Microeconomics Concept : Private Information
• States that a firm profits from unique information and insights it has
about production techniques and trade secrets.
Important Trade Secret: The unique insight a business has about the behaviour of
• knowledge about changing consumer preferences and buying behaviour.
Powerful driver of competitive success and profitability: Information about
Consumer Research Activity
1.) First and foremost is to track consumer satisfaction and consumer
• Firms keep track of consumer dissatisfaction from the number of
product returns and complaints.
• Firms also survey or ask someone else to survey their own customers to
• This Will show what about the firms products and services they like, or
2.) Test product concepts in new product development
- particularly in global markets where the company has never operated and
products need to be redesigned.
• Special Consumer Research is what helps new players in the global
market learn about consumers
• i.e. They employ local market research firms to study local consumers.
Market Research Process (Logical Order):
• Problem Definition/Question to be Answered (the most difficult step)
• Research Design
• Data Collection
• Data Analysis and Interpretation
5. Presentation of Results
• Exploratory research and data collection: When problem or research
question isn't clear and the management wants additional information before
starting its research.
• Includes: Internal records, customer complaints, financial analysis
trends, and discussions with distributors and suppliers.
• Descriptive study research: Used to describe customers. Either; small
number in-depth. Or large number through survey.
• Used to gather information about customer satisfaction, product
use, and segment customers.
• Answers who, what, where, when, and why, of consumer
• It can be cross-sectional, or longitudinal
o Cross Sectional: Studies sample of customers' responses at a specific
• i.e. if business students were asked “How satisfied
are you with the college of business?”
• Repeated measurement of the same customer and
addresses customer responses over a period of time
• Cause and Effect Research: "Does X cause Y"
Qualitative Consumer Research
• Plastering photos taken during the customer visit around the room keep this
voice heard in decision-making
o Took pictures of several refrigerators around various households.
• Noticed that fridge needed more beverage space and therefore
o Employed anthropologists in Japan to study 100 families over several
months (due to failure to enter the Japanese market)
• Led to redesign of furniture and then eventually entered the
Motivational Research: Encouraging consumers.
Customer Shopping Behaviour
Habitual Shopping: Shopping at the same convenience stores, super markets, dry
• the best time to influence shopping and consumption values, beliefs and habits
is before the age of about fifteen
Recreational Shopping: Mindless shopping. People who do recreational shopping,
shop for the fun of it or to pass time. Shopping for supplies, or seeing what is new and
• Psychographics: Our attitudes, opinions, interests, hobbies and passions.
• Product enthusiast market is very profitable hobbyists are heavy users, are
influential. And are targeted because they usually gather in clubs or groups of
similar interests. (Also known as Market Multipliers)
• Recreational cosmetic and clothing shopping is huge among teenagers
Complex Search and Shopping Behaviour: Shopping for a house, car, a college
education, which requires consultation of expert sources, either on the Internet or in
person, and includes realtors, investment advisers, accountants, travel agents,
interior designers, wardrobe consultants and car and appliance salespeople. • Over 80% of car purchases involve initial research on the internet and
comparing to similar models at various prices.
• Purchase specification: What emerges from initial search and discussion with
friends, etc. is a rough idea of what you want to buy
• Consumer Confidence: Whether consumers think they will be better off, worse
off, or the same in the future. This correlates with buying large assets such as
cars, houses etc.
o 75% of the US economy depends on consumer spending
o Over 50% of North American consumers also believe that within five
years they will go strongly green in their life-style and purchasing, reflecting
a serious shift toward a concern over environmental quality
The employee morale circle - Customer satisfaction (in recurring order)
1.) Service quality
2.) Customer Satisfaction and Demand
3.) Employee's benefits and wages
4.) Employee Morale
The Consumption Behaviour of Businesses
Company shopping behaviour can be viewed in two ways:
1.) Engineering-user view
2.) Purchasing-buyer view
Purchasing agents decision-making rules:
1. Actively seek new sources when the number of suppliers on the bid list is less than
2. Keep using current suppliers when their performance is satisfactory and the
number of suppliers on the list is greater than three.
3. Toughen acceptable performance standards when the number of suppliers on the
list is greater than three.
4. Drop the existing vendor with the worst performance when new vendors are
included on the bid list.
Just in Time Delivery: Seller delivers product as it is needed to the buyer.
*Advantage*: Inventory holding costs can be dramatically reduced
1. Items and subcomponents (i.e., assembled modules of items such as hard drives,
transformers or keyboards for a personal computer) are designed and produced
according to buyer specifications.
2. All delivered items are inspected by the supplier before delivery, reducing the
defect rate to zero for the