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BACHELOR OF COMMERCE IN PURCHASING AND SUPPLY CHAIN

MANAGEMENT

YEAR 2: SEMESTER 2

CB 202: CONSUMER BEHAVIOUR

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How to use the module

Welcome to the module “CONSUMER BEHAVIOUR ”. I hope you find this module interesting
and helpful .This study guide will help you to understand the contents of the syllabus.

At the beginning of every unit there are some learning outcomes. These learning outcomes
outline the main points that you need to understand on completion of that unit, at the end of each
unit are some questions which you have to attempt in order to assess your understanding of the
unit. Usually if you are able to answer the questions correctly, you have understood the essential
elements of the unit. If you still find the questions challenging, you have to spend more time on
the unit and consult some of the quoted textbooks on the reference section.

The module was designed for self study, ensure that you make your own notes /summaries as
you work through the module. The module complements, not substitute the need for a wider
program of reading, research and individual study. It is for this reason that, throughout the text,
you will find references to other books which you have to consult
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Module Overview

This module covers topics which include, understanding the consumer, consumer decision
processes, problem recognition and the research process, Evaluative Criteria beliefs and
attitudes, Learning and behaviour modification, Information processing, Social and Cultural
influences, Purchasing behaviour and diffusion of innovation, consumerism.

Module Objectives

After completing this module, student should be able to:

 Describe the various research methods in order to understand the consumer

 Describe the steps in the consumer decision making process
 Explain the criteria used bay consumers to evaluate the brands they buy in the supply
chain.
 Discuss the various factors that influence the consumers in making purchase decisions.
 Discuss the stages in the diffusion of innovation in consumers
 Discuss the strategies that firms can use to change customers attitudes

Assessment

Assignment1 10%
Assignment 2 10%
Mid semester examinations 20%
Final examination 60%
Total 100%
Attendance: Class attendance will be monitored and attendance record has direct bearing on
continuous assessment marks. Regular attendance and participation is encouraged as it is very
helpful to the student. Numerous studies show a strong correlation between class attendance and
student success. If student’s attendance falls below 75%, he/she may be required to retake the
module.

Module contents

1. Understanding the consumer ……………………………………………………………… 7

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 Different categories of customers

 Internal customers
 Individual external customer
 Organizational (B2B) customers
 Non profit making organization customers
 The government as a customer

2. The consumer decision making process…………………………………………………. 20

 Need /problem recognition

 Information searching
 Evaluation of alternatives
 Purchase action
 Post purchase evaluation
 The different types of purchase decisions made by consumers

3. Factors influencing consumer decision making…………………………………………. 29

 Cultural factors
 Personal factors
 Income
 Family
 Friends
 Occupation
 Lifestyle
 Situational factors

4. Market segmentation………………………………………………………………………37

 Defining market segmentation

 Benefits and drawbacks of market segmentation.
 The criteria for selecting viable segments
 The basis for segmenting consumer markets
 Basis for segmenting industrial market
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5. Consumer Attitude and Perception……………………………………………………….51

 What are consumer attitudes?

 How consumer attitudes develop towards products and brands
 How to change consumer negative attitudes to be positive
 Consumer perception

6. Consumer motivation………………………………………………………………………79

 Consumer needs and wants

 Consumer goals
 The relationship between needs and goals
 The dynamics of consumer goals
 Theories of motivation

7. Understanding the new consumers and the youth market ……………………………….94

 The changing demographic environment

 The changing needs of consumers
 Availability of information and its impact on consumer behaviour
 Information technology and the youth market
 The rise of “green” and ethical consumers
 The global consumer

CHAPTER 1: UNDERSTANDING THE CUSTOMER

1.0.Introduction
Marketing starts with the needs of the customer and ends with the satisfaction or dissatisfaction
of the consumer. Given that, marketing revolves around the customer, then the study of
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consumer behaviour becomes a necessity. It starts with the buying of goods. Goods can be
bought individually, or in groups. Goods can be bought under stress (to satisfy an immediate
need), for comfort and luxury in small quantities or in bulk. For all this, exchange is required.
This exchange is usually between the seller and the buyer. Consumer behaviour is a complex,
dynamic, multidimensional process, and all marketing decisions are based on assumptions about
consumer behavior.

1.1. Chapter objectives

After studying through this chapter, the student is expected to be able to
 Define consumer, customer and client
 Distinguish the different types of customer
 Explain the characteristics of different customers

Defining consumer behaviour

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Consumer behaviour refers to the psychological processes and physical activities that consumers
undergo when acquiring, evaluating, using and disposing goods and services available on the
market. This definition clearly brings out that it is not just the buying of goods/services that
receives attention in consumer behaviour but, the process starts much before the goods have been
acquired or bought. A process of buying starts in the minds of the consumer, which leads to the
finding of alternatives between products that can be acquired with their relative advantages and
disadvantages. This leads to internal and external research. Then follows a process of decision-
making for purchase and using the goods, and then the post purchase behaviour which is also
very important, because it gives a clue to the marketers whether his product has been a success or
not.
To understand the likes and dislikes of the consumer, extensive consumer research studies are
being conducted. These researches try to find out:
 What the consumer thinks of the company’s products and those of its competitors?
 How can the product be improved in their opinion?
 How the customers use the product?
 What is the customer’s attitude towards the product and its advertising?
 What is the role of the customer in his family?

The role of customer knowledge in marketing strategy

Marketing strategy is the game plan which the firms must adhere to, in order to outdo the
competitor or the plans to achieve the desired objective. In formulating the marketing strategy, to
sell the product effectively, cost-benefit analysis must be undertaken.
The idea is to provide superior customer value and this requires the formulation of a marketing
strategy. The entire process consists of market analysis, which leads to target market selection,
and then to the formulation of strategy by juggling the product, price, promotion and distribution,
so that a total product (a set of entire characteristics) is offered. The total product creates an
image in the mind of the consumer, who undergoes a decision process

 Consumer behavior is an important consideration when constructing a marketing plan.

While revenue, sales numbers and all profit generating departments are important, when
it comes down to it consumer behavior is a big part of the marketing puzzle.
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 Businesses that cannot understanding how a consumer’s mind operates will have a more
challenging time figuring out how to target a campaign that will attract or catch attention.
 The study of consumers helps firms and organizations improve their marketing strategies
by understanding issues” and continues to describe how “the psychology of how
consumers think, feel, reason and select between different alternatives.”
 Other consumer behavioral factors of value are gaining perception of how consumers are
influenced by their environments, shopping routines, decision making processes, and
motivations.
 The other benefits related to consumer behavior are
• Marketing Strategies – this includes grasping good timing, effective advertising
techniques and pleasing customers.
• Public Policy – Gaining knowledge of public policy and how products can impact
(i.e. side effects) is critical.
• Social Marketing – This factor involves ensuring ideas are passed to consumers
rather than aggressive sales. This could include awareness or if society is
resistant, alternative methods.
• Better Consumers – Studying consumer behaviors make marketers better
consumers too.
 Understanding how to utilize the information gleaned from consumer behavior is the key.
Armed with this information marketers can focus on producing products and/or services
targeted markets are actually interested in, and they can also figure out how to develop
effective campaigns..
 If these two objectives can be accomplished, then the chance of converting marketing
efforts to sales increases

If a good glimpse in consumer behavior can be made, then the rest comes more naturally.

What Satisfies/Dissatisfies Customers

 Customers expect satisfaction and in doing so they distinguish between dissatisfies and
satisfiers.
 Certain elements of the exchange are necessary to avoid certain customer dissatisfaction.
Dissatisfies would include a car that will not start, a jacket that has been so badly stitched
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that the buttons fall off the first time it is worn, and a watch that does not keep the correct
time.
 Dissatisfies occur when the level of quality provided by the service suppliers falls below
the basic level of product quality and service from any supplier as a right. However, they
hope for additions to the basic level of product or service that will delight them. Of
course, for organizations, the key to this is understanding exactly what customers are
looking for, what their responses to product and service offers are and exactly why
customers behave the way they do.
 If the supplier delivers a basic level of product quality and service, it does not guarantee
that customers will be satisfied because competitors may be offering additional value.
 The customer expects these services to be part of the normal product in an efficiently
operated airline but they will not create satisfaction for the customer. It will take
something better to delight the customer.
 The customer may be delighted if she or he is offered better food in the plane than was
expected, a seat upgrade, the opportunity to wait in the executive lounge or even if the
cabin steward is prepared to chat to him or her in quiet periods during the flight. All these
small events may make a boring airline flight more memorable for the customer.
 The problem for suppliers, of course, is that customers get used to the free additions to
the product and service initially delight them and begin to take them for granted.
Customers then start looking around for what extra value other suppliers are offering. All
these extras ultimately have to be paid for and so suppliers find ways of increasing prices
to cover their costs to the point where premium prices are being charged for over-
elaborate products and services.

 Organizations observe that out of the mass of potential customers they can identify
groups or customer segments that have similar needs and expectations. For example, one
group of customers simply wants low-cost basic food products form supermarkets,
whereas another group wants a wider variety of food, perhaps with more exotic
ingredients. Having defined these groups of customers with similar needs, the
organization can then clearly identify what each of the customer segments is looking for,
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and work out how their precise requirements can be delivered. The customer
requirements take the form of tangible and intangible benefits.

Defining customer

A customer (sometimes known as a client, buyer, or purchaser) is the recipient of a good,

service, product, or idea, obtained from a seller, vendor, or supplier for a monetary or other
valuable consideration.

A customer may or may not also be a consumer, but the two notions are distinct, even though the
terms are commonly confused. A customer purchases goods; a consumer uses them. An ultimate
customer may be a consumer as well, but just as equally may have purchased items for someone
else to consume. An intermediate customer is not a consumer at all. The situation is somewhat
complicated in that ultimate customers of so-called industrial goods and services (who are
entities such as government bodies, manufacturers, and educational and medical institutions)
either themselves use up the goods and services that they buy, or incorporate them into other
finished products, and so are technically consumers, too.

Different types of customers

Internal customers
An internal customer is a customer who is directly connected to an organization, and is usually
(but not necessarily) internal to the organization. Internal customers are usually stakeholders,
employees, or shareholders, but the definition also encompasses creditors and external
regulators. In most organizations individual staff members or departments depend on being
served by other staff members or departments within the organization. Global companies, which
operate across borders, face many additional challenges in achieving satisfactory internal
customer exchanges. Staffs from different countries and cultures have different languages too.
These companies often try to standardize their products; promotions and their new product
launch to be carried out by other parts of the company in their home countries.

Needs of the internal customer

Here are some pointers to satisfy internal customers and retain them as a valuable asset.
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 Maintain a healthy work culture – Friendliness and Co-operation is very important to

maintain the chain of internal customers and hence the work culture in the organization
should be such that this chain is maintained.
 Show Respect – An outside vendor should be treated with the same respect as an
employee of an organization. Remember, they are both your internal customers.
 Motivate them – By providing regular perks and benefits, Internal customers can be
motivated and better results can be obtained as compared to a disgruntled internal
customer.
 Be proactive – Prepare policies which help the internal customers in times of needs. Go
out of your way to satisfy and help them. Always try and exceed expectations.
 Importance of training – There are several organizations which focus on training as a
measure to strengthen the internal customer chain such that work is carried out smoothly
without hassle. These trainings emphasize on job roles and job profiles as well as
responsibilities thereby clearing the objectives and expectations from internal customers.

3Cs of internal customer care

Internal customers are one of the most important stake holders within a company. An internal
customer can be employees, a supplier, a contract manufacturer, so on and so forth. So how do
you take care of internal customers?

Care and concern – The primary objective of any organization should be to maintain employee
welfare.

 Care and concern is evident with the facilities provided to internal customers as well as
the provisions and overall the work culture prevailing within an organization.

Co – Operation and collaboration – It is very necessary to co-operate, co ordinate and

collaborate with internal customers to keep them happy and active.

 Internal customers have their own demands and they should be co operated.
 Co ordination and collaboration between internal customers such as sales and service
department is also necessary.
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 Ultimately, this brings about harmony in the organization and the organization is placed
above self by the internal customer.

Communication – Communication between internal customers (mostly top, middle and lower
management) is critical.

 Any changes occurring within the system, good or bad should be communicated.
 Not only changes, but even time to time communication of latest happenings in the
organization as a whole should be communicated to internal customers.
 Several companies resort to using weekly or monthly newsletter which gives internal
customers updates about their company as well as their sector keeping the internal
customers united.

Individual /family customer

The individual / family customer

In the business-to-consumer market organizations are usually selling to the end user of the
product or service. Understanding who these customers are and how they spend their money is
therefore of interest to many organizations. However, it is also important to understand the
family as a decision-making unit as a large number of our purchases is made as members of a
family.
 There have been a number of changes to the family structure over the past 30 years, many
of which have impacted on children and their role as consumers. The fact that parents are
delaying having children has meant that these parents are more affluent and have clearer
views regarding such matters as healthy eating, educational priorities as well as ethical
consumerism.
 Later and smaller families and the rise in the number of divorces have led to children
having more to spend on them individually and them playing a more prominent role in
the purchasing decisions made by the family.
 The market place for products aimed at children is becoming increasingly complicated,
with cross over marketing, brand extensions and character licensing all playing a part.

Types of individual /family customers

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Not all individual customers will behave in a similar fashion. If you differentiate customers by
the way they purchase products and services you can identify four different types: the
economic/rational customer, the passive customer, the cognitive customer and the emotional
customer.
• The economic/rational customer: This is the customer who makes decisions based
on economic rationale alone. The customer has been able to access a complete
understanding of all other alternatives and has been able to fully evaluate those
alternatives and so identify the best one. Many marketers view this as unrealistic
as customers rarely have enough information to make a full evaluation, nor do
they have the search and evaluation skills necessary. Furthermore, a lot of
customers may be willing to spend the time needed to make such an evaluation.
• The passive customer: This customer is basically submissive and makes irrational
decisions. Passive customers as seen as impulsive and easily swayed by marketing
promotions. Thus they make decisions based on what information is readily
available and do not actively seek to develop an understanding of the alternatives
available and may skip whole stages of the decision-making process.
• The cognitive customer: This customer focuses on the purchasing process.
Cognitive customer seek information and evaluate that information, and then as
an information processing system but accepts that it is an imperfect world so sets
the objective of getting enough information to make an adequate decision.
• The emotional customer: This customer puts a lot of less emphasis on the search
for information. Current mood and feeling are the key determinant of their
purchase decision. This customer views making purchases to satisfy emotional
needs as entirely rational. Thus the emotive benefits of the alternatives are much
more concerned with the social recognition that the purchase brings than the
mechanical attributes of the car

Organizational customers.
There are several different types of organizational customer, principally business-to –business
B2B, Business-to-government and Not-For-Profit Organizations.
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The business-to-business customer

B2B customers are usually concerned with obtaining inputs to create an added value in either
goods or services that flow down the supply chain. In the purchasing of products this means B2B
customers are usually either manufacturers or intermediaries in the supply chain. In the purchase
of services, the B2B customer could be any of the parties mentioned above or perhaps another
provider of business services. The different types of B2B customers are discussed below
• Manufacturers as b2b customers: Manufacturers of original equipment are
major purchasers of components and parts, which they then integrate into the
products they are manufacturing. Historically, whole industries have developed in
close geographical proximity as suppliers have endeavored to beat their
competitors by being as close as possible to their customers. Today, the
globalization of the manufacturing processes, together with growth of global
sourcing and the development of global supplier Internet, means manufacturers
and their suppliers have a much more virtual proximity through e-business than
actual geographical proximity.
• Supply chain intermediaries as b2b customers: Intermediaries as B2B
customers purchase goods to sell on to the next stage of supply chain. These could
be wholesalers and retailers, distributors and agents or perhaps franchisees or
brokers. The key role for all of these intermediaries is to provide the route to the
end –user market for the Manufacturer and to help them get their goods to the
right customers at the right time and in the right condition. However, they are also
customers in their own right and, like end-users customers the manufacturer needs
to understand the motivations for buying the product and the needs they are
hoping to satisfy by reselling the products. Manufacturers will endeavor to build
close relationships with such customers, as it is such intermediaries in the supply
chain that have the skills and resources to reach the end-user market. It is also
these intermediaries who are in constant communication with the place than the
manufacturers themselves.
• Service clients as b2b customers: B2B organizations require wide ranges of
services to facilitate their operations so are important as customers of services.
These services are not just the financial, legal and management advisors they may
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need also maintenance contractors for the whole range of office and production
equipment as well as for building, facilities and other requirements. Such services
are usually provided through contract providers. This means the service customer
sets up a service level agreement, setting down clearly the expectations as to the
level of service required. While the vetting process may not be as arduous for a
contract service provider as for one who is providing technical goods, the penalty
clauses for not meeting the conditions of the service level agreement can be
punitive for the supplier.
Robinson et al (1967) cited in jobber (2004) divide the different types of purchasing decision
carried out by B2B customers into straight re-buy, modified re-buy and new task.
• A straight re-buy represents the bulk of the business buying. The buy signal is
often triggered through information systems when stock levels reach a pre-
determined replenishment point.
• The modified re-buy indicates a certain level of information search and re-
evaluation of products/services and supplies before the purchase is made.
• The new task represents an area of considerable uncertainty in which the company
needs to make decisions about what it wants, about performance standards and
about supplier capabilities. The new task, particularly if the purchase is of major
importance to the company, will involve discussion with senior management.
Whatever the type of B2B customer, we can discern from the above descriptions that B2B
customers have a number of special characteristics.
• First, both B2B buyers and sellers are usually active participants in the buying
process.
• The process is one of active negotiations on both sides. This can differ from the
individual customer, where impulse purchases or purchases made in response to
aggressive advertising are much more common.
• Secondly, B2B customers are much more likely to form a much long-term
relationship with their suppliers which can, in some cases, be sustained over a
long period of time.
• However, the nature and the strength of this relationship may well depend on the
characteristics of the buying problem itself.
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• If the purchase is perceived as highly important to the buyer and they rely on the
seller’s capabilities to help them solve the buying problem, the relationship will
be stronger and closer than more routine purchase which are not seen as
problematic and where the buyer feels they have the capability of making the
correct purchasing decision.
• As we have discussed above, purchasing decisions are concerned with problem
resolution.
• The nature of the decision-making process will vary with the seriousness and
complexity of the problem being faced by the purchasing organization.
• They generally go through a more complex buying process.
• The purchase they make maybe infrequent or one-offs.
• The decision to buy can be postponed indefinitely
• The demand for products and services is derived from their clients and the end
users.
• Traditionally they have been highly concentrated either geographically or by
industrial sector.
• Lead and delivery times are of paramount importance.
Non profit making organisational customers
Not-for-profit customers can be a range of organizations. Large institutions such as hospitals and
universities are not-for-profit customers, although they are also large public bodies that, as
customers, will bear many similarities to B2G customers.
Equally, this category could include charities, churches or educational organizations. Such
bodies obtain their funding from a range of sources both private and public and so will have a
wide range of stakeholders in a B2B buying situation, where the major motivation is to make a
profit, in that the varying political, ethical and emotional motives for the involvement of the
various stakeholders within the organization can make the decision-making process in any
purchase politically sensitive and sometimes highly complex
The government as a customer
Governments and other governmental institutions, such as local authorities and nationalised
industries, are important buyers in most national markets. In many countries, governmental
bodies account for around 50% of all goods and services purchased within the country. The
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methods used in buying by governments and other institutions are therefore very important.
The key elements of buying by governmental institutions are as follows.

Buying will be a bureaucratic process: A bureaucratic process is more likely to apply than an
open DMU approach - or, at least, the DMU roles are likely to be submerged within the
bureaucratic framework.
A tender system is usually used: The tender system is used by governmental bodies to ensure
public accountability. The taxpayers' money needs to be spent, and to be seen to be spent,
efficiently and without corruption. The tender system aims to reduce or eliminate personal bias
and prejudice in the awarding of what are often very large contracts. The broad principles of the
tender system are the public announcement of a contract for specific goods or services inviting
those wishing to respond do so by submitting a quotation for the contract - a tender. Details of
the contract and the criteria for selection are made available to interested parties. All tenders
remain sealed until the buying committee meets and they are all then adjudicated according to
agreed rules. The adjudication of tenders might be based on the lowest price tendered or it might
be based on an estimation of best value, in which case factors such as quality and delivery may
be important.

Political influence: The decisions of governmental bodies are ultimately the responsibility of
politicians and buying decisions - particularly those involving the award of large contracts - may
have political importance. Thus, there is always the possibility that political influence will be
brought to bear to achieve a satisfactory outcome. The type of political system will also influence
government purchasing.

- National preference: In most countries, for all the obvious reasons (political, economic,
employment, etc.) governmental institutions will try to buy from their own nations. In
some countries, national preference will be a major barrier to market entry for companies
seeking to export. Public contracts must be predetermined in one of two ways - lowest
prices or best value. Whichever tender is best, according to the method selected, will win
the contract. Public procurement contracts showing preference to national suppliers will
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be penalised. This has implications for the market opportunities of EU companies

specializing in gaining government contracts
- Types of business and government buying: Certain types of business are more dependent
upon government buying than others. Most goods and services can be bought by
government and institutions, but some markets revolve solely around government
decisions. A good example of this is companies selling defense equipment - tanks, guns,
radar, night sights, etc. National governments are, generally, the only buyer of defense
equipment within a country, and they may also control which other countries may be
supplied

Chapter summary
Once again, it is important to stress that business must carefully look for differences in
institutional or government buyer behaviour in international markets. Once more, cultural factors
will play a key role in giving rise to differences here, but so too, given the nature of the buyer,
will political differences. The business must therefore carefully analyse and appraise each market
in which they operate or intend to operate, developing an in-depth understanding of customers
and customer behaviour in each market. Then, and only then, will it be in a position to make a
decision about the extent to which there are similarities in customer behaviour.

CHAPTER 2: THE CONSUMER DECISION MAKING PROCESS

Introduction
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Consumers make a staggering number of purchasing decisions. In this section we will examine
who the consumers are, we will briefly examine the decision making process they undergo in
making the above decisions. There are different processes involved in the consumer behavior.
Initially the consumer tries to find what commodities he would like to consume, then he selects
only those commodities that promise greater utility. After selecting the commodities, the
consumer makes an estimate of the available money which he can spend. Lastly, the consumer
analyzes the prevailing prices of commodities and takes the decision about the commodities he
should consume. Meanwhile, there are various other factors influencing the purchases of
consumer such as social, cultural, personal and psychological. This chapter covers, the steps
followed by consumers in making purchase decisions as well as the factors that influence the
consumers in making purchase decisions.

Chapter objectives
After studying through this chapter, the student is expected to be able to
 Describe the process that consumers undergo when making purchase decisions
 Explain the criteria used by consumers to evaluate the various alternatives they will be
having
 Describe the post purchase evaluation techniques used by consumers
 Explain the concept of cognitive dissonance and highlight how marketers can minimize
it.

Consumer decision making process

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There are different processes involved in the consumer behavior. Initially the consumer tries to
find what commodities he would like to consume, then he selects only those commodities that
promise greater utility. After selecting the commodities, the consumer makes an estimate of the
available money which he can spend. Lastly, the consumer analyzes the prevailing prices of
commodities and takes the decision about the commodities he should consume. Meanwhile, there
are various other factors influencing the purchases of consumer such as social, cultural, personal
and psychological. The consumer decision making process has the stages outlined below.
Figure 2. 1 . Consumer decision making process

Problem recognition
 This first stage is when we sense there is a difference between our actual state and desired
state. This means that the start of the buying process is something that triggers our desire
to find a solution to a problem that we have become aware of. Perhaps previously there
was no desire or perhaps no recognition that there is a purchasing need.
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 This, then, is the very beginning of the recognition of the satisfied; a purchase has to be
made.
 This trigger could be an impulse, or it could be a growing realization that in order for the
need to be satisfied or the situation to be changed, a purchasing has to be made.
 The stimulus for problem recognition can be external or internal.
 An external stimulus could come from one of many sources; it may be an advertisement,
point-of-sale material in a supermarket or perhaps through talking to a friend or
colleague. Advertisers are sometimes accused of creating unnecessary needs through
their advertisements and making consumers feel pressured into thinking needs are real.
 This is a particular issue in advertising to children, who see products on television
advertised. Equally, however, the stimulus could be the creation of an internal awareness.
 At its simplest level this could be the feeling of hunger or thirst, which then requires
satisfaction through a purchase, or it could be a growing dissatisfaction with the products
or services currently being used.
Information search
Once a purchasing problem is recognized, it sometimes may stay unsatisfied in which case it will
remain a latent need. However, a consumer may go on from that position to either actively search
for information or simply have a heightened awareness, and so be more receptive to
advertisements or other external stimuli.
In obtaining information on which to make purchasing decisions, consumers use a variety of
sources,
such as:
• Personal sources – family, friends, colleagues
• Commercial sources – advertisements, sales people, displays, dealers
• Public sources – mass media, public information sources
• Experimental sources – seeing the product or service being used, handling and examining
the product or experiencing a similar service.
In Internet marketing, understanding how potential customers search for information is a critical
success factor.
Evaluation and selection
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In searching for information, particularly on the Internet, consumers may be faced with a huge
number of potential alternative solutions to their buying problems. Most consumers will have the
time or the energy to make an exhaustive evaluation of these alternatives and so will try to
identify specific criteria, either subconsciously or consciously, to help them decide among the
alternatives on
offer.
Consumers use the following criteria to evaluate alternatives:
• Product/service attributes: when weights are attached to the various attributes to identify
the key ones. Perhaps in making a more complex purchase, such as a car or a consumer
durable, a consumer with list and rank the attributes needed to solve the problem
identified.
• Salient attributes: when the decision is based on the attributes, which most easily spring
to mind. In deciding a holiday destination it only may be the salient attributes that are
considered – perhaps the quality of the nightlife available or whether a particular hotel is
near to the beach.
• Brand beliefs: perceptions as to how each brand performs on the important attributes
identified. Thus in buying a hi-fi system it may be difficult to differentiate between
products and so the brand that is most well known is bought in the belief it will be
reliable and deliver the attributes desired. However, modern consumers are also
increasingly socially responsible consumers. They may not only have perceptions as to
the product benefits but also be concerned with the values of that brand. As society has
become more affluent, ethical considerations have become more important to us in
choosing among brand alternatives.
• Utility/functional value: an assessment of the expected value of the consumption of the
product or service, depending on the alternatively levels of each attribute. Thus, in
choosing a car the functional value of a speedy acceleration may be regarded as more
important than the functional value of alloy wheels by such customers. The result of the
evaluation stage is the ranking of the alternatives. Potential customers will develop a final
shortlist for more in-depth evaluation to help the formation of the purchase intention.
However, two factors can interfere with this process:
 24

• The attitude of others; such as family, friends or perhaps personal contacts whose
opinions are valued and respected.
• Unexpected situational factors; – perhaps the supermarket doesn’t stock the particular
choice of brands or perhaps the price of the preferred alternatives is too high to pay.

Choice and decision to purchase

• The choice made and the actual decision to purchase is the outcome of the evaluation
stage. Sometimes the choice is easy to make if there is a clear alternative or perhaps if it
is a simple purchase and so the risk of making a wrong decision is not costly.
• If a particular brand of shampoo is chosen, but it proves to be the incorrect solution to the
buying problem, then buying a replacement does not involve huge cost.
• However, if the consumer is making a major purchase, the risk of a wrong decision is
much higher. This means how consumers make their actual decision to purchase will
depend on the perceived risk involved in the purchase, the type of risk and how they
decide to resolve the risk.
• If the risk is high, consumers will involve more people to help make the correct decision.
These could be people whom they believe have expertise in the area or, again, family and
friends whose judgment is trusted.
• Marketers, recognizing the difficulty consumers have in making decisions, will try to
make this stage as easy as possible.

Post-purchase evaluation
Most consumers having made a purchasing decision will need to seek reassurance after the
purchase that the decision made was the correct one and so they will make a post-purchase
evaluation. In the case of low-risk purchases this will be when having experienced the product or
service, they can assess their level of satisfaction in its usage. For larger purchases, which have
involved a higher degree of risk, consumers will seek reassurances that the decision was the
correct one and avoid what is known as cognitive dissonance. This occurs when consumers
experience some degree of discomfort that there purchase was the correct choice and so still have
doubts.
 25

• Car manufacturers spend millions of dollars with glossy advertisements in Sunday

newspapers often targeting the recent buyers of cars to reinforce the benefits and
attributes of their cars in order to reassure customers.
• They also know of course that their customers are their best ambassadors and will be
sought out by other potential buyers for their advice.
• The post-purchase evaluation stage is also important to ensure companies retain
customers and nsure they return to make a repeat purchase. 68% of customers/clients who
stop doing business will average only 4% of customers ever actually complain.
• This means that businesses never hear from 96% of their customers. Given that it costs
three to four times as much to gain a new customer as to keep an established one, it is
important for businesses to know who their customers/clients are and to keep them
happy. This is why the post-purchase evaluation stage is as important to marketers as it is
to consumers.
Exercise 2.1.
What strategies can be used by the firm to reduce cognitive dissonance?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
__________________________________________________________________________

Types of decisions made by consumers

The type of purchasing decision being made will determine the complexity of the decision-
making process. Purchasing decisions fall into three principal categories: routine, limited or
extensive problem solving.
Routine purchasing decisions
• The majority of purchasers a consumer makes falls into the category of routine
purchasing decisions.
• These are the many repeat purchases made for a myriad of products and services that are
frequently bought.
 26

• In this type of decision consumers usually have good knowledge of the attributes of the
alternatives available and strong beliefs about the brands that can satisfy the purchase
need.
• Their understanding of the alternative is well established and they are already likely to be
predisposed to one particular brand.
• Thus products that are low-risk, low-priced and frequently purchased tend to fall into this
category.
• Usually it means that the energy involved in seeking out alternatives is not viewed as
being potentially beneficial as the product or services we regularly use adequately meet
our needs.
Limited problem solving
• Limited problem solving tends to occur when the consumer is not able to fully assess the
choice of alternatives and so some comparative information is sought.
• This could be in situations where the risk of making a wrong decision is higher, probably
because the expense of the purchase is higher.
• This could happen perhaps in the case of replacing consumer durables such as
dishwashers or other kitchen equipment.
• It may be some years since the previous purchase was made and so needs to do a more in-
depth information search than if it was simply a routine repeat purchase.
Extensive problem solving
• This is really when a consumer is making a major purchase and does not feel they have
sufficient knowledge or understanding to make an informed purchase.
• The consumer will then seek extensive information concerning the alternatives available
and probably involve others in the purchasing.
• Usually consumers will put considerable effort into making sure the purchase decision is
the correct one.
• This could mean a much more formal decision-making process. In the case of a routine
purchase, the whole process could be quite instinctive and the stages hardly discernible.
• In an extensive problem-solving situation the consumer will be much more involved in
the decision process, put a much greater effort into each stage of the process and take
much longer in making the decision.
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The Decision Making Unit

As we have seen in many buying situations, be it for a product, the customer is a problem solver.
This is so whether the buyer is a single individual, a family, a business, an organization or a
government buyer. The customer is a complex decision-making unit (DMU). As customers go
through the decision-making process, they take information, process that information in the light
of existing information and the take an action to achieve satisfaction and enhance their lifestyle.

In order for the process to be undergone, the persons involved in the purchasing decisions will
play a number of different roles, which facilitate the process. One or perhaps two people may
well display all these buying roles, however, a number of purchasing decisions involve a number
of people who will make up the DMU. Each of these will have distinct roles in the buying
decision:
• Initiator: These are the individuals who suggest the buying of the product or service.
They do so in their role of seeing such a purchase as a solution to the problem. This could
be a mother seeking to buy new clothes for a child or perhaps the child himself seeking to
buy a DVD to alleviate his own boredom.
• Gatekeeper: These people control the flow of information. It may be a parent or a
secretary/receptionist in an organizational buying situation. Purchasing departments in
organizations often act as gatekeepers as they are the departments to which promotional
material is often sent by a potential seller.
• Influencer: The advisors, whose opinion carries weight with the buyer, they inform or
persuade at different points of the purchasing decision. The child may initiate the search
for a DVD but the parents will have an important role in the buying process in
influencing which DVD they think is a suitable purchase.
• Decider: This is the person who determines the buying decision – whether to buy or not
and which provider to use. In a B2C buying situation, this could well be the same person
as the influencer. However, in a B2B buying situation, while the purchasing department
may act as the gatekeeper that has a role in influencing the decision, it could be a
departmental manager who is the budget holder and who makes the final decision.
 28

• Buyer: These are the people who make the actual purchase. In a B2B buying situation,
this person could have had little to do with the decision to buy. The buyer is the person
who places the order and pays for the goods or service.
• User: The user is the consumer, the person who consumes the product or uses the
service provided. Users may have had little to do with the buying decision process, but
they are of critical importance. The satisfaction of the user (or consumer) is paramount if
the service or product provider is to achieve customer loyalty over the longer term.

Although the actual customer can carry out all of these roles, often-different people carry them
out.
An important part of marketing research is to understand the roles in the buying situation for a
product and service, who carries out the roles and who plays the key roles. Where the roles are
carried out by different people, it can be difficult not only to identify who the role players are but
also, once they are identified, to reach them carry out the roles. This means it is sometimes
necessary to develop different communication strategies targeted at different individuals. If the
same person carries out the roles, different approaches may still be needed to cater for each stage
of the buying process.

CHAPTER 3 : FACTORS INFLUENCING CONSUMER’S DECISIONS

 29

3.0. Introduction
There is a mix of cultural, social, personal and psychological factors which influence behaviour
are largely non-controllable. Because of the influence they exert upon patterns of buying, it is
essential that as much effort as possible is put into understanding how they interact and,
ultimately, how they influence purchase behaviour.

3.1. Chapter Objectives

After studying this chapter the student should be able to:
• Explain the personal factors that influence consumer decision making
• Explain how culture affects consumer decisions making
• Explain the impact of personal factors like education, income, and learning impact on
consumer decision making

3.2.Personal factors that influence consumer buying behavior

 30

Consumer behavior is influenced by many things, including environmental and marketing

factors, the situation, personal and psychological factors, family, and culture. Businesses try to
figure out trends so they can reach the people most likely to buy their products in the most cost-
effective way possible. Businesses often try to influence a consumer’s behavior with things they
can control such as the layout of a store, music, grouping and availability of products, pricing,
and advertising. While some influences may be temporary and others are long lasting, different
factors can affect how buyers behave—whether they influence you to make a purchase, buy
additional products, or buy nothing at all. Let’s now look at some of the influences on consumer
behavior in more detail.

3.4.Personality and Self-Concept

Personality describes a person’s disposition, helps show why people are different, and
encompasses a person’s unique traits. The “Big Five” personality traits that psychologists discuss
frequently include openness or how open you are to new experiences, conscientiousness or how
diligent you are, extraversion or how outgoing or shy you are, agreeableness or how easy you
are to get along with, and neuroticism or how prone you are to negative mental states.

 The link between people’s personalities and their buying behavior is somewhat unclear.
 Some research studies have shown that “sensation seekers,” or people who exhibit
extremely high levels of openness, are more likely to respond well to advertising that’s
violent and graphic. The problem for firms is figuring out “who’s who” in terms of their
personalities.
 Marketing researchers believe people buy products to enhance how they feel about
themselves—to get themselves closer to their ideal selves.
 Many beauty products and cosmetic procedures are advertised in a way that’s supposed
to appeal to the ideal self people seek.
 All of us want products that improve our lives.

3.5.Gender.

 While demographic variables such as income, education, and marital status are important,
we will look at gender, age, and stage of life and how they influence purchase decisions.
 31

 Men and women need and buy different products.

 They also shop differently and in general, have different attitudes about shopping.
 You know the old stereotypes. Men see what they want and buy it, but women “try on
everything and shop ‘til they drop.” There’s some truth to the stereotypes. That’s why
you see so many advertisements directed at one sex or the other.
 Women influence fully two-thirds of all household product purchases, whereas men buy
about three-quarters of all alcoholic beverages. The shopping differences between men
and women seem to be changing, though.
 Younger, well-educated men are less likely to believe grocery shopping is a woman’s job
and would be more inclined to bargain shop and use coupons if the coupons were
properly targeted at them.
 One survey found that approximately 45 percent of married men actually like shopping
and considers it relaxing.
 One study by Resource Interactive, a technology research firm, found that when shopping
online, men prefer sites with lots of pictures of products and women prefer to see
products online in lifestyle context—say, a lamp in a living room. Women are also twice
as likely as men to use viewing tools such as the zoom and rotate buttons and links that
allow them to change the color of products.

3.6.Age

 You have probably noticed that the things you buy have changed as you age. Think about
what you wanted and how you spent five dollars when you were a child, a teenager, and
an adult.
 When you were a child, the last thing you probably wanted as a gift was clothing. As you
became a teen, however, cool clothes probably became a bigger priority.
 If you’re single and working after graduation, you probably spend your money differently
than a newly married couple. How do you think spending patterns change when someone
has a young child or a teenager or a child in college? Once children graduate from college
and parents are empty nesters, spending patterns change again.
 Empty nesters and baby boomers are a huge market that companies are trying to tap. Ford
and other car companies have created “aging suits” for young employees to wear when
 32

they’re designing automobiles. The suit simulates the restricted mobility and vision
people experience as they get older. Car designers can then figure out how to configure
the automobiles to better meet the needs of these consumers.
 The “aging suit” has elastic bindings that hamper a car designer’s movement and goggles
that simulate deteriorating eyesight. The suit gives the designer an idea what kinds of car-
related challenges older consumers face.

3.7.Lifestyle

 To better understand and connect with consumers, companies interview or ask people to
complete questionnaires about their lifestyles or their activities, interests, and opinions
(often referred to as AIO statements).
 Consumers are not only asked about products they like, where they live, and what their
gender is but also about what they do—that is, how they spend their time and what their
priorities, values, opinions, and general outlooks on the world are.
 Where do they go other than work? Who do they like to talk to? What do they talk about?
.
 A number of research organizations examine lifestyle and psychographic characteristics
of consumers.
 Psychographics combines the lifestyle traits of consumers and their personality styles
with an analysis of their attitudes, activities, and values to determine groups of consumers
with similar characteristics.
 One of the most widely used systems to classify people based on psychographics is the
VALS (Values, Attitudes, and Lifestyles) framework.
 Using VALS to combine psychographics with demographic information such as marital
status, education level, and income provide a better understanding of consumers.

3.8.Perception

 Perception is how you interpret the world around you and make sense of it in your brain.
You do so via stimuli that affect your different senses—sight, hearing, touch, smell, and
taste. How you combine these senses also makes a difference. For example, in one study,
consumers were blindfolded and asked to drink a new brand of clear beer. Most of them
 33

said the product tasted like regular beer. However, when the blindfolds came off and they
drank the beer, many of them described it as “watery” tasting.
 Consumers are bombarded with messages on television, radio, magazines, the Internet,
and even bathroom walls. The average consumer is exposed to about three thousand
advertisements per day. Consumers are surfing the Internet, watching television, and
checking their cell phones for text messages simultaneously. Some, but not all,
information makes it into our brains. Selecting information we see or hear (e.g.,
television shows or magazines) is called selective exposure.
 Have you ever read or thought about something and then started noticing ads and
information about it popping up everywhere? Many people are more perceptive to
advertisements for products they need. Selective attention is the process of filtering out
information based on how relevant it is to you. It’s been described as a “suit of armor”
that helps you filter out information you don’t need. At other times, people forget
information, even if it’s quite relevant to them, which is called selective retention. Often
the information contradicts the person’s belief. A longtime chain smoker who forgets
much of the information communicated during an antismoking commercial is an
example. To be sure their advertising messages get through to you and you remember
them, companies use repetition. How tired of iPhone commercials were you before they
tapered off? How often do you see the same commercial aired during a single television
show?
 Another potential problem that advertisers (or your friends) may experience is selective
distortion or misinterpretation of the intended message. Promotions for weight loss
products show models that look slim and trim after using their products, and consumers
may believe they will look like the model if they use the product. They misinterpret other
factors such as how the model looked before or how long it will take to achieve the
results. Similarly, have you ever told someone a story about a friend and that person told
another person who told someone else? By the time the story gets back to you, it is
completely different. The same thing can happen with many types of messages.

3.9.Culture
 34

 Culture refers to the shared beliefs, customs, behaviors, and attitudes that characterize a
society. Culture is a handed down way of life and is often considered the broadest
influence on a consumer’s behavior.
 Your culture prescribes the way in which you should live and has a huge effect on the
things you purchase. For example, in Beirut, Lebanon, women can often be seen wearing
miniskirts.
 If you’re a woman in Afghanistan wearing a miniskirt, however, you could face bodily
harm or death. In Afghanistan women generally wear burqas, which cover them
completely from head to toe.
 Similarly, in Saudi Arabia, women must wear what’s called an abaya, or long black
garment. Interestingly, abayas have become big business in recent years. They come in
many styles, cuts, and fabrics and some are encrusted with jewels and cost thousands of
dollars.
 Most Germans don’t own credit cards and running up a lot of debt is something people in
that culture generally don’t do. Credit card companies such as Visa, American Express,
and MasterCard must understand cultural perceptions about credit.

3.10.Social Class

 A social class is a group of people who have the same social, economic, or educational
status in society.
 While income helps define social class, the primary variable determining social class is
occupation.
 To some degree, consumers in the same social class exhibit similar purchasing behavior.
In many countries, people are expected to marry within their own social class.
 When asked, people tend to say they are middle class, which is not always correct.
 Have you ever been surprised to find out that someone you knew who was wealthy drove
a beat-up old car or wore old clothes and shoes or that someone who isn’t wealthy owns a
Mercedes or other upscale vehicle?
 While some products may appeal to people in a social class, you can’t assume a person is
in a certain social class because they either have or don’t have certain products or brands.
 35

Table 3.1 An Example of Social Classes and Buying Patterns

Type of
Class Definition of Class
Car
People with inherited wealth and aristocratic names (the
Upper-Upper Rolls- Kennedys, Rothschilds, Windsors, etc.)
Class Royce

Lower-Upper
Mercedes Professionals such as CEOs, doctors, and lawyers
Class

Lexus College graduates and managers

Upper-Middle
Class

Middle Class Toyota Both white-collar and blue-collar workers

Working Class Pontiac Blue-collar workers

Used
Lower but Not the People who are working but not on welfare
Vehicle
Lowest

Lowest Class No vehicle People on welfare

3.11. Income
A household’s income level combined with its accumulated wealth determines its purchasing
power. Income certainly influences purchasing decisions because it determines how much people
can afford. For example, families with incomes below Rs.10, 000 find it very difficult to buy a
home. On the other hand, families in the higher income categories buy luxury automobiles and
vacation homes.
3.12. Education
Education has been associated with the purchase of books, healthier foods, and entertainment.
Education also influences how decisions are made. Educated consumers seek more information
and demand better quality products. Those with a limited education are generally at a
disadvantage not only in earning money but also in spending it wisely.
3.13. Occupation
 36

A person’s occupation also influences his / her consumption pattern. Marketers try to identify the
occupational groups that have above average interest in their products and services. A company
can even specialize its products for certain occupational groups.

3.14. Motivation
Motivation involves the positive or negative needs, goals and desires that impel a person to or
away from certain actions, objects or situations. By identifying and appealing to people’s
motives – the reasons for behaviour – a firm can produce positive motivation. Each person has
distinct motives for purchases, and these change by situation and over time. Consumers often
combine economic and emotional motives when making purchases.
3.15. Learning
Learning consists of changes in a person’s behaviour that are caused by information and
experience. Variations in behaviour that result from psychological conditions such as hunger,
fatigue, physical growth, or deterioration are not considered learning. Learning refers to the
effects of direct and indirect experiences on future behaviour. Consumers learn about products
directly by experiencing them.
3.16. Attitudes
Attitude is a predisposition to feel or act in a given manner towards a specific person, group,
object, institution or idea. Customer attitudes, understanding and awareness of the product are
intimately related. A preference for a particular brand indicates the customer’s attitude towards
it.

.
 37

CHAPTER 4 : MARKET CUSTOMER SEGMENTATION

4.0. Introduction
Market segmentation can be defined as the process of dividing the market up into distinct
subgroups of customers who display common characteristics and then selecting one more
subgroups which company action targets with a unique strategy. In earlier years, before the
widespread Acknowledgement of market segmentation as a business strategy, the prevalent way
of doing business with customers was via mass marketing (or market aggregation), that is
offering the same product to all customers with the same strategy – a ‘one size fits all’ approach.

4.1. Chapter objectives

After studying through this chapter, the student is expected to
• Define market segmentation
• Explain the criteria applied in selecting viable segments
• Explain the advantages and disadvantages of market segmentation
• Describe the basis for segmenting consumer markets.
 38

4.2.Benefits of market segmentation

Clearly, because market segmentation more closely matches supply to the demands of customer,
and also because the segments contain fewer and more similar customers, the business is able to
obtain much more detailed information about customer characteristics. This leads to a number of
benefits or advantages:
• Businesses are able to develop strategies that more truly meet the demands of customers,
and hence overcome the lack of competitive advantage that is so obvious under mass
marketing. For example, Mercedes-Benz developed the Smart car, which meets the
demands for an environmentally friendly urban run about, while their S series meets the
demand for the luxury executive car. Neither of these models would be particularly
successful if aimed at the mass market with a single strategy.
• Trends that arise in the market place due, perhaps, to changing tastes among customers
can be more quickly detected and strategies adapted accordingly. For example, Sony
developed the Walkman to capitalize on the taste for music on the move. This was much
copied over the years but, as taste and lifestyles changed, so did music on the move, from
portable CD players to minidisc players, to MP3 players.
• Product launches can be better timed, as can the releases of promotional campaigns. For
example, hot snacks can be launched and promoted more readily from autumn, while
cold drinks are launched and promoted more from spring.
• Because of the greater knowledge businesses are able to build up regarding their chosen
segments, financial budgets can be allocated more exactly where and when they are
required. Companies can move budgets from segments that are responding especially
well to the strategies that require more support.
4.3.Disadvantages of Market Segmentation
A number of costs or disadvantages also rise:
• Costs will inevitably rise due to the investigation of more segments and the development
of a variety of strategies to meet the segments’ requirements.
• Overlapping segments can lead to brand cannibalisation as one product within the
company steals sales from other products within the company. Breakfast cereals and
margarine-type spreads can have particular problems in this area and some companies
have begun to rationalize their product lines in view of this.
 39

• Due to producing multiple product ranges, sometimes for smaller segments,

manufacturing cost can rise due to shorter production runs. Also, similar costs can occur
as a result of losing media quantity discounts due to advertising in more varied media to
reach more diverse market segments. Thus market segmentation can result in greater
sales for the company but frequently at higher costs. The ultimate goal, however, is for
the resulting increased sales to lead to increased revenue and profit, which should
outweigh the increased costs.
4.4.The necessary requirements for viable segmentation
There are several requirements that need attention if the segmentation process is to be viable.
 The segment needs to be identified: It must be possible for the business to identify
relevant characteristics to be able to subdivide the market into subgroups on the basis of
shared needs or common characteristics. Some segmentation variables, such as
geographic (physical location) and demographic (sex, age, ethnic groups, etc). Variables
are easy to identify and may even be observable, while others, such as income or marital
status, etc, can be determined via questionnaires. However, other variables such as
lifestyle or benefits sought, are much more difficult to identify. It is here that knowledge
of consumer behaviour is especially useful to the businesses that wish to use such
intangibles as a basis for their market segmentation.
 The segment needs to be measurable: This does not simply relate to measuring numbers
of customers, but to measuring the nature and behaviour of the segments. In order to
formulate viable strategies it is necessary to be able to measure the people who exhibit
similar behaviour. It is, for example, insufficient to measure the number of young adult
males between the ages of 18 and 25 as x million, and then develop a strategy based on
the figure, if the largest part of that number would never behave in the way you want and
buy your product. Much of the study of consumer behaviour is about measuring
behaviour.
 The segment needs to be accessible: This relates to reachability of segments. Companies
must be able to reach their chosen segments effectively and economically and, as such,
are always looking out for new ways to reach segments with the minimum of waste and
the maximum of competitive advantage. The growth in usage of the Internet is the latest
medium to attract businesses in this way. It allows the use of personalized emails to keep
 40

prospective and existing customers in their segments informed of new products or special
deals.
 The segment needs to be substantial: This very often means the size of market segments.
While generally larger market segments are more attractive due to economies of scale
factors, smaller niche segments can also be very substantial in terms of profitability.
Rolex has a relatively small segment in the overall wristwatch market but because of its
niche at the very top end of that market, it remains a profitable company. In fact, the main
concern is not the basic physical size of the segment, but the substance of the segment in
terms of profit after the cost of segmentation has been considered.
 The segment needs to be appropriate: The segment should be appropriate to the
organisation’s objectives and resources. The cost of changing the offering may make the
segment non-viable as the costs outweigh the potential benefit, for example, a steel
producer considering going into car production as a means of securing an outlet for its
core product. The common problem here is also identifying market segments that will
respond favorably to the specific strategy designed for them. There is little to commend
the development of a unique strategy for a segment unless enough members of the
segment respond to it. Segmentation has to reflect the competitive advantage of the
organization. It does not take place a vacuum but in conjugation with the organization’s
strategy.
 The segments needs to be stable: The segment should be stable over a period of time in
order to recover the costs. Some markets are too volatile for organizations to respond to
them. Should the above criteria be fulfilled, market segmentation is an attractive
proposition. Should any remain unmet, then the costs may well outweigh the benefits.

4.5.The basis or techniques of segmenting consumer markets

Many methods or variables can be used to segment markets and there is no single prescribed way
of segmenting a market. The first step is to select the most appropriate method (s) on which to
segment the market. Several categories of consumer characteristics may be found that form the
methodology for segmentation, although some categories could be classed as splitting hairs. A
practical division of segmentation categories could be the three major divisions of profile
variables, psychographics variables and behavioral variables:
 41

4.5.1.Profile Segmentation
Age
 Customers’ needs and interests in the products will often vary with age. For instance,
adults of all ages buy clothes primarily to conform to social norms, but there are other
motivations which set adult consumers apart with regard to this fundamental purchase.
 Younger adults will buy clothes to follow fashion or make themselves ‘look good’, while
older adults are less likely to be influenced by the pure ‘fashion ability’, of clothes but
may buy to reflect status, or on a more functional basis. Because of these age-
motivational differences, marketers have found age to be a particularly useful
demographic base for market segmentation.
 Many marketers have concentrated on specific age groups and in so doing; have carved a
viable niche in the market place.
 Age effect is the greater propensity of retired people (both single and married) to take
extended holidays abroad during the winter. This trend is an example of age effects
because it seems to occur as people reach a particular age category.
 In contrast, the age cohort effect is demonstrated by the idea that people hold on to the
interests they grew up to appreciate.
Sex
 Sex is frequently a distinguishing segmentation variable and the differentiation starts very
early – blue baby clothes for a boy and pink for a girl.
 Men have traditionally been seen as the main users of DIY and shaving products, women
the main users of cosmetics and hair care products. However, this distinction is blurring,
brought about by changes in society, the growth of dual income households, role reversal
and a higher divorce rate.
 To the marketer, this means that sex is no longer an accurate method of distinguishing
consumers in some product categories.
 Women are now significant purchasers of home improvement products and the market
for men’s cosmetics has grown.
 It is now more common to see advertisements that depict both women and men in roles
traditionally reserved for the opposite sex (e.g. childcare).
 42

 Media coverage for the sexes has also changed and marketers have been forced to explore
more avenues of direct marketing, such as catalogues and the internet, to reach many
time-pressured working women who use these to shop for clothing and household
accessories as well as many family needs.

Income
 This has long been an important variable for identifying market segments, due to
marketers’ beliefs that income level is a strong indicator of the ability to purchase a
product.
 However, they have also proven to be attractive to higher-level income households who
want additional PCs for children.
 To make the best use of this variable, it is common to combine it with other variables to
give a more clearly defined segment, for example, with age in the case of the affluent
retired, or with age an occupation as in the yuppies segment.
 University students are also a sought-after segment, which combines age, education and
also occupation and income.
Social class
 This is a variable that is measured in different ways depending upon the country taking
measurements.
 The extent to which variable is a useful predictor of buyers behaviour is open to the
question.
 Many consumers in the same occupation exhibit different lifestyles hold different values
and show dissimilar purchasing patterns.
 However, some studies have shown that social class can be useful in discriminating
between ownership of certain product classes (O’Brien and Ford, 1988).
Geography
 In its simplest form, geographical segmentation refers to regional differences between
areas of the same country such as taste differences (northern versus southern beer, or
English preference for pork sausages versus Scottish preference for beef sausages).
 In its wider sense it takes in cross-country boundaries with the incumbent cultural
differences, language differences and tastes differences.
 43

 While there has been an increased level of globalisation and strategies have been sought
that will be useful worldwide, many companies have found that some degree of
adaptation is essential if they are to become successful on a pan-European basis.
Family life cycle
 Family life cycle is a useful variable for marketers because purchasing requirements and
disposable income are likely to vary according to life-cycle stage (young and single
versus young and married with children).
 This variable is likely to be of greater value to marketers for more precise segmentation
because consumption is more affected by family responsibility than by simple
chronological age. For example, a married 19 year old with a child is likely to exhibit
very different consumption pattern from a single 19 year old.
 Likewise, ‘empty nester’ whose children have left home, are viable target markets for
expensive household items due to their greater affluence compared to young married
couples starting out and building a home for the first time.
 The financial services sector in particular has found life-cycle analysis of great use in
better targeting their services. Financial advice for retirement and income tax preparation
were relatively more important for older consumers than those in the bachelor or ‘full
nest’ stages
4.5.2.Psychographic segmentation
Lifestyle
 Simple profile variables of segmentation simply describe consumers and trend to be
based on bare statistical information in as much as they tend to lack depth and richness in
their description.
 As a result, marketers have embraced psychographic research in an attempt to address
this problem.
 This type of applied research is referred to as lifestyle analysis and can be a valuable tool
in aiding the identification of consumer segments that are likely to be responsive to
specific marketing messages.
 Lifestyle research measures activities interests and opinions or, simply, ALOs. Activities
measure how consumers spend their time, interests measure, preferences and priorities,
and opinion measures consumer’s feelings about a wide variety of events, political issues,
etc.
 44

 Demographics are also included in most psychographic or AIO studies, as lifestyle

segmentation does not replace profile studies but enhances them.
 AIO studies may be general or specific. In general, studies marketers seek to classify the
consumer population into groups based on general lifestyle characteristics, with the
intention that consumers within each group have similar lifestyles. The danger here is of
stereotyping and generalization.
 From a customer view point, individuals may feel varying emotions, from humour at
being so labeled to anger.
 However, stereotyping serves the purpose of highlighting certain behaviour, which may
help the marketer.
 The specific approach seeks to understand consumer behaviour in relation to a particular
product or service.
 The AIO questions must be tailored to make them more product-specific. The advantage
of this method is that groups emerge which are much more sharply defined in terms of
their usage of a particular product or service.
4.5.3.Behavioural segmentation
Marketers are constantly striving to identify the one key benefit of a product or a service that will
be most meaningful to consumers. There are many examples of such benefits but some of the
more common ones include: pain relief (Nurofen); white teeth (pearl Drops); clean-smelling
lothes (Radion); financial security (Scottish Windows); safety and longevity (Volve).
The benefits segmentation process involves:
• Developing a complete list of the benefits that could be of value in segmenting the
market.
 Not all benefits elicit a favourable response from consumers.
 Developing sensitive and reliable scales to measure major attitude dimensions towards
the benefits.
 Developing a quantitative measurement of the market, which results in the clustering of
respondents by their attitudes?
• Identifying those segments whose needs (sought benefits) remain largely unmet.
 45

Changing lifestyles can play a major role in determining what benefits consumers will respond to
and present marketers with opportunities for new product development in order to capitalize on
new, emerging benefits.
Supermarkets are now realizing the benefit of home shopping and delivery required by many
shoppers, hence the development of growing number of supermarkets offering in internet
shopping.
Similarly, by opening stores for 24 hours, supermarkets are offering consumers who work
different hours an added benefit.
Usage rate
• This method differentiates between heavy, medium, light and non-users of a specific
product, service or brand. However, research has consistently shown that Pareto’s Law
(the 80/20 rule) applies in some degree or other. For example, approximately 25-35% of
beer drinkers account for approximately 70-75% of all beer consumed.
• It is for this reason that marketers target their advertising towards the heavy users rather
than spending considerably more attempting to attract the light-user segment.
• The same analysis can be applied in a wide range of other markets both in the consumer
and industrial markets. Hence, targeting heavy users has become the basis of the
marketing strategy of many companies.
• It should be noted, however, that medium and light users can be effectively targeted if
marketers take note of the gaps in market coverage. Also non-users of a company’s brand
should not be ignored. Research can highlight reasons for their apparent dislike of a
brand, and repositioning can then be effective.
Usage and purchase situation
• It is often recognized by marketers that the occasion or situation can often determine
what consumers will purchase.
• For this reason the usage situation can be focused upon as segmentation variable. The
following statement perhaps reveals the potential of situation segmentation: ‘I always buy
my wife flowers on St Valentine’s Day’. On other occasions or under different
circumstances the same consumer might choose differently.
• Circumstances can also influence choice, for example, the day of the week, time, whom
the product is for, and so on.
 46

• Marketers have tried to suggest the suitability of products for certain occasions, others
have tried to
• break consumer habits.
• Kelloggs, for example, have advertised cornflakes as more than a breakfast cereal. They
suggest it can be eaten anytime, as a snack, for supper, and it can be made into cakes.
Many products are promoted for special usage occasions.
• The greeting card industry stresses special cards for a wide variety of occasions
(Christmas, mother’s day, Easter, etc).
• The diamond industry promotes diamond rings as anniversary gifts or as a symbol of
engagement. The chocolate industry promotes chocolates as suitable for Christmas,
Mother’s Day, Easter, etc.
Loyalty
• Loyalty segmentation involves marketers identifying differences in characteristics
between brand loyal and non-brand-loyal buyers so that they can direct their marketing
effort to people with similar
• Characteristics in the wider population with the objective of increasing the size of the
loyal population.
• However, consumer innovators, almost by definition, tend not to be brand loyal.
Increasingly, companies are rewarding brand loyalty in order to increase the brand loyal
segment.
• These rewards often take the form of ‘club’ membership, for example store loyalty cards
that give discounts from a variety of member stores, or British Airways’ frequent-flyer
bonuses.
• These relationship programmes offer a variety of benefits to keep the loyalty of the
frequent or regular customers.

4.5.5.Critical events segmentation

Our lives are composed of major events which cause stress, happiness and other emotions, and
affect our subsequent behavior. These include:
• Marriage
• Birth
• Death
 47

• Unemployment
• Illness
• Retirement
• Moving house
These critical events offer companies opportunities to specialize and thus to provide products
and services which meet not just our basic needs but also help us to achieve self-actualisation,
inMaslow’s terms, to give expression to the outside world of who and what we are.

4.6. Segmenting Industrial/Organizational Customers

To a great extent, industrial markets can be segmented using similar variables to the ones just
discussed. The difference, of course, is that instead of using the characteristics and behaviour of
the Individual customer, the segmented uses characteristics and behaviours of the organization.
For example, in the case of microprocessors, different industry types, from consumer electronics
manufacturer to military hardware manufacturer may buy them.
Order sizes may differ from light to heavy usage. Geographic location may vary from domestic
purchases to international purchasers, and organizational size may differ from huge multinational
to small regional manufacturer.
The type of purchase may differ from straight repurchase to new task purchase, and different
benefits may be sought, etc. Business customers may be segmented on the basis of geography,
organizational characteristics, purchase behaviour and usage patterns and organizational
predispositions or policy.
Industry type
The Standard Industrial Classifications (SIC) index is an international method of identification
for all industries. SIC codes are useful in the selection of segments for business-to-business
marketing. When companies register at Companies House (www.compnieshouse.gov.uk) they
have to describe the main business and give the appropriate SIC code. Organizations can look at
their customer base and analyze, as Dun and Bradstreet and Thomson Directories will produce
mailing lists of similar companies.
Organizational size
This can be defined either by number of employees or by turnover. Segmentation can therefore
include SIC code, number of employees and turnover or a combination.
 48

Technology used
Company selling business software will only need to identify customers who use computers.
• Company selling nitrogen freezers will only need to identify those companies which use
that technology, for example sperm banks, pharmaceutical companies, etc.
• Norcool is a Scandinavian company selling commercial fridges. Their products range
includes glass-fronted fridges, which are used in pubs, clubs and restaurants.
• They also have a range of fridges that can take panel, and kitchen designers use these.
• The potential of e-commerce in business-to-business marketing in reducing costs in
enormous.
• However, the use of EPOS systems means that only suppliers who can interface with the
technology can take advantage.
Purchase behavior and usage patterns
Order size (heavy vs. light)
• In a production line organization, the longer the production runs the cheaper the unit cost.
• This saving can then be passed on to customers.
• This will only be profitable if the customers can take advantage of larger orders.
• Organizations using price as an incentive will look for customers who can take larger
orders. They do this by having a minimum order sizes.
• This leaves smaller order customers who cannot meet the minimum order size
requirement to have their needs met elsewhere.
Centralized vs. Decentralized purchasing
• Organizations with multiple sites may have different policies for their services.
• For example, legal services will be contracted out on a centralized basis whereas other
services, such as window cleaning, may be decentralized but with a budget allocation.
Type of repurchase (straight vs. new task)
• Repurchasing, that is re-ordering, is essential to long-term profitability.
• If the repurchase is a repeat order, the set-up costs may have been covered by the first
order, so repurchasing can be very profitable.
• If the orders are unique and not identical, then there will be set-up costs involved.
• Sometimes standardizing process can overcome these problems.
Organizational predisposition or policy
 49

Product knowledge
• In a business-to-business situation, specialized product knowledge may be required in
order to get the maximum benefit out of the product or service.
• Customers who already have these skills can be selected to avoid training costs.
• An example would include suppliers of energy-efficient boilers looking for customers
who already use this type of equipment.
Benefits sought
• Corgi developed an energy-efficient boiler, which met the energy reduction requirements
being introduced by the European Community in the early 1990s.
• Their initial customers were heating engineers who supplied who supplied replacement
boilers.
Organizational problems
• Some organizations in their normal business have a requirement for specialized needs.
• This can include health and safety requirements, for example disposing of asbestos or
other toxic by-products.
Multiple vs. Single supplier policy
• Companies using modern supply chain management techniques, including just- in- time,
tend to have a single supplier policy.
• The selection of the company will depend upon a number of issues, including past
experience and quality as well as price.
• Other companies use multiple suppliers to avoid being dependent upon a single supplier
and to allow trade-offs between competing suppliers.
Customer segmentation in the business-to-business area
• The reality of segmentation in the business-to-business area may not be as scientific as
that suggested above.
• Customers tend to arise out of buyer/supplier relationships rather than being sought out as
in consumer activities.
The reality of segmentation in ‘real-life’ may not be as simple as suggested in this section. The
segment will appear blurred. Many organizations have been around for some time (and surviving
and maybe thriving) without a formal segmentation process. Many SMEs (small and medium
enterprises) say that they just get on with it. Their customers are anyone who will pay for their
 50

goods. However, if we analyze their customer profiles, we very often find that the more
successful organizations are focused upon a narrow segment.
This is especially true in the case of not-for-profit organizations, such as charities where their
segment is clearly defined. As customers, we are becoming more electric, taking our lifestyle
from more than source. As customers, we are also becoming increasingly more difficult to
pigeon hole.
From an organization’s point of view, we appear as individuals, to be in more than one (or even
two) segments. We will at a later stage look at how changes in customer profiles are forcing
organizations to have a major rethink.
Organizations segment their customers so that they can position their products and target their
marketing activities to produce a cost-effective solution – one that benefits customers (giving
them the products they want/need) and the organization (by maximizing their profit).
 51

CHAPTER 5: CONSUMER ATTITUDES AND PERCEPTIONS

5.0. Introduction
In a consumer behaviour context, an attitude is a learned predisposition to behave in a
consistently favorable or unfavorable way with respect to a given object. Each part of this
standing the role of attitudes in consumer behavior. Consumer researchers assess attitudes by
asking questioning inferences from behavior. Moreover, the illustration suggests that a whole
universe of consumer behaviour –consistency of purchases, recommendations to others, top
ranking, beliefs, evaluations and intentions are related to attitudes.

5.1. Chapter objectives

After studying this chapter, the students are expected to be able to:

• Define consumer attitudes

• Explain the formation of consumer attitudes
• Discuss the strategies used by firms to change the attitude of consumers
• Define consumer perception
• Explain different perceptual distortions affecting consumers
• Explain how consumers handle risk
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5.2. The characteristics of attitudes

 The attitude “object”: The word object in our consumer-oriented definition of attitude
should be interpreted broadly to include specific consumption – or marketing-related
concepts, such as product, product category, brand, service, possessions, product use,
causes or issues, people, advertisement, Internet site, price, medium, or retailer. In
conducting attitude research, we tend to be object specific. For example, if we were
interested in learning consumers’ attitudes towards three major brands of DVD players,
our “object” might include Sony, Toshiba, and Panasonic; if we were examining
consumer attitude toward major brands of cellular telephones, our “object” might include
Nokia, Ericsson, Kyocer, LG, Panasonic, and Motorola.
 Attitudes are a learned predisposition: There is general agreement that attitudes are
learned. This means that attitudes relevant to purchase behaviour are formed as a result of
direct experience with the product, word-of-mouth information acquired form others, or
exposure to mass media advertising, the Internet and various forms of direct marketing. It
is important to remember that although attitudes may result from behaviour, they are not
synonymous with behaviour. Instead, they reflect either a favorable or an unfavorable
evaluation of the attitude object. As learned predispositions, attitudes have a motivational
quality; that is, they might propel a consumer toward a particular behavior or repel the
consumer away from a particular behavior.
 Attitudes have consistency: Another characteristic of attitudes is that they are relatively
consistent with the behaviour they reflect. However, despite their consistency, attitudes
are not necessarily permanent; they do change. It is important to illustrate what we mean
by consistency. Normally, we expect consumer’s behaviour to correspond with their
attitudes. For example, in a French consumer reported preferring Japanese over Korean
electronics, we would expect that the individual would be more likely to buy a Japanese
brand when his current VCR needed to be replaced. In other words, when consumers are
free to act as they wish, we anticipate that their actions will be consistent with their
attitudes.
 However, circumstances often preclude consistency between attitudes and behaviour. For
example, in the case of our French consumer, the mater of affordability may intervene,
and the consumer would find a particular Korean VCR to be a more cost effective choice
 53

than a Japanese VCR.Therefore, we must consider possible situational influences on

consumer attitudes and behavior.
 Attitudes occur within a situation: It is not immediately evident from our definition that
attitudes occur within and are affected by the situation. By situation, we mean events or
circumstances that, at a particular point in time, influence the relationship between an
attitude and behaviour. A specific situation can cause consumers to behave in ways
seemingly inconsistent with their attitudes. For instance, let us assume that Reid
purchases a different brand of deodorant each time the brand he is using runs low.
Although his brand-switching behaviour may seem to reflect a negative attitude or
dissatisfaction with the brands he tries, it actually may be influenced by a specific
situation, for example, his wish to economize. Thus, he will buy whatever is the least
expensive brand.

5.3.Structural Models of Attitudes

Motivated by a desire to understand the relationship between attitudes and behaviour,

psychologists have sought to construct models that capture the underlying dimensions of an
attitude. To this end, the focus has been on specifying the composition of an attitude to better
explain or predict behavior. The following section examines several important attitude models:
the tricomponent attitude model, the multiattribute attitude models, the trying-to-consume model,
and the attitude-toward-the-ad models. Each of these models provides a somewhat different
perspective on the number of component parts of an attitude and how those parts are arranged or
interrelated.According to the tricomponent attitude model, attitudes consist of three minor
components: a cognitive component, an affective component, and a conative component.

a). The cognitive component

The first part of the tri-component attitude model consists of a person’s cognitions, that is, the
knowledge and perceptions that are acquired by a combination of direct experience with the
attitude object and related information from various sources. This knowledge and resulting
perceptions commonly take the form of beliefs; that is, the consumer believes that the attitude
objects possesses various attributes and that specific behavior will lead to specific outcomes.
 54

Although it captures only a part of Ralph’s belief system about two types broadband Internet
connections. Ralph’s belief system for both types of connections consists of the same basic four
attributes: speed, availability, reliability, and “other” features.

b). The affective component

A consumer’s emotions or feelings about a particular product or brand constitute the affective
component of an attitude. Consumer researchers as primarily evaluative in nature frequently test
these emotions and feelings; that is, they capture an individual’s direct or global assessment of
the attitude object Affect-laden experiences also manifest themselves as emotionally charges
states. Research experiences and those later recollections of such experiences may impact what
comes to mind and how the individual acts. For instance, a person visiting an outlet mall is likely
to be influenced by his or her emotional state at the time. If the outlet mall shopper is feeling
particularly joyous at the moment, a positive response to the outlet mall may be amplified. The
emotionally enhanced response to the outlet mall may lead the shopper to recall with great
pleasure the time spent at the outlet mall. It also may influence the individual shopper to
persuade friends and acquaintances to visit the same outlet mall and to make the personal
decision to revisit the mall. In addition to using direct or global evaluative measures of an
attitude object, consumer researchers can also use a battery of affective response sales to
construct a picture of consumers’ overall feelings about a product, service.

c). The conative component

Conation, the final component of the tricomponent attitude model, is concerned with the
likelihood or tendency that an individual will undertake a specific action or behave in a particular
way with regard to the attitude object. According to some interpretations, the conative
component may include the actual behaviour itself. In marketing and consumer research, the
conative component is frequently treated as an expression of the consumer’s intention to buy.
Buyer intention scales are used to assess the likelihood of a consumer purchasing a product or
behaving in a certain way.

5.4.Multi -attribute attitude models

 55

Multiattribute attitude models portray consumers’ attitudes with regard to an attitude object as a
function of consumers’ perception and assessment of the key attributes of beliefs held with
regard to the particular attitude object. Although there are many variations of this type of attitude
model, we have selected the following three models to briefly consider here: the attitude-toward-
object model, the attitude-toward-behavior model, and the theory-of-reasoned-action model.

(i).The attitude-toward-object model

The attitude-toward-object model is especially suitable forth measuring attitudes toward a

product category or specific brands. According to this model, the consumer’s attitude toward a
product or specific brands of a product is a function of the presence and evaluation of certain
product-specific beliefs and/or attributes. In other words, consumers generally have favorable
attitudes toward those brands that they believe have an adequate level of attributes that they
evaluate as positive, and they have unfavorable attitudes towards those brands they feel do not
have an adequate level of desired attributes or have too many negative or undesired attributes.
Conducting consumer attitude research with children, especially gauging their attitudes toward
products and brands is an ongoing challenge. What is needed are new and effective measurement
approaches that allow children to express their attitudes toward brands. To this end, researchers
have labored to develop an especially simple and short attitude. Measurement instrument for
questioning children between 8 and 12 years of age.

(ii).The attitude-toward-behaviour model

The attitude-toward-behaviour model is the individual’s attitude toward behaving or acting with
respect to an object rather than the attitude toward the object itself. The appeal of the Attitude
toward- behavior model is that it seems to correspond somewhat more closely to actual behavior
than does the attitude-toward-object model. For instance, knowing Howard’s attitude about the
act of purchasing a top-of-the-line BMW reveals more about the potential act of purchasing than
does simply knowing his attitude toward expensive German cars or specifically BMWs. This
seems logical, for a consumer might have a positive attitude towards and expensive BMW but a
negative attitude as to his prospects for purchasing such an expensive vehicle.

(iii).Theory-of-reasoned-action model
 56

The theory of reasoned action represents a comprehensive integration of attitude components

into a structure that is designed to lead to both better explanation and better predictions of
behaviour. Like the basic tricomponent attitude model, the theory-of-reasoned-action model
incorporates a cognitive component, an affective component, and a conative component;
however, these are arranged in a pattern different from that of the tricomponent model .In
accordance with this expanded model, to understand intention we also need to measure the
subjective norms that influence an individual’s intention to act. A subjective norm can be
measured directly by assessing a consumer’s feelings as to what relevant others would think of
the action being contemplated; that is, would they look favorably or unfavorably on the
anticipated action?

Consumer researchers can get behind the subjective norm to the underlying factors that are likely
to produce it. They accomplish this by assessing the normative beliefs that the individual
attributes to relevant others, as well as the individual’s motivation to comply with each of the
relevant others. For instance, consider the graduate student contemplating the purchase of a new
VW beetle. To understand his subjective norm about the desired purchase, we would have to
identify his relevance to others; his beliefs about how each would respond to his purchase of the
Beetle and, finally, his motivation to comply with his parents and/or his girlfriend.

(iv).Theory of trying-to-consume model

There has been an effort underway to extend attitude models so that they might better
accommodate consumers’ goals as expressed by their “trying” to consume. The theory of Trying
to consume is designed to account for the many cases in which the action or outcomes is not
certain but instead reflects the consumer’s attempts to consume. A classic example of tying to
consume is attempting to diet and lose with

(v).Attitude-toward-the-ad models

In an effort to understand the impact of advertising or some other promotional vehicle on

consumer attitudes towards particular products or brands, considerable attention has been paid to
developing what has been referred to as attitude-toward-the-ad models.

5.5. Attitude formation

 57

How do people, especially young people, from their initial general attitudes toward “things”?
Consider their attitudes towards clothing they wear, for example, underwear, casual wear, and
business attire. On a more specific level, how do they form attitudes toward Fruit of the Loom or
Calvin Klein underwear, or Levi’s or Gap casual wear? Our examination of attitude formation is
divided into three areas: how attitudes are learned, the sources of influence on attitude formation,
and the impact of personality on attitude formation.

5.6. How attitudes are learned

When we speak of the formation of an attitude, we refer to the shift from having no attitude
toward a given object to having some attitude toward it. The shift form no attitude is a result of
learning. Consumers often purchase new products that are associated with a favorably viewed
brand name. Their favorable attitude toward the brand name is frequently the result of repeated
satisfaction with other products produced by the same company. In terms of classical
conditioning, an established brand name is an unconditioned stimulus that though past positive
reinforcement resulted in a favorable brand attitude. A new product, yet to be linked to the
established brand, would be the conditioned stimuli. To illustrate by giving a new moisturizing
body wash the benefit of its well-known and respected family name, oil of Olay is counting on
an extension of the favorite attitude already associated with the brand name of the new product.
Sometimes attitudes follow the purchase and consumption of a product. For example, a
consumer may purchase a brand name product without having a prior attitude toward it because
it is the only product of its kind available. Consumers also make trial purchases of new brands
from product categories in which they have little personal involvement. If they find the
purchased brand to be satisfactory, then they are likely to develop a favorable attitude toward it.
In situations in which consumers seek to solve problem or satisfy a need, they are likely to form
attitudes about products on the basis of information exposure and their own cognition. In general,
the more information consumers have about a product or service, the more likely they are to
form attitudes about it, either positive or negative. However, regardless of available information,
consumers are not always ready or willing to process product-related information. Furthermore,
consumers often use only a limited amount of the information available to them. Research
suggests that only two or three important beliefs about product dominate in the formation of
attitudes and those less important beliefs provide little additional input. This important finding
 58

suggests that marketers should fight off the impulse to include all the features of their products
and services in their ads; rather, they should focus on the few key points that are at the heart of
what distinguishes their product from competition.

5.7. Sources of influence on attitude formation

The formation of consumer attitude is strongly influenced by personal experience, the influence
of family and friends, direct marketing, and mass media. The primary means by which attitudes
toward goods and services are formed is through the consumer’s direct experience in trying and
evaluating them. Recognizing the importance of direct experience, marketers frequently attempt
to stimulate trial of new products by offering cents-off coupons or even free samples. As we
come in contact with others, especially family, close friends, and admired individuals, we form
attitudes that influence our lives. The family is an extremely important source of influence on the
formation of attitudes, for it is the family that provides us with many of our basic values and a
wide range of less central beliefs. For instance, young children who are rewarded for good
behavior with sweet foods and candy often retain a taste for sweets as adults. Marketers are
increasingly using highly focused direct-marketing programs to target small consumer niches
with products and services that fit their interests and lifestyles. Marketers very carefully target
customers on the basis of their demographic, psychographic, or geodemographic profiles with
highly personalized product offerings and messages that show they understand their special
needs and desires. Direct-marketing efforts have an excellent chance of favorably influencing
target consumers’ attitudes, because the products and services offered and the promotional
messages conveyed are very carefully designed to address the individual segment’s needs and
concerns and, thus, are able to achieve a higher “hit rate” than mass marketing. Still another
issue with regard to evaluating the impact of advertising messages on attitude formation is the
level of realism that is provided. Research has shown that attitudes that develop through direct
experience tend to be more confidently held, more enduring, and more resistant to attack than
those developed via indirect experience. And just as television provided the advertiser with more
realism than is possible in a radio or print ad, the Internet has an even greater ability to provide
telepresence, which is toe simulated perception of direct experience. The World Wide Web also
has the ability to provide the “flow experience”, which is cognitive state occurring when the
individual is so involved in an activity that nothing else matters. Research on telepresence
 59

suggests “perceptions of telepresence grew stronger as levels of interactivity and levels of

vividness of websites increased.

5.8. Personality factors

Personality also plays a critical role in attitude formation. For example, individuals with a highly
need for cognition are likely to form positive attitudes in response to ads or direct mail that are
rich in product-related information. On the other hand, consumers who are relatively low in need
for cognition are more likely to form positive attitudes in response to ads that feature an
attractive model or well-known celebrity. In a similar fashion, attitudes toward new products and
new consumption situations are strongly influenced by specific personality characteristics of
consumers.

5.9.Strategies of attitude change

It is important to recognize that much of what has been said about attitude formation is also
basically true of attitude change. That is, attitude changes are learned; they are influenced by
personal experience and other sources of information, and personality affects both the receptivity
and the speed with which attitudes are likely to be altered.

Altering consumer attitudes is a key strategy consideration for most markers. For marketers who
are fortunate enough to be market leaders and to enjoy a significant amount of customer
goodwill and loyalty, the overriding goal is to fortify the existing positive attitudes of customers
so that they will not succumb to competitors’ special offers and other inducements designed to
win them over.

(i).Changing the basic motivational function

An effective strategy for changing consumer attitudes toward a product or brand is to make
particular needs prominent. One method for changing motivation is known as the functional
approach.

According to this approach, attitudes can be classified in terms of four functions: the utilitarian
function, the ego-defensive function, the value-expressive function, and the knowledge function.
 60

• -The utilitarian function: We hold certain brand attitudes partly because of a brand’s
utility. When a product has been useful of helped us in the past, our attitude toward it
tends to be favorable. One-way of changing attitudes in favor of a product is by showing
people that it can serve utilitarian purpose that they may not have considered.
• -The ego-defensive function: Most people want to protect their self-images from inner
feelings of doubt – they want to replace their uncertainty with a sense of security and
personal confidence. Ads for cosmetics and personal care products, by acknowledging
this need, increase both their relevance to the consumer and the likelihood of a favorable
attitude change by offering reassurance to the consumer’s self-concept.
• -The value-expressive function: Attitudes are an expression or reflection of the
consumer’s general values, lifestyle, and outlook. If a consumer segment generally hold a
positive attitude toward owning the latest personal communication devices, then their
attitudes toward new electronic devices are likely to reflect that orientation. Similarly, if a
segment of consumers have a positive attitude toward being “in fashion”, then their
attitudes toward high-fashioned clothing are likely to reflect this viewpoint. Thus, by
knowing target consumers’ attitudes, marketers can better anticipate their values,
lifestyle, or outlook and can reflect these characteristics in their advertising and direct
marketing efforts.
• -The knowledge function: Individuals generally have a strong need to know and
understand the people and things they encounter. The consumer’s “need to know” a
cognitive need, is important to marketers concerned with product positioning. Indeed,
many product and brand positioning are attempts to satisfy the need to know and to
improve the consumer’s attitudes toward the brand by emphasizing its advantages over
competitive brands. For instance, a message for an advanced-design toothbrush might
point out how it is superior to other toothbrushes in controlling gum disease by removing
more plaque and that this is so important to overall good health. This message might even
use a bar graph to contrast its plaque removal abilities to other leading toothbrushes.

(ii).Combining several functions

Because different consumers may like or dislike the same product or service for different
reasons, a functional framework for examining attitudes can be very useful. For instance, three
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consumers may all have positive attitudes toward suave hair care products. However, one may be
responding solely to the fact that the products work well; the second may have the inner
confidence to agree with the point “when you know beautiful hair doesn’t have to cost a
fortune”.

(iii).associating the product with a special group, event, or cause

Attitudes are related, at least in part, to certain groups, social events, or causes. It is possible to
alter attitudes toward products, services, and brands by pointing our their relationships to
particular social groups, events, or causes. Companies regularly include mention their advertising
of the civic and public acts that they sponsor to let the public know about the good that they are
trying to do.

(iv).Resolving two conflicting attitudes

Attitude-change strategies can sometimes resolve actual or potential conflict between two
attitudes. Specifically, if consumers can be made to see that their negative attitudes toward a
product, a specific brand, or its attributes is really not in conflict with another attitude, they may
be induced to change their evaluation of the brand. For example, Stanley is a serious amateur
photographer who has been thinking of moving from 35mm photography into the realm of
medium format photography in order to take advantage of the larger negative size.

However, with the growth of digital photography, Stanley is unsure of whether his move to the
medium format will be worthwhile. Sanely loves the idea of having a bigger negative to work
with in his darkroom. However, if Stanley learns than Mamiya makes a medium format camera
that offers both a film capability and a digital capability, he might change his mind and thereby
resolve his conflicting attitudes.

(v).Altering components of the multi-attribute model

Earlier in this chapter we discussed a number of multi attribute models. These models have
implications for attitude-change strategies; specifically, they provide us with additional insights
as to how to bring about attitude change:
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• Changing the relative evaluation of attributes: The overall market for many product
categories is often set out so that different consumer segments are offered different
brands with different features or benefits. In general, when a product category is naturally
divided according to distinct product features or benefits that appeal to a particular
segment of consumers, marketers usually have an opportunity to persuade consumers to
“cross over”, that is to persuade consumers who prefer one version of the product to shift
to the other favorable attitudes toward another version of the product, and possibly vice
versa.
• Changing brand beliefs:A second cognitive-oriented strategy for changing attitudes
concentrates on changing beliefs or perceptions about the brand itself. This is by far the
most common form of advertising appeal. Advertisers constantly are reminding us that
their product has “more” or is “better” or “best” in terms of some important product
attribute. As a variation on this theme of “more” ads for Palmolive dishwashing liquid are
designed to extend consumers’ brand attitudes with regard to the product’s gentleness by
suggesting that it be used for hand washing of fine clothing items. Within the context of
brand beliefs, these are forces working to stop or slow down attitudes change. For
instance, consumers frequently resist evidence that challenges a strongly held attitude or
belief and tend to interpret any ambiguous information in ways that reinforce their
preexisting attitudes. Therefore, information suggesting a change in attitude needs to be
compelling and repeated enough to overcome the natural resistance to letting go of
established attitudes.
• Adding an attribute: Another cognitive strategy consists of adding and attribute. These
can be accomplished either by adding an attribute that previously has been ignored or one
that represents an improvement or technological innovation. The point that yogurt has
more potassium than a banana illustrates the first route, adding a previously ignored
attribute. For consumers interested in increasing their intake of potassium the comparison
of yogurt and bananas has the power of enhancing their attitudes toward yogurt. The
second route of adding an attribute that reflects an actual product change or technological
innovation is easier to accomplish than stressing a previously ignored attribute.
• Changing the overall brand rating: Still another cognitive-oriented strategy consists of
attempting to alter consumers’ overall assessments of the brand directly, without
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attempting to improve or change their evaluation of any single brand attribute. Such a
strategy frequently relies on some form of global statement that “this is the largest-selling
brand” or “the one all others try to imitate”, or a similar claim that sets the brand apart
from all its competitors. Other auto manufacturers as the “standard” to live up to use
these cars.
• Changing beliefs about competitors’ brands: Another approach to attitude-change
strategy involves changing consumer beliefs about the attributes of competitive brands or
product categories. For instance, an ad for Advil makes a dramatic assertion of product
superiority over aspirin and Tylenol: the ad claims that Advil lasts longer and is gentler
than aspirin.

5.10.Consumer Perception

Despite the many studies undertaken by academicians and researchers since the 1950s, there is
no evidence that subliminal advertising persuades people to buy goods or services. A review of
the literature indicates that subliminal perception research has been based on two theoretical
approaches. According to the first theory, constant repetition of very weak stimuli has an
incremental effect that enables such stimuli to build response strength over many presentations.
This would be the operative theory when weak stimuli are flashed repeatedly on a movie screen
or played on a soundtrack or audiocassette. The second approach is based on the theory that
subliminal sexual stimuli arouse unconscious sexual motivations. This is the theory behind the
use of sexual embeds in print advertising. But no studies have yet indicated that advertisers to
increase sales have effectively used either of these theoretical approaches. However, there is
some indication that subliminal advertising may provide new opportunities for modifying
antisocial behaviour through public awareness campaigns that call for individuals to make
generalized responses to suggestions that enhance their personal performance or improve their
attitudes. There is also some evidence that subliminal methods can indirectly influence attitudes
and feelings toward brands. In summary, although there is some evidence that subliminal stimuli
may influence affective reactions, there is no evidence that subliminal stimulation can influence
consumption motives or actions. There continues to be a big gap between perception and
persuasion.
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A recent review of the evidence on subliminal persuasion indicates that the only way for
subliminal techniques to have a significant persuasive effect would be through long-term
repeated exposure under a limited set of circumstances, which would not be economically
feasible or practical within an advertising context. As to sexual embeds, most researchers are of
the opinion that “what you see is what you get”; that is, a vivid imagination can see whatever it
wants to see in just about any situation. And that pretty much sums up the whole notion of
perception: individuals see what they want to see and what they expect to see. Several studies
concerned with public beliefs about subliminal advertising found that a large percentage of
Americans know what subliminal advertising is, they believe it is used by advertisers, and that it
is effective in persuading consumers to buy. To correct any misperceptions among the public that
subliminal advertising does, in fact, exist, the advertising community.

5.10.1.Dynamics of perception

The preceding section explained how the individual receives sensations from stimuli in the
outside environment and how the human organism adapts to the level and intensity of sensory
input. We now come to one of the major principles of perception: Raw sensory input by itself
does not produce or explain the coherent picture of the world that most adults posses. Indeed, the
study of perception is largely the study of what we subconsciously add to or subtract from raw
sensory inputs to produce our own private picture of the world.

Human beings are constantly bombarded with stimuli during every minute and every hour of
every day. The sensory world is made up of an almost infinite number of discrete sensations;
intensive stimulation “bounces off” most individuals, who subconsciously block the receipt of a
heavy bombardment of stimuli. Otherwise, the billions of different stimuli to which we are
constantly exposed might serve to confuse us totally and keep us perpetually disoriented in a
constantly changing environment. One type of input is physical stimuli from the outside
environment: individuals themselves in the form of certain perdition based on previous
experience provide the other type of input. The combination of these two very different kinds of
inputs produces for each of us a very private, very personal picture of the world.

This is because each person is a Unique individual, with experiences, needs, wants, desires, and
expectations, it follows that each individual’s perception is also unique. This explains why no
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two people see the world in precisely the same way. Individuals are very selective as to which
stimuli they “recognize” they subconsciously organise the stimuli they do recognize according to
widely held psychological principles, and they interpret such stimuli subjectively in accordance
with their personal needs, expectations, and experiences.

Let us examine in some detail each of these three aspects of perception: the selection,
organization, and interpretation of stimuli.

(i).Perceptual selection

Consumers subconsciously exercise a great deal of selective as to which aspects of the

environment they perceive. An individual may look at some things, ignore others. In actuality,
people receive only a small fraction of the stimuli to which they are exposed.

Which stimuli get selected depends on two major factors in addition to the nature of the stimulus
itself:

(1) consumer’s previous experience as it affects their expectation and

(2) their motives at the time.

Each of these factors can serve to increase or decrease the probability that a stimulus will be
perceived.

Nature of the stimulus

Marketing stimuli include an enormous number of variables that affect the consumer’s
perception, such as the nature of the product, its physical attributes, the package design, the
brand name, the advertisement and commercials, the position of a print or a commercial, and the
editorial environment. In general, contrast is one of the most attention compelling attributes of a
stimulus. Advertisers often use extreme attention-getting devices to achieve maximum number of
magazines and newspapers carry ads that readers can unfold to reveal oversized, poster like
advertisements for products ranging from cosmetics to automobiles, because of the “stopping
power” of giant ads among more traditional sizes. However, advertising does not have to be
unique to achieve a high degree of differentiation: it simply has to contrast with the environment
in which it is run. The use of a dramatic image of the product again a white background with
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little copy in a print advertisement, the absence of sound in a commercial’s opening scene, a 60-
second commercial within a string of 20-second spots – all offer sufficient contrast from their
environments to achieve differentiation and merit the consumer’s attention. With respect to
packaging, astute marketers usually try to differentiate their packages to ensure rapid consumer
perception. Since the average package on the supermarket shelf has about 1/10th of a second to
make an impression on the consumer, it is important that every aspect of the package – the name,
shape, color, label, and copy- provide sufficient sensory stimulation to be noted and
remembered.

In print advertising, some advertisers run print ads that closely resemble editorial mater making
it increasingly difficult for readers to tell them apart. Also, advertisers are producing 30-minute
commercials that appear to the average viewer as documentaries and, thus, command more
attentive viewing than obvious commercials would receive.

• Expectations: People usually see what they expect to see, and what they expect to see is
usually based on familiarity, previous experience, or preconditioned set. In a marketing
context, people tend to perceive products and product attributes according to their own
expectations. A student who has been told by his friends that a particular professor is
interesting and dynamic will probably perceive the professor in that manner when the
class begins; a teenager who attends a horror movie that has been billed as terrifying will
probably find it so.On the other hand, stimuli that conflict sharply with expectations. For
years, certain advertisers have
• used blatant sexuality in advertisements for products to which sex was not relevant, in the
belief that such advertisements would attract a high degree of attention. However, ads
with irrelevant sexuality often defeat the marketer’s objective because readers tend to
remember the sexual aspects of the ad, not the product or brand advertised. Nevertheless,
some advertisers continue to use erotic appeals in promoting a wide variety of products,
from office furniture to jeans.
• Motives: People tend to perceive the things they need or want. The stronger the need, the
greater the tendency to ignore unrelated stimuli in the environment. A student who is
looking for a new cell phone provider is more likely to notice and read carefully ads for
deals and special offers regarding such services than his roommate who may be satisfied
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with his present cellular service. In general, there is a heightened awareness of stimuli
that are irrelevant to those needs. An individual’s perceptual process simply attunes itself
more closely to those elements in the environment that are important to that person.
Someone who is hungry is more likely to notice ads for food: a sexually repressed person
may perceive sexual symbolism where none exists. Marketing managers recognize the
efficiency of targeting their products to the perceived needs of consumers. For example, a
marketer can determine through marketing research what consumers consider to be the
ideal attributes of the product category or what consumers perceive their needs to be in
relation to the product category. The marketer can then segment the market on the basis
of those needs and vary the product as meeting their own special needs, wants, and
interests.

As the preceding discussion illustrates, the consumer’s “selection” of stimuli from the
environment is based on the interaction of expectations and motives with the stimulus itself.
These factors give rise to four important concepts concerning perception.

• Selective exposure: Consumers actively seek out messages that they find pleasant or with
which they are sympathetic, and they actively avoid painful or threatening ones. They
also selectively expose themselves to advertisements that reassure them of the wisdom of
their purchase decisions.
• Selective attention: Consumers exercise a great deal of selectivity in terms of the
attention they give to commercial stimuli. They have a heightened awareness of stimuli
that met their needs or interests and minimal awareness of stimuli irrelevant to their
needs. Thus, consumers are likely to note ads for products that would satisfy their needs
and disregard those in which they have no interest. People also vary in terms of the kinds
of information in which they are interested and the form of message and type of medium
they prefer. Some people are more interested in price, some in appearance, and some in
social acceptability. Some people like complex, sophisticated messages; others like
simple graphics.
• Perceptual defense: Consumers subconsciously screen out stimuli that they find
psychologically threatening, even though exposure has already taken place. Thus,
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threatening or otherwise damaging stimuli are less likely to be consciously perceived than
are neutral stimuli at the same level of exposure.
• Perceptual blocking: Consumers protect themselves from being bombarded either stimuli
by simply “tuning out” –blocking such stimuli from conscious awareness. They do so out
of self-protection because of the visually overwhelming nature of the world, which we
live in.

Perceptual organization

People do not experience the numerous stimuli they select from the environment as separate and
discrete sensations, rather, they tend to organize them into groups and perceive them as unified
wholes. Thus, the perceived characteristics of even the simplest stimulus are viewed as a
function of the whole to which the stimulus appears to belong. This method of perceptual
organization simplifies life considerably for the individual. The specific principles underlying
perceptual organizations are often referred to by the name given the school of psychology that
first developed it: Gestalt psychology. Three of the most basic principles of perceptual
organization are figure and ground, grouping, and closure.

• Figure and ground: As we have noted earlier, stimuli that contrast with their environment
are more likely to be noticed. A sound must be louder or softer, a colour brighter or paler.
The simplest visual illustration consists of a figure on a ground, it appears to be well
defined, solid, and in the forefront. People have a tendency to organize their perceptions
into figure-and-ground relationships. How a figure-ground pattern is perceived can be
influenced by prior pleasant or painful association with one or the other element in
isolation. Advertisers have to plan their advertisements carefully to make sure that the
stimulus they want noted is seen as figure and not as ground. The musical background
must not overwhelm the jingle; the background of an advertisement must not detract from
the product. Print advertisers often silhouette their products against a no distinct
background to make sure that the features they want noted are clearly perceived. We are
all familiar with figure-ground patterns. Marketers sometimes run advertisements that
confuse the consumers because there is no clear indication of which is figure and which
is ground. Of course, in some cases, the blurring of figure and ground is deliberate.
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• Grouping: Individuals tend to group stimuli so that they form a unified picture or
impression. The perception of stimuli as groups or chunks of information, rather than as
discrete bits of information, facilitates their memory and recall. Marketers to imply
certain desires meanings in connection with their products can use grouping
advantageously. For example, an advertisement for tea may show young people sipping
tea in a beautifully appointed room before a blazing hearth. The overall mood implied by
the grouping of stimuli leads the consumer to associate the drinking of tea with romance,
fine living, and winter warmth.Most of us can remember to repeat our social security
numbers because we automatically group them into three “chunks” rather than try to
remember nine separate numbers. Similarly, we recall and repeat our phone numbers in
three segments – the area code, first three digits, and the last four digits.
• Closure: Individuals have a need for closure. They express this need by organizing their
perceptions so that they form a complete picture. If the pattern of stimuli to which they
are exposed is incomplete, they tend to perceive it, nevertheless, as complete; that is, they
consciously or subconsciously fill in the missing pieces. Thus, a circle with a section of
its periphery missing in invariable perceived as a circle, not an arc. Incomplete messages
or tasks are better remembered than completed ones. One explanation for this
phenomenon is that a person who hears the beginning of a message or who begins a task
develops a need to complete it. If he or she is prevented from doing so, a state of tension
is created that manifests itself in improved memory for the incomplete task. The need for
closure has interesting implications for marketers. Promotional messages in which
viewers are required to “fill in” information beg for completion by consumers, and the
very act of completion serves to involve them more deeply in the message.

Perceptual interpretation

The preceding discussion has emphasized that perception is a personal phenomenon. People
exercise selectively as to which stimuli they perceive, and they organize these stimuli on the
basis of certain psychological principles. The interpretation of these stimuli is also uniquely
individual, because it is based on what individuals expect them to see in light of their previous
experience, on the number of plausible explanation they can envision, and on their motives and
interests at the time of perception. Stimuli are often highly ambiguous. Some stimuli are weak
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because of such factors as poor visibility, brief exposure, high noise level, or constant
fluctuation. Even stimuli that are strong tend to fluctuate dramatically because of such factors as
different angles of viewing, varying distances and changing levels of illumination. Consumers
usually attribute the sensory input they receive to sources they consider most likely to have
caused the specific pattern stimuli. When stimuli are highly ambiguous, an individual will
usually interpret them in such a way that they are sure to fulfill personal needs, wishes, interests,
and so on. It is this principle that provides the rationale for the projective tests. Such tests
provide ambiguous stimuli to respondents who are asked to interpret them, how a person
describes a vague illustration, or what meaning the individual ascribes to an ink blot, is a
reflection not of the stimulus itself, but of the subject’s own eeds, wants, and desires.

Perceptual distortion

Individuals are subject to a number of influences that tend to distort their perceptions; some of
these are discussed next.

• Physical appearance: People tend to attribute the qualities they associate with certain
people to others who may resemble them, whether or not they consciously recognize the
similarity. For this reason, the selection of models for print advertisements and for
television commercial can be a key element in their ultimate persuasiveness. Studies have
found that attractive models are more persuasive and have a more positive influence on
consumer attitudes and behaviour than average-looking models; attractive men are
perceived as more successful businessmen than average looking men.
• Stereotypes: Individuals tend to carry pictures in their minds of the meanings of various
kinds of stimuli. These stereotypes serve as expectations of what specific situations,
people, or events will be like, and they are important determinants of how two men – one
black and one white – handcuffed together, which was part of the “united colors of
Benetton” campaign promoting racial harmony, produced a public outcry because people
perceived it as depicting a white man arresting a black man.
• Jumping to conclusion: Many people tend to jump to conclusions before examining all
the relevant evidence. For example, the consumer may hear just the beginning of a
commercial message and draw conclusions regarding the product or service being
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advertised. For this reason, some copywriters are careful to give their most persuasive
arguments first.
• -Halo effect: Historically, the halo effect has been used to describe situations in which the
evaluation of a single object or person on a multitude of dimensions is based on the
evaluation of just one or a few dimensions. Consumers’ behaviorists broaden the notion
of the halo effect to include the evaluation of multiple objects on the basis of the
evaluation of just one dimension tampering with the perceived halo effect of a product or
brand can have disastrous consequences. For example, in an attempt to enhance the
image of JW Marriott, the Marriott hotel chain’s upscale brand, Marriott took over the
Righa Royal Hotel, an upscale hotel in New York City, and renamed it the JW Marriott
New York. When the new name signs went up, the company discovered that scores of
regular, upscale customers who always stayed at the Righa when visiting New York City
canceled their reservation because they did not want to tell colleagues to contact them at
the Marriott, the company restored the Righa Hotel name, with the JW Marriott name
included in smaller print.
• -Consumer imagery: Consumers have a number of enduring perceptions, or images, that
are particularly relevant to the study of consumer behaviour. Product and brands have
symbolic value for individuals, who evaluate them on the basis of their consistency with
their personal pictures of themselves.

Product positioning

The essence of successful marketing is the image that a product has in the mind of the consumer
– that is, it’s positioning. Positioning is more important to the ultimate success of a product than
are its actual characteristics, although products that are poorly made will not succeed in the long
run on the basis of image alone. The core of effective positioning is a unique position that the
product occupies in the mind of the consumer. Most new products fail because they are
perceived as “me too” offerings that do not offer consumers any advantages or unique benefits
over competitive products. Marketers of different brands in the same category can effectively
differentiate their offerings only if they stress the benefits that their brands provide rather their
products’ physical features. The benefits featured in a product’s positioning must reflect
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attributes that are important to and congruent with the perceptions of the targeted consumer
segment.

Positioning conveys the concept, or meaning, of the product or service in terms of how if fulfills
a consumer need. A good positioning strategy should have a two-prolonged meaning: one that is
congruent with the consumer’s needs while, at the same time, featuring the brand against its
competition. The result of successful positioning strategy is a distinctive brand image on which
consumers rely in making products choices.

A positive brand image also leads to consumer loyalty, positive beliefs about brand value, and a
willingness to search for the brand. A positive brand image also promotes consumer interest in
future brand promotions and inoculates consumers against competitors’ marketing activities.
Furthermore, research suggests that and advertiser’s positioning strategy affects consumer beliefs
about its brand’s attributes and the prices consumers are willing to pay.

In today’s highly competitive environment, a distinctive product image is most important, but
also very difficult to create and maintain. As products become more complex and the
marketplace more crowded, consumers rely more on the product’s image and claimed benefits
than on its actual attributes in marketing purchase decisions.

The major positioning strategies are in the following five sections.

• Umbrella positioning: This strategy entails creating and overall image of the company
around which a lot of products can be featured individually. This strategy is appropriate
for very large corporations with diversified product lines. For example, McDonald’s
positioning approaches over the years include “You deserve a break today at
McDonald’s”, “Nobody can do it like McDonald can”, Good times, great taste”.
• Positioning against competition: One of the most memorable TV commercials ever made
is the 1984 ad introducing Apple’s Macintosh. This very somber and futuristic
commercial depicted IBM, without ever naming the company, as an oppressive giant
resembling “Big Brother”, an evil character featured in George Orwell’s classic book
1984.
• Positioning based on a specific benefit: FedEx created its highly reliable service image
with the slogan “When it absolutely, positively has to be there overnight”. Maxwell
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House Coffee is “good to the last drop”. Bounty is “the quicker picker upper”. These are
examples of slogans that smartly and precisely depict key benefits of the brands they
promote and have effectively positioned these brands in the minds of consumers. There
are also many examples of products that failed because they positioned to deliver a
benefit that consumers did not want or did not believe. For example, Gillette’s “For Oily
Hair Only” shampoos failed because most consumers do not acknowledge that they have
oily hair.
• Finding an “unowned” position:In highly competitive markets, finding a niche unfilled
by other companies is challenging but not impossible. For example, Long Island’s
Newsday, in a reference to two competitive daily newspapers published in New York
City, is positioned “on top of the news and ahead of the times”. In the crowded and
commodity-like toothpaste market, where virtually every benefit associated with teeth
care has been claimed by one or another well-established brand, Topol became a success
because it was positioned as the smoker’s toothpaste; successful introductions include
products that fight tartar and gum disease.
• Filling several positions: Because unfilled gaps or “unowned”: perceptual positions
present opportunities for competitors, sophisticated marketers create several distinct
offerings, often in the form of different brands, to fill several identified niches. For
example, among Anheuser-Busch’s three major brands, Michelob is positioned as the
“super premium beer,” Budweiser as the largest-selling “king of beers” and Busch as the
“subpremium” brew; the prices of the three brands reflect their images.
• Product repositioning: Regardless of how well positioned a product appears to be, the
marketer may be forced to reposition it in response to market events, such as a competitor
cutting into the brand’s market share or too many competitors stressing the same
attribute. For example, rather than trying to meet the lower prices of high-quality private
label competition, some premium brand marketers have repositioned their brands to
justify their higher prices, playing up brand attributes that had previously been ignored.
Another reason to reposition a product or service is to satisfy changing consumer
preferences.

Perceptual mapping
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The technique of perceptual mapping helps marketers to determine just how their products or
services appear to consumers in relation to competitive brands on one or more relevant
characteristics. It enables them to see gaps in the positioning of all brands in the product or
service class and to identify areas in which consumer needs are not being adequately met. For
example, if a magazine publisher wants to introduce a new magazine to Generation Y, he may
use perceptual mapping to uncover a niche of consumers with a special set of interests that are
not being adequately or equally addressed by other magazines targeted to the same demographic
segment.

Positioning of services

Compared with manufacturing firms, service marketers face several unique problems in
positioning and promoting their offerings. Because services are intangible, image becomes a key
factor in differentiating a service from its competition. Thus, the marketing objective is to enable
the consumer to link a specific image with a specific brand name. Many service marketers have
developed strategies to provide customers with visual images and tangible reminders of their
service offerings. These include delivery vehicles painted in distinct colours, restaurant
matchbooks, packaged hotel soaps and shampoos, and a variety of other special items.Many
service companies market several versions of their service to different market segments by using
a differentiated positioning strategy. However, they must be careful to avoid perceptual
confusion among their customers. For example, Hilton Hotels recently purchased the Doubletree,
Embassy Suites, and Hampton Inn chains. In spite of the shared ownership, the company must
keep these brands separate and distinct from one another since each of these hotels brands target
a different segment – each with its own expectations regarding the service delivered. Although
distinct brand names are important to all products or services, they are particularly crucial in
marketing services due to the abstract and intangible nature of many services. The design of the
service environment is an important aspect of service positioning strategy and sharply influences
consumer impressions and consumer and employee behavior. The physical environment is
particularly important in creating a favorable impression for such service as banks, retail stores,
and professional offices, because there are so few objectives criteria by which consumers can
judge the quality of the service they receive. The service environment conveys the image of the
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service provider whom the service is so closely linked. One study of service environments
identified five environmental variables most important to bank customers:

 Privacy
 efficiency/convenience
 ambient background conditions
 social conditions
 Aesthetics.

Perceived price

How a consumer perceives a price – as high, as low, as fair – has strong influence on both
purchase intentions and purchase satisfaction. Consider the perception of price fairness, for
example. There is some evidence that customers do pay attention to the prices paid by other
customers and that the differential pricing strategies used by some marketers are perceived as
unfair by customers not eligible for the special prices. No one is happy knowing he or she paid
twice as much for and airline ticket of a theater ticket as the person in the next seat. Perceptions
of price unfairness affect consumers’ perceptions of product value and, ultimately, their
willingness to patronize a store or a service.

Reference prices

Products advertised as “on sale” tend to create enhanced customer perception of savings and
value. Different formats used in sales advertisements have differing impacts, based on consumer
reference prices. A reference price is any price that a consumer uses as a basis for comparison in
judging another price. Reference prices can be external or internal. An advertiser uses a higher
external reference price in an ad offering a lower sales price, to persuade the consumer that the
product advertised is a really good buy. Internal reference prices are those retrieved by the
consumer from memory. Internal reference points are thought to play a major role in consumers’
evaluations and perceptions of value of an advertised price deal, as well as in the believability of
any advertised reference price.

According to acquisition-transaction utility theory, two types of utility are associated with
consumer purchases. Acquisition utility represents the consumer’s perceived economic gain or
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loss associated with a purchase and is a function of product utility and purchase price.
Transaction utility concerns the perceived pleasure or displeasure associated with the financial
aspect of the purchase and is determined by the difference between the internal reference price
and the purchase price. Several studies have investigated the effects on consumer price
perceptions of three types of advertised reference prices: plausible low, plausible high, and
market prices. Plausible high are near the outer limits of the range but not beyond the realm of
believability, and implausible high are well above the conference price within a given
consumer’s acceptable price range, it is considered plausible and is assimilated.

Perceived quality

Consumers often judge the quality of a product service on the basis of a variety of informational
cues that they associate with the product. Some of these cues are intrinsic to the product or
service, whereas others are extrinsic. Either singly or in composite, such cues provide the basis
for perceptions of product and service quality.

Perceived quality of products

Cues that are intrinsic concern physical characteristics of the product itself, such as size, colour,
flavor, or aroma. In some cases, consumers use physical characteristics to judge product quality.
Consumers like to believe that they base their evaluations of product quality on intrinsic cues,
because that enables them to justify their product decisions as being “rational” or “objective”
product choices. More often than not, however, they use extrinsic characteristics to judge quality.
For example, though many consumers claim they buy a brand because of its superior taste, they
are often unable to identify the brand in blind tests. Many consumers use country-of-origin
stereotypes to evaluate products. Many consumers believe that a “made in the U.S.A.” label
means a product is “superior” or “very good”. Yet for food products, a foreign image is often
more enticing. For example, Haagen-Dazs and American-made ice cream, has been incredibly
successful with its made-up Scandinavian-sounding name. The success of Smirnoff vodka, made
in Connecticut, can be related to its so-called Russian derivation.

Perceived quality of services

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It is more difficult for consumers to evaluate the quality of services than the quality of products.
This is true because of certain distinctive characteristics of services. They are intangible, they are
variable, they are perishable, and they are simultaneously produced and consumed. To overcome
the fact that consumers are unable to compare competing services side-by-side as they do with
competing products, consumers rely on surrogate cues to evaluate service quality. In evaluating a
doctor’s services, for example, they note the quality of the office and examining room
furnishings, the number of framed degrees on the wall, the pleasantness of the receptionist and
the professionalism of the nurse; all contribute to the overall evaluation of the quality of a
doctor’s services. Because the actual quality of services can vary from day to day, from service
employee to service employee, and from customer to customer, marketers try to standardize their
services in order to provide consistency of quality. Unlike products, which are first produced,
and then sold, and then consumed, most services are first sold and then produced and consumed
simultaneously. Whereas a defective product is likely to be detected by factory quality control
inspectors before it ever reaches the consumer, an inferior service is consumed as it is being
produced; thus, there is little opportunity to correct it. During peak demand hours, the interactive
quality of services often declines, because both the customers and the service provider are
hurried and under stress. Without special effort by the service provider to ensure consistency of
services during peak hours, service image is likely to decline. Some marketer’s try to change
demand patterns in order to distribute the service more equally over time. The most widely
accepted framework for researching service quality stems from the premise that a consumer’s
evaluation of service quality is a function of the magnitude and direction of the gap between the
customer’s expectation of service and the customer’s assessment for the service actually
delivered.

How consumers handle risk

Consumers characteristically develop their own strategies for reducing perceived risk. These risk
reduction strategies enable them to act what increased confidence when making product
decisions, even though the consequences of such decisions remain somewhat uncertain. Some of
the more common risk-reduction strategies are discussed below:
 Consumers seek information: Consumers seek information about the product and product
category through word-of-mouth communication, from sales people, and from the general
media. They spend more time thinking about their choice and search for more
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information about the product alternatives when they associate a high degree of risk with
the purchase.
 Consumers are brand loyal: Consumers avoid risk by remaining loyal to a brand with
which they have been satisfied instead of purchasing new or untried brands. High-risk
perceivers, for example, are more likely to be loyal to their old brands and less likely to
purchase newly introduced products.
 Consumers select by brand image: When consumers have had no experience with a
product, they tend to “trust” a favored or well known brand name. Consumers often
think well-known brands are better and are worth buying for the implied assurance of
quality, dependability, performance, and service. Marketers’ promotional efforts
supplement the perceived quality of their products by helping to build and sustain a
favorable brand image.
 Consumer relies on store image: If consumers have no other information about a product,
they often trust the judgment of the merchandise buyers of a reputable store and depend
on them to have made careful decisions in selecting products for resale. Store image also
imparts the implication of product testing and the assurance of service, return privileges,
and adjustments in case of dissatisfaction.
 Consumers buy the most expensive model: When in doubt, consumers often feel that the
most expensive model is probably the best in terms of quality; that is, they equate price
with quality.
 Consumers seek reassurance: Consumers who are uncertain about the wisdom of a
product choice seek reassurance through money-back guarantees, government and private
laboratory test result, warranties, and repurchase trial. For example, it is unlikely that
anyone would buy a new model car without a test drive. Products that do not easily lead
themselves to free or limited trial present a challenge to marketers.
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CHAPTER 6: CONSUMER MOTIVATION

6.0. Introduction

Consumer motivation is an internal state that drives people to identify and buy products or
services that fulfill conscious and unconscious needs or desires. The fulfillment of those needs
can then motivate them to make a repeat purchase or to find different goods and services to
better fulfill those needs.

3.1.Chapter objectives

After studying through this chapter, the student is expected to be able to

 Define consumer motivation

 Describe the different types of needs that motivate consumers
 Discuss the dynamics of consumer motivations
 Explain how consumers learn ,applying different learning theories

.
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6.2. Motivation

Motivation is a highly dynamic construct that is constantly changing in reaction to life

experiences. Needs and goals change and grow in response to an individual’s physical condition,
environment, interactions with others, and experiences. As individuals attain their goals, they
develop new ones. If they do not attain their goals, they continue to strive for old goals or they
develop substitute goals.

Human needs have the following characteristics :

Needs are never fully satisfied

 Most human needs are never fully or permanently satisfied. For example, at fairly regular
intervals throughout the day individuals experience hunger needs that must be satisfied.
 Most people regularly seek companionship and approval from others to satisfy their
social needs.
 Even more complex psychological needs are rarely fully satisfied. For example, a person
may partially satisfy a power need by working as administrative assistant to a local
politician, but this vicarious taste of power may even to run for political office herself.
 In this instance, temporary goal achievement does not adequately satisfy the need for
power, and the individual strives harder in an effort to satisfy her need more fully.

New needs emerge as old needs are satisfied

 Some motivational theorists believe that a hierarchy of needs exists and that new, higher-
order needs emerge as lower-order needs are fulfilled.
 For example, a man who has largely satisfied his basic physiological needs may turn his
efforts to achieving acceptance among his new neighbors by joining their political clubs
and supporting their candidates.
 Once he is confident that he has achieved acceptance, he then may seek recognition by
giving lavish parties or building larger house.

Success and failure influence goals

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 A number of researchers have explored the nature of the goals that individuals set for
themselves. Broadly speaking, they have concluded that individuals who successfully
achieve their goals usually set new and higher goals; that is, they raise their level of
aspiration.
 This may be due to the fact that their success in reaching lower goals makes them more
confident of their ability to reach higher goals. Conversely, those who do not reach their
goals sometimes lower their levels of aspiration.
 Thus, goal selection is often a function of success and failure in reaching certain goals.
Those expectations, in an inexpensive camera may be motivated to buy a more
sophisticated camera in the belief that it will enable her to take even better photographs.
 In this way, she eventually may upgrade her camera by several hundred dollars. On the
other hand, a person who has not been able to take good photographs is just as likely to
keep the same camera or even to lose all interest in photography.
 These effects of success and failure on goal selection have strategy implications for
marketers. Goals should be reasonably attainable.
 Advertisements should not promise more than the product will deliver. Products and
services are often evaluated by the size and direction of the gap between consumer
expectations and objective performances.
 Thus, even a good product will not be repurchased if it fails to live up to unrealistic
expectations created by ads that “over promise”.
 Similarly, a consumer is likely to regard a mediocre product with greater satisfaction than
it warrants if its performance exceeds her expectations.

Substitute goals

 When an individual cannot attain a specific goal or type of goal that he or she anticipates
to satisfy certain needs, behaviour may be directed to a substitute goal.
 Although the substitute goal may not be as satisfactory as the primary goal, it may be
sufficient to dispel uncomfortable tension.
 Continued deprivation of a primary goal may result in the substitute goal assuming
primary-goal status. For example, a woman who has stopped drinking whole milk
because she is dieting may actually begin to prefer skim milk.
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 A man who cannot afford a BMW may convince himself that a Mazda Miata has an
image he clearly prefers.

Frustration

 Failure to achieve a goal often results to feelings of frustration. At one time or another,
everyone has experienced the frustration that comes from the inability to attain a goal.
 The barrier that prevents attainment of a goal may be personal to the individual or an
obstacle in the physical or social environment.
 Regardless of the cause, individuals react differently to frustrating situations. Some
people manage to cope by finding their way around the obstacle or, if that fails, by
selecting a substitute goal.
 Others are less adaptive and may regard their inability to achieve a goal as a personal
failure. Such people are likely to adopt a defense mechanism to protect their egos from
feelings or inadequacy.

Defense mechanism

 People who cannot cope with frustration often mentally redefine their frustrating
situations in order o protect their self-images and defend their self-esteem. For example, a
young woman may yearn for a European vacation she cannot afford.
 The coping individual may select a less expensive vacation trip to Disneyland or to a
national park. The person who cannot cope may react with anger towards her boss for not
paying her enough money to afford the vacation she prefers, or she may persuade herself
that Europe is unseasonably warm this year.
 These last two possibilities are examples, respectively, of aggression and rationalization,
defense mechanisms that people sometimes adopt to protect their egos from feeling of
failure when they do not attain their goals.
 Other defense mechanisms include regression, withdrawal, projection, autism,
identification, and repression. This listing of defense mechanisms far from exhaustive,
because individuals tend to develop their own ways of redefining frustrating situations to
protect their self-esteem from the anxieties that result from experiencing failure.
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 Marketers often consider this fact in their selection of advertising appeals and construct
advertisements that portray a person resolving a particular frustration through the use of
the advertised product.

Multiplicity of needs

 A consumer’s behaviour often fulfills more than one need. In fact, it is likely that specific
goals are selected because they fulfill several needs.
 We buy clothing for protection and for a certain degree of modesty; in addition, our
clothing fulfills a wide range of personal and social needs, such as acceptance or ego
needs.
 Usually, however, there is one overriding need that initiates behaviour. For example, a
young woman may consider joining a health club because she has nothing special to do
most evenings. She wants to wear midriff-baring clothes, and she wants to meet men
outside a bar setting.
 If the cumulative amount of tension produced by each of these three reasons is
sufficiently strong, she will probably join a health club.

Needs and goals vary among individuals

 One cannot accurately infer motives from behaviour. People with different needs may
seek fulfillment through selection of the same goal; people with the same needs may seek
fulfillment through different goals. Consider the following examples.
 Five people who are active in a consumer advocacy organization may each belong for a
different reason. The first may be genuinely concerned with protecting consumer
interests; the second may be concerned about an increase in counterfeit merchandise; the
third may seek social contacts from organizational meetings; the fourth may enjoy the
power of directing a large group; and the fifth may enjoy the status provided by
membership in an attention-getting organization.
 Similarly, five people may be driven buy the same need to seek fulfillment in different
ways. The first may seek advancement and recognition through a professional career; the
second may become active in a political organization; the third may run in regional
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marathons; the fourth may take professional dance lessons; and the fifth may seek
attention by monopolizing class- room discussions.

6.3. Arousal of motives

Most individual’s specific needs are dormant much of the time. The arousal of any particular set
of needs at a specific moment in time may be caused by internal stimuli found in the individual’s
physiological condition, by emotional or cognitive processes, or by stimuli in the outside
environment.

-Physiological arousal

 Bodily needs at any one specific moment in time are based on the individual’s
physiological condition at that moment.
 A drop in blood sugar level or stomach contractions will trigger awareness of a hunger
need.
 A decrease in body temperature will reduce shivering, which makes the individual aware
of the need for warmth.
 Most of these physiological cues are involuntary; however, they arouse related needs that
cause uncomfortable tensions until they are satisfied.
 For example, a person who is cold may turn up the heat in his bathroom and also make a
mental note to buy a warm cardigan sweater to wear around the house.

-Emotional arousal

• Sometimes daydreaming results in the arousal or stimulation of latent needs.

• People who are bored or who are frustrated in trying to achieve their goals often engage
in daydreaming, in which they imagine themselves in all sorts of desirable situations.
• These thoughts tend to arouse dormant needs, which may produce uncomfortable
tensions that drive them into goal-oriented behavior.
• A young woman who daydreams of a torrid romance may spend her free time in Internet
single chat rooms; a young man who dreams of being famous novelist may enroll in a
writing workshop.

-Cognitive arousal
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• Sometimes random thoughts can lead to a cognitive awareness of needs.

• An advertisement that provides reminders of home might trigger instant yearning to
speak with one’s parents.
• This is the basis of many long-distance telephone company campaigns that stress the low
cost of international long-distance rates.

-Environmental arousal

 These are the needs an individual experience’s at a particular time and are often activated
by specific cues in the environment.
 Without these cues, the needs might remain dormant. For example, the six o’clock news,
the sight or smell of baked goods, fast-food commercials on television, the end of the
school day – all of these may arouse the “need” for food. In such cases, modification of
the environment may be necessary to reduce the arousal of hunger.
 When people live in a complex and highly varied environment, they experience many
opportunities for need arousal.
 Conversely, when their environment is poor or deprived, fewer needs are activated. This
explains why television has had such a mixed effect on the lives of people in
underdeveloped countries.
 It exposes them to various lifestyles and expensive products that they would not
otherwise see, and it awakens wants and desires that they have little opportunity or even
hope of satisfying.
 Thus, while television enriches many lives, it also serves to frustrate people with little
money or education or hope, and may result in the adoption of such aggressive defense
mechanism as robbery, boycotts, or even revolts.
 There are two opposing philosophies concerned with the arousal of human motives.
 The behaviorist school considers motivation to be a mechanical process; behaviour is
seen as the response to a stimulus, and elements of conscious thought are ignored. and
extreme examples of the stimulus response theory of motivation is the impulse buyer who
reacts largely to external stimuli in the buying situation.
 According to this theory, the consumer’s cognitive control is limited; he or she does not
act but reacts to stimuli in the marketplace.
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 The cognitive school believes that all behaviour is directed at goal achievement. Needs
and past experiences are reasoned, categorized and transformed into attitude and beliefs
that act as predisposed to behavior. These predispositions are focused on helping the
individual satisfy needs, and the determine the actions that he or she takes to achieve this
satisfaction.

6.4. Consumer needs

In this section we shall make brief references to Maslow’s Hierarchy of needs in order to
understand how physiological and psychological factors (needs for growth and status) affect
consumer-buying behaviour. Abraham Maslow argued that human needs are grouped into five
levels in a hierarchical fashion. He argued that these needs progress from lower order needs to
higher order needs. He categorized these needs as follows

• Physiological Needs – These are basic needs of which a person cannot not survive
without satisfying them .They are fulfilled by such products as food, sleep, shelter etc.
• Safety Needs – People need to have security from harm .When customers have acquired
the products to ensure survival, they move own to seek products that ensure safety,
protection and security. (Physiological and safety needs are regarded as lower order
needs or basic needs)
• Social/Affiliation Needs – These cover a sense of belonging, and love. A person is happy
if he/she is a member of a social club or a professional board. These are classified as the
beginning of higher order needs.

Fig 6.1 Maslow’s hierarchy of needs

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Esteem Needs – These are largely associated with status and the need for recognition. (Houses in
low density suburbs, expensive brands of cars, expensive jewellery and designer clothes)

Self-Actualization Needs – a person operating at this level will be just focusing on empire
building, thus, building a name for himself /herself through charity, and social responsibility.

From a marketing viewpoint, marketers should be able to identify these needs and seek to satisfy
them.
According to the psychological approach to consumer behaviour, the starting point is a
perception about a particular product. This will motivate a person to buy a product after
gathering some information on the product.

Before a decision to buy is taken the consumer has to evaluate his /her alternatives in terms of
the four stages we discussed earlier then he/she will make a decision or choice.

6.6. The growth of relationship marketing

Marketers have come to realize that, the cost of gaining a new customer, particularly in mature
and slowly declining markets are often high. It is therefore argued that, the marketer has to
ensure that existing customer base is managed as effectively as possible. One way of doing this
is to move away from the traditional come- and- go type of transactions and implement strategies
concerned with the management of long term relationships.
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The table below compares the traditional mode of marketing with relationship marketing

Traditional transaction based Relationship management

model

Focus on single transaction Focus on customer retention and customer

loyalty

Emphasis on product features Emphasis upon product benefits that are

meaningful to the customer

Short timescales Long timescales recognizing the short term costs

maybe higher but so will long term profits

Little emphasis on customer Emphasis upon higher levels of service that are

retention possibly tailored to the individual customer

Limited customer commitment Higher customer commitment

Moderate customer contact Higher customer contact with each contact

being used to gain information and build

relationship

Quality is essentially the concern Quality is the concern of all and it is the
of production and no one else
failure to recognize this that creates minor

mistakes that lead to major problems

Steps in developing relationship marketing

In developing relationship marketing program (in business to business markets) the following
steps are relevant
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 Identify the key customers, since it is them , particularly in the early stages, that the
most profitable long term relationship can be developed
 Examine in detail the expectations of both the customer and the supplier
 Identify how the two organizations can work together
 Think about how operating processes on both sides might need to be changed so that
cooperation can be made easier
 Appoint a relationship manager in each of the two organizations so that there is neutral
focal point
 Go for a series of small wins in the first instances and gradually strengthen the
relationship
 Recognize from the start that the customers has different expectations and that these
needs have to be reflected in the way in which the relationship is developed
Activity

Is it necessary for marketers to under factors that affect consumer behaviour? Support your
answer

Human needs are constantly changing. So many changes are taking place in the consumer
buying behaviour. Marketers need to appreciate these trends in order to be relevant to the
people they market to. Marketers can influence consumers and create a desire to buy a
particular product if they understand the factors that influence consumer decisions. Accordingly
outline your understanding of the importance of studying a topic on consumer behaviour from a
marketer’s viewpoint.
6.7. Consumer learning

As was noted in the previous section, it is the motive that arouses individuals and thereby
increases their readiness to respond. This arousal is essential as it activates the energy necessary
to engage in learning activity. However, any success in achieving the motivating goal tends to
reduce arousal. This is reinforcement, and will create a tendency for the same behavior to occur
again in a similar situation. This is why companies attempt to have their products or their names
available.
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6.8. Learning theories

Several theories have been put forward in order to explain different aspects of learning. It is
possible to group these theories into major categories in order to offer some focus to the
discussion. The major division is between the connectionist school of thought and the cognitive
school of thought.
The connectionists stress that what people learn in connection between stimuli and responses,
which can be subdivided depending upon the type of conditioning employed. The cognitive
school, on the other hand, argues that people learn by discovering patterns and insights
6.8.1.Connectionist theories
The connectionist school maintains that people learn by developing the connections between a
stimulus and a response. Hence, the association between a stimulus and a response is the
connection that is learned. Reinforcement can be seen as a crucial part in the process of
understanding customer’s learning behavior. However, reinforcement is employed with two
fundamentally different methods of learning connections, classical conditioning and instrumental
conditioning. Let us now examine each on in more detail.
(i) Classical conditioning

Essentially, this method pair’s one stimulus with another stimulus that already elicits a given
response, over time, and with repetition the new stimulus will begin to elicit the same, or a very
similar, response. This is illustrated by Pavlov’s experiment (Figure 4.1.). Evidence suggests that
humans are capable of even further levels of conditioning.
Figure 6.2 classical conditioning
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 Classical conditioning explains how customers acquire tastes and motives. Hence
advertisers show their products in pleasant surroundings or otherwise positive settings.
 Here classical conditioning applies to the plan for repeated association of the product or
brand with positive settings, which will lead to customers developing a preference
towards the brand.
 Certain types of habitual behavior can also be explained through classical conditioning.
For example, many customers automatically purchase brands such as Heinz baked beans
or Nescafe instant coffee because they have developed strong associations between the
brand name and the generic p market.
 Learning brand names or acquiring attitudes, tastes and opinions are probably much
better explained by classical conditioning because the material learned in such cases can
be associated with stimuli that already elicit either favorable or unfavorable experiences.

(ii) Instrumental conditioning

The method of instrumental conditioning also involves learning connections between stimuli and
response, but the process differs from classical conditioning in several important ways. This can
be best illustrated with reference to the pioneering work of B.F. Skinner and his pigeons. The
experiment is represented in figure the figure below. Instrumental conditioning is a common
characteristic of customers. Customers often buy to try. Once they have found the product brand
they prefer, they buy time and again.
Figure 6 .3. Instrumental conditioning using (brands)

 The response is instrumental in producing reinforcement, hence the name for this method
of conditioning.
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 Because of these differences, each method is better suited to explaining different types of
customer learning.
 Adapting to and attempting to control one’s environment is better explained by
instrumental conditioning due to the fact that it requires the learner to discover the correct
response that will lead to reinforcement.

(iii).Cognitive learning theory

 Rather than view learning as the development of connections between stimuli and
responses, cognitive theorists stresses the importance of the development of perceptions,
problem solving and insight.
 They contend that much learning does not occur as a result of trial and error or practice
but as a result of discovering meaningful patterns, which enable customers to solve
problems.
 These patterns are termed gestalts, and cognitive theorists rely heavily on the process of
insight to explain the development of gestalts.
 A brief examination of the work of Wolfgang Kohler is useful to illustrate this view of
how we learn.
 An ape was placed in a cage with a box, and a bunch of bananas was hung from the top
of the cage out of the ape’s reach, even if the ape were to jump.
 After failing to reach the food, the problem was solved when the ape placed the box
under the bananas, climbed on to the box and reached the bananas.
 Kohler suggests that this was not the result of trial and error but a result of thought and
insight to solve the problem.
 The eureka situation with which we are all familiar. Although in this case the ape did
receive reinforcement in the form of food, reinforcement is not always as apparent in
many cognitive learning situations.
 Do we get rewards when we solve that last clue to complete a difficult crossword puzzle?
No, in this situation there is no tangible reinforcement.
 However, Cognitive theorists suggest that the reinforcement comes from closure, the
successful solution to properties.
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 An unsolved problem leads to tension and motivates a continued search for a solution.
Solving the problem leads to closure. This reduces tension and, as such, is reinforcing.
 94

CHAPTER 7 : THE NEW CONSUMER AND THE YOUTH MARKET

7.0.Introduction

The effectiveness of any marketing programmed is determined to a very large extent by the
marketing planners’ understanding of the customer and, in particular, by their understanding of
how and why customers behave as they do. We discuss the implications of this new marketing
reality for the marketing planning process. In doing so, we argue that because of the nature and
significance of these changes, the ways in which marketing planners need to understand
customers has also changed. In practice, though, it appears that many marketing planners still
view customers in much the same way that they did ten years ago. Against this background, we
then turn to the characteristics of what we have labeled the ‘new consumer’ and how marketing
planners might possibly respond to this.

7.1. Objectives

On completion of this topic, learners are expected to be able to

 Describe the changes taking place in the marketing environment

 Distinguish the old consumers from the new consumers
 Describe the impact of globalization on customers’ culture
 Explain how the internet has impacted on the new trends in buyer behavior.
 Describe the characteristics of the youth market
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7.2.The changing marketing environment (or the emergence of a new marketing reality)

If there is a single issue or theme that now links all types and sizes of organizations, it is that of
the much faster pace of environmental changes and the much greater degree of environmental
uncertainty than was typically the case even a few years ago. This changes and uncertainty have
been manifested in a wide variety of ways and have led to a series of environmental pressures
and challenges with which managers have had to come to terms. Taken together, these changes,
some of which appear in the table, have led to what we refer to here as the ‘new marketing
reality. This new reality is significant for a number of reasons, but most obviously because of the
ways in which it is forcing many marketing managers to rethink how they operate. Although the
ten points identified in table are not intended either as a complete or definite list of the sorts of
environmental challenges that marketing managers now face, they illustrate some of the ways in
which marketing environments are changing and how the pressures upon managers are
increasing. Of these changes, the one with which we are most concerned here is that of the very
different cultural and social pressures that have led to what we refer to as the ‘new consumer’.
However, before we examine the new consumers, the reader should not automatically assume
that rapid environmental change always leads to problems or threats for organizations. Instead,
many changes lead to windows of opportunity. The real challenge for managers can therefore be
seen to bet hat of developing a sensitive environmental monitoring system that is capable not
only of identifying as quickly as possible the nature and significance of any threats – and
opportunities – but that providing marketing planners with the information needed to respond to
these cleverly.

7.3.The changing marketing environment and the emergence of a new marketing reality

Among some of the most significant and far-reaching environmental changes of the past few
years have been the following:

1. A much greater degree of economic volatility and uncertainty.

2. The opening up of a series of new and often very different geographical markets (think about
the emergence of China and the Central and Eastern European markets).
 96

3. High and seemingly ever higher levels of political change and uncertainty in many parts of the
world.

4. The far greater pace of technological change.

5. New forms of distribution and access to markets, including through the Internet.

6. New and often more unpredictable competitors and forms of competition.

7. The increasingly global nature of many markets.

8. The erosion of many of the traditional bases of competitive advantage.

9. A significant downward pressure upon prices.

10. Very different social and cultural pressure that have led to a different types of consumer (this
is the new consumer referred to in the title of the chapter).

Although the impact of any one of these factors may, by itself, be relatively small, their
combined effect is significant and has created a new marketing reality which demands that
marketing planners be infinitely more aware of the changes taking place within the market and
infinitely cleverer in how they respond. In essence, therefore, the new marketing reality has
highlighted the way in which many of the traditional market paradigms are no longer really
appropriate and now need to be rethought.

7.4. The rise of the new consumer

The new consumer is a phenomenon that emerged throughout the 1990s very largely as the result
of a series of major social, political, economic, technological and cultural changes within society.

103 In so far as it is possible to identify how the new consumer differs from the old, it is that
they are typically:

• Far more demanding

• Far more discriminating
• Much less brand loyal
• Much more willing to complain than customers in the past.
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The significance of the new consumer can perhaps best be understood by focusing upon just two
of these factors that of the changed and changing roles of men and women and, at least in some
parts of the market, the greater emphasis upon value for money. In case of the car market, for
example, women bought slightly more than 40% of new cars that were bought privately in 2003;
this compares with less than 6% in 1970.

The implications of this for the car manufacturers have been enormous and have had to be
reflected not just in terms of the design of cars, but also in the type of market research that is
conducted, the nature of the advertising used to promote the cars, the media vehicles that are
used, and the approaches to selling. At the same time the search for greater value has led
customers to be willing to use less traditional ways of buying cars, including through car
supermarkets, through the Internet, and through companies that specialize in importing cars from
those parts of the world where prices are lower than in the UK. The implications of this car
manufacturers, with their traditional dealers networks, have been significant and have forced
them to refocus substantial parts of their marketing strategies but most obviously their
approaches to pricing, distribution, dealer support and after-sales services.

7.5.The emergence of the new consumer

The marketing environment of the past 10-15 years has been characterized by a series of
Fundamental and far-reaching economic, social and political changes. One consequences of this
has been the emergence of what we can refer to as the ‘new consumer’. Although, as Gilligan
and Wilson (2003) suggest. ‘This new consumer is not necessarily new in any absolute sense,
they differ in a wide variety of ways from traditional consumers in that their expectations, values
and patterns of behaviour are all very different from those of the past. The consequences of this
are manifested in several ways but most obviously by the way in greater and the marketing
efforts tailored more firmly and clearly to the patterns of specific need.’ This new consumer is
characterized by:

• New and very different sets of value systems;

• A greater emphasis upon value for money and higher levels of price awareness;
• Less technophobia;
• A greater willingness to accept more and exciting new products;
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• A tendency to experiment with new products, ideas and delivery systems;

• Lower levels of brands and suppliers loyalty;
• Higher levels of brand promiscuity;
• A far more questioning and skeptical attitude towards government, big business,
politicians, the church and brands;
• Higher levels of environmental awareness and a greater ‘greenness’;
• Major changes in family structures and relationships, with changes and changing roles of
men and women;
• The emergences of a far more media, advertising, brands and technologically literate
generations of consumers.

7.6.The new consumer and the youth market

The differences that exist between the new consumer and the old are even more apparent, and
more extremes, in the case of young(er) consumers (for our purposes here, we see these to be
aged between four and 19), in that this segment, when compared with other customers groups, is
also typically:

• Far more media literate;

• Infinitely more advertising literate;
• Much more brand literate, brand sophisticated and brand discriminating;
• Far more technologically literate.

To a large extent, these higher levels of media, advertising, brand and technological literacy can
be seen to be the direct result of having been exposed to a far greater number and a much larger
variety of media than any previous generations. Included within this are 24-hour television,
satellite broadcasting, and a huge upsurge in the numbers of newspapers and far more finely
targeted magazines. The advertising literacy then follows directly from this in that the sheer
number of advertising to which they have been exposed in higher than ever before. Brand
literacy emerges from brands having been an integral part of lifestyles for as long as this
generations has been alive, something that was not always the case with older consumers.
Equally, the technological literacy follows from their exposure to technologies such as
information technology from a very early age. The combined effect of this is the more
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emergence of a very different types of buyer who has very different and often much more
unpredictable patterns of buying.

In many ways, the emergences of this new type of consumer be it in the teens market or those
aged 20-55, represents one of the biggest challenges for marketers, since their expectations of
organizations and the nature of the relationships that they demand are very different from
anything that existed previously. Recognizing this, if marketers fail to come to terms with it, the
implications for organizational performance and marketing planning are significant.

7.7.The changing social, cultural and demographic environments

Many of the factors that have led to the emergence of the new consumer can be seen to be the
almost inevitable result of the often radical changes that have taken place within the social,
cultural and demographic environments of the past 20-30 years and it is to these areas that we
now turn our attention. Western societies have been and are currently still undergoing a series of
significant and far-reaching changes (for a more detailed treatment of these areas, see Gilligan
and Wilson (2003: Chapter 6).

Including within these are:

1. An upsurge in the number of single-person households, the size and importance of this SSWD
group (single, separated, widowed, divorced) having grown enormously over the past 20
years.This upsurge has been driven by a series of changes across society that include:

• People getting married at a later stage than in the past

• A rapid rise in the divorce rate (about one0third of all marriages in the UK now ends in
• (divorce)
• The increasingly high failure rate of second marriages
• An upsurge in the number of one-parent families
• A much greater degree of social and geographical mobility
• Higher income levels, especially among women that gives people the freedom to live
alone if they wish to do so.
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2. A significant growth in the number of people sharing a home, with this becoming increasingly
like the first stage marriage. At the same time, the number of household with two or more people
of the same sex sharing has also increased.

3. A rapid increase in-group household with three or more people of the same or opposite sex
living together and sharing expenses.

4. A greater tendency for young adults not to leave home but, because of the rapidly increasing
costs of property, to stay at home for longer, a phenomenon that is seen as its most extreme in
Italy where many children do not leave the family home until their early 30s. There is also the
phenomenon of young adults leaving home for short periods but still seeing the parental home as
‘their’ home and returning to it frequently. Labeled the ‘boomerang generation’ the factors that
have contributed to this partly cost, but also a reluctance to accept the full responsibilities of
adulthood. The significance of this is shown by the way in which a study in 2002 by the Social
Market Foundation, an independent think tank, revealed that one in four people in the20-30 age
group are now returning to live with their parent

5. A far greater degree of social mobility that has developed across the Western world as the
result of consumer cultures changing, income levels increasing and very different lifestyle
expectations emerging. Taken together, this has led to the creation of a far larger and far more
powerful middle class, which exhibits fewer specifically national characteristic and a greater
number of common expectations and patterns of buying.

6. The ever-greater urbanization of society as a higher proportions of the population, but

Especially the young move into the centers of population.

7. A substantial increase in the number of young people going into higher education. In the
1960s, about one in 17 of the population went to university. By the mid1990s the figure was
about one in three. Current government targets suggest a figure of one in two. The implications
of this are significance in a variety of ways, but most obviously in terms of the ways in which
education not only broadens perspectives, but also career expectation and lifelong earning
potential increase.

8. The collapse of the idea if the job is necessary for life.

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7.8.Social and Cultural Change:

Taken together, the net effect of the changes referred to above has been significant, and is
continuing to prove so, with the marketing strategies of nearly all companies being affected in
one way or another. At their most fundamental, these changes have led to a shift from a small
number of mass markets to an infinitely larger number of micro-markets, differentiated by age,
sex, lifestyle, education, and so on. Each of these groups differs in terms of its preferences and
characteristics and, as a result, requires different more flexible and far more precise approaches
to marketing which no longer take for granted the long-established assumptions and conventions
of marketing practice.

7.9.Social change and the three nation’s society

Recognizing the nature and significance of the sort of changes within society that we have
discussed so far, the Henley Centre in the mid-1900s highlighted the ways in which there is an
interaction of time and money and how this led to the emergence of a sizeable cash-rich/time-
poor segment in society. The profile of this segment, which they referred to as ‘the first nation’,
differs in a number of significant ways from that of what they labeled the second and third
nations; the characteristics of the three segments are in the table. The 20% of the people in the
first nation segment are characterized by being willing to spend money to save time, something
that distinguishes them from the other 80% of society. By virtue of their income levels, this
segment of society also has open to it a greater spectrum of product choices, and has responded
by being more willing than other segments to pass on to others some aspects of the management
of their lives. The significance of the cash-rich/time-poor segment: the growth of the service
support sector. It should be apparent from the table that the first nation identified by the Henley
Centre is of enormous potential significance to marketers. Because more and more people are
working longer hours, the services sector has grown enormously to fill the time gap. The idea of
getting someone to do something for you is no longer seen to be a sign of laziness, but is instead
a sign of people valuing their life and being far clearer about their priorities. Others factors that
have led to the growth of the service sector to serve this market include the following:

• 72% of women of working age are now employed and while statistics show that women still do
the majority of housework, young women are less inclined to do it than their mothers. The
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number of single-person households is also increasing and so these people have no one else to do
it for them.

• The desire for convenience and the intention to exploit fully the limited time that people do
have.

They are therefore willing to pay for time, quality and simplicity.

• The 24-hour society that has been driven by:

- The Internet being ‘open’ 24 hours a day, something that helps to confirm this notion for the
24- hour society;

- Home delivery and the easy availability of products when and where you want them;

- An increase in stress-related diseases.

7.10.The significance of the cash-poor/time rich segment: the search for greater value

At the other end of the spectrum to the first nation society is the cash-poor/time-rich third nation
group, a group that has very different spending patterns and whose significance is shown by the
way in which:

• Although 40% of households are affluent, one in three is poor and getting poorer;

• High levels of price consciousness continue to thrive, with retailers such as Wal-Mart, Aldi and
Netto all set to capitalize on this;

• Even the wealthier, older households will feel squeezed as they live longer and more of their
discretionary income goes on health, education (that of their grandchildren) and private
insurance;

• Consumers are becoming ever more demanding of quality and see price/ value solutions more
than price by itself to be important.

The first nation The second nation The third nation

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20% of the population 50% of the population 30% of the population

40% of consumer spending 50% of consumer spending 10% of consumer spending

Cash-rich Cash-constrained Cash-poor

Time-poor Time-constrained Time-rich

7.11.The rise of the new consumer and the implications for marketing planning

Throughout this chapter we have suggested that the 1990s saw the emergence of a very different
type of consumer. Among those to have discussed this in details are Lewis and Bridger (2000)
who in their book The soul of the New Consumer suggest that consumers have evolved form
being conformist and deferential children, reared on the propaganda of the post-Second World
War and who were prepared to trust mass advertising, into free-thinking, individualistic adults
who are skeptical of figures of authority such as politicians, big business and mega brands. Old
Consumers, they suggest, were ‘typically constrained by cash, choice and the availability of
goods, New Consumers are generally short of time, attention and trust’ (this is the cash-rich/
time poor first nation generation that we referred to. Mass society, they argue, has shattered and
been reduced to a mosaic of minorities: In a hyper competitive world of fragmented markets and
independently minded, well-informed individuals, companies that fail to understand and attend
to the needs of New Consumers are doomed to extinctions. Currently, the average life of a major
company only rarely exceeds 40 years. In the coming decade, any business that is less than
highly successful will find that lifespan reduced by a factor of at least 10. (Lewis and Bridger,
2000) Although it might be argued that the picture that Lewis and Bridger paint is a little
dramatic, the changes that are taking place are undoubtedly significant and have major
implications for marketing planners. In discussing this, Gilligan and Wilson (2003) argue that
there are four key areas to which planners need to pay attention:

1. How best to (re) connect with the new consumer. The roll call to those who have failed to do
this includes some of the biggest brands in the world, some of which have found it difficult to
recognize the new consumers’ often very different patters of behaviour, much higher
expectations and lower levels of brands loyalty. How best to direct and subsequently manage
their messages to increasingly critical audiences
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who have access to technology and who, through tools such as the Internet, are able very quickly

2.Publicize often highly critical reviews of new products, services or films that can be far more
influential than the formal advertising campaigns.

3. Recognize the real potential of innovative forms of communications, such as viral marketing,
to deliver their message to new consumers. Among those who have done this well are some of
the niche teenage fashion brands whose target market is largely the urban street warrior who in
the early days is attracted to a brand not on the basis of mass advertising, but of word of mouth.
As soon as there is any danger of the brand moving anywhere near the mainstream, the urban
street warrior – and his friends – moves on to another brand.

4. How best to individualize and tailor services to the consumers’ needs to a far greater extent
than has typically been the case in the past. This sort of response, which can be labeled
‘complicated simplicity’, means the end of a mass audience-oriented approach and the far greater
acceptance of an audience-of-one approach. This shift is likely to be driven in part at leas, by the
consumer empowerment movement, which, among other things, demands a far greater degree of
price transparency. The implications of this are potentially significant, since organizations face
the pressure of having to cut costs and maintain profitability, while having little opportunity to
raise prices.

7.12.The new assertiveness: the rise of the complaining consumer

It should be apparent from what has been said so far that the new consumer is a very different
type of consumer, who demands a very different approach to marketing. This theme of very
different and far more assertive type of consumer has also been developed by the advertising
agency Publicist, which in its reports The New Assertiveness (2002), suggests that this new type
of consumer:

Infuriated by the pressures of twenty-first-century living and a feeling of having little control
over many aspects of their lives, consumers are attempting to regain control and vent their
frustrations through their Buying habits. …Seventy per cent of those surveyed believe the future
is more uncertain than it was in their parents’ day – an anxiety that has been increased since
September 11.Many now feel vulnerable to the possibility that anything could happen, at any
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time. The study goes on to argue that: This insecurity is breeding a new generation of consumer.
Increasingly, we are buying products or services to cheer ourselves up – 31 per cent of adults
surveyed said this, a figure that rose to 50 per cent among 15 to 24 years-old respondents,
motivated their consumption. (2001/2)

The report also highlighted the way in which consumers’ expectations of product quality and
levels of service are outstripping satisfaction, with 96% of respondents having made a complaint
about a product or service during the previous 12 months. The new consumer moves on: the
genie of the super-powered consumer, arguably one of the most significant and far-reaching
characteristics of new consumers are, we suggested above, their willingness to complain. This
has, in turn led to the emergence of what might loosely be termed the super-powered consumer.
Super-powered consumers are typically media literate, have access to their own mass-media
channel of communications (the web), have a number of tools for a fast response to problems
(the mobile phone), and often have a public relations strategy and an ability to hurt companies.
They are also well informed and frequently politicized in their behaviour patterns. Example of
super-powered consumers in action include the anti-global brand demonstrations in Seattle in
1999; French farmers attacking the ‘imperialism’ of McDonalds’s; European and North
American customers asking questions of Nike about their manufacturing policies in Southeast
Asian; and the green lobby forcing the British government to change its policy on genetically
modified foods. In a number of ways, however, the emergence of the super-powered consumer
represents something of a paradox. Marketers have worked hard to create this type of consumer
by giving them greater access, more information and more influence over how business is done,
and how brands communicate. Having been encouraged to ask questions, consumers have
become far more discriminating and cynical, with the result that marketing planners are now
under far greater pressure and need to respond with communications that is more open.

7.13.The new consumer and youth culture: the rise and fall of generation x and the
emergence of generation y

Published in 1991, Robert Coupland’s Generation X defined a slice of zeitgeist that was

Characterized by young people who in many cases had dropped out of society and rejected the
idea of work. They, it was claimed, were the future. However, just four years later. Generation X
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vanished to be replaced by a very different type of youth culture. In an attempt to come to terms
with this, the advertising agency BMP DDB Needham conducted a major study of Britain’s
youth in 1995/96. Labelled ROAR (Right of Admission Reserved), the research focused upon
consumption habits, jobs, income, love and hates, and hopes and dreams. The ROAR research, in
common with many other youth studies, focused upon trying to find the style leaders. Based on
the ‘trickle down’ theory, each social group, the theory suggests, will have Purists, the handful of
people who create the fashion; Style Leaders, who pick up on it first; Early Adopters, who Crave
recognition by the Style Leaders; Happy Compromisers, who know they’re not style Leaders but
know what’s hip and what they want from it; and the Unsophisticated, who dress up – perhaps
strangely – but probably get things six months too late. This approach to structuring youth is
used by many brands targeted at the young. The product is placed with Purists or Style Leaders
in the hope it will ‘trickle down’ to the Early Adopters and finally to the reminders of the target
market. Although he sorts of grouping that emerged from the ROAR study have an initial
attraction, the dangers of categorizing markets in this way should not be underestimated. Despite
our earlier comment about many young consumers being relatively conservative in their choice
of brands, there is also a strong element of heavy individualism among young consumers. This
individualization, together with an accelerating culture, leads to a sizeable part of the youth
market being inherently and intensely brand promiscuous. The idea of brand promiscuity reflects
the way in which many new consumers show far lower levels of loyalty to brands than in the past
and constantly switch between one brand and another, despite any incentives offered through the
marketing mix. Following the decline of Generation X, Generation Y began to emerge.
However, unlike the earlier Generation X, who had grown up during an era of downsizing and
restructuring, members of Generation Y have been shaped by the experience of entering the
workforce during one of the longest and strongest economic booms in history. It was also this
generation that was brought up in the decade of the child, when the psychology of self-esteem
drove a great deal of thinking about how children should be raised. In discussing this generation,
Tomkins (2002:43) suggest that: On entering the job market, the twenty something were in big
demand not just because of the booming economy but because, as the first generation to have
grown up with computer technology, they were seen as leaders of the biggest business upheaval
since the industrial revolution. Small wonder these cosseted, sought-after youngsters were
optimistic and self-confident – or that their elders may have seen them as arrogant. However,
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with the end of the dot.com boom it was this segment that was hit the hardest. In the USA, for
example, unemployment among those aged 16-24 is now much higher than among those aged 25
and over – a reversal of what happened in the last recession, when companies downsized by
cutting older, more experienced workers. In the longer term, though, Generation Y represents a
powerful market, since not only will demographics weigh heavily in the favors as populations
age and the demand for younger workers outstrips supply, but it is also this market that we are
referring to when we discuss the higher levels of media, advertising, brand and technological
literacy. The almost desperate struggle to understand youth markets in detail by a combination of
factors. In part, it is the sheer size, value and volatility of the market. However, perhaps more
importantly, this is a market, which has many, many years of buying ahead of it. Because many
consumers are invariably relatively conservative, they tend to stay with the brands of their youth
for some time.

7.14. The new consumer and the growth of relationship marketing

Against the background of everything that I have said about new consumers and their typically
much higher and very different sets of expectations, there is the question of how marketing
planners need to respond. Among the most obvious or necessary responses is the need to develop
and build much closer and more cost-effective relationships with the consumers. Gilligan and
Wilson (2003) suggest that there are numerous ways in which relationships can managed
proactively, including by redefining and extending the marketing mix. As markets have become
more competitive, the extent to which marketing planners can differentiate purely on the basis of
the traditional 4Ps of the product, price, promotion and place has become increasingly more
difficult and more questionable. To overcome this, the focus in many markets has moved to the
‘softer’ elements to markets and the additional 3Ps of people, processes and proactive customer
service. In emphasizing the softer elements of marketing, marketing planners are giving explicit
recognition to the way in which the product or service is typically delivered through people and
that it is the organization’s staffs who have the ability to make or break the relationship. This, in
turn, is influenced either positively or negatively by organizational processes and the
effectiveness of process management (process management is concerned with the ways in which
the customer is handled from the point of very first contact with the organization through to the
last). The third of the soft Ps is that of proactive customer service and the ways in which levels of
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customer satisfaction can be leveraged by proactive rather than reactive service standards and
initiatives.

7.15. Relationship marketing myopia

But although relationship marketing and relationship management have an obvious attraction,
they also have their critics. Nigel Piercy (2002), for example, has identified what he terms
relationships marketing myopia, or the naive belief that every customer wants to have a
relationship with its suppliers. He goes on to suggest that ‘customers differ in many important
ways in the types of relationships type want to have with different suppliers, and that to ignore
this reality is an expensive indulgence’, (Piercy 2002). This, in turn, has led him to categories
customers in terms of those who are:

• Relationship seekers –customers who want a close a long-term relationship with

suppliers.
• Relationship exploiters – customers who will take every free service and offer but will
still move their business elsewhere when they feel like it.
• Loyal buyers – customers who will give long-term loyalty, but who do not want a close
relationship.
• Arm’s lengths, transaction buyers – customers who avoid close relationships and move
business based on price, technical specification or innovation.
• In categorizing customers in this way, Piercy gives recognition to the need for
relationship strategies to be based upon the principle of market segmentation and
customers’ relationship-seeking characteristics:

Relationship investment with profitable relationship seekers is good. Relationship investment

with exploiters and transactional customers are a waste. The trick is going to be developing
different marketing strategies to match different customer relationships needs (Piercy, 2002)

Percy’s comments are interesting for a variety of reasons and raise the questions of whether there
is a direct link between customer satisfaction and customer loyalty. Although a link might appear
obvious, there is in fact little hard evidence to suggest anything other than the existence of what
is at best an indirect relationship. Instead, it is probably the case that it is customer dissatisfaction
that leads to customer disloyalty, although even here the link may be surprisingly tenuous. While
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this may seem to be a strange comment to make, the reality in many markets is that there is often
a surprisingly high degree of inertia within the customer base. Given this, customers or
consumers may be in a position where they simply cannot be bothered to change their source of
supply until levels of dissatisfaction reach a very high level.

The Problems of Customer and Brand Promiscuity: The Need for The Extra Value Proposition
One of the principal themes that we have tried to pursue throughout this chapter is that many of
the traditional assumptions that have been made about customers and that have driven thinking
on marketing strategy are quite simply no longer appropriate. In the case of customer loyalty, for
example, rather than being able to take customer loyalty for granted, the reality for many
marketing planners today is that, as customers have become more demanding, more
discriminating, less loyal and more willing too complain, levels of customers and brand
promiscuity have increased dramatically. In a number of ways, this can be seen to be the logical
end-point of the sorts of ideas discussed by Alvin Toffler in his book Future Shock (1970), when
he predicted that we would be living in a world of accelerating discontinuities where ‘the points
of a compass no longer navigated us in the direction

of the future’. Among Toffler’s predictions was that, is the pace of change accelerates, so the
nature of relationships becomes much more temporary. For marketers, the most obvious
manifestation of this is the fracturing of the relationship between the organization and its markets
and the decline of brand loyalty. In part, this can be seen to be the result of the way in which
customers are now faced with so many stimuli in the form of advertising, promotions, point-of-
sale offers, posters sites, and sponsorship, that there is the danger of a considerable amount of
marketing activity simply becoming white noise, that is noise that cancels out other noise so that
nothing can be heard. Given this, there is a need to rethink the nature of the relationship between
the consumer and the brand. One of the ways in which this can be done is by focusing upon
added value and the extra value proposition (EVP), customers driven strategies and permission
marketing. In the absence of this, there is the very real danger of competitive oblivion,
particularly as web-based strategies reduce market entry barriers and costs.

Activity

Define relationship marketing and outline its benefits to the marketer

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7.15.Looking to the future

There is in many organizations the temptation to focus upon the short term. There are several

explanations for this, the most obvious of which stems from the (greater) feeling of security that
managers derive from concentrating upon the comfort zone of the areas and developments that
are essential predictable. A more fundamental explanation, however, emerged from a survey in
the Asian Wall Street Journal. The study, which covered large firms and multinational
corporations, illustrated the extent to which many senior managers are forced to demonstrate
higher and more immediate short-term results than in the past. The implications for strategic
marketing planning are significant, since strategic planners have little incentive to think and act
for the long term if they know they will be evaluated largely on the basis of short-term gains and
results. The sort of trade-offs that emerge from this have, in turn, been heightened as the pace of
change within environment and the need to manage ambiguity, complexity and paradox have
increased. Nevertheless, strategic marketing planners must, of necessity, have some view of the
longer term and of the ways in which markets are likely to move. Doyle (2002) identifies ten
major trends within the environment: Tthe move towards what he term the fashionable of
markets, in which an ever-greater number of products and markets are subject to rapid
obsolescence and unpredictable and fickle demand. 2. The fragmentation of previously
homogeneous markets and the emerge of micro-markets.

3. Ever-higher expectations.

4. The greater pace of technological changes.

5. Higher levels of competition.

6. The globalization of markets and business.

7. Expectations of higher service.

8. The commoditization of markets.

9. The erosion of previously strong and dominant brands.

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10. A series of new and / or greater governmental, political, economic and social constraints.

Although the list is by no means exhaustive (it fails, for example, to come to terms with the
details of a series of the major social and attitudinal changes that we have discussed within this
chapter) and, in a number of ways, focuses upon the broadly obvious in that much of what he
suggest is simply a continuation of what exists currently, it does provide an initial framework for
thinking about the future. A somewhat different approach has been taken by Fifiel (1998) who
has focused upon tomorrow’s customers.

He suggests that these customers will not simply be a replication of the customer of the past, but
will instead be characterized by a series of traits that include being:

• Inner-driven and less susceptible to fashion and fads;

• Multi-individualistic and multifaceted;
• Interconnected with a far stronger awareness of different facets of their lives;
• Pleasure seeking’
• Deconstructed in that they will view work, family and society very differently from that
in the past;
• Unforgiving in that they will not only expect more, but they will demand more and
retaliate if and when this is not provided.

7.16.The new consumer and the rise of the Internet – new rules for the new world

The background

The characteristics of the new consumer and, in particular, their much higher levels of
technological awareness and technological literacy have provided enormous opportunities – and
enormous threats

– For large numbers of organizations. In the case of the retail sector, many of the traditional
players have been hit hard by new entrance to their markets and have struggled to come to terms
with the consumers’ new shopping habits and the development by new entrants of what we can
loosely refer to as new rules for the new world. Internet shopping has grown exponentially over
the past few years and in December 2003 accounted for 7% of total UK retail sales. Amongst the
winners in the battle for consumer spending power have been the Inter net banks such as Smile,
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and Egg which have blended 24-hour access with far higher levels of services than the traditional
banks; the low-cost airlines such as easyjet and Ryanair, both of which have made the travel
agent redundant by operating only through the Internet; and Amazon.com which has reinvented
the rules for book selling by rejecting the traditional high street book selling business model.

Activity

Do you think the internet have changed the buying behavior of consumers, explain

7.16.Consumerism and consumer rights.

Consumer protection can only survive in highly industrialized countries because of the resources
needed to finance consumer interests.

Kennedy's Consumer Bill of Rights included the right to be informed, the right to safety, the
right to choose, and the right to be heard. The right to be informed involves protection against
misleading information in the areas of financing, advertising, labeling, and packaging. Several
laws of the 1960s and 1970s were aimed at this right. This legislation dealt with the accurate
identification of the content of the product and any dangers associated with the product. The
Truth-in-Lending Act required full disclosure of all costs and the annual percentage rate on
installment loans. Prior to Truth-in-Lending, the actual cost was hidden and confusing to
calculate. Another significant piece of legislation, the Magnuson-Moss Warranty Act, requires a
warranty which states that a product will meet performance standards and affirms that a warranty
can be stated or implied. Other regulation took place at the state level. Forty states have a
cooling-off law, which allows a consumer to change his or her mind when purchasing products
from direct salespeople.

The second consumer right, the right to safety, is aimed at injuries caused by using products
other than automobiles. The powers of the CPSC include the right to require warning labels, to
establish standards of performance, to require immediate notification of a defective product, and
to mandate product testing. However, its greatest power is product recall.
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The right of consumer choice means the consumer should have a range of products from various
companies to choose from when making a purchasing decision. To ensure these rights, the
government has taken a number of actions, such as imposing time limits on patents, looking at
mergers from the standpoint of limiting consumer choice, and prohibiting unfair price cutting
and other unfair business practices.

The final consumer right is the right to be heard. Presently, no government agency is responsible
for handling consumer complaints. However, a number of government agencies do attempt to
protect certain consumer rights. The Office of Consumer Affairs publishes a Consumer's
Resource Handbook listing agencies that work in the area of consumer rights. In addition, a
number of consumer groups issue complaints to the government and industry groups.

The growth of consumerism in this country has not been without opposition. Although
corporations have taken positive steps in many areas, they have also opposed advancement of
some consumer rights. Because corporations can have deep pockets, they are able to appeal court
cases and slow down litigation. Today, however, because of past successes, the need for
consumer protection is not nearly as great as it was in previous years.
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REFRENCES

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