MOS 3321 - Consumer Behaviour - Chapters 9-17 EXAM TEXT NOTES.docx

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Management and Organizational Studies
Management and Organizational Studies 1021A/B
Kevin Thompson

Consumer Behavior 3321 Chapter 9: Individual Decision Making Consumers as Problem Solvers  1 – Problem Recognition  2 – Information Search  3 – Evaluation of Alternative  4 – Product Choice  Some purchase decisions are more important than others, the amount of effort we put into each differs  Decisions get more complicated in today’s environment where we have so many options to choose from  Consumer Hyper choice: condition where the large number of available options forces us to make repeated choices that may drain psychological energy while decreasing our abilities to make smart decisions. Perspectives on Decision Making  Rational Perspective: people calmly and carefully integrate as much information as possible with what they already known about a product, weigh the pluses and minuses of each alternative, and arrive at a satisfactory decision. This relates to the economics of information approach  We absorb additional pieces only to the extend that we think they will add to what we already know  Purchase Momentum: When initial impulses actually increase the likelihood that we will buy even more.  People differ in terms of their cognitive processing style o Rational system of cognition: processing info analytically and sequentially using rules of logic o Experiential system of cognition: processing info holistically and in parallel  Decision makers have a repertoire of decision making strategies  Choose a strategy best fit to decision – constructive processing where tailor degree of cognitive effort to task at hand  Low involved decisions are a learned response to the environment o This is the - Behavioral influence perspective: assessing environmental, such as physical surroundings and product placement, that influence members of a target market  Highly involved decisions are experiential were the gestalt, or the totality of the P or S are stressed. Types of Consumer Decisions  Extended Problem Solving: Traditional decision making perspective. Fairly central to the self-concept, and the decision carries fair risk. Collect as much info as possible from memory (Internal search) and from outside sources (External Search). Each alternative is carefully evaluated – by considering attributes of one brand at a time and seeing how it shapes up to desired characteristics.  Limited Problem Solving: Not as motivated to search for info, or evaluate alternatives rigorously.  Habitual Decision Making: Little or no actual effort. Automatically performed with minimal effort and without conscious control. Minimize the time and energy spent on mundane purchase decisions. Have to ―unfreeze‖ former habits and replace them with new ones. Problem Recognition: occurs whenever the consumer sees a significant difference between his or her current state of affairs and some desired or ideal state.  Quality of the consumer’s actual state can move downward (need recognition)  Ideal state can move upward (opportunity recognition)  Quality can be diminished by running out of a product – not to satisfy needs adequately  Person’s circumstances have somehow changed Information Search: Process in which the consumer surveys his or her environment for appropriate data to make a reasonable decision. Types of Information Search  Internal Versus External Search o Internal: scanning own memory bank to assemble info about different product alternatives o Supplement this knowledge with external search  Deliberate Versus ―Accidental Search‖ o Existing knowledge of a product may be the result of directed learning – from a previous search we performed o Incidental learning – from exposure to ads, packaging, and sales promotions o Sometimes we can be experts and need no search Online Search: Declare our desire to purchase. Search engines show ads to those who search for brand names. Online sources create the new info shopper who searches online before buying just about anything – these tend to be well educated, and affluent. 90% more confident in info they find online. 70% consult product reviews. Search Engine Optimization (SEO) – small army of consultants who help companies to ―game‖ the search engines, ensuring links are at the top of the list when certain terms are searched.  Do Consumers Always Search Rationally? o Amount of external search is usually small o Fair amount of external search for symbolic items like clothing o Perceived risk leads to external search o Often engage in brand switching even if current brands satisfy needs o Variety seeking: people just like to try new things and vary their experiences. More likely to happen in a good mood or for sensory-specific satiety – pleasantness of eaten food drops while the pleasantness of uneaten foods remains unchanged.  Mental Accounting: Biases in the Decision-making process. Decisions are influences by the way a problem is posed (framed) and by whether it is put in terms of gains or losses o Sunk cost fallacy: having paid for something makes us reluctant to waste it o Hyperopia: who are obsessed with preparing for the future that they cant enjoy the present o Loss aversion: people place more emphasis on loss than they do on gain o Prospect theory: descriptive model of choice, finds that utility is a function of gains and losses, and risk differs when the consumer faces options involving gains versus losses – willing to risk if they think they’re losing someone else’s resources How Much Search Occurs: As a general rule search activity is greater when the purchase is important, when there is a need to learn more about the purchase, and when the relevant information is easily obtained and used.  Amount of Information Available: We have limited capacity in ST memory. Truncate environment to deal efficiently with it.  The Consumers Prior Expertise: Novices who know little should be more motivated for info but experts should know the value of knowledge more. Search is greatest among those who are moderately knowledgeable. o Little knowledge: don’t know where to start o Experts: selective search – more focused and efficient o Novices: relay opinions and non-functional attributes. Process in top down manner. o Blissful ignorance effect – know more less happy. Feel we’ve bought the right thing Perceived Risk: Belief that the product has potentially negative consequences. Expensive or complex and hard to understand. Run the risk of embarrassment. Highly self confident person is less worried about social risk. Evaluation of Alternatives: Most of the effort of a decision is here. Identifying Alternatives  Most extended processes happens when we experience negative emotions from conflicts of available alt  Evoked/Consideration set: alternatives actively considered during choice process – products already in memory. Inert set (aware & wont buy) inept set (not in game at all).We also have an unwillingness to give products a second chance. Product Categorization: product stimulus evaluated in terms of what people already know about product or things similar to it. Categorization is crucial! Marketers offer knowledge because they want to ensure that their products are grouped correctly.  Levels of Categorization: o Basic level category: typically most useful, usually products with a lot in common o Superordinate level: abstract o Subordinate category: individual brands  Strategic Implications of Product Categorization: important for determining its competitors and what criteria will be used to make this choice. o Product Positioning: convince the customer that product should be in a certain category. o Identifying Competitors: superordinate level there is competition btwn categories that compete on broad level. Ex. Different version of entertainment. o Exemplar Products: Rhubarb Versus Apples, For Example: If something is a good example of a category, it is more easily recalled and recognized. Unusual products may result in more information processing and positive evaluations. Strongly discrepant may tend to occupy a unique niche position o Locating Products: Product categorization can affect consumer’s expectations regarding places they can locate a desired product Product Choice: Selecting among Alternatives  Feature creep: overwhelmed with more and more features – assume more features are better, its only when we try to use it that we realize the value of simplicity. Evaluative Criteria: Dimensions used to judge the merits of competing options. From functional to experiential ones. Determinant attributes: used to differentiate among choices Procedural learning: decision about which attribute to use – undergo cognition steps before making a decision. Should point out: 1. Significant differences among brands 2. Supply consumer with a decision making rule 3. Convey a rule that can be easily integrated  Neuromarketing: How your Brain Reacts to Alternatives: using functional magnentic resonance imaging – a brain scanning device that tracks blood flow as we perform mental tasks. Measures reactions. Memory trumps out taste. Brains respond to cool images. Brains react to unstylish items when ppl are anxious, apprehensive, or neurotic. Cybermediaries: helps to filter and organize online market information so that customers can identify and evaluate alternatives more efficiently. Website evaluators, forums, fan clubs, user groups, intelligent agents.  Electronic recommendation agent: software tool trying to understand human decision makers multi attribute preferences for a product category by asking user to communicate his or her preferences.  Brand Advocates Heuristics: Mental rules of thumb that lead to a speedy decision.  Relying on a Product Signal: infer hidden dimensions of products from observable attributes. Aspect of product that is visible acts as a product signal. If product info is incomplete we get our judgment from covariation or association among events. We are poor estimators of covariation.  Market Beliefs: about relationships in the market place. Which become shortcuts – whether or not they’re accurate. Ex. Price Quality relationship.  Country of Origin as a Heuristic: Because of stereotypes (knowledge based on inferences across products). Countries stimulate consumers interest in product to a certain degree. When other info is available, experts ignore country of origin information but novices continue to rely on it. o Ethnocentrism: tendency to prefer products or people of own culture Choosing Familiar Brand Names: Loyalty or Habit? Some brands known because they are well known. We assume that if many people choose a product it must be good. Zipfs law: #1 is 50% better than #2  Inertia: where a brand is bought of our a habit merely because less effort is required. Little to no underlying commitment to the product.  Brand Loyalty: form of repeat purchasing behaviour reflecting a conscious decision to continue buying the same brand. Accompanied by an underlying positive attitiude toward the brand. Can also create emotional attachment and these purchase decisions become habitual over time leading to stronger commitment. o Brand parity: consumers’ beliefs that there are no significant differences among brands. Decision Rules  Non-Compensatory Decision Rules: some poor attributes may eliminate the choice despite its strength on other attributes. Basically simple decisions. o The Lexicographic rule: brand that is best on the most important attribute is selected. If 2 or more are good, consumer compares with second most important attribute. o The Elimination-by-aspects rule: specific cut offs are imposed. o The Conjunctive Rule: processing by brand. Brand chosen if meets all cut offs while failure to meet any one means rejection – rates negative data more heavily o The Disjunctive Rule: acceptable standards for each attribute. If choice alternative exceeds the standard for any attribute it is accepted  Compensatory Decision Rules: one good attribute can compensate for other poorer attributes. Giving a product a chance to make up for its short comings. o Simple additive rule: consumer chooses alt with largest number of positive attributes – motivation to process info is limited o Weighted additive rule: take into account relative importance of positively rated attributes, essentially multiplying brand ratings by importance weights Chapter 10: Buying and Disposing Choices are affected by many personal factors, such as mood, pressure, time, and situation or context in which product is needed. A lot of important activity occurs after product has been purchased and brought home. Forge a relationship with the consumer so he/she can continue to buy product in the future. Situational Effects on Consumer Behaviour Consumption situation is defined by factors over and above characteristics of the person and the product. Behavioral or perceptual. Day reconstruction method: wake up grumpy but enter state of pleasure and slowly increase. Bad day usually from Poor nights sleep, and tight work deadlines. Situational Self Image asking who they are right them BY identifying important usage situations, marketers can develop market segmentation strategies to position products that will meet the specific needs arising from these situations. Physical/ Social Surroundings  Can make big difference in motives and include physical, as well as #/type of people surrounding  Décor, smells, temperature  Co-consumers: the people around you that affect you when youre buying  Large # of people in a consumer environment increases arousal levels so that subjective experience of a setting tends to be more intense  Actual experience depends on interpretation of this arousal  Consumers who patronize the store/service can serve as attribute Temporal Factors  Economic Time: priorities determine our lifestyle. Today we are more pressed for time than ever before which is the feeling of time poverty. It may just be that we have more options and are pressured by these options. Theres a rise in polychromic activity (do more than one thing at a time).  Psychological Time: experience of time is subjective and influenced by immediate priorities and needs. o People are more likely to be receptive to mktg messages when:  Flow time: become absorbed we know nothing else  Occasion time: special moments  Deadline time  Leisure time:  Time to kill: o Four dimensions of time:  Social dimension: time for me/others  Temporal orientation dimension: significance attached to past, present, and future  Planning orientation dimension: diff time management styles varying on a continuum from analytic to spontaneous  Polychromic orientation dimension: 1 thing at a time, to multitasking o Perspectives on time:  Time is a pressure cooker  Time is a map  Time is a mirror  Time is a river  Time is a feast o Experience of time is largely a result of culture Antecedent States: If It Feels Good, Buy It…  Mood at time of purchase can have a big impact on decision and how products are evaluated because behaviour is directed to certain goal states.  Stress can impair information processing and problem solving abilities  Arousal can be either distressing or exciting depending on pos or neg context  Mood state biases judgments of P&Ss in that direction  Some high tech cos sudy mood very closely – true smiles vs. social smiles Shopping: A job or an adventure? Utilitarian, or hedonic reasons. Women shop to love, while men shop to win.  Reasons for shopping: o Hedonic Shopping motives:  Social experiences  Sharing of common interests  Interpersonal attraction  Instant status  Thrill of the chase o Shopping orientation: General attitudes about shopping.  Economic consumer  Personalized consumer  Ethical consumer  Apathetic consumer  Recreational shopper E-commerce: Clicks versus Bricks  Experience of acquiring goods differs online and offline  E-commerce reaches customers around the world, but competition increases exponentially  Benefits: Good customer service, technology value  Limitations: Security/identity theft, actual shopping experience, large delivery/return shipping charges Retailing as Theatre: Appealing to social motives, and providing access to desired goods. Creating imaginative environments to entertain consumers by retail theming. Landscape themes, marketscape themes, and cyberspace themes. Convert store into a being space: resemble a commercial living room to relax. Ex. Starbucks. Minipreneurs: offer work-centered being places. Pop up stores appear in many forms all around the world. Store Image: May be thought of as having a personality and a defined image. Which is composed of features, location, merchandise suitability, and knowledge and congeniality of sales staff. We evaluate stores in terms of both their specific attributes and global evaluation or gestalt.  Shifting retail landscape: drug store = corner store  Atmospherics: careful store design increases the amount of space the shopper covers and stimulating displays keep them in aisles longer. o Area just inside super market = decompression zone slow down before you get a serious start ex. Produce sections fresh food makes people feel good and righteous so they feel less guilty when they throw chips and cookies in the cart later o Atmospherics: conscious designing of space and its various dimensions to evoke certain effects in buyers – colours, scents, and sounds, even smells. All affect purchasing behaviour o Recognition of a new audio environment has created a new niche – ambient music affects shoppers from subliminally discouraging theft to putting people in the mood to buy o Light colours impart a feeling of spaciousness and serenity and signs in bright colours create excitement In Store Decision Making  Spontaneous shopping: o Unplanned buying: when unfamiliar with stores layout and is under pressure – reminded of something by seeing it or recognizing new needs while in store o Impulse buying: when person experiences sudden urge he or she cannot resist o Planners: know what they’ll buy and what brands o Partial planners: know what just not what brand o Impulse purchasers: do no advanced planning  Point-of-purchase stimuli: elaborate product display or demonstration that is designed to catch the attention of the consumer. The Salesperson  Most important in store factor  Exchange theory: stresses that every interaction involves an exchange of value; each participant gives something to the other and hopes to receive something in return. o Expertise o Reassurance o Appearance  Factors influencing their role is age, appearance, educational level, and motivation to sell  Ability to be adaptable is especially vital Has IT destroyed customer service? Corporate culture pays lip service to customer service, while focusing on immediate returns and cost cutting.  Many times customer service fails  Call centres use activated response systems that often do not satisfy the customer  A custom-made guitar was destroyed on an airplane  There was no compensation until the Canadian musician posted a video song on You Tube Post Purchase Satisfaction: overall feelings or attitude, a person has about a product after purchase. It’s a big competitive advantage. Perceptions of Product Quality  Number of cues infer quality: brand name, price, estimates. Consumers use post purchase aspects to relive perceived risk and assure themselves. Quality threatens to become meaningless if companies overuse it.  Expectancy disconfirmation mode: consumers form beliefs of product quality based on prior performance  Marketers should manage expectations  Don’t promise what you can’t deliver  When product fails, marketers must reassure customers with honesty  Marketers: quality = ―good‖  Expectancy disconfirmation model of product performance o Expectations determine satisfaction and/or dissatisfaction o Importance of managing expectations Acting on Dissatisfaction Three ways consumers can act on dissatisfaction: 1. Voice response: Appeal to retailer directly 2. Private response: Express dissatisfaction to friends or boycott store 3. Third-party response: legal action A number of factors influence which way a consumer will act. Action is more likely for expensive products, while a meek person may not react. If usually satisfied customers are more likely to complain. Encourage consumers to complain because if they don’t complain they may just switch if they think the company wont react or help. The Real Value of Happy customers  78% of customers are willing pay more for products if they experience great customer service  Good service travels fast via social networking TQM: Going to the Gemba  Important to know how people actually interact with their environment in order to identify potential problems  TQM: mgmt and eng procedures aimed at reducing errors and increasing quality  Gemba: One true source of information o Need to send marketers/designers to the precise place of product consumption - Host Foods study in airport cafeterias Product Disposal: products serve as anchors to our identities: our past lives on in our things. Ease of product disposal is now a key product attribute to consumers Disposal Options: 1. Keep 2. Temporarily dispose 3. Permanently dispose In many cases new product bought even though old one still functions. This is due to desire for new features, and a change in environment, or change in role and self-image. Public policy implications of product disposition: Recycling is a priority in many countries. Means-end chain analysis study of lower-order goals linked to abstract terminal values when consumers recycle. Perceived effort involved in recycling as predictor. Lateral Cycling: Junk versus “Junque”  Already purchased products are sold to others or exchanged for still other things o Flea markets, garage sales, classified ads, bartering for services, hand-me- downs, etc.  Freegans: Anti-consumerists (like vegans) but political statement against corporation and consumerism  Divestment rituals: where they take steps to gradually distance themselves from things they treasure so that they can be sold or given away. o Iconic transfer: pictures or videos o Transition-place: out of way location first o Ritual cleansing: washing/ironing/wrapping the item  Internet has revolutionized lateral cycling  Re-stores across Canada (Habitat for Humanity) Chapter 11: Group Influence and Opinion Leadership Reference Groups: Actual or imaginary individual/group conceived of having significant relevance upon an individual’s evaluations, aspirations, or behaviour. Our desire to fit in is primary motivation for many of our purchases and activities.  Influences consumers in three ways: o Informational o Utilitarian o Value-expressive Reference group influences stronger for purchases that are: Luxuries rather than necessities, Socially conspicuous/visible to others.  Normative influence: Helps to set and enforce fundamental standards of conduct  Comparative influence: Decisions about specific brands or activities are affected Any external influence that provides social clues  Cultural figure  Parents  A large, formal organization: Tend to be more product- or activity-specific: comparative influence  Small and informal groups: Exert a more powerful influence on individual consumers. A part of our day-to-day lives: normative influence. Types of Reference Groups  Formal vs. Informal o Reference group can be large and formal with a standard, recognized structure, these are more product or activity specific o The reference group can be small and informal, just a group of friends o However - As a rule, small informal groups can exert powerful influence on individual consumers because they are more involved in day to day lives  Brand Communities and Tribes o Brand communities are a group of consumers who share a set of social relationships based upon usage or interest in a product o Brandfests enhance brand loyalty, feeling more positive about the product, more forgiving over mistakes, and being brand missionaries. o Consumer tribe is a group of ppl who share a lifestyle and can identify with each other because of a shared allegiance to an activity or product. Share emotions, moral beliefs, styles of life, and affiliated product.  Tribal marketing: linking a product to the needs of a group as a whole  Membership vs. Aspirational o People the consumer actually knows vs. people the consumer doesn’t know but admires o Aspirational strategies concentrate on highly visible, widely admired figures (athletes or performers) o Membership strategies focus on ―ordinary‖ people whose consumption provides informational social influence o Propinquity: As physical distance btwn people decreases and opportunities for interaction increase, relationships are more likely to form. o Mere exposure: we come to like people or things simply as a result of seeing them more often. o Group cohesiveness: degree to which members of a group are attracted to each other and value their group membership  As value of group to individual increase so does likelihood that group will influence decisions  Smaller groups are more cohesive. Exclusivity is a benefit.  Positive vs. Negative Reference Groups o Consumers model behaviour to what they believe to be consistent with what is expected o Reference groups may exert either a positive or negative influence on consumption behaviour o Avoidance groups: motivation to distance oneself from other people/groups o Motivation to distance ourselves from negative reference group can be as or more powerful than the desire to please a positive group o Marketers show ads with undesirable people using competitor’s product  Antibrand Communities o Coalesce around a celebrity, store, or brand—but in this case they’re united by their disdain for it o Social Idealists who advocate non-materialistic lifestyles o Usually share a moral stance, support network to achieve common goals, or a means for coping with workplace frustrations, and a hub for information, activities, and related resources o Many oppose Walmart, Starbucks, McDonald’s and Hummers When Reference Groups are Important  Impact of reference groups vary based on whether the product is complex or, a product with little perceived risk (less susceptible), as well whether or not the product can be tried before purchase.  Two dimensions of influence: o Purchases to be consumed privately or publicly o Whether a luxury or a necessity  Reference groups are most robust for purchases: o Luxuries: subject to individual taste and preferences o Socially conspicuous products: sway more than items that people will not see The Power of Reference Groups Social power: capacity to alter the actions of others.  Referent Power: Admires the qualities of individual and try to imitate those qualities by copying the referents behaviour  Information power: b/c you know what others would like to know – influence opinion by virtue of access to truth  Legitimate power: virtue of social agreement  Expert power: possessing a specific knowledge or skill – evaluate products in an objective and informed way o Affiliation with elite uni, think tank, or investment house o Authorship of a slim, easy-to-read book that yields a vision of the future  Reward power: to provide positive reinforcement – power to the extent that the reward is valued. Social approval/acceptance.  Coercive power: effective in short term. Does not create attitude/behavioral change. It is evident in fear appeals. Conformity Conformity refers to a change in beliefs or actions as a reaction to real or imagined group pressure. Norms are informal rules that govern behaviour. Ex. Gift giving, gender roles, and personal hygiene. Factors Influencing the Likelihood of Conformity  Cultural pressures  Fear of deviance: apply sanctions to punish behaviours  Commitment to group: principle of least interest, person/group with least commitment to staying in a relationship has the most power  Group unanimity, size, expertise: compounded when group members are perceived as knowing what they’re talking about  Susceptibility to interpersonal influence: individuals need to identify with or to enhance his or her image in the opinion of significant others. Role relaxed individuals usually have higher confidence, and are more affluent. Social Comparison Social Comparison Theory: We look to others’ behaviour to inform us about reality. Occurs as way to increase stability of one’s self-evaluation (sans physical evidence). Tastes in music and art. We tend to choose co-oriented peers when performing social comparison.  Tactical requests o People want others to conform o Foot in the door technique: Ask for a small request then hit them up for something bigger o Low-ball technique: Asked for small favour that becomes costly o Door in the face technique: First ask to do something extreme, and when they refuse the person will then ask for a smaller request  Group effects on individual behaviour o Likely to focus less attention to yourself. o Home shopping parties: capitalize on group pressure to increase sales. Can lead to the bandwagon effect.  Tupperware and Botox parties  Informational and normative social influence o Deindividuation: individual identities become submerged within a group. Example: binge drinking at college parties o Social loafing: People don’t devote as much to a task when their contribution is part of a larger group. Example: we tend to tip less when eating in groups o Risky shift: Group members show a greater willingness to consider riskier alternatives following group discussion than if members decide alone. Due to diffusion of responsibility, and the value hypothesis. Resisting Conformity Anti-conformity: Defiance of the group is the actual object of behaviour. Don’t want to do what is in style. Innovation should be encouraged, as it creates change and demands for more styles and products. Difference btwn independence, and anti conformity. Reactance: Threats of censoring books, television or rock music that people find objectionable actually results in an increase desire for these items. Word of Mouth Communication WOM: product information transmitted by individuals to individuals. More reliable form of marketing-buzz marketing. Social pressure to conform. Influences two-thirds of all sales. We rely upon WOM in later stages of product adoption. Powerful when we are unaware of product category. Mountain Dew’s young U.S. consumers happily discovered the high caffeine content of the drink.  Factors encouraging WOM o Powerful when consumer is unfamiliar with the WOM o Product related conversations can be created  Take pleasure in talking about product  Knowledgeable about product and use conversations as a way to let others know it  Initiate discussion out of a genuine concern for someone else.  Negative WOM o We weigh negative WOM more heavily than we do positive comments!  90% of unhappy customers will not do business with a company again  Negative WOM is easy to spread, especially online  Determined detractors  Information/rumor distortion  Social Networking o Web sites allow members to post information about themselves and make contact with similar others o Empower consumers to become partners and shape markets o Share interests, opinions, business contacts o Twitter, facebook, myspace o Web 2.0: internet on steroids  Crowd Power: Wisdom of crowds – under right circumstances a group can be smarter than the smartest individual in it. o Guerrilla Marketing: Promotional strategies that use unconventional locations and intensive WOM to push products  Recruits legions of real consumers for street theater  Hip-hop ―mix tapes‖/street teams  Brand ambassadors o Virtual Communities: A collection of people who share their love of a product in online interactions – members usually remain anonymous  Multi-user dungeons (MUD), Rooms (IRC), rings, and lists. Boards. Blogs/blogosphere  Internet users tend to progress from asocial information gathering to increasingly affiliative social activities  Intensity of identification depends on:  More central activity to persons self concept more like to pursue an active membership in a community  The intensity of the social relationships the person forms with other members of the virtual community helps to determine the extent of his or her involvement  Great potential for abuse via untrustworthy members  members can watch original programming and get skin care information on the site. o Viral Marketing: Getting visitors to a Web site to forward information on the site to their friends.  Most of us rely on friends or family for website recommendations  Creating online content that is entertaining or weird  Which type of Web surfer are you? o Virtual Worlds: 3D worlds that employ sophisticated computer graphics to produce photo-realistic images  Consumer engagement and often creates the flow state  They walk, fly, teleport  Virtual Goods: a new market for these virtual goods are at least a $1.5 billion market Opinion Leadership Opinion leaders: influence others’ attitudes and behaviours. Researchers identify profile of a representative opinion leader and then generalize these insights to a larger market. They are:  Technically competent – expert power  Knowledge power  Socially active, highly interconnected – legitimate power  Are similar to consumer – referent power slightly higher social status but not so high that they’re in a different class  Are among the first to buy and likely to impart both positive and negative information  Hands-on experience The Nature of Opinion leadership  Extent of an opinion leaders influence o Generalized opinion leader versus monomorphic/polymorphic experts o Although opinion leaders exist for multiple product categories, expertise tends to overlap across similar categories o It is rare to find a generalized opinion leader o Innovative communicators o Opinion seekers o More likely to talk about products with others and solicit others’ opinions o Casual interaction prompted by situation  Types of opinion leaders o Opinion leaders absorb information from mass media and transmits data to opinion receivers o May or may not purchase the products they recommend o Early purchasers are innovators o Innovative communicators – early purchasers and opinion leaders o Two-step flow of model of influence: small group of influencers change opinions or many people. Responsible for dissemination of information since they can modify the opinions of a large # of other people. o Part of an influence network o Cascades of information which is information that triggers a sequence of interactions o Market maven: Actively involved in transmitting marketplace information of all types. Close to a generalized opinion leader.  Just into shopping and aware what’s happening in the marketplace  Overall knowledge of how and where to get products  Surrogate consumers: Hired to provide input into purchase decisions and compensated for involvement ex interior designer Identifying Opinion Leaders Many ads intend to reach influencers rather than average consumer. Local opinion leaders are harder to find. Companies try to identify influencers in order to create WOM ―ripple effect. Exploratory studies identify characteristics of opinion leaders for promotional strategies  Self-designating model: Most commonly used technique to identify opinion leaders…  Simply ask individuals whether they consider themselves to be opinion leaders  Method is easy to apply to large group of potential opinion leaders  View with skepticism…inflation or unawareness of own importance/influence o Alternative: key informants identify opinion leaders  Sociometry: Trace communication patterns among group members and allows researchers to create a systematic map of group interactions that take place o Most precise method of identifying product-information sources, but is very difficult/expensive to implement o Very hard and expensive to implement o Best in closed, self contained social settings o Social contagion effect: o Network analysis  Referral behaviour: locate S&Ws in terms of how ones reputation is communicated through the community  Network analysis: communication in social systems. Considers relations of people in a referral network and measures Tie strength btwn them – nature of the bond between them  Bridging function, strength of weak ties Chapter 12: Household Decision Making More than one person is involved in the purchasing process for products or services that may be used by multiple consumers who have different preferences, tastes, and investments in the outcome. Households and Families Before 1900s: Extended family 1950s: Nuclear family (mother, father, and children) Today, many households: Married couples less than 50% of households. Majority of adult women live without spouse. Unmarried opposite sex couples. Same-sex couples. Intentional families: groups of unrelated people who meet regularly and celebrate holidays together. Extended family and nuclear family Just what is a household? Household living arrangements refers to whether or not the person lives with another person or persons and, if so whether they’re related Census family: married couple and children, both spouses living in common law, either or both living with child, or lone parent with 1 child. Extended family contains at least three generations living together Nuclear family: mother and father with 1 or more children. Today: at least two people, regardless of their relationship. Divorces and separations are accepted in our culture…marital breakups are ever-present theme in books, music, and movies. Adult females are staying home with family/children more (especially among best- educated/highest achieving women).  Age of the Family o Most Canadians under 24 have never been married or living common-law o 35-64 age group greatest number of marriages and common-law relationships (75%) o People are waiting longer to get married o Trend toward giving non-traditional items as wedding gifts (home electronics, computers)  Family Size o Depends on educational level, availability of birth control, and religion o Total fertility rate: avg # of children that would be born per woman if all women lived to the end of their child bearing years and bore children. In 2006 was 1.6, which is below the replacement rate of 2.1 to sustain Canadian population o Marketers keep an eye on fertility rate and birth rate o Worldwide, women want smaller families (especially in industrialized countries)  Divorce is common  Fewer young people to support their elders  Some countries want people to have more children  Non-Traditional Household and Family structures o Any occupied housing unit is a household o Same-sex households are increasingly common: Marketers target them as unit  POSSLQ living arrangement o Rise of single-person households  Singles spend more on rent, alcohol, reading materials, health care, and tobacco/smoking  Two income couples without children are better educated than two- income couples with children  Child free children are more likely to have professional or managerial occupations  Who’s living at home? o Sandwich generation: Adults who care for their parents as well as their own children o Boomerang kids: Adult children who return to live with their parents. If moving in with roommates more likely to come back. Spend less on household items and more on entertainment. o Non-human Family Members: Pets are treated like family members and spending has doubled in the last decade. Some Pet-smart marketing strategies:  Name-brand pet products  Designer dog water  Lavish kennel clubs, pet accessories The Family Life Cycle  Factors that determine how couples spend money: o Whether they have children o Whether the woman works  Family life cycle (FLC) concept combines trends in income and family composition with change in demands placed on income o As we age, our preferences/needs for products and activities tend to change  A number of models have been proposed before, but they fail to take into account important social trends.  FLC Models: Useful models take into account the following variables in describing longitudinal changes in priorities and demand for product categories: o Age o Marital status o Presence/absence of children in home o Ages of children o Definition of marriage must also be relaxed to include any couple living together in a long term relationship.  Such factors allow use to identify categories of family-situation types  Family life cycle effects on bullying: FLC model categories show marked differences in consumption patterns o Young bachelors and newlyweds: exercise, go to bars/concerts/movies, drink alcohol – dollar value of cars and homes is lowest o Early 20s: apparel, electronics, gas o Families with young children: health foods o Single parents/older children: junk foods o Newlyweds: appliances o Mature consumers are having the time of their lives  Overall understanding of FLC can help marketers clearly identify their target markets Household and Family Decision Making Decision Roles and Dynamics Families make two types of decisions: Consensual purchase decision: Members agree on the desired purchase, differing only in terms of how it will be achieved. Ex. Getting a dog. Accommodative purchase decision: Members have different preferences or priorities and cannot agree on a purchase to satisfy the minimum expectations of all involved. Use bargaining, coercion, and compromise to get to an agreement. Roles – depending on decision to be made some or all of these roles are used, or one person can embody more than one:  Initiator  Information Gatherer  Gatekeeper – conducts search for info and controls flow of info to group  Influencer – sway the outcome of the decision  Decision Maker  Buyer  Preparer – processes product and directs service into product that can be used by other  User  Maintainer – upkeep  Disposer – discontinue or dispose Conflict occurs when there is an incomplete alignment of family memebrs’ needs and preferences. Specific factors that determine how much family decision conflict there will be:  Interpersonal need – persons level of investment in the group  Product involvement and utility – degree to which a person will use the product to satisfy a need  Responsibility – for procurement, maintenance, payment and so on. More likely to come into conflict if decision is about a LT commitment  Power – degree to which one member exerts influence over others in making a decision. In traditional families husband has more than wife, who has more than oldest child. Conflict can arise when a person continually uses their power to get own satisfactions Families construct a family identity: that defines the household both to members and to outsiders. Gender Roles and Decision-Making responsibilities Who makes key decisions in a family? Autonomic decision: one family member chooses a product. Wives still make decisions on groceries, toys, clothes, and medicines Syncratic decision: involve both partners. Used for cars, vacations, homes, appliances, furniture, home electronics, interior design, phone service. As education increases, so does syncratic decision making. Gender convergence: gender neutral As the couples are more educated they are more likely to compromise and make decisions together. There is a shift to compromise and turn taking.  Identifying the decision maker o Marketers have to identify who is the decision maker in order to be able to target them. o Family financial officer (FFO): who keeps track of the bills and decides how any surplus will be spent.  Newlyweds share this, but overtime one of another takes control  In traditional families, the man makes the money and the woman spends it  If spouses adhere to modern sex-role norms, participation in family maintenance activities  Working mothers struggle with a juggling lifestyle o Four factors in joint versus sole decision making:  Gender-role stereotypes – make more individual decisions  Spousal resources – spouse who contributes more has more influence  Experience – gained exp as unit will make individual decisions  Socioeconomic status – middle class families make decisions together o He-she decisions:  Half of kitchenware customers are men  25% men do the grocery shopping  Kin-network system: perform rituals intended to maintain ties among family members both immediate, and extended. Generally the women organize family rituals, send cards, visit relatives etc.  Heuristics in joint decision making o Synoptic ideal: Husband and wife to take a common view and to act as joint decision makers Thoroughly weigh alternatives, assign each other well defined roles, and calmly make mutually beneficial consumer decisions o Heuristics simplify decision making:  Salient, objective dimensions  Task specialization  Concessions based on intensity of each spouse’s preferences Children as decision makes: Consumers-in-training Children make up three distinct markets: Primary market: Kids spend their own money on their own wants and needs Influence market: Parents buy what their kids tell them to buy (parental yielding – surrendering to a child) Likelihood of yielding depends on parents style, kids can ask for things, saying they had seen the product on TV, sibling or friend had it, or doing chores, sometimes evening engaging in persuasive behaviour. Future market: Kids ―grow up‖ quickly and purchase items that normally adults purchase (e.g., photographic equipment, cell phones) Lock in brand loyalty at a young age. Consumer Socialization: process by which young people acquire skills, knowledge, and attitudes relevant to their functioning in the marketplace. Children’s purchasing behaviour is influenced by: Parents, Television (―electronic babysitter‖), & Sex roles.  Influence of parents o Direct and indirect parental influences:  Deliberate attempt to instill own consumption values  Determine exposure to informational sources (TV, salespeople, peers)  Cultural expectations regarding involvement of children in purchase decisions o Grown-ups as models for observational learning  Passing down of brand loyalty  Children watch and imitate o Parental styles that affect socialization:  Authoritarian: hostile, restrictive, and emotionally uninvolved – censor their children  Neglecting – detaches and not exercise a lot of control  Indulgent – less restrictive, communicate, and are warm  Television and the web o Advertising’s influence begins at early age:  Many marketers start to push their products on kids to encourage them to build a habit young o Kids are also exposed to idealized images of what it is like to be an adult o In 2006, kids 2 to 11 years old watched more than 14 hours each week o American pediatric organizations recommend less than two hours a day, and one hour for preschoolers Gender-Role Socialization  Children pick up on gender identity at an early age than previously believed o One function of play is to rehearse for adulthood, and learn about expectations that others have of them o Toy companies perpetuate gender stereotypes  Girls interested in creativity and relationships  Boys interested in battle and competition  Children rehearse adulthood roles via toys as props o Toys ―R‖ Us Girls’ World & Boys’ World o ―Male and female play patterns‖ o Smartees’ line of dolls and Working Woman Barbie Cognitive Development Stage of cognitive development: Ability to comprehend concepts of increasing complexity  Jean Piaget o Very young children are thought to be able to learn consumption-related information surprisingly well o Experiment with lemon juice An alternative approach identifies three segments of information-processing capability:  Limited – don’t employ storage and retrieval strategies under 6  Cued – 6-12 employ strategies when prompted  Strategic – 12 years and up spontaneously employ the strategies o Children do not think in ―adult‖ ways—they cannot be expected to use information the same way o Children do not form the same ―adult‖ conclusions when presented with product information o Therefore more vulnerable to persuasive msgs o Multiple-intelligence theory Marketing Research and Children  Relatively little real data on childrens’ preferences/influences on spending patterns is available  Kids tend to: o Be undependable reporters of own behaviour o Have poor recall o Not understand abstract questions  Product Testing: Tell them what they like and valuable perspective on which products will succeed with other children  Message Comprehension o Serious ethical issues when advertisers try to appeal directly to children o Children may not understand persuasive intent of ads o FTC action to protect children (1990 Children’s Television Act) Advertising to Children: An Ethnical Minefield Canadian Advertising Foundation’s Broadcast Code for Advertising to Children Provides Guidelines such as:  Endorsements by programme characters  Product claims  Sales pressure  Scheduling  Safety  Social Values Chapter 13: Income and Social Class Its not just money Social class has a profound impact on what person does with money and how consumption choices reflect place in society. Other people know what our standing are through what we buy, as we use this as status symbols. Income Patterns Whether a skilled worker or a child of privilege, social class has a huge impact on one’s life. Status symbols are valued as markers of social class. Average Canadian income increased from $50,000 in 1970 to $70,400. This change is the result of increases in educational attainment and the shift in women’s roles in life. Women’s Work  A larger proportion of people of working age are in the labour force  Mothers with preschool children comprise the fastest growth in the labour market  Women get high-paying jobs such as doctors, architects, etc.  Nearly 30 percent of wives make more money than their spouses Yes, It pays to go to school  Education pays off in the long run  In 2006 about 50 per cent of Canadians have post-secondary education  25 percent have university training and 16 per cent have a degree  ―Show me the money!‖  In 2005 graduates earned about $74,600 versus $43,700 for other education levels To spend or not to spend: that is the question  Demand for G&S depends on both ability to buy and willingness to buy  Discretionary income: money available to household over and above that required for a comfortable standard of living. o Households spend a much larger share of budget on shelter and transportation, and less on food and apparel o Households are spending more now on entertainment and education  Attitude toward money: o Money = success/failure, social acceptability, security, love, or freedom  Individual Attitudes Toward money:
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