CH-1-3 What is CB, and Why Should I Care? – CB Consumer Behaviour Canadian : Chapter Notes

This Document Contains Chapters 1 to 3 CHAPTER 1 WHAT IS CB, AND WHY SHOULD I CARE? WHAT DO YOU THINK? POLLING QUESTION In any business, the customer is truly the most important person. Strongly disagree 1 2 3 4 5 6 7 Strongly agree Have students access www.icancb.com to answer the polling questions for each chapter of CB. Ask them to take the online poll to see how their answers compare with those of other students taking consumer behaviour courses across the country. Then turn to the last page of the chapter to find the What Others Have Thought box feature. This graph is a snapshot of how other consumer behaviour students have answered this polling question thus far. LEARNING OUTCOMES After studying this chapter, the student should be able to: LO1 Understand marketing ethics and consumer misbehaviour. LO2 Understand the meaning of consumption and consumer behaviour. LO3 Describe how consumers get treated differently in various types of exchange environments. LO4 Explain the role of consumer behaviour in business and society. LO5 Be familiar with basic approaches to studying consumer behaviour. LO6 Describe why consumer behaviour is so dynamic and how recent trends affect consumers. SUGGESTED LECTURE OPENER Consumer behaviour is driven by many things, including the weather. If your sprinkler breaks down during a dry, hot spell, you are likely to replace it quickly. However, you might have to travel to the back of the store before you get to the product you need, passing by fans, bathing suits, and air conditioners along the way. Savvy marketers use consumers’ seasonal needs to drive sales and promote other products. Canada’s unseasonably warm winter of 2011/12 even led to a mini housing boom, driving home sales up 6.7% from the previous year, according to Garry Marr’s article in the March 15, 2012 edition of The Financial Post. KEY CONCEPTS WITH POWERPOINT® SLIDES Slide 1 Slide 2 Slide 3 What can I do in class? Q: Ask students to explain the link between the recent economic downturn and consumption. A: Answers will vary but should include discussion of the housing market, appliance and furniture purchases, fewer requests for services, and loss of jobs. LO1. Understand marketing ethics and consumer misbehaviour. Slide 4 Marketing Ethics and Consumer Misbehaviour There are times when consumers misbehave and act in an unethical manner and there are times when marketers misbehave and act unethically. Scandals, manipulative marketing practices, and deceptive advertising can upset the value equation associated with a given exchange. Ultimately, consumers may vote with their wallets by changing their own buying behaviour and potentially that of family and friends, as well. Slide 5 Slide 6 LO2. Understand the meaning of consumption and consumer behaviour. Consumption and Consumer Behaviour Slide 7 Slide 8 Consumer Behaviour as Human Behaviour Consumer behaviour is the set of value-seeking activities that takes place as people go about addressing their needs. Slide 9 The Basic CB Process This process is detailed in Exhibit 1.2. In this chapter, the purchase of a BlackBerry Bold is described. In the first step, the consumer determines a need for a new cellphone with better access to other people, media, and the Internet. The want is to fit into society’s norms; therefore, the consumer visits a cellphone store. The exchange occurs when money is exchanged for the phone. The costs involve the actual price of the product as well as the time and physical effort to visit the store. The benefits are the positive results of the purchase, such as better work performance. The reaction follows the purchase when the consumer evaluates the effectiveness of the phone. Ultimately, the process results in a perception of value. Consumption Consumption represents the process by which goods, services, or ideas are used and transformed into value. Slide 10 Economics and Consumer Behaviour Economics is the study of production and consumption. Consumer Behaviour as a Field of Study This relatively young field of study (initiated in the 1960s) represents the study of consumers as they go about the consumption process. Consumer behaviour is also referred to as buyer behaviour, or the science of studying how consumers seek value in an effort to address real needs. Slide 11 Slide 12 LO3. Describe how consumers get treated differently in various types of exchange environments. Slide 13 The Ways in Which Consumers Are Treated The customer is treated differently depending on the place of business and type of service being performed. Consider the following two questions to understand the importance to any given organization of providing good service to customers: 1. How competitive is the marketing environment? 2. How dependent is the marketer on repeat business? Slide 14 Slide 15 What can I do in class? Q: Ask students to name places where the consumer was not “king,” such as places where the wait time was too long or the establishment was not clean. A: Examples used in the book include the passport office, Service Canada, a dining establishment, and an apparel retailer. Competition and Consumer Orientation What does a consumer do if their wait time at the passport office is too long? If the alternative is not to travel, the consumer will tend to tolerate poor service. The opposite experience is consumer (customer) orientation, in which the business prioritizes the customer. A consumer orientation is a key component of a firm with a marketoriented culture. The organizational culture that embodies the importance of creating value for customers among all employees is called a market orientation. Slide 16 Relationship Marketing and Consumer Behaviour Relationship marketing is based on the belief that a firm’s performance is enhanced through repeat business. Relationship marketing is the recognition that customer desires are recurring and that a single purchase may be only one touchpoint in an ongoing series of interactions with a customer. Touchpoints may include any type of correspondence with the consumer (i.e., email, phone call, text message, and face-to-face contact). Each touchpoint represents a way for the business to build value with the customer. What can I do in class? Q: Ask students to provide examples of relationship marketing. Why should a company take the time to establish a repeat customer? A: Examples could include emails that customers receive on a weekly basis or loyalty cards for movie rentals and groceries. It’s cheaper for a business to build customer relationships than to establish new customers. LO4. Explain the role of consumer behaviour in business and society. Consumer Behaviour’s Role in Business and Society Slide 17 Consumer Behaviour and Marketing Strategy Consumer behaviour is not only an interesting subject, but also an important topic to understand from multiple perspectives: 1. CB provides an input to business/marketing strategy. 2. CB provides a force that shapes society. 3. CB provides an input to making responsible decisions as a consumer. Businesses have a goal of achieving long-term survival. Companies that achieve that goal do so by obtaining resources from consumers in return for the value they create. This helps to explain resource-advantage theory. Exhibit 1.4 lists several companies, their products, and when they first started doing business. Slide 18 Slide 19 Slide 20 What Do People Buy? Theodore Levitt, a famous marketing researcher, noted that consumers don’t really seek products. Companies ultimately need to understand why people buy their products in order to understand how to keep their business current. Products that are on their way to obsolescence include VHS tapes, tape recorders, and CD players. Slide 21 Ways of Doing Business Various ways of doing business are summarized in Exhibit 1.5, including: 1. Undifferentiated marketing—Offering the same product to all customers with no customization. 2. Differentiated marketing—Serving multiple market segments with different product offerings, such as the variety of products found in a Toyota car dealership. 3. Niche marketing—Serving one market segment with unique needs. For example, The Running Room targets runners to the exclusion of other recreational and competitive athletes. Slide 22 Consumer Behaviour and Society The items that people buy and consume are representative of the type of society in which they live. For example, how does society treat smoking? Today, smoking is frowned upon not only in Canada and the United States, but also in Europe, where many places have embraced a nonsmoking policy. However, smoking was commonplace and acceptable 40 years ago. Smoking is a consumption behaviour that is no longer valued by society at large in Canada. Slide 23 What can I do in class? Q: Ask students how many of them smoke. When did they start smoking and why? How have their consumption patterns changed? A: You will likely see a decline in the number of smokers each year. However, particular regions of Canada as well as colleges or universities might have different numbers. Consumer Behaviour and Personal Growth This section is based on life stages. Many university students are acquiring large amounts of credit card debt, contributing to the average Canadian debt of $110,000 per household (including mortgage) in 2009. Several topics can be particularly helpful in enlightening consumers about consumer behaviour, including: 1. Consequences associated with poor budget allocation 2. The role of emotions in consumer decision making 3. Avenues for seeking redress for unsatisfactory purchases 4. Social influences on decision making, including peer pressure 5. The effect of the environment on consumer behaviour The Motorola “Brick” phone of the 1980s led to smartphones being widely used today. In both Canada and the United Kingdom a large population of children age 10–14 have their own cellphones. Restrictions are being put on mobile phone users ranging from safety issues while driving to etiquette issues for phone use in public places. Slide 24 Slide 25 What can I do in class? Q: Ask students their opinions of the list on page 16 about mobile phone etiquette. Should people be restricted on how they use their phone in a public place? A: Student answers will vary greatly. LO5. Be familiar with basic approaches to studying consumer behaviour. Different Approaches to Studying Consumer Behaviour Slide 26 There is no single “best” way to study consumer behaviour. The following research methods should be considered. Interpretive Research Interpretive research seeks to explain the inner meanings and motivations associated with specific consumption experiences. Methods include observations and words that consumers use to describe events. Interpretive research generally falls into the category of qualitative research. Qualitative research tools include case analyses, clinical interviews, focus group interviews, and other tools in which data are gathered in a relatively unstructured way. Interpretive researchers adopt one of several orientations. Two common interpretive orientations are phenomenology and ethnography. Phenomenology represents the study of consumption as a “lived experience.” Ethnography has roots in anthropology and often involves analyzing the artifacts associated with consumption. Quantitative Consumer Research Quantitative research addresses questions about consumer behaviour by using numerical measurement and analysis tools. The measurement is usually structured, meaning that the consumer will simply choose a response from among alternatives supplied by the researcher. In other words, structured questionnaires typically involve multiple choicetype questions. If consumers have an average attitude score of 50 for Brand A and 75 for Brand B, it can objectively be said that consumers tend to prefer Brand B. Experimental methodologies are also a key component of quantitative research, and offer the only research method to directly assess cause-and-effect relationships. Exhibit 1.6 summarizes some key differences between quantitative and qualitative research. Slide 27 Slide 28 Slide 29 LO6. Describe why consumer behaviour is so dynamic and how recent trends affect consumers. Consumer Behaviour Is Dynamic Slide 30 Today, consumers do not need to wait for a store to open in order to shop. Consumers can visit virtual stores 24 hours a day/7 days a week. The trends that are shaping the value received by consumers today are discussed in this section. Slide 31 What can I do in class? Q: Ask students how they feel about companies like 33Across analyzing their social networking communications to find out about products. A: This statement should spark some debate among students to discuss how the information they volunteer online through social networking may be used. Companies strive to meet consumer demands, offer increasingly innovative products, and grow in response to increased sales. Is it OK that they gain the information for these innovative products by tracking us online? Internationalization Many store chains have expanded outside their home markets. Consequently, companies must deal not only with geographical distances, but with cultural distances as well. The book discusses two examples—Starbucks and Outback Steakhouse. Each corporation must adapt its product menu to the country in which it operates. For example, in Seoul, Outback Steakhouse serves kimchi (fermented cabbage) on the menu, which is neither American nor Australian. Slide 32 Technological Changes In the mid-20th century, television revolutionized consumer behaviour. Not only did TV change advertising forever, but true home shopping became a possibility. Although technology continues to change, the basic consumer desire for value has not changed. In fact, the dot-com failures of the late 1990s illustrated that companies can fail if they do not enhance the value that consumers receive when buying online. Changing Communications Consumers’ favourite form of communication used to be face-to-face. Now, many consumers choose the telephone as their preferred communication method (either by voice or text message). Email and social networks are also used. Marketers are learning quickly how to use these tools to communicate with consumers. Changing Demographics Over the last 25 years, changing demographics mean families include two primary income providers and fewer people make up a family in North America and Europe, resulting in stagnant population growth. This leads marketers around the world to look harder at countries with increasing populations, like China and India. Changing Economy Much of the developed world has faced a recent downturn in the economy, so consumers have less money to spend. Hearing about other economies around the world that are also in turmoil causes consumers to be more cautious as well. VIDEO CLIP PowerPoint Clip from Netflix Run time 1:24 minutes Slide 33 Netflix is a subscription service that provides streaming video over the Internet or delivers DVDs via mail. Netflix changed the way people rent movies and TV shows by cutting out the “shop front.” For a monthly fee, consumers have increased selections, no late fees, the ability to rent as many times as they like, and no need to leave their homes. Headquartered in Silicon Valley, CA, Netflix maintains distribution centres all over North America in order to maintain the company’s business model of speedy delivery and catering to consumers’ convenience needs. Ask your students: 1. How has Netflix’s business model successfully tapped into consumer behaviour? Answer: By removing the need to drive to a store to rent or return films and by removing late fees, Netflix provides considerably greater consumer convenience than the traditional method of film rental. 2. How does Netflix use consumer behaviour and the Internet to avoid becoming obsolete as technology changes? Answer: Netflix provides a website with film summaries, reviews, a queue for tracking and rating your videos, as well as a service called “Watch Instantly” that allows consumers even more convenience by eliminating the need to wait for a DVD to arrive in the mail. This delivery method uses current technology to stream video instantly to consumers. CHAPTER 2 VALUE AND THE CONSUMER BEHAVIOUR VALUE FRAMEWORK WHAT DO YOU THINK? POLLING QUESTION I get a lot out of shopping even when I don’t buy anything. Strongly disagree 1 2 3 4 5 6 7 Strongly agree Have students access www.icancb.com to answer the polling questions for each chapter of CB. Ask them to take the online poll to see how their answers compare with those of other students taking consumer behaviour courses across the country. Then turn to the last page of the chapter to find the What Others Have Thought box feature. This graph is a snapshot of how other consumer behaviour students have answered this polling question thus far. LEARNING OUTCOMES After studying this chapter, the student should be able to: LO1 Describe the Consumer Value Framework, including its basic components. LO2 Define consumer value and compare and contrast two key types of value. LO3 Apply the concepts of marketing strategy and marketing tactics to describe the way firms go about creating value for consumers. LO4 Explain the way market characteristics like market segmentation and product differentiation affect marketing strategy. LO5 Analyze consumer markets using elementary perceptual maps. LO6 Justify consumers’ lifetime value as an effective focus for long-term business success. SUGGESTED LECTURE OPENER Consumer segments play a vital and sometimes surprising role in marketing. Consider the wine industry. The image that likely comes to mind is of an older crowd composed mostly of Baby Boomers. While this image isn’t completely wrong, the demographics of wine consumption have changed dramatically in recent years, with younger Canadians playing a surprising role. In a press release dated February 24, 2011, Wine Intelligence (www.wineintelligence.com) describes an attitude and behaviour-based study of Canadian wine drinkers which finds younger, highly involved wine drinkers experimenting with new styles, varietals, and countries of origin, and spending significantly more on wine, though perhaps not drinking it as often, compared to the older “traditional” wine-drinking segments whose primary concern, increasingly, is price. “It’s a fascinating moment for the Canadian wine market,” said Erika Neudorf, a native of the Niagara region and project manager for Wine Intelligence Canada. “We have an amazing opportunity to engage with a new generation of wine drinkers who are into our product, and looking for quality.” While adults under 45 represent only a third of all Canadian wine drinkers, they account for 60% of the most valuable segment, the Adventurous Tasters. KEY CONCEPTS WITH POWERPOINT® SLIDES Slide 1 Slide 2 Slide 3 LO1. Describe the Consumer Value Framework, including its basic components. The Consumer Value Framework and Its Components Slide 4 What can I do in class? Q: Should the band allow their fans to choose the type of music they play? A: Answers will vary. In the introduction to this chapter, the pie chart shows different consumer preferences for types of music. The Consumer Value Framework The Consumer Value Framework (CVF) represents consumer behaviour theory that illustrates the factors shaping consumption-related behaviours and ultimately determines the value associated with consumption. Exhibit 2.1 explains the various functions of CVF in greater detail. All components in the model are related and consist of the following elements: • Internal influences • External influences • Consumption process • Value • Relationship quality Slide 5 Slide 6 Value and the CVF Components The concept of value is at the heart of consumer behaviour and found throughout the entire book. Relationship Quality A term used to describe this relationship that has gained popularity over the years is Customer Relationship Management (CRM). The basis of this concept is that a company builds a relationship with a customer over a period of time as opposed to simply conducting a transactional exchange. From there, the marketer can determine an effective strategy to communicate with customers. Relationship quality reflects the connectedness between a consumer and a retailer, brand, or service provider. Consumption Process The consumption process contains many factors, which can be divided into internal, external, and situational influences. Internal Influences: The Psychology and Personality of the Consumer Internal influences constitute the psychology of the consumer. For example, how will customers react to a price increase from $80 to $100? Are some scents and colours better for selling certain products? The psychology of the consumer involves both cognition and affect. Individual differences are the traits including personality and lifestyle differences that help determine consumer behaviour. This is the personality of the consumer. So a consumer who is highly health-conscious is more likely to buy a gym membership or low-fat food than a consumer who is less health-conscious. Slide 7 Slide 8 Slide 9 Why do consumers have such varied tastes in food? External influences include the social and cultural aspects of life as a consumer. The social environment includes the people and groups who help shape a consumer’s everyday experiences. For example, what we like to eat is primarily shaped by our families and what we eat at home. Situational influences include the effect that the physical environment has on consumer behaviour. Slide 10 What can I do in class? Q: Ask students to recall a recent shopping experience. Determine whether anyone shops at Hollister, where the music is loud and the perfume and cologne are sprayed every few minutes. Do the situational influences affect their purchase? A: Answers will vary. Some students will not even be aware that music is playing in a store, while others will experience a heightened state because of the environment. LO2. Define consumer value and compare and contrast two key types of value. Value and Two Basic Types of Value Slide 11 Value is a personal assessment of the net worth—that is, the benefits minus the costs— obtained from an activity. Consumers are never willing to sacrifice value, but they often are willing to sacrifice quality or satisfaction. An example of value used in the book involves a person’s choice of eating establishments. Those who eat at a fast food chain tend to relinquish quality in return for a better price or faster service. It is worth noting, however, that high value does not necessarily mean low price. In fact, companies from Starbucks to Lululemon to Harley-Davidson have created exceptionally loyal customers with products at relatively high price points. The Value Equation Exhibit 2.2 demonstrates the value equation, which is “what you get” for “what you have to give.” • What you get = benefits such as quality, convenience, and nostalgia • What you give = time, money, and effort Consumers ultimately pursue value because valuable actions address motivations that manifest themselves in needs and desires. It is a good idea to look at the types of value in order to better understand the concept. Slide 12 Slide 13 Utilitarian Value Utilitarian value describes how the consumer solves the issues that come with being a consumer and can generally be equated to how a consumer completes a task. An example of utilitarian value would be using bleach to clean something. Hedonic Value Hedonic value is the immediate gratification that comes from experiencing some activity. Because it is emotional and subjective in nature, hedonic value is not a means to an end, but an experience. An example of hedonic value would be watching a horror film. It should be noted that consumers can derive both a utilitarian and a hedonic value from the same experience. The book uses the example of dining in a place like the Hard Rock Café. A consumer can have a fun dining experience while still being nourished by food. Exhibit 2.3 further explains this concept. Slide 14 Slide 15 Slide 16 What can I do in class? Q: Many restaurants are reviewed by diners online through various websites and smartphone applications. Have these reviews helped you to experience a restaurant that has put it all together—a highquality meal with impeccable service in a memorable place? How might this experience change your consumer behaviour? A: Answers will vary. LO3. Apply the concepts of marketing strategy and marketing tactics to describe the way firms go about creating value for consumers. Marketing Strategy and Consumer Value Slide 17 Marketing Strategy Exhibit 2.4 details the different levels of a marketing strategy. 1. Corporate strategy—This strategy deals with how the firm will be defined and sets general goals. 2. Marketing strategy—This is the way a company goes about creating value for customers. Good strategy ensures that value is delivered in a way that is not easy for competitors to copy, and is not defined only in terms of the tangible product offered. Apple’s focus on aesthetics, ease of use, advanced technology, and highend image is a good example. 3. Marketing tactics—These are the ways in which marketing management is implemented. They involve price, promotion, product, and distribution decisions. Slide 18 Total Value Concept Is Coca-Cola just a soft drink? No. Coke and Diet Coke together represent about onequarter of all carbonated drinks sold in Canada, but Coke is definitely not the cheapest product on the market. Exhibit 2.5 shows Canadian market share data for carbonated drinks. Total value concept is practised when companies operate with the understanding that products provide value in multiple ways, not through price alone. Slide 19 The Total Value Concept Illustrated How does the Ferrari provide value? If you understand this, you understand the total value concept. Here are some likely value factors: 1. Transportation 2. Ferrari service plan 3. Feelings associated with driving the car 4. Positive feelings that go along with ownership 5. Negative feelings that go along with ownership Slide 20 Value Is Co-Created Value is not created only by the marketer; the consumer adds his or her own resources to the consumption process. Slide 21 What can I do in class? Q: Ask students for an example of a total value concept. Students may use the textbook and walk though the example of purchasing a Ferrari or a university education. A: Answers will vary. Encourage students to use the book as a guide for comprehending the concept of total value. LO4. Explain the way market characteristics like market segmentation and product differentiation affect marketing strategy. Market Characteristics: Market Segments and Product Differentiation Slide 22 Target market is a common term signifying the particular market segment that a company will serve with a specific marketing mix. The marketing mix is the combination of product, pricing, promotion, and distribution strategies used to position the brand in the marketplace. What can I do in class? Q: Ask students to name the potential target markets that might be found among their peers. For example, how would the students in the class be grouped into segments by a coffee shop like Tim Hortons or Starbucks? A: Answers will vary. Market Segmentation Market segmentation is the separation of a market into groups based on the different demand curves associated with each group. There may be many or few market segments (groups of people with similar characteristics) in any given market. Exhibit 2.6 depicts the market segmentation process. Elasticity is a term that is used to demonstrate the degree to which a consumer is sensitive to changes in some product characteristic. The example in the book suggested that there was more elasticity in the price variable versus the warranty variable when consumers purchase HDTVs. Product category demand explains the market segment for many products that features a positive price–quantity demand relationship. The book uses the example of two perfumes—Trés Cher sold by the gallon and Chanel No.5 sold by the ounce. Slide 23 Slide 24 Slide 25 Product Differentiation Product differentiation is a marketplace condition in which consumers do not view all competing products as identical to one another. An example of product differentiation is that many people regard Coke and Pepsi as similar but different products. What can I do in class? Q: Have students name products that appeal to different groups of people, such as an iPhone. iPhone users range from college students to professionals. How do the segments differ? How could Apple differentiate the product? A: Answers will vary. Encourage students to come up with different types of consumers and identify their needs. Apple could possibly find new ways to differentiate the product and reach multiple market segments by changing the colour of the iPhone or by adding ring tones or additional features. LO5. Analyze consumer markets using elementary perceptual maps. Analyzing Markets with Perceptual Maps Slide 26 Product differentiation becomes the basis for product positioning. Product positioning refers to the way in which a product is perceived by a consumer. Positioning takes place in the mind of the consumer. Perceptual Maps Perceptual maps are used to depict the positioning of competing products graphically. Illustrating a Perceptual Map Exhibit 2.7 uses a radio station launching in the Springdale market as an example. After analyzing the perceptual map, the analyst can draw several conclusions about the radio station: 1. Because this is a start-up station without massive resources, an “oldies” format with nearly all music is recommended in an attempt to capitalize on the purple segment. 2. The highest demand quadrant appears to be quadrant 1, with contemporary music and little news/talk. A lot of resources would be required to start here because of the entrenched competition. Thus, option 1 appears preferable. 3. A potential threat exists if WXPC were to decrease the amount of news and talk, thus moving them toward the purple ideal point; however, this appears unlikely. If WXPC were to undergo a format change, a move to more news and talk to try to capitalize on the red segment’s ideal point appears easier because of the relative proximity. Slide 27 What can I do in class? Have students choose an example of a product (i.e., car, makeup, household product) using Exhibit 2.7. Students can come up to the board or draw a perceptual map in their notebooks for a classroom discussion. Using Consumer Behaviour Theory in Marketing Strategy Businesses are constantly using consumer behaviour to make better strategic and operational marketing decisions. Exhibit 2.8 in the book displays a consumer behaviour analysis checklist that is used by simply applying each question to the given situation. LO6. Justify consumers’ lifetime value as an effective focus for long-term business success. Value Today and Tomorrow—Customer Lifetime Value Slide 28 Not all customers are created equal. Therefore, firms increasingly want to know the lifetime value associated with a customer or customer segment. Ultimately, companies need to delineate their most profitable segment and devise a way to communicate with them to increase profit. Customer Lifetime Value (CLV) represents the approximate worth of a customer to a company in economic terms or the overall profitability of an individual consumer. Although there is no generally accepted formula for CLV, the basic premise is simple and can be represented as follows: CLV = npv (sales – costs) + npv (equity) where npv = net present value. Consider a customer who shops twice a week at IKEA. On average, this customer spends $200 per week, or $10,400 per year, at IKEA. If we assume a 5% operating margin, this customer yields a net $520 per year to IKEA. Slide 29 What can I do in class? Q: Have students calculate the CLV of their favourite take-out restaurant or shopping destination. It might make sense to calculate the CLV of their pizza habits over the course of four years at university. A: Answers will vary. Students may assume that the average university student eats pizza twice a week or spends $10 per week or $520 a year (if the student stays for the summer). If you assume a 10% margin, the cost per year is $52 or $208 over four years. Consumers who find value in the authenticity of cheese, for instance, are willing to spend more for Stilton cheese than plain blue cheese. Some governments recognize the uniqueness of certain products that can be identified by geographical areas and protect their names by law, including Stilton cheese (it can be produced only in three specific counties in England). Authenticity is a potential product characteristic that creates product differentiation. VIDEO CLIP PowerPoint Clip from The Toledo Mud Hens Run time 1:12 minutes Slide 30 The Toledo Mud Hens are a minor league baseball team inspired by the poem Casey at the Bat. The baseball team is positioned as a family entertainment brand. Although the team has historically strong players and performs well during the baseball season, the major focus of the positioning strategy is actually to brand an experience all fans can count on: a fun, affordable, family or group outing. This strategy has worked successfully for the team in both athletic performance and marketing performance arenas. Ask your students: 1. How does the business model of the Mud Hens provide a different value to minor league fans than it would to major league fans? Answer: Fans that attend minor league baseball games are looking for a different experience than those who attend major league games. Major league fans are looking for star players and winning records. The minor league Mud Hens focus on providing an affordable and engaging family activity over stars and streaks. 2. How does attending a Mud Hens event provide value beyond a baseball game? Answer: By focusing on merchandising, food and beverage sales, and low-priced tickets the Mud Hens are able to extend a consumer’s concept of value beyond just watching baseball, which one might do at home, and into the area of a multi-age, low-cost entertainment outing. CHAPTER 3 CONSUMER LEARNING STARTS HERE: PERCEPTION WHAT DO YOU THINK? POLLING QUESTION My perceptions of advertisements are usually accurate. Strongly disagree 1 2 3 4 5 6 7 Strongly agree Have students access www.icancb.com to answer the polling questions for each chapter of CB. Ask them to take the online poll to see how their answers compare with those of other students taking consumer behaviour courses across the country. Then turn to the last page of the chapter to find the What Others Have Thought box feature. This graph is a snapshot of how other consumer behaviour students have answered this polling question thus far. LEARNING OUTCOMES After studying this chapter, the student should be able to: LO1 Define learning and perception and how the two are connected. LO2 List and define phases of the consumer perception process. LO3 Apply the concept of the JND. LO4 Contrast the concepts of implicit and explicit memory. LO5 Know ways to help get a consumer’s attention. LO6 Understand key differences between intentional and unintentional learning. SUGGESTED LECTURE OPENER Consumer perception and reality are not always the same thing—a point that Gulf of Mexico fish and seafood retailers are well acquainted with after the BP oil spill of 2010. Although aggressive marketing messages were immediately used to communicate to consumers that products from the Gulf fishing areas that remained open were safe to eat, public confidence continued to erode. Even with extra funding from BP and the government, some estimate it may take up to five years and many millions of dollars to regain consumer confidence. [Source: Kari Huus, “Is BP On the Hook for Fish’s Sullied Reputation?” MSNBC, July 30, 2010, http://fieldnotes.msnbc.msn.com.] KEY CONCEPTS WITH POWERPOINT® SLIDES Slide 1 Slide 2 Slide 3 LO1. Define learning and perception and how the two are connected. Defining Learning and Perception Slide 4 Value is important to the discussion of consumer behaviour and cannot be communicated without consumer learning and perception. Learning refers to a change in behaviour resulting from the interaction between a person and a stimulus. Perception is how the consumer is aware of and interprets reality. Slide 5 Consumer Perception An issue important to consumer researchers is: What’s more important, perception or reality? This is important to understand since the way a consumer perceives something greatly influences learning. What can I do in class? Q: Ask students to find Exhibit 3.1 in the book and answer the question it asks: “What Is the Reality in the Image Below?” A: Answers will vary. A discussion of differences in perception should follow. Exposure, Attention, and Comprehension There are three elements of consumer perception: exposure, attention, and comprehension. Exposure brings a stimulus in close proximity to a consumer to be sensed by one of the five human senses. Attention is the consumer’s allocation of information-processing capacity toward the stimulus to develop an understanding of it. Comprehension occurs when consumers attempt to derive meaning from the information they receive. Slide 6 LO2. List and define phases of the consumer perception process. Consumer Perception Process Slide 7 Slide 8 The three phases of consumer perception include: sensing, organizing, and reacting as shown in Exhibit 3.3. Sensing This is an immediate response to stimuli that have come into contact with one of the five senses. When a consumer reads a Tweet from someone he or she is following, the perceptual process goes into action. Organizing When something is sensed, the consumer organizes information like sorting mail, as shown in Exhibit 3.4. Consumers develop an interpretation during this stage and begin to comprehend the stimulus. If a consumer has difficulty categorizing a stimulus, the brain tries to reconcile the inconsistencies by reacting in three possible ways: 1. Assimilation occurs when a stimulus has characteristics that consumers readily recognize as belonging to some specific category. 2. Accommodation occurs when a stimulus shares some, but not all, of the characteristics that allow it to fit in an existing category. 3. Contrast occurs when a stimulus does not share enough in common with existing categories to allow it to be categorized. Slide 9 Slide 10 Reacting This is the end of the perceptual process and can be both physical and mental in response to the stimulus. The example in the book details when a driver notices that the car ahead has its brake lights on so the learned response is to apply brakes as well. The reaction occurs as a response or behaviour. Selective Perception What would you pay attention to if you saw this picture of a street in Seoul? Selective exposure screens out most stimuli and exposes a person to only a small portion of stimuli. Selective attention is the process of paying attention to only certain stimuli. Selective distortion involves how consumers interpret information in ways that are biased by their previously held beliefs. Slide 11 Subliminal Processing Subliminal processing refers to the way our brains handle very low-strength stimuli, so low that the person has no conscious awareness of such stimuli. Exhibit 3.5 shows the Vicary experiment that reportedly took place in a New Jersey movie theatre when a researcher added subliminal messages within a movie. Slide 12 What can I do in class? Have students find other products online that they perceive as smiling. Bring examples to class for discussion. Did the smile have an effect on their preference? Are there other human-like characteristics you can find in products for sale? LO3. Apply the concept of the JND. Applying the JND Concept Slide 13 Slide 14 Slide 15 The JND concept is closely related to the perceptual process and deals with changes in the strength of stimuli. Weber’s Law states that as the intensity of the initial stimulus increases, a consumer’s ability to detect differences between two levels of the stimulus decreases. The book uses the decibel levels at a concert as an example. The JND has numerous marketing implications for marketers attempting to provide value to consumers. 1. Pricing changes by small increments do not attract a lot of consumer attention. 2. Quantity changes by small increments do not attract a lot of consumer attention. 3. Quality improvements in small amounts will not attract attention so the difference must be large enough to create a true perceptual difference. 4. Add-on purchases work if it doesn’t create the perception of increased spending. Just Meaningful Difference Closely related to JND is JMD. The example in the book asks, How much of a change in price is really needed to influence consumer behaviour and learning? What makes the change in price meaningful to the consumer? Retailers generally find a 20% price discount effective. Slide 16 What can I do in class? Q: Have you noticed any price changes in products that you use regularly? A: Answers will vary. Try to pinpoint the amount of change that makes a price change meaningful. LO4. Contrast the concepts of implicit and explicit memory. Implicit and Explicit Memory The knowledge a person gets from reading a textbook is stored in explicit memory—memory for information that a person is exposed to, attends to, and applies effort to remember. Implicit memory is for things that a person did not try to remember such as stimuli you are exposed to but do not pay attention to. Banner ads on websites are a good example of implicit memory. Slide 17 Slide 18 Mere Exposure Effect This effect leads consumers to prefer a stimulus to which they’ve previously been exposed. Consumers prefer familiar objects. There is a difference between the mere exposure effect and subliminal effects. Subliminal messages are presented below the threshold of perception, while during the mere exposure effect the stimulus is evident and could be paid attention to. Product placements are another way promotions can impart implicit memory among consumers. Slide 19 Attention Attention plays a key role in distinguishing implicit and explicit memory. Involuntary attention is beyond the conscious control of the consumer and occurs as a result of exposure to new or surprising stimuli. A natural reflex that occurs as a response to a threat from the environment is an orientation reflex. This happens when attention is given to a stimulus that surprises us. Slide 20 What can I do in class? Q: What examples of marketing get your attention when you’re multi-tasking (studying, listening to music, instant messaging a friend)? A: Answers will vary. LO5. Know ways to help get a consumer’s attention. Enhancing Consumers’ Attention Slide 21 Factors That Get Attention Getting a consumer’s attention is even more difficult in today’s multi-tasking society. These factors can enhance attention: • Intensity of Stimuli—examples might include a brightly coloured ad • Contrast—examples might include quiet TV commercials when you’re expecting it to be loud (or when the program is loud) • Movement—examples might include a strobe light to advertise a car wash • Surprising Stimuli—examples might include the billboard that featured a fake small child and teddy bear seated on top of it • Size of Stimuli—examples might include a billboard with a life-size MINI Cooper attached • Involvement—examples will vary depending on how relevant each individual finds the product Slide 22 Comprehension Consumers should devote cognitive capacity to comprehend the choices that offer the most value for them. Comprehension is the way consumers organize and understand information. What can I do in class? Q: Are there any infomercials you’ve watched recently with surprising stimuli? Did they keep you watching through the entire segment? A: Answers will vary. Determine why surprising stimuli gain consumer attention. In this reality-TV age, how surprising does a stimulus have to be to keep our attention? LO6. Understand the key differences between intentional and unintentional learning. The Difference between Intentional and Unintentional Learning Both types of consumer learning (intentional and unintentional) concern perceptual processes. Slide 23 Slide 24 Slide 25 Behaviourism and Cognitive Learning Theories Psychologists generally follow one of two basic theories of learning: behaviourist approach to learning or information processing (or cognitive) perspective. The behaviourist approach focuses on changes in behaviour due to association without great concern for the cognitive mechanics of the learning process. So consumers are exposed to stimuli and respond in some way. For information processing theory, the focus is on the cognitive processes associated with comprehension. So the consumer’s mind acts like a computer processing bits of knowledge to form meaning. Slide 26 Unintentional Learning Two approaches to unintentional learning from the behavioural learning theory are classical conditioning and instrumental conditioning. Pavlov’s experiments were the most famous in classical conditioning studies. B.F. Skinner provided much of what we know about instrumental (or operant) conditioning. The Dockers ad illustrates a popular use of unintentional learning through classical conditioning—the use of intimate imagery. The girl at the casino is playing a slot machine, which requires repetitive action to play. Her behaviour is reinforced each time she pulls the lever. Slide 27 Slide 28 What can I do in class? Q: Does the Dockers ad on page 60 “condition” the brand in your mind because of this image? Has the advertiser succeeded? A: Answers will vary. In instrumental conditioning, discriminative stimuli are stimuli differentiated from other stimuli because they signal the presence of a reinforcer. In Exhibit 3.7 the discriminative stimulus could be an ad giving 10% off for shopping in a particular store. The behaviour is for the person with the ad to shop in that store. Reinforcement occurs after the purchase is made. VIDEO CLIP PowerPoint Clip from Culver’s Restaurants Run time 1:22 minutes Slide 29 Culver’s is an American-style hamburger and ice cream family-owned restaurant with a strong focus on the positive interactions among customers, staff, and high-quality food. Founded in 1984, Culver’s is famous for their friendly and quick service as well as their fresh never frozen Butterburger. CEO Craig Culver founded the business with his wife and parents after working for McDonald’s and realizing there was a niche for providing fresh, quality food in a fast-paced environment. Ask your students: 1. Why does Culver’s use a phrase like “quick service” rather than “fast food” to describe their food service? Answer: Language can affect and reflect consumers’ perceptions of quality. Culver’s wants customers to know that their burgers are prepared after they order, not before and kept warm via a heat lamp. 2. Why is a high level of customer service such an important part of Culver’s business model? Answer: Culver’s believes that if customers feel respected and cared for they are more likely to perceive their dining experience as pleasurable and thus to return. Instructor Manual for CB Consumer Behaviour Canadian Barry J. Babin, Eric Harris, Kyle B. Murray 9780176555283