Marketing Real People Real Decisions Why People Buy

Marketing: Real People, Real Decisions Why People Buy: Consumer Behaviour Chapter 6 Lecture Slides Solomon, Stuart, Carson, & Smith Your name here Course title/number Date ©Copyright 2003 Pearson Education Canada Inc.

Marketing: Real People, Real Decisions Chapter Learning Objectives When you have completed your study of this chapter, you should be able to: • • • Explain why understanding consumer behaviour is important to organizations Explain the pre-purchase, and post-purchase activities consumers engage in when making decisions Describe how internal factors influence consumers’ decision-making process. Describe how situational factors at the time and place of purchase may influence consumer behaviour. Describe how consumers’ relationships with other people influence their decision-making processes. ©Copyright 2003 Pearson Education Canada Inc. 2

Marketing: Real People, Real Decisions Introduction to the Topic • Consumer behaviour: the process individuals or groups go through to select, purchase, and use goods, services, ideas or experiences to satisfy their needs and desires. • Why do we (marketers) care? • We want to understand why consumers make the decisions that they do, so that we will be able to predict what they will do in a given situation, so that ultimately, we will be able to influence that process. • Why do people buy? • It relates to value, but that is getting ahead of ourselves. ©Copyright 2003 Pearson Education Canada Inc. Understand Predict Influence 3

Marketing: Real People, Real Decisions The Consumer Decision-Making Process Problem Recognition Bill realizes that he is fed up with his puny b/w TV Information Search Bill talks to a few of his friends about a new TV Evaluation of Alternatives Bill goes shopping to compare TVs of different brands Product Choice Bill chooses one model/brand for its features and price Post-purchase Evaluation Bill takes the TV home and becomes a couch potato ©Copyright 2003 Pearson Education Canada Inc. Figure 6 -1 • Does this process look familiar? • How does it differ for low versus high risk products? • Has anyone done it differently? • Which is the most critical stage? 4

Marketing: Real People, Real Decisions Concepts of Interest • Involvement: the relative importance of perceived consequences of the purchase to a consumer. The level of involvement determines the extent of effort a person puts into the purchase decision. • Note that: involvement is determined by the consumer, not the product, and the level will influence: – the amount of time spent making the decision – the amount and quality of information sought • Involvement is also influenced by the perceived risk felt by the consumer. • Buying a digital camera would be an example of a high involvement decision. ©Copyright 2003 Pearson Education Canada Inc. 5

Marketing: Real People, Real Decisions Concepts of Interest (continued) • Types of decisions: purchase decisions will vary in the amount of effort consumers make in the process, according to their level of interest and the nature of the task. • Habitual decision making: familiar, low value, convenience goods, decisions made by habit or brand loyalty. • Limited problem solving: some effort required, rules of thumb are used to simplify decisions. • Extended problem solving: Habitual Limited Extended problem most complex, higher risk and value. Decision making effort ©Copyright 2003 Pearson Education Canada Inc. 6

Marketing: Real People, Real Decisions Concepts of Interest (continued) • Perceived risk: the belief that use of a product has potentially negative consequences, either financial, physical, or social. • The consequences of making a bad choice may vary from minimal (chocolate bar) to severe (university program or choice of mate!). • Risk is perceptual, therefore it can be influenced. How do marketers reduce the risk perceived by consumers? • What do consumers do to reduce their perceived risk? • Mostly, they look for information. ©Copyright 2003 Pearson Education Canada Inc. 7

Marketing: Real People, Real Decisions The Decision Making Process • Problem recognition: the process that occurs whenever the consumer sees a significant difference between his or her current state of affairs and some desired or ideal state. • What is the difference between a need and a want? • Needs are biologically determined (food, water, shelter) while wants are learned responses to satisfying those needs. • Marketers want to know how consumers learn so that they can attempt to influence this process. • The essential question: can marketers create needs? • The second question: how bad do I need a Porsche? ©Copyright 2003 Pearson Education Canada Inc. 8

Marketing: Real People, Real Decisions The Decision Making Process (continued) • Information search: the process whereby a consumer searches for appropriate information needed to make a reasonable decision. • Information search takes place: – Internally: our own memory bank. – Externally: everywhere else. • The Internet has enabled this process by huge leaps and bounds. • Information search can be: – Purposeful: looking for it. – Passively acquired. • Of key interest is what influences the amount and quality of search? ©Copyright 2003 Pearson Education Canada Inc. 9

Marketing: Real People, Real Decisions The Decision Making Process (continued) • Evaluation of alternatives: the process whereby a consumer evaluates the different purchase alternatives identified. • Evaluation criteria: the dimensions that consumers use to compare competing product alternatives. • Students choosing a university may use many different selection criteria, such as: size, reputation, costs, location, programs, living accommodations, or social life. • Macleans Magazine ranks universities on just these factors, not without some controversy. • Some criteria are more important than others, so we still need to know how the decision will be made. ©Copyright 2003 Pearson Education Canada Inc. 10

Marketing: Real People, Real Decisions The Decision Making Process (continued) • Product choice: the process whereby a consumer makes a choice between the different purchase alternatives identified. • Heuristics: a mental rule of thumb that leads to a speedy decision by simplifying the process. • The human mind seeks to simplify the amount of decision making required whenever possible. • We hold attitudes for the same reason, and we apply them to purchase decisions. • Does higher price equal more quality? If it is a Rolex, yes. • What happens when it doesn’t in the short and long run? ©Copyright 2003 Pearson Education Canada Inc. 11

Marketing: Real People, Real Decisions The Decision Making Process (continued) • Brand loyalty: a pattern of repeat product purchases, accompanied by an underlying positive attitude toward the brand, which is based on the belief that the brand makes products superior to its competition. • Brand names can serve as an expectation of performance and can be used to facilitate new product acceptance. • What happens when a product fails to live up to its brand expectations? • Brand equity: the value of the brand name’s acceptance. • Companies use brand equity to facilitate new product acceptance. ©Copyright 2003 Pearson Education Canada Inc. 12

Marketing: Real People, Real Decisions The Decision Making Process (continued) • Post-purchase evaluation: the process whereby a consumer evaluates the quality of the purchase decision made, as a result of consumption and learning. • Customer (dis)satisfaction: the overall feelings or attitude a person has about a product after purchasing it. • What is the connection between satisfaction and re-purchase intentions? • Why do marketers care? • It is much cheaper to hang on to a customer than to be constantly trying to find new ones and offering them deals to switch. • CRM: customer relationship management is all about profitability through customer retention. ©Copyright 2003 Pearson Education Canada Inc. 13

Marketing: Real People, Real Decisions Influences on Consumer Decision Making Figure 6 -2 Psychological influences: Sociocultural influences: • Motivation • Personality • Perception • Learning • Values, beliefs, and attitudes • Lifestyle • Personal influence • Reference groups • Family • Social class • Culture • Sub-culture Consumer purchase Decisionmaking process Marketing mix influences: • Product • Price • Promotion • Place (distribution) Situational influences: • Purchase task • Social surroundings • Physical surroundings • Temporal effects • Antecedent states ©Copyright 2003 Pearson Education Canada Inc. 14

Marketing: Real People, Real Decisions Internal Influences • Perception: the process by which people select, organize, and interpret information from the outside world. • Sensations are the immediate response of our receptors (eyes, ears, nose, mouth, and fingers) to basic stimuli such as light, colour, smell, and sound. • Consumers attach meaning to sensations based on past experience. Such as: potato chips are good, vegetables are bad. Look closely, what do you see? ©Copyright 2003 Pearson Education Canada Inc. 15

Marketing: Real People, Real Decisions Internal Influences (continued) • The following issues about perception are of interest: • Exposure: the stimulus must be within range of the person’s receptors to be noticed. • Perceptual selection: consumers are more likely to pay attention to messages about things that they already have an interest in. • Interpretation: What do you see when you look at this advertisement? What does it mean? consumers will interpret stimuli based on their own view of the world and experience. ©Copyright 2003 Pearson Education Canada Inc. 16

Marketing: Real People, Real Decisions Internal Influences (continued) • Motivation: an internal state that drives us to satisfy needs by activating goaloriented behaviour. • Maslow’s Hierarchy of Needs: an approach that categorizes motives according to five levels of importance, the more basic needs being on the bottom of the hierarchy and the higher needs at the top. • Example: a homeless person is motivated to find shelter and food, while only the wealthy have the luxury of spending their time seeking “self-fulfillment”. Self-actualization Ego Needs Belongingness Safety Physiological ©Copyright 2003 Pearson Education Canada Inc. 17

Marketing: Real People, Real Decisions Internal Influences (continued) • Learning: a relatively permanent change in behaviour caused by acquiring information or experience. Consumers must learn how to satisfy their needs. • Learning can be either deliberate or vicarious. • Behavioural learning theories: theories of learning that focus on how consumer behaviour is changed by external events or stimuli. • The consumer forms connections between the things that happen to them or within their range of perception. • Freud had a few things to say about these connections. ©Copyright 2003 Pearson Education Canada Inc. 18

Marketing: Real People, Real Decisions Internal Influences (continued) • Classical conditioning: learning that occurs when a stimulus eliciting a response is paired with another stimulus that initially does not elicit a response on its own, but will cause a similar response over time because of its association with the first stimulus. During conditioning Stimuli Bell After conditioning Responses Alerts the dog CS Bell + Meat paste Salivation UCS UCR ©Copyright 2003 Pearson Education Canada Inc. Salivation CR 19

Marketing: Real People, Real Decisions Internal Influences (continued) • Operant conditioning: learning that occurs as a result of rewards or punishments. Also known as instrumental learning. • Rewards given positively reinforces the desired behaviour, thus encouraging its continuance. – Loyalty programs such as Air Miles. – Free nights at hotels for repeat stays. – Free bonus packs of product • Punishment levied negatively reinforces the specific behaviour, thus discouraging its continuance. – Late penalties for rentals – Loss of discounts ©Copyright 2003 Pearson Education Canada Inc. 20

Marketing: Real People, Real Decisions Internal Influences (continued) • Stimulus generalization: behaviour caused by a reaction to one stimulus that occurs in the presence of other similar stimuli. The positive or negative feelings are transferred from one to the other. • Marketers will use this when introducing product line extensions. • Cognitive learning theory: a theory of learning that stresses the importance of internal mental processes and that views people as problem solvers, who actively use information from the world around them to master their environment. • Applies more to high involvement purchase situations. ©Copyright 2003 Pearson Education Canada Inc. 21

Marketing: Real People, Real Decisions Internal Influences (continued) • Attitude: a learned predisposition to respond favourably or unfavourably to stimuli based on relatively enduring evaluations of people, objects, and issues. High involvement purchase situation Attitude Beliefs Affect Behaviour Based on cognitive information processing Low involvement purchase situation Attitude Beliefs Behaviour Affect ©Copyright 2003 Pearson Education Canada Inc. Based on behavioural learning processes 22

Marketing: Real People, Real Decisions Internal Influences (continued) • Personality: the psychological characteristics that consistently influence the way a person responds to situations in the environment. • Consumers like to buy products that they believe are an extension of their personality traits. – Innovativeness: interest in trying new things such as fashion or technology. – Self-confidence: degree of positive self-evaluations may be linked to interest in products that improve oneself. – Sociability: interest in social interaction can influence activities and entertainment choices. ©Copyright 2003 Pearson Education Canada Inc. 23

Marketing: Real People, Real Decisions Internal Influences (continued) • Self-concept: an individual’s self-image that is composed of a mixture of beliefs, observations, and feelings about personal attributes. • Self concept can be both positive or negative, and consumers will purchase products in either case to feed and/or express their perception of who they are. • Gym memberships? Weight control or plastic surgery? • Nostalgia-based marketing involves appealing to the consumer’s longing for the “good old days” ©Copyright 2003 Pearson Education Canada Inc. 24

Marketing: Real People, Real Decisions Internal Influences (continued) • The family life cycle (FLC): a classification scheme that segments consumers in terms of changes in income and family composition and changes in demands placed upon this income. Age of head of household Under 35 35 to 64 Over 64 One adult in household Bachelor 1 Bachelor 2 Bachelor 3 Two adults in household Young couple Childless couple Older couple Two adults + children Full nest 1 Full nest 2 Delayed full nest Full nest 3 M. Gilly & B. Enis, “Recycling the Family Life Cycle: A Proposal for Redefinition”, in Advances in Consumer Research, 1982 ©Copyright 2003 Pearson Education Canada Inc. 25

Marketing: Real People, Real Decisions Internal Influences (continued) • Lifestyle: the pattern of living that determines how people choose to spend their time, money, and energy and that reflects their values, tastes, and preferences. • How do university students choose to spend their time and money? • Psychographics: information about the activities, interests, and opinions (AIO) of consumers that is used to construct market segments. • The combination of psychology and demographics to improve our ability to understand consumers. ©Copyright 2003 Pearson Education Canada Inc. 26

Marketing: Real People, Real Decisions Situational Influences • The physical environment of the retail facility can strongly influence the moods of the consumer, which then influences purchase behaviour. • This becomes very important when unplanned buying dominates consumer behaviour, such as grocery shopping. • Retailers want to arouse consumers and provide a pleasurable experience. • Shopping as entertainment? • Observational studies have shown that time in store and amount spent are positively related. The more time in the store, the more money spent. ©Copyright 2003 Pearson Education Canada Inc. 27

Marketing: Real People, Real Decisions Situational Influences • Atmospherics: the use of space and physical features in store design to evoke certain effects in buyers. • Atmospherics uses all of the five senses to appeal to the consumer’s hedonic tastes. • Think about the shopping experience at a large bookseller such as Chapters or Barnes & Noble, from a sensory point of view. • Not all store environments want to entertain, such as funeral homes. ©Copyright 2003 Pearson Education Canada Inc. 28

Marketing: Real People, Real Decisions Situational Influences (continued) • Temporal factors: the influence of time on the consumer’s mood and behaviour. Time is a limited resource but our attitude towards it will vary significantly. • Consumers will purchase products or services to “save” time for more important things. • The effect of time spent waiting can be influenced by giving consumers something to do, such as putting a mirror beside an elevator. • Pressuring consumer decision making may or may not be in the seller’s best interests. ©Copyright 2003 Pearson Education Canada Inc. 29

Marketing: Real People, Real Decisions Social Influences • Culture: the values, beliefs, customs, and tastes that a group of people value. Culture influences all aspects of our lives, often without our awareness. • Culture is passed from one generation to the next through learning. • Exactly what does it mean to be a Canadian? • To not be an American? • Culture is expressed in the media, social institutions, symbols, and artifacts created by our society. • And hockey. ©Copyright 2003 Pearson Education Canada Inc. 30

Marketing: Real People, Real Decisions Social Influences (continued) • Subculture: a group within a society whose members share a distinctive set of beliefs, characteristics, or common experiences. • Canada has a very diverse mixture of cultures driven by its history of immigration, and it encourages the maintenance of this diversity, rather than assimilation. • Multicultural marketing: the practice of recognizing and targeting the distinctive needs and wants of one or more ethnic subcultures. ©Copyright 2003 Pearson Education Canada Inc. 31

Marketing: Real People, Real Decisions Social Influences (continued) • Social class: the overall rank of social standing of groups of people within a society according to the value assigned to such factors as family background, education, occupation, and income. • Social class is a perceptual construct and subject to wide variation between individuals. • It is not how much money a person may have, but rather how it is spent. • Status symbols: products that consumers purchase to signal membership in a desirable social class. • Examples: the Rolex watch, the Ferrari, and the cottage in the Muskokas! ©Copyright 2003 Pearson Education Canada Inc. 32

Marketing: Real People, Real Decisions Social Influences (continued) • Reference group: an actual or imaginary individual or group that has a significant effect on an individual’s evaluations, aspirations, or behaviour. • We are social beings, and most of us seek a feeling of community with others, even if only a virtual one. • Conformity: a change in beliefs or actions as a reaction to real or imagined group pressure. • People in groups behave differently than as individuals; riskier choices. ©Copyright 2003 Pearson Education Canada Inc. 33

Marketing: Real People, Real Decisions Social Influences (continued) • Sex roles: society’s expectations about the appropriate attitudes, behaviours, and appearance for men and women. • Products can take on the attributes of their users, and become linked to one gender or another. • Men buy hardware while women shop for clothing and food(? ) • In today’s social environment of gender equality, changing roles, and political correctness, these rules no longer apply. ©Copyright 2003 Pearson Education Canada Inc. 34

Marketing: Real People, Real Decisions Social Influences (continued) • Opinion leader: a person who is frequently able to influence others’ attitudes or behaviours by virtue of their active interest and expertise in one or more product categories. • A study of male student opinion leaders showed: – They were socially active – Were appearance conscious and narcissistic – Involved in rock culture – Heavy magazine readers – Likely to own more clothing in a broader range of styles ©Copyright 2003 Pearson Education Canada Inc. 35

Marketing: Real People, Real Decisions Famous Last Words… • Organizations want to understand consumer behaviour because it is the first step to being able to predict what they are going to do next, and ultimately influence that behaviour. • Consumers strive to satisfy their needs in a wide variety of ways, called wants. • In this process, consumers are influenced by many factors in their environment. • Marketing strategy should be consistent with this behaviour. ©Copyright 2003 Pearson Education Canada Inc. 36