MOS 1023 Consumer Behaviour Notes Chapters 1,2,3,4,6,7.docx

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Management and Organizational Studies
Management and Organizational Studies 1023A/B
Maria Ferraro

Midterm: text, notes and in-class material fro the consumer behavior sessions from weeks 1-6, 80 multiple choice. Chapter 1 – Marketing Fundamentals Creating Customer Value  Developing customer loyalty is prompting many firms to focus on customer value by providing customers with products and services that have added value.  This is often achieved by delivering outstanding value through a combination of: pricing strategies, product design, and service elements.  Customer Value – the unique combination of benefits received by targeted buyers that include quality, price, convenience, on-time delivery and both before and after sale service. Appealing to Target Markets  Companies cannot satisfy everyone’s needs with one single product, so they design their products to appeal to a specific target market.  Better to put money towards a target market, where you know the consumers will have interest rather than spread your money around a larger market where you wont.  Target Market – the specific group of existing and potential consumers to which a marketer targets in marketing efforts (ME – geared to appeal to a products specific target market, ensuring that each element of the marketing mix appeals to the characteristics of the target group) Marketing Mix – Product, Price, Place and Promotion - need to be carefully managed by marketers to ensure that they are well coordinated and that each appeals to the distinct characteristics of the target market for the product.  Product – all the attributes that make up a good, a service or an idea, including product design, features, colour, packaging, warrantee, and service levels.  Price – the expected retail shelf price and sale price of the product.  Place – the distribution channels and retailers requires to sell the product.  Promotion – the communication tools needed to inform consumers about the product including advertising, sales promotion, public relations, direct marketing and personal selling. The Marketing Process – is a continuous ne that requires marketers to pay attention to detail and apply their strategic, analytical and creative thinking skills. Marketing Process – in short, involves 1. Identifying consumer needs, 2. Managing the marketing mix to meet these needs, 3. Realizing profits Throughout the process marketers constantly evaluate the level of their success and make changes that can make their products more competitive and alluring to their customers. Marketers are ultimately responsible for the profit and revenue. Marketing – the process of planning goods, services or ideas to meet consumer needs and organizational objectives. It includes the conception of these products and the pricing, promotion and distribution programs designed to make a profit. Exchange – the trade of things of value between buyers and sellers so that each benefits. Typically, the trade is money for a product but can be volunteering or a referall. Good – a product you can touch and own. Exp. shoes. Service – an intangible product you cannot touch. It does not result in something you can take home. Exp. massage, movie. Idea - a concept that typically looks for your support. Exp. earth hour. What is a Market? Market – used in marketing to describe the potential consumers who have both the willingness and ability to buy a product. Exp. Fisher price bike although children have the willingness to pay they don’t have the ability; therefore their parents are the market. Evolution of the business process: Up until 1930’s – Production Orientation – stage focused on manufacturing, which until the industrial revolution was not a widespread phenomenon. Manufactured goods tended to sell regardless of their quality because they were in short supply. Consumer needs were not a priority. 1930’s – 1960’s – Sales Orientation Stage - focused on selling as many products as possible. Market had become more competitive, production became more efficient and products were in abundance. Consumer needs were not a major consideration. 1960’s – Marketing Orientation – focuses on the idea that an organization should strive to satisfy the needs of consumers while also trying to achieve the organizations goals. Follows the Marketing Concept - is the idea that an organization should strive to satisfy the needs of consumers while also trying to achieve organizational goals. 1990’s Last Decade – Relationship Marketing – sees organizations considering the lifetime value of its customers as they strive for better services, deliver consistent product quality and develop long term relationships. Transition from short-term transactions to one that now focuses on building long-term customer relationships. Customer Relationship Management (CRM) Focuses on identifying a firm’s most valued customers and building programs to appeal to their needs while fostering long-term customer relationships and loyalty. When used successfully permeates an organization which then implements policies, processes, and strategies to maximize customer satisfaction by tracking customer information and using this data to anticipate and meet customer needs. Experimental Marketing An approach where marketers create opportunities for their consumers to interact directly with the brand. Exp. Alcohol brand in Australia promoted with no media just rented out nightclubs for free trials. Corporate Social Responsibility (CSR) Concept where organizations voluntarily consider the well being of society by taking responsibility for how their businesses impact consumers, customers, suppliers, employees, shareholders, communities, the environment and society in general. Social Marketing Concept – focusing on the consumer and the well being of society. Exp. Maxwell house and “Brew Some Good” awareness program for habitat for humanity Chapter 2 – The Marketing Environment Marketing Fundamental Scan - process of continually acquiring information on events occurring outside the organization to identify trends, opportunities, and threats to business. Marketers use this knowledge to ensure that their products, services and ideas are relevant and meaningful. When managed properly, this knowledge translates into competitive marketing programs that meet consumer needs and bring revenues into the company. Looks at the forces identified in “the core” image (opposite), namely:  Demographic Forces  Socio-Cultural Forces  Economic Forces  Technological Forces  Competitive Forces  Regulatory Forces 1) Demographic Forces Demographics - the statistical data on a population according to characteristics such as age, gender, ethnicity, income and occupation. Aging Population - the percentage of the population over the age of 55 continues to increase due to low birth rates and better health care. Diverse Generations  Baby Boomers – generation of people born between 1946 and 1964  Generation X - people born between 1965 and 1976  Generation Y - people born between 1975 and 1995 2) Socio-Cultural Forces - referring to cultural values, ideas, and attitudes that are learned and shared among a group of people. 3) Economic Forces Economy - collective income, expenditures, and resources that affect the cost of running a business Macroeconomics – the state of a country’s economy as a whole Inflation - period when the cost to produce and buy products and services gets higher as prices rise Recession – time of slow economic activity with two consecutive periods of negative growth Microeconomic Forces - the supply and demand of goods and services and how this is impacted by individual, household, and company decisions to purchase.  Gross Income – total amount of money made in one year by a person, household, or family unit, including taxes.  Disposable Income – balance of income left after paying taxes; income that is used for spending and savings.  Discretionary Income – money that consumers have left after paying taxes and buying necessities. 4) Technological Forces - inventions from applied science or engineering resources. 5) Competitive Forces - alternative products that can satisfy a specific market’s needs.  Direct Competitive - similar products sold in the same category  Indirect Competitors - products competing for the same buying dollar in a slightly different but related category.  Perfect Competition – type of competition where there are many sellers with nearly identical products and little differentiation.  Monopolistic Competition – type of competition where a large number of sellers compete with each other, offering customers similar or substitute products.  Oligopoly - type of competition that occurs when a few companies control a market.  Monopoly – when only one company sells in a particular market. 6) Regulatory Forces  Regulations – restrictions places on marketing practices by government and industry associations. Chapter 3 – Consumer Behavior Consumer Behavior Effective marketers keep an eye on their target market, and work to understand them and satisfy consumer’s wants and needs. Purchase Decision Process The stages that a buyer passes through when making choices about which products and services to buy. This process has 5 stages: Problem Information Evaluation of Purchase Post-purchase Recognition: Search: Seeking Alternatives: Decision: Behavior: Perceiving a Value Assessing Buying Value Value in need Value consumption or use Problem Recognition: Perceiving a Need Occurs when a person realizes that the difference between what he or she has and what he or she needs is big enough to actually do something about it. The process may be triggered by a certain situation, i.e. finding an empty milk container. Advertisements or sales people can trigger this recognition. Information Search: Seeking Value After realizing they need the product the consumer begins to search for information that might satisfy their newly discovered need. They may: Internal Search: search in memory for knowledge on previous experiences with products or brands, popular with past experience purchases, i.e. shampoo. External Search: when one does not have much past experience, the risk of making a bad decision is high and cost of gathering information is low. Can come from: Personal Sources: friends or family who the consumer trusts. Public Sources: Internet, consumer reports or marketer-dominated sources (sellers, company websites, salespeople, in store displays) Evaluation of Alternatives: Assessing Value What selection criteria would us you when buying your product? Price, ease of use, or some other type? These factors are the evaluation criteria, which represent both the objective attributes of a brand (such as quality) and subjective ones (such as prestige) Purchase Decision: Buying Value Now you are almost ready to make your purchase decision. Three choices remain: the chosen brand, whom to buy from and when to buy. Many factors may influence these choices. I.e. sales that are occurring, atmosphere of store, etc. Post-purchase Behavior: Value in consumption or use After purchasing the product, the consumer compares it with his or her expectations and is either satisfied or dissatisfied. Satisfaction and Dissatisfaction of the product will influence the consumer’s communications and repeat purchase behavior. **Satisfied people tell 3 people, dissatisfied people complain to 9 people. Involvement The level of involvement that a consumer has in a particular purchase depends on the personal, social and economic consequences of the purchase to the consumer. Low Level of Involvement: toothpaste or soft drinks. High Involvement: car or computer.  Typically have at least one of three characteristics: the item to be purchased is expensive, it can have serious personal consequences or it could reflect on ones social image. For these occasions the consumers engage in the information. Problem Solving Researches have determined three general variations of in the consumer purchase process based on consumer involvement and product knowledge. 1) Routine Problem Solving: Consumers recognize problem and spend little effort seeking external information, and evaluating alternatives. (table salt and milk) 2) Limited Problem Solving: Consumers typically seek some information or rely on a friend to help them evaluate alternatives. (restaurant, pair of jeans) 3) Extended Problem Solving: Each of the 5 stages of the purchase decision is used in the purchase, including considerable time and effort on external information search and in identifying and evaluating alternatives. (houses, automobiles and financial investments) Situation Influences Often the purchase situation will affect the purchase decision process. Five situation influences have an impact on the process: 1) Purchase Task: Information searching and evaluating alternatives may differ depending on whether the purchase is a gift, which often involves social visibility, or for the buyers own use. 2) Social Surroundings: Including the other people present when a purchase decision is made, may also effect what is purchased. 3) Physical Surrounding: Such as décor, music and crowding in store. 2) Temporal Effects: Such as time of day or the amount of time available, will influence where consumers have breakfast, lunch or what is ordered. 3) Antecedent States: Which include the consumer’s mood or the amount of cash on hand. Motivation is the energizing force that stimulates behavior to satisfy a need. Because consumer’s needs are the focus of the marketing concept, marketers try to arouse these needs. Types of needs: 1) Psychological Needs: basic to survival and must be satisfied first. (Burger king for food) 2) Safety Needs: involve self-preservation and physical well being. (Smoke detector and burglar alarm companies) 3) Social Needs: concerned with love and friendship. (Dating service and fragrance companies) 4) Personal Needs: by the need for achievement, status, prestige, and self-respect. (American Express Gold Card) 5) Self-actualization: involve personal fulfillment. (Travel providers offer specialized educational and exotic trips) Personality is a person’s consistent behaviors or responses to recurring situations Perception is the process by which someone selects, organizes and interprets information to create a meaningful picture of the world. Selective Perception Selective Exposure: occurs when people pay attention to messages that are consistent with their attitudes and beliefs and ignore messages that are inconsistent. I.e. not likely to “see” McDonalds ad after eaten a pizza. Selective Comprehension: involves interpreting information so that it is consistent with your attitudes and beliefs. I.e. Sales of Snow Toy increased after changed name to Snow Master. Selective Retention: means that consumers do not remember all the information they see, read or hear, even minutes after being exposed to it. I.e. give information booklets after leave the showroom. Perceived Risk is anxiety felt when a consumer cannot anticipate possible negative outcomes of a purchase. Learning is behaviors that result from repeated experience or reasoning. Brand Loyalty is favorable attitude toward and consistent purchase of a single brand over time. Beliefs are consumer’s perceptions of how a product or brand performs. Attitude is the tendency to respond to something in a consistently favorable or unfavorable way. Opinion Leaders are individuals who have social influence over others. Word of Mouth is people influencing each other in personal conversations. Reference Groups people to whom an individual looks as a basis for self-appraisal or as a source of personal standards. Membership Group: one to which a person actually belongs, including fraternities and sororities, social clubs and the family. Easily identifiable. Aspiration Group: one that a person wishes to be a member of or wishes to be identified with, such as a professional society. Dissociative Group: one that a person wishes to maintain a distance from because of differences in values or behaviors. Family Life Cycle is a progression from formation to retirement, with each phase brining distinct needs and purchasing behavior. Culture a set of values, ideas and attitudes that are learned and shared among the members of a group. Subcultures are subgroups within a larger culture that have unique values, ideas and attitudes. Cross-cultural Analysis involves the study of similarities and differences among consumers in two or more nations or societies. Values are socially preferable modes of conduct or states of existence that tend to persist over time. Customs are norms and expectations about the way people do things in a specific country or culture. Cultural Symbols are objects, ideas, or processes that represent a particular group of people or society. Back Translation is retranslating a word or phrase back into the original language by a different interpreter to catch errors. Chapter 4: Marketing Research Many companies have… Marketing Information System, which is a set of procedures and processes for collecting, sorting, analyzing and summarizing information on an ongoing basis. May collect information from various sources and analyze it to create an accurate market assessment. However, some specific information may not be available through an MIS so they turn to MR projects to help lead them to business decisions. or… Market Research is the process of collecting and analyzing information in order to recommend actions to improve marketing activities. Research can be classified into three basic areas: 1) Exploratory Preliminary research conducted to clarify the scope and nature of the marketing problem. Usually conducted with the expectation that more conclusive research will follow. 2) Descriptive Research designed to describe basic characteristics of a given population or to clarify their usage and attitude. 3) Casual Research designed to identify cause and effect relationships among variables. The Six-Step Market Research Approach Makes sure research is done thoroughly, all elements are considered and the results are accurate. 1. Define the problem/issue/opportunity – clearly define. 2. Design the research plan – how will you collect data? 3. Conduct exploratory research – primary data (information that is newly collected for a project) vs. secondary data (facts and figures that have already been recorded by a third party – lower in cost and readily available) Collect secondary data first then primary data 4. Collect quantitative (designed to be statistically accurate and is more reliable than exploratory) research information – more data can be conducted through observational (watching how people behave) or questioning techniques (obtaining information with questions via phone, email, etc.) 5. Compile, analyze and interpret data – information is summarized into actionable information. 6. Generate r
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