their marketing strategy.

Consumer involvement tends to vary dramatically depending on the type of product and its relationship to the consumer. In general, consumer involvement tends to be higher for products that are very expensive (e.g., a home, a car) or are considered highly significant in the consumer’s life (e.g., a newborn baby product).

Purchasing a Vehicle

Consumer involvement tends to be higher for expensive products like vehicles.

A Chevy Suburban.

Marketing strategy should take into account the level of involvement that a consumer has with a specific product, as this also dictates the type of information that the consumer needs to process in order to make a purchase decision.

The following levels of information processing are required, which can help dictate the marketing approach that should be used:

• Low-Involvement purchases tend to be made by habitual decisions (e.g., dish washing liquid, toothbrush). These require minimal information processing.
• Moderate-Involvement purchases tend to be made by simple decisions (e.g., orange juice, snacks). These often may require some evaluation of alternatives.
• High-Involvement purchases tend to be made by lengthy or more involved decisions (e.g., a car or a house). These are usually considered highly important to consumers and require extensive information processing.

Print advertising is considered high-involvement because newspapers and magazines provide information that can be processed clearly and can help shape attitudes and influence decisions. Television advertising is considered low-involvement because it presents information that is considered passive.

The four main types of buying behavior in consumer marketing depend on the level of consumer involvement:

High involvement & significant differences between brands (complex buying behavior):

• Example: Houses, kitchen renovation
• One-time sale
• Consumers need evaluation and pre-sale learning
• Selling activities are key

Low involvement & significant differences between brands (variety-seeking buying behavior):

• Example: Retail food stuff
• Consumers have added buying triggers
• Consumers want free samples, special deals

High involvement & few differences between brands (dissonance-reducing buying behavior):

• Example: Consumer electronics, top-line sport equipment
• Decision making is difficult both pre- and post-purchase

Low involvement & few differences between brands (habitual buying behavior):

• Example: Food, personal care products
• Brand familiarity and promotion with convenience is key
• Consumers look for price/sales promotions