Consumer Behavior

1.1. CONSUMER BEHAVIOR 1.1.1.

Meaning and Definition of Consumer Behavior

The term individual buyer behavior, end user behavior, consumer behavior, and consumer buying behavior all stands for the same. The study of consumer behavior is the study of how individuals make decisions to spend their available resources (time, money, effort) on consumption-related items. It includes the study of what they buy, why they buy it, when they buy it, where they buy it, how often they buy it, and how often they use it. Take the simple product toothpaste. Consumer researchers want to know what types of toothpaste consumers buy (gel, regular, striped, in a tube, with a pump); what brand (national brand, private brand, generic brand); why they buy it (to prevent cavities, to remove stains, to brighten or whiten teeth, to use as a mouthwash, to attract romance); where they buy it (supermarket, drugstore, convenience store); how often they use it (when they wake up, after each meal, when they go to bed, or any combination thereof); and how often they buy it (weekly, biweekly, monthly). Consumer behavior may be defined as the decision process and physical activity individuals engage in when evaluating, acquiring, using, or disposing of goods and services”. According to Belch and Belch, “Consumer behavior is the process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and desires”. According to Solomon, “Consumer behavior is the process involved when individuals or groups select, purchase, use, or dispose of products, services, ideas or experiences to satisfy needs and wants”. Consumer behavior may also be defined as the study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society”. According to Leon G. Schiffman and Leslie Lazar Kanuk, “Consumer behavior can be defined as the behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs”. Consumer behavior focuses on how individuals make decisions to spend their available resources (time, money, effort) on consumption related items. That includes what they buy, why they buy it, where they buy it, how often they buy it, how often they use it, how they evaluate it after the purchase, the impact of such evaluations on future purchases and how they dispose of it. So in Consumer behavior it is not only learnt, what is the behavior of the consumer when he buys it but also before the consumption, during the consumption and after the consumption?

1.1.2.

Nature/Characteristics of Consumer Behavior

Characteristics of consumer buying behavior are discussed below: 1) Consumer behavior or buyer behavior is the process by which individuals decide whether, what, when, from whom, where and how much to buy. 2) Consumer behavior comprises both mental and physical activities of a consumer. 3) It covers both visible and invisible activities of a buyer. 4) Buyer behavior is very complex. 5) Buyer behavior is very dynamic. 6) An individual’s behavior is influenced by internal and external factors. 7) It is an integral part of human behavior. 8) In many cases, it is the sum total of the behavior of a number of persons. 9) It is influenced by a number of marketing stimuli offered by the marketer. 10) It involves both psychological and social process. 11) Consumer behavior is basically social in nature.

12) 13) 14) 15)

Consumers act differently at different times and often respond differently to the same stimulus at different times. They learn and thereby change their attitudes and behavior. Consumers are heterogeneous in nature and they are all different from each other in certain respects. They often act emotionally rather than rationally.

1.1.3.

Scope of Consumer Behavior

There are varieties of practical applications in the field of consumer behavior. Some involve a societal perspective while others illustrate a micro viewpoint. Together they underscore the importance of understanding consumers for solving a variety of contemporary problems. 1) Consumer Behavior and Marketing Management: Effective business managers realize the importance of marketing to the success of their firm. Marketing may be defined as, “The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives”. A sound understanding of consumer behavior is essential to the long-run success of any marketing program. In fact, it is seen as a cornerstone of the marketing concept, an important orientation of philosophy of many marketing managers. The essence of the marketing concept is captured in three interrelated orientations: i) Consumer’s Needs and Wants: When the focus is on identifying and satisfying the wants and needs of consumers, the intention of the firm is not seen as merely providing goods and services. Instead, want and need satisfaction is viewed as the purpose, and providing products and services is the means to achieve that end. ii) Company Objectives: Consumers’ wants and needs are numerous. Therefore, a firm that concentrates on satisfying a small proportion of all desires will most effectively utilize its resources. Company objectives and any of the firm’s special advantages are used as criteria to select the specific wants and needs to be addressed. iii) Integrated Strategy: An integrated effort is most effective in achieving a firm’s objective through consumer satisfaction. For maximum impact this requires that marketing efforts be closely coordinated and compatible with each other and with other activities of the firm. Several major activities can be undertaken by an organization that is marketing-oriented. These include market-opportunity analysis, target-market selection, and marketing-mix determination, which include decisions on the proper combination of marketing variables to offer consumers. i) Market Opportunity Analysis: This activity involves examining trends and conditions in the marketplace to identify consumers’ needs and wants that are not being fully satisfied. The analysis begins with a study of general market trends, such as consumers’ lifestyles and income levels, which may suggest unsatisfied wants and needs. ii) Target-Market Selection: The process of reviewing market opportunities often results in identifying distinct groupings of consumers who have unique wants and needs. This can result in a decision to approach each market segment with a unique marketing offering. Consider the soft-drink market. Here, major segments of ultimate consumers are distinguished by the type of purchase situation: a) The food-store segment, b) The “cold bottle” or vending-machine segment, and c) The fountain market, which includes fast-food outlets. iii) Marketing-Mix Determination: This stage involves developing and implementing a strategy for delivering an effective combination of want satisfying features to consumers within target markets. A series of decisions are made on four major ingredients frequently referred to as the marketing-mix variables: product, price, place and promotion. The following characterizes each area and provides a small sampling of how knowledge of consumer behavior is relevant for decision-making.

a) Product: The nature of the physical product and service features are of concern here, among decisions that are influenced by consumer behavior are: • What size, shape, and features should the product have? • How should it be packaged? • What aspects of service are most important to consumers? • What types of warranties and service programs should be provided? • What types of accessories and associated products should be offered? b) Price: Marketers must make decisions regarding the prices to charge for the company’s products or services and any modification to those prices. These decisions will determine the amount of revenues the firm will generate. A few of the factors involving consumer behavior are: • How price-aware are consumers in the relevant product category? • How sensitive are consumers to price differences among brands? • How large a price reduction is needed to encourage purchases during new-product introductions and sales promotions? • What size discount should be given to those who pay with cash? c) Place: The place variable involves consideration of where and how to offer products and services for sale. It also is concerned with the mechanisms for transferring goods and their ownership to consumers. Decisions influenced by consumer behavior include: • What type of retail outlet should sell the firm’s offering? • Where should they be located, and how many should there be? • What arrangements are needed to distribute products to retailers? • To what extent is it necessary for the company to own or maintain tight control over activities of firms in the channel of distribution? • What image and clientele should the retailer seek to cultivate? d) Promotion: Of concern here are the goals and methods of communicating aspects of the firm and its offerings to target consumers. Consumer-related decisions include: • What methods of promotion are best for each specific situation? • What are the most effective means for gaining consumers’ attention? • What methods best convey the intended message? • How often should a given advertisement be repeated? 2) Consumer Behavior and Non-profit and Social Marketing: Can crime prevention, charitable contributions, or the concept of family planning be sold to people in much the same way that some business firms sell soap? A number of writers have suggested that various social and nonprofit organizations can be viewed as having services or ideas that they are attempting to market to target group of “consumers” or constituents. Such organizations include governmental agencies, religious orders, universities, and charitable institutions. Often these groups must also appeal to the public for support in addition to attempting to satisfy some want or need in society. Clearly, a sound understanding of consumer decision processes can assist their efforts. 3) Consumer Behavior and Governmental Decision-Making: In recent years the relevance of consumerbehavior principles to governmental decision-making has become quite evident. Two major areas of activity have been affected: i) Government Services: It is increasingly evident that government provision of public services can benefit significantly from an understanding of the consumers, or users, of these services. Numerous analysts have noted that frequently failing mass-transportation systems will not be viable alternatives to private automobile travel until government planners fully understand how to appeal to the wants and needs of the public. In other cases, state and municipal planners must make a variety of decisions, including where to locate highways, what areas to consider for future commercial growth, and the type of public services (such as health care and libraries) to offer. The effectiveness of these decisions will be influenced by the extent to which they are based on an adequate understanding of consumers. This requires knowledge of people’s attitudes, beliefs, perceptions and habits as well as how they tend to behave under a variety of circumstances.

ii) Consumer Protection: Many agencies at all levels of government are involved with regulating business practices for the purpose of protecting consumers’ welfare. Some government programs are also designed to influence certain consumer action directly (such as the use of auto seatbelts) and discourage others (speeding, drug abuse, and so on). 4) Consumer Behavior and Demarketing: It has become increasingly clear that consumers are entering an era of scarcity in terms of some natural gas, and even water. These scarcities have led to promotions stressing conservation rather than consumption. The effort of electric power companies to encourage reduction of electrical use serves as one illustration. In other circumstances, consumers have been encouraged to decrease or stop their use of particular goods believe to have harmful effects. Programs designed to reduce drug abuse, gambling, and similar types of consumption are examples. These actions have been undertaken by government agencies, nonprofit organizations, and other private groups. The term “demarketing” refers to all such efforts to encourage consumers to reduce their consumption of a particular product or service. Some demarketing efforts have met with considerable success while many others have made hardly any impact on changing long-established consumption pattern. An analysis of the success and failures of various efforts strongly suggests that demarketing programs must be based on a sound understanding of consumers’ motives, attitudes, and historically established consumption behavior. 5) Consumer Behavior and Consumer Education: Consumer also stands to benefit directly from orderly investigations of their own behavior. This can occur on an individual basis or as part of more formal educational programs For example, when consumers learn that a large proportion of the billions spent annually on grocery products is used for impulse purchases, and not spent according to preplanned shopping lists, consumer may be more willing to plan purchases in an effort to save money. In general, as marketers discover the many variables that can influence consumers’ purchases, marketers have the opportunity to understand better how they affect their own behavior. What is learned about consumer behavior can also directly benefit consumers in a more formal sense. The knowledge can serve as data for the development of educational programs designed to improve consumer’s decision-making regarding products and services. Such courses are now available at the high school and college level and are becoming increasingly popular.

1.1.4.

Importance of Consumer Behavior

In olden days, the importance of consumers’ behavior was not realized because it was seller’s market. But modern marketing is customer-oriented. Therefore, the study of customers’ behavior is vital in framing production policies, price policies, decisions regarding channels of distribution and above all decisions regarding sales promotion. 1) Production Polices: The study of consumer behavior affects production policies of the enterprise. Consumer behavior discovers the habits, tastes and preferences of consumers and such discovery enables an enterprise to plan and develop its products according to these specifications. It is necessary for an enterprise to be in continuous touch with the changes in consumer behavior so that necessary changes in products may be made. 2) Price Policies: The buyer behavior is equally important in having price policies. The buyers of some products purchase only because particular articles are cheaper than the competitive articles available in the market. In such a case the price of such products cannot be raised. On the other hand, some other articles are purchased because it enhances the prestige and social status of persons. The prices of such things can easily be prestige and social status of the persons. The price of such things can easily be raised or fixed higher. Some articles are purchased under particular attitudes and emotions such as khadi garments are purchased who think themselves the followers of Gandhi. Prices of articles purchased under emotional motives, can also be raised.

3) Decision Regarding Channels of Distribution: The goods, which are sold and purchased solely on the basis of low price, must have cheap and economical distribution channels. In case of those articles, which require after-sale service such as T.V. sets, refrigerators etc. must have different channels of distribution. Thus, decisions regarding channels of distribution are taken on the basis of consumer behavior. 4) Decision Regarding Sales Promotion: A study of consumer behavior is also vital in making decisions regarding sales promotion. It enables the producer to know what motive prompts consumer to make purchase and the same are utilized in advertising media to awaken desire to purchase. The marketer who takes decision regarding brand, packaging, discount, gifts etc. on the basis of consumer behavior for promoting sales of the products. 5) Exploiting Marketing Opportunities: A study of consumer behavior helps the marketers to understand the consumers, needs, aspirations, expectations, problems, etc. This knowledge will be useful to the marketers in exploiting marketing opportunities and meeting the challenges of the market. 6) Consumers do not always Act or React Predictably: The consumers of the past used to react to price levels as if price and quality had positive relation. Today, consumers seek value for money, lesser price but with superior features. The consumers’ response indicates that the shift had occurred. 7) Consumer Preferences are Changing and becoming highly diversified: This shift has occurred due to availability of more choice now. Thus study of consumer behavior is important to understand the changes. 8) Rapid Introduction of New Products: Rapid introduction of new product with technological advancement has made the job of studying consumer behavior more imperative. For instance, the information technologies are changing very fast in personal computer industry. 9) Implementing the “Marketing Concept”: This calls for studying the consumer behavior, as customers needs have to be given priority. Thus identification of target market before production becomes essential to deliver the desired customer satisfaction and delight.

1.1.5.

Model of Consumer Behavior

Consumers make many buying decisions every day. Most large companies research consumer buying decisions in great detail to answer questions about what consumers buy where they buy, how and how much they buy, when they buy, and why they buy. Marketers can study actual consumer purchases to find out what they buy, where, and how much. But learning about the whys of consumer buying behavior is not so easy – the answers are often locked deep within the consumer’s head. The company that really understands how consumers will respond to different product features, prices, and advertising appeals has a great advantage over its competitors. The starting point for understanding buying behavior is the stimulus − response model of buyer behavior (as shown in figure 10.1). This figure shows that marketing and other stimuli enter the consumer’s “black-box” and produce certain responses. Marketers must figure out what is in the buyer’s black-box. Marketing stimuli consist of the four Ps: product, price, place, and promotion. Other stimuli include major forces and events in the buyer’s environment: economic, technological, political, and cultural. All these inputs enter the buyer’s black-box, where they are turned into a set of observable buyer responses: product choice, brand choice, dealer choice, purchase timing, and purchase amount. The marketer wants to understand how the stimuli are changed into responses inside the consumer’s black-box, which has two parts. First, the buyer’s characteristics influence how he or she perceives and reacts to the stimuli. Second, the buyer’s decision process itself affects the buyer’s behavior. Marketing Stimuli Product Price Place Promotion

Other Stimuli Economic Technological Political Cultural

Buyers Characteristics Cultural Social Personal Psychological

Buyers Decision Process Problem recognition Information search Evaluation of alternatives Purchase decision Post purchase behavior

Figure 10.1: Black -box Model of Buying Behavior

Buyers Decisions Product choice Brand choice Dealer choice Purchase timing Purchase amount

It is assumed that if a sales person applies a stimulus (or sales presentation), the prospective buyer will respond in a predictable manner. However, the prospect may or may not buy the product, which the salesperson is trying to sell. Salesperson should, therefore, understand the psychological aspects in buyer behavior. Psychological factors of buyer or consumer behavior includes attitudes, perceptions, motivations, and personality of behavior. Study of consumer behavior helps the salesperson to understand the psychological aspects in selling or why the prospect is buying or not buying the product or services.

1.1.6.

Factors influencing Consumer decision making

A consumer’s buying behavior is influenced by cultural, social, personal, and psychological factors. Cultural factors exert the broadest and deepest influence. Factors Affecting Consumer Behavior

Personal Factors Age and Life Motivation Cycle Stage Perception Occupation Learning Life Style Beliefs and Personality and Attitude Self Concept

Psychological Factors

1.1.6.1.

Cultural Factors Culture Sub Culture Social Class

Social Factors Reference Groups Family Roles and Status

Psychological Factors

A person’s buying choices are influenced by four major psychological factors – motivation, perception, learning, beliefs and attitudes. 1) Motivation: A person has many needs at any given time. Some needs are biogenic; they arise from physiological states of tension such as hunger, thirst, discomfort. Other needs are psychogenic; they arise from psychological states of tension such as the need for recognition, esteem, or belonging. A need becomes a motive when it is aroused to a sufficient level of intensity. A motive is a need that is sufficiently pressing to drive the person to act. 2) Perception: A motivated person is ready to act. How the motivated person actually acts is influenced by his or her perception of the situation. Perception is the process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world. Perception depends not only on the physical stimuli but also on the stimuli’s relation to the surrounding field and on conditions within the individual. 3) Learning: When people act, they learn. Learning involves changes in an individual’s behavior arising from experience. Most human behavior is learned. Learning theorists that learning is produced through the interplay of drives, stimuli, cues, responses, and reinforcement. A drive is a strong internal stimulus impelling action. Cues are minor stimuli that determine when, where, and how a person responds. 4) Beliefs and Attitudes: Through doing and learning, people acquire beliefs and attitudes. These in turn influence buying behavior. A belief is a descriptive thought that a person holds about something. Beliefs may be based on knowledge, opinion, or faith. They may or may not carry an emotional charge. Manufacturers are very interested in the beliefs people carry in their heads about their products and services. An attitude is a person’s enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward some object or idea. People have attitudes toward almost everything: religion, politics, clothes, music, and food. Attitudes put them into a frame of mind of liking or disliking an object, moving toward or away form it. Attitudes lead people to behave in a fairly consistent way toward similar objects.

1.1.6.2.

Personal Factors

A buyer’s decisions are also influenced by personal characteristics. These include the buyer’s age and stage in the life cycle, occupation, economic circumstances, lifestyle, and personality and self-concept. 1) Age and Stage in the Life Cycle: As a person passes through different stages of his life he needs different set of products. Further the tastes, habits of persons change with age. They eat baby food in the early years, most foods in the growing and mature years, and special diets in the later years. Taste in clothes, furniture,

and recreation is also age related. Consumption is shaped by the family lifecycle. Some recent work has identified psychological life-cycle stages. Marketers pay close attention to changing life circumstances – divorce, widowhood, remarriage – and their effect on consumption behavior. 2) Occupation and Economic Circumstances: Occupation also influences a person’s consumption pattern. A blue-collar worker will buy clothes, work shoes, and lunchboxes. A company president will buy expensive suits, air travel, country club membership, and large sailboat. Marketers try to identify the occupational groups that have above-average interest in their products and services. Product choice is greatly affected by economic circumstances; spend able income (level, stability, and time pattern), savings and assets (including the percentage that is liquid), debts, borrowing power, and attitude towards spending versus saving. Marketers of income-sensitive goods pay constant attention to trends in personal income, savings, and interest rates. If economic indicators point to a recession, marketers can take steps to redesign, reposition, and re-price their products so they continue to offer value to target customers. 3) Lifestyle: People from the same subculture, social class, and occupation may lead quite different lifestyles. A lifestyle is the person’s pattern of living in the world as expressed in activities, interests, and opinions. Lifestyle portrays the “whole person” interacting with his or her environment. Marketers search for relationships between their products and lifestyle groups. For example, a computer manufacturer might find that most computer buyers are achievement-oriented. The marketer may then aim the brand more clearly at the achiever lifestyle. 4) Personality and Self-Concept: Each person has a distinct personality that influences buying behavior. By personality, we mean distinguishing psychological characters that lead to relatively consistent and enduring responses to environment. Personality is usually described in terms of such traits as self-confidence, dominance, autonomy, deference, sociability, defensiveness, and adaptability. Personality can be a useful variable in analyzing consumer behavior, provided that personality types can be classified accurately and that strong correlations exist between certain personality types and product or brand choices. For example, a computer company might discover that many prospects show high self-confidence, dominance, and autonomy. Related to personality is self-concept (or self-image). Self concept is the totality of person’s thoughts and feelings with reference to himself or herself as the object. Marketers try to develop brand images that match the target market’s self-image. It is possible that a person’s actual self-concept (how she views herself) differs from her ideal self-concept (how she would like to view herself) and from her others-self-concept (how she thinks others see her).

1.1.6.3.

Cultural Factors

Culture, subculture, and social class are particularly important in buying behavior. 1) Culture: Culture is the most fundamental determinant of a person’s wants and behavior. It consists of the learned values, norms, rituals, and symbols of society, which are transmitted through both the language and symbolic features of the society. The growing child acquires a set of values, perceptions, preferences, and behaviors through his or her family and other key institutions. A child growing up in the United States is exposed to the following values: achievement and success, activity, efficiency and practicality, progress, material comfort, individualism, freedom, external comfort, humanitarianism and youthfulness. The basic characteristics of a culture are as follows: a) Culture exists to serve the needs of the society. b) Culture is acquired from society, throughout our life time. c) Culture is learned through interactions with other members of the culture. d) Culture is transferred from generation to generation with new influences constantly being added to the cultural ‘soup’. Social Class e) Culture will be adaptive to the needs of the society. 2) Subculture: Each culture consists of smaller subcultures that provide more specific identification and socialization for their

Culture

Sub Cultures

Cultural Factors and Their Relationships

members. Subcultures include nationalities, religions, racial groups, and geographic regions. Many subcultures make up important market segments, and marketers often design products and marketing programs tailored to their needs. 3) Social Class: Virtually all-human societies exhibit social stratification. Stratification sometimes takes the form of a caste system where the members of different castes are reared for certain roles and cannot change their caste membership. More frequently, stratification takes the form of social classes. Social classes are relatively homogenous and enduring divisions in a society, which are hierarchically ordered and whose members share similar values, interests, and behavior. Social classes have the following characteristics: a) Persons within a given social class tend to behave more alike. b) Social class is hierarchical. c) Social class is not measured by a single variable but is measured as a weighted function of one’s occupation, income, wealth, education, status, prestige, etc. d) Social class is continuous rather than concrete, with individuals able to move into a higher social class or drop into a lower class. Social class can be subdivided into four categories, viz., upper class, upper middle class, middle class and the lower class. i) Upper Class: This class consists of people who are rich and possess considerable wealth, e.g., people with large businesses and wealthy corporate executives. ii) Upper Middle Class: This class consists of well-educated people holding top class positions in middle size firms, or professionals. They have a strong drive for success and indulge in shopping for goods that speak of their social status. iii) Middle Class: This class consists of white collar workers like middle level and junior executives, salespeople, small business owners, etc. These people lead a conservative lifestyle and spend moderately. iv) Lower Class: This class consists of blue collar workers like factory laborers, semi-skilled and unskilled laborers in the unorganized sector. These people are more family oriented and depend on their family for economic and emotional support. Their families are usually male dominated.

1.1.6.4.

Social Factors

In addition to cultural factors, a consumer’s behavior is influenced by such social factors as reference groups, family, and social roles and statuses. 1) Reference Group: Generally speaking a reference group can designate to any person or group that serves as a point of comparison (or reference) for an individual informing either general or specific values, attitudes or behavior. Every human being because of his sociable nature prefers to evaluate his abilities and opinion based on the comparison of others abilities and opinions. According to Philip Kotler, “A person’s reference groups consist of all the groups that have a direct (face to face) or indirect influence on the person’s attitudes or behavior”. Reference groups are of different types. According to Herbert Hyman, “Reference group is the type of group that an individual uses as a point of reference in determining his own judgments, preferences, beliefs and behavior”. Classification of Reference Groups i) Normative Reference Group: Reference groups that directly influence general or broadly defined values or behavior are usually called normative reference group. For example, a child's normative reference group will be his family. ii) Comparative Reference Group: Reference group which will serve as a benchmark for certain specific or narrowly defined attitudes are called comparative reference group. Such a group serves as a point of comparison especially for evaluating ones own status. iii) Contractual Group: Another way of classifying reference group will be in terms of a person's membership or degree of involvement with the group and in terms of the positive or negative influence

they are able to evolve on the person's attitudes, behavior and values. One such reference group is the contractual group. These are the groups with which the person interacts and has regular contact. iv) Aspirational Group: An aspirational group is one to which the individual wishes or aspires to belong. The individual may not have a formal membership and also does not have face to face contact but he aspires to be a member. This aspiration acts as a positive influence on that person's attitude and behavior. v) Disclaimant Group: Another type of reference group is the disclaimant group. This is a group whose values or behavior does not appeal to the individual. Here a person may have membership or face to face contact but he disapproves of the group values, attitudes and behavior. Here his behavior will be the opposite or reverse to the norms of the particular reference group. vi) Avoidance Group: This may be a group with which the person may not hold membership nor have face to face contact and also of whose values, attitudes and behavior, the person totally disapproves. Here the person will tend to avoid the group and will adopt values, attitudes and behavior which will be in opposition to that of the group. People are significantly influenced by their reference groups in at least three ways: a) Reference groups expose an individual to new behaviors and lifestyles. b) They influence attitudes and self-concept. c) They create pressures for conformity that may affect actual product and brand choices. 2) Family: Family members can strongly influence buyer’s behavior. The family is the most important consumer buying organization in society, and it has been researched extensively. Family is of two types: a) Family of Orientation: From parents a person acquires an orientation towards religion, politics, self worth etc. In countries where parents live with their grown children, their influence can be substantial. b) Family of Procreation: This involves a more direct influence on every buying behavior it includes one’s spouse and children. Marketers are interested in the roles and influence of the husband, wife, and children on the purchase of different products and services. Husband-wife involvement varies widely by product category and by stage in the buying process. Buying roles change with evolving consumer lifestyles. Functions of the Family a) Economic Well-Being: Economic security, providing financial means to its dependents is unquestionably a basic family function. b) Emotional Support: Love, affection, support, intimacy, care, and courage. c) Suitable Family Lifestyles: Another important family function in terms of consumer behavior is the establishment of a suitable lifestyle for the family. Upbringing, experience, and the personal and jointly held goals of the spouses determine the importance placed on education or career, on reading, on television viewing, and on the selection of other entertainment and recreational activities. d) Socialization of Family Members: It encompasses young children and adults, and is a central function. These generally include moral and religious principles, interpersonal skills, dress and grooming standards, appropriate manner and speech and the selection of suitable educational and occupational or career goals. 3) Roles and Statuses: A person participates in many groups – family, clubs, and organizations. The person’s position in each group can be defined in terms of role and status. A role consists of the activities that a person is expected to perform. Each role carries a status. A Supreme Court justice has more status than a sales manager, and a sales manager has more status than an office clerk. People choose products that communicate their role and status in society. Thus company presidents often drive Mercedes, wear expensive suits, and drink Chivas Regal scotch. Marketers are aware of the status symbol potential of products and brands.

1.1.7.

Buying Motives of Consumers

Motive is the inner urge that moves or prompts a person to some action. Motive is an effectual desire that prompts one to a definite action. Customers purchase any goods as a result of certain mental and economic forces that create desires or wants that they know can be satisfied by the articles offered for purchase. ‘Motive’ can be a strong desire, feeling, an urge from within, a drive, stimulus or emotion, which plays a role in the consumer’s decision to purchase a product/service. According to R.S. Davar, “A motive is an inner urge that moves or prompts a person to action”. According to D.J. Durian, “Buying motives are those influences or considerations which provide the impulse to buy, induce action or determine choice in the purchase of goods or services”. According to W. J. Stanton, “A motive can be defined as a drive or an urge for which an individual seeks satisfaction. It becomes a buying motive when the individual seeks satisfaction through the purchase of something”. Thus an understanding of buying motives will help the firm to know what are the consumers attitudes, which make them act in a particular way while buying certain goods or services. A consumer purchases a particular product or service because of a strong inner feeling or force, which instills in him a strong desire to have possession of the same. A buying motive can thus be said to all the desires, considerations and impulses, which induce a buyer to purchase a given product. Behavior is a goal directed activity. Motive | Need (Hungry)

Goal (preparing/buying) Goods (Food)

Behavior

Goal achievement (Eating)

Motives behind purchase are of two types, which are as follows: 1) Personal Motives i) Role-Playing: Shopping activities are learned behavior and are accepted as part of one’s position or role, such as mother or housewife. It is expected that a woman expecting her first child will shop extensively for baby clothes and other stuff meant for infants. It is also accepted that a housewife does the grocery shopping for her home. ii) Diversion: Shopping can offer a diversion from the routine of daily life and is a form of recreation. iii) Learning about New Trends: Shopping provides consumers with information about trends and movements, and product symbols reflecting attitudes and lifestyles. For example, a visit to Weekender will reveal the latest trend in casual wear and it is with this motive in mind that many young shoppers visit Weekender. iv) Sensory Stimulation: Shopping can provide sensory benefits such as looking at and handling merchandise, listening to the sounds (music), and smelling the scents. 2) Social Motives i) Social Experience: Outside the home shopping can provide opportunities for seeking new acquaintances, encounters with friends, or just “people watching”. ii) Status and Authority: Shopping may provide an opportunity to attain a feeling of status and power by being waited on. It is a pleasure shopping at Big Jo’s in Delhi where the sales staff is extremely courteous and treats customers with a great deal of respect. iii) Pleasure of Bargaining: Shopping may offer the enjoyment of gaining a lower price through bargaining, companion shopping, or visiting sales.

1.1.8.

Buying role of Consumers

There are following six different roles of persons, which can participate in the buying decision: 1) Initiator: The initiator is a person who first suggests or thinks of the idea of buying the particular service. 2) Influencer: Influencer is a person who explicitly or implicitly has some influence on the final buying decision of others. Students are influenced by the advice of the professor while taking a decision to purchase a book. Here Professor is the influencer. 3) Decider: The decider is a person who ultimately determines any part or whole of the buying decision, i.e., whether to buy, what to buy, how to buy, when to buy or where to buy. Children are the deciders for buying the toys, house lady for kitchen provisions, and head of the family for durable or luxury items. 4) Gatekeeper: The person or organization or promotional materials which act as a filter on the range of services which enters the decision choice set. 5) Buyer: The buyer is the person who actually purchase. Buyer may be the decider or he may be some other person. Children (deciders) are the deciders for purchasing the toys, but purchases are made by the parents. Thus, parents are buyers. 6) User: User is the person who actually uses or consumes the services or products. The marketer’s task is to study the buying process and its main participants and their role in the buying process. He should initiate all of them to make the purchases of his product at different stages and through different strategies Influencers (Children) Communications Targeted at Children (Taste, Image) DecisionMakers (Parents/ Children Communications Targeted at Parents (Nutrition)

Purchasers (Parents)

Consumers (Children)

Information Gatherers (Parents)

Various Roles in Family

1.1.9.

Consumers Decision Making Process / Buying Process

Decision-making is a process of selecting an appropriate option from two or more alternatives. A customer enjoys the freedom of choosing a particular brand or product when there is Problem Recognition more than one brand or product to choose from. The purchaser or consumer takes his buying decision, for some commodities immediately without much consideration such as items of daily use while for some other commodities mainly luxury or durable items, he thinks much before taking a decision to purchase it. Sometimes, he consults others. Generally, the purchaser passes through five distinct stages in taking a decision for purchasing a particular commodity. Broadly, in making a purchase decision the consumer goes through the following stages: 1) Problem Recognition: The buying process starts when the buyer recognizes a problem or need. The need can be triggered by internal stimuli. In the former case one of the person’s normal needs-hunger, thirst,

Pre purchase Information Search

Evaluation of Alternatives

Purchase Decision

Post Purchase Behavior Figure 10.2: Buying Process

sex-rises to a threshold level and become a drive. In the latter case, a need is aroused by an external stimulus. A person passes a bakery and sees freshly baked bread that stimulates her hunger, she admires a neighbor’s new car; or she watches a television ad for a Hawaiian vacation. Marketers need to identify the circumstances that trigger a particular need by gathering information from a number of consumers; marketers can identify the most frequent stimuli that spark an interest in a product category. They can then develop marketing strategies that trigger consumer interest. 2) Pre-purchase Information Search: An aroused consumer will be inclined to search for more information. We can distinguish between two levels of arousal. The milder search state is called heightened attention. At this level a person simply becomes more receptive to information about a product. At the next level the person may enter active information search: looking for reading material, phoning friends and visiting stores to learn about the product of key interest to the marketers, are the major information sources to which the consumer will turn and the relative influence each will have on the subsequent purchase decision. Consumer information sources fall into four groups. i) Personal Sources: Family, friends, neighbors, acquaintance ii) Commercial Sources: Advertising, salespersons, dealers, packaging, displays. iii) Public Sources: Mass media, consumer, rating organization. iv) Experiential Sources: Handling, examining, uses the product. The relative amount and influence of these information sources vary with the product category and the buyer’s characteristics. Generally speaking the consumer receives most of the information about a product from commercial source–that is, marketers-dominated sources. But most effective information comes from personal sources. Each information sources performs a different function in influencing the buying decision. Commercial information normally performs an informing function, and personal sources perform a legitimizing or evaluation function. For example, physicians often learn of new drugs from commercial sources but turn to other doctors for evaluative information. 3) Evaluation of Alternatives: There is no single evaluation process used by all consumers or by one consumer in all buying situations. There are several decision evaluation processes the most current models of, which see the process as cognitively oriented. That is, they see the consumer as framing judgment largely on a conscious and rational basis. Evaluation may be thought of as a system as depicted in figure 10.3: i)

Evaluative (Choice) Criteria: These are the dimensions used by consumers to compare or evaluate products or brands. In the car example, the relevant evaluative criteria may be fuel economy, purchase price and reliability.

Evaluative Criteria

Beliefs

Attitudes

Intentions Figure 10.3: Evaluation System

ii) Beliefs: These are the degrees to which, in the consumer’s mind, a product possesses various characteristics, e.g., roominess. iii) Attitudes: These are the degrees of liking or disliking a product and are in turn dependent on the evaluative criteria used to judge the products and the beliefs about the product measured by those criteria. iv) Intentions: These measure the probability that attitudes will be acted upon. The assumption is that favorable attitudes will increase purchase intentions, i.e., the probability that the consumer will buy. Some basic concepts will help us understand consumer evaluation processes. i) The consumer is trying to satisfy a need. ii) The consumer is looking for certain benefit from the product solution.

iii) The consumer sees each product as a bundle of attributers with varying abilities of delivering the benefit sought to satisfy this need. The attributes of interest to buyers vary by product. Consumers vary as to which product attributers they see as most relevant and the importance they attach to each attribute. They will pay the most attention to attributers that deliver the sought benefit. The market for a product can often be segmented according to attributes that are salient to different consumer groups. The consumer develops a set of brand beliefs about where each brand stands on each attribute. The set of beliefs about a brand makes up the brand image. The consumer’s brand image will vary with his or her experience as filtered by the effects of selective perception selective distortion and selective retention. 4) Purchase Decision: In the evaluation stage, the consumer forms preference among the brand in the choice. The consumer may also form an intention to buy the most preferred brand. However, two factors can intervene between the purchase intention and the purchase decision. i) The first factor is the attitudes of others. The extent to which another person’s attitude reduces, one’s preferred alternative depends on two things: a) The intensity of the other person’s negative attitude towards the consumer’s preferred alternative. b) The consumer’s motivation to comply with the other person’s wishes. ii) The second factor is unanticipated situation factors that may erupt to change the purchase intention. Preferences and even purchase intentions are not completely reliable predictors of purchase behavior. A consumer’s decision to modify, postpone, or avoid a purchase decision is heavily influenced by perceived risk. The amount of perceived risk varies with the amount of money at stake the amount of attribute uncertainty and the amount of consumer self-confidence. In executing a purchase intention, the consumer may make up to five purchase sub decisions: i) A brand decision (brand A); ii) Vendor decision (dealer 2); iii) Quantity decision (one computer); iv) Timing decision (weekend), and v) Payment-method decision (credit card). Purchase of everyday product involves fewer decisions and less deliberation. For example, in buying sugar a consumer gives little thought to the vendor or payment method. 5) Post-purchase Behavior: After purchasing the product, the consumer will experience some level of satisfaction or dissatisfaction. The marketer’s job does not end when the product is bought. Marketers must monitor post purchase satisfaction, post purchase actions and post purchase product uses. i) Post-purchase Satisfaction: What determines whether the buyer will be highly satisfied, somewhat satisfies or dissatisfied with a purchase? The buyer’s satisfaction is a function of the closeness between the buyer’s expectations and the product’s perceived performance. If performance falls short of expectations, the customer is disappointed; if it meets expectations the customers is satisfied; if it beyond expectations the customer is delighted. These feelings signify a difference in whether the customer buys the product again and talks favorably or unfavorably about the product to others. ii) Post-purchase Actions: The consumer’s satisfaction or dissatisfaction with the product will influence subsequent behavior. If the consumer is satisfied he or she will exhibit a higher probability of purchasing the product again. Dissatisfied consumer may abandon or return the product. They may seek information that confirms its high value. The may take public action by complaining to the company, going to a lawyer, or complaining to other groups (such as business private or government agencies). Private action includes making a decision to stop buying the product (exit option) or, warning friends (voice option). In all these case the seller has done a poor job of satisfying the customer.

iii) Post-purchase Use and Disposal: Marketers should also monitor how buyers use and dispose of the product. If consumers store the product in a closet, the product is probably not very satisfying and word-of-mouth will be not being strong. If they sell or trade the product new product sales will be depressed. Consumer may also find new uses for the product.

1.1.10. Subcultures Buying Habits of Consumers/Levels of Consumer Decision-Making Consumer decision making varies with the types of buying decision. The decisions to buy toothpaste, a tennis racket, a personal computer, and a new car are all very different. If all purchase decisions required extensive effort, then consumer decision-making would be an exhausting process that left little time for anything else. On the other hand, if all purchases were routine, then they would tend to be monotonous and would provide little pleasure or novelty. On a continuum of effort ranging from very high to very low, we can distinguish four specific levels of consumer decision-making: High Involvement

Low Involvement

Significant Differences between Brands

Complex buying behavior

Variety-seeking buying behavior

Few Differences between Brands

Dissonance-reducing buying behavior

Habitual buying behavior

Figure 10.4: Types of Buying Behavior

1) Complex Buying Behavior/Extensive Problem Solving: At this level, the consumer needs a great deal of information to establish a set of criteria on which to judge specific brands and a correspondingly large amount of information concerning each of the brands to be considered. This behavior is adopted for the purchase of low cost, frequently purchased items. Here the buyers do not give much thought, or search or take a lot of time to make the purchase. The products in this class are generally classified as low involvement goods. The buyers are very well aware of the product class, know the brands and also have a clear preference among the brands. So the buyers have to take very few decisions for the purchase of such type of goods. The marketer has to ensure two tasks: i) The marketer must continue to provide satisfaction to the existing customers by maintaining quality, service and value. ii) He must try to attract new customers by making use of sales promotion techniques like point of purchase displays, off-price offers, etc., and also introduce new features to the products. 2) Dissonance-Reducing Buying Behavior/Limited Problem Solving: At this level consumers already have established the basic criteria for evaluating the product category and the various brands in the category. However, they have not fully established preferences concerning a select group of brands. Their search for additional information is more like “fine-tuning”; they must gather additional brand information to discriminate among the various brands. Here the marketer’s job is to design a communication programme, which will help the buyer to gather more information, increase his brand comprehension and gain confidence in the brand. 3) Habitual Buying Behavior/Routinized Response Behavior: At this level, consumers have some experience with the product category and a well-established set of criteria with which to evaluate the brands they are considering. In some situations, they may search for a small amount of additional information; in others, they simply review what they already know. The marketers must understand the information gathering and evaluation activities of the prospective consumers. They have to educate the prospective buyers to learn about the attributes of the product class,

their relative importance and the high standing of the marketer’s brand on the more important brand attributes. In other words, the marketing communications should aim at supplying information and help the consumer to evaluate and feel good about his/her brand choice. 4) Variety-Seeking Buying Behavior: Some buying situation are characterized by low involvement but significant brand differences, here consumers often do a lot of brand switching. The market leader and the minor brand in this product category have different marketing strategies. The market leader will try to encourage habitual buying behavior by dominating the shelf space, avoiding out-of-stock conditions, and sponsoring frequent reminder advertising. Challenger firms will encourage variety seeking by offering lower prices, deals, coupons, free samples, and advertising that presents reasons for trying something new. Characteristics Purchase Involvement Level Problem Recognition Information Search and Evaluation Purchasing Orientation Post Purchase Processes

Characteristics of Consumer Problem-Solving Approaches Routine Problem Limited Problem Solving Extensive Problem Solving Solving Low, Medium High Automatic Minimal

Semiautomatic Limited

Complex Extensive

Convenience Very limited Habit Brand loyalty

Mixed Limited Inertia to repurchase Brand Switching If dissatisfied

Shopping Complex Loyalty if satisfied Complaint if dissatisfied

1.1.11. Consumer Behavior and Marketing Strategy Net Matter When a consumer buys something, he or she gives-up resources in the form of time, money, and energy in return for whatever is being sold. Consider a customer who purchases a kindle. What does he or she really get? Well, the tangibles include mostly plastic and some integrated circuitry. These are the parts that make-up the product. No reasonable consumer would trade any significant sum of money for plastic and circuitry. A consumer is not really buying attributes or the physical parts of a product. However, the plastic enables the product to be small and light and the integrated circuitry enables this small, light product to function as an electronic reader. Once again, we can ask, is this really what the consumer wants? The fact is, this function enables the consumer to enjoy the benefits of information availability in a very convenient package. Outcomes like these are valuable and what the customer is ultimately buying. Marketing firms often adopt poor strategies when they do not understand exactly what a product truly is, because they do not understand exactly what they are selling. With this in mind, a product is potentially valuable bundle of benefits. Theodore Levitt was one of the most famous marketing researchers. A sound understanding of consumer behavior is essential to the long-run success of any marketing program. In fact, it is seen as a cornerstone of the marketing concept, an important orientation or philosophy of many marketing managers. The following descriptions explore the role of consumer behavior in designing and deploying three major marketing activities: 1) Market-Opportunity Analysis: This activity involves examining trends and conditions in the marketplace to identify consumers’ needs and wants that are not being fully satisfied. The analysis begins with a study of general market trends, such as consumers’ lifestyles and income levels, which may suggest unsatisfied wants and needs. More specific examination involves assessing any unique abilities the company might have in satisfying identified consumer desires.

A variety of recent trends have resulted in many new product offerings for consumer satisfaction. For example, companies attuned to the fitness interests of Americans have been quick to offer such new products as exercise bicycles, weight training books, and clothing. In the healthcare field, companies sensing consumers’ unmet medical needs have offered coin-operated blood pressure testing machines at shopping centers and other convenient locations. 2) Target-Market Selection: The process of reviewing market opportunities often results in identifying distinct groupings of consumers who have unique wants and needs. This can result in a decision to approach each market segment with a unique marketing offering. Consider the soft drink market. Here, major segments of ultimate consumers are distinguished by the type of purchase situation: i) The food store segment, ii) The “cold bottle” or vending machine segment, and iii) The fountain market, which includes fast-food outlets. Unique packaging arrangements (container type and size), point of purchase promotions, and other variations are made for each segment. In other cases, the marketer may decide to concentrate company efforts on serving only one or a few of the identified target-markets. An excellent example of this occurred in the bath soap market. By segmenting consumers according to their lifestyle patterns and personalities, the Colgate-Palmolive company was able to identify a unique group of consumers in need of a certain type of deodorant soap. Development of Irish Spring for this target group led to the capturing of 15 per cent of the deodorant soap market within three years of introduction. 3) Marketing-Mix Determination: This stage involves developing and implementing a strategy for delivering an effective combination of want-satisfying features to consumers within target-markets. A series of decisions are made on four major ingredients frequently referred to as the marketing mix-variables – product, price, place, and promotion. To survive in a competitive environment, an organization must provide target customers more value than is provided by its competitors. Customer value is the difference between Outcomes all the benefits derived from a total product and all the costs and risks of Individual acquiring those benefits. For example, owning a car can provide a Firm number of benefits, depending on the person and the type of car, Society including flexible transportation, image, status, pleasure, comfort, and even companionship. However, securing these benefits requires paying Consumer Decision Process Problem recognition for the car, gasoline, insurance, maintenance, and parking fees, as well Information search as risking injury from an accident, adding to environmental pollution, Alternative evaluation and dealing with traffic jams and other frustrations. It is the difference Purchase between the total benefits and the total costs that constitutes customer Use value. Evaluation Providing superior customer value requires the organization to do a better job of anticipating and reacting to customer needs than the competition does. As figure aside indicates, an understanding of consumer behavior is the basis for marketing strategy formulation. Consumers’ reactions to this marketing strategy determine the organization’s success or failure. However, these reactions also determine the success of the consumers in meeting their needs, and they have significant impacts on the larger society in which they occur. Marketing strategy is conceptually very simple. It begins with an analysis of the market the organization is considering. This requires a detailed analysis of the organization’s capabilities, the strengths and weaknesses of competitors, the economic and technological forces

Marketing Strategy Product, Price, Distribution, Promotion, Service

Market Segmentation Identify product-related need sets Group customers with similar need sets Describe each group Select attractive segment(s) to target Market Analysis Company Competitors Conditions Consumers Marketing Strategy and Consumer Behavior

affecting the market, and the current and potential customers in the market. On the basis of the consumer analysis undertaken in this step, the organization identifies groups of individuals, households, or firms with similar needs. These market segments are described in terms of demographics, media preferences, geographic location, and so forth. Management then selects one or more of these segments as target markets based on the firm’s capabilities relative to those of its competition (given current and forecast economic and technological conditions). Next, marketing strategy is formulated. Marketing strategy seeks to provide the customer with more value than the competition while still producing a profit for the firm. Marketing strategy is formulated in terms of the marketing mix; that is, it involves determining the product features, price, communications, distribution and services that will provide customers with superior value. This entire set of characteristics is often referred to as the total product. The total product is presented to the target market, which is consistently engaged in processing information and making decisions designed to maintain or enhance its lifestyle (individuals and households) or performance (businesses and other organizations). 1) Market Analysis: Market analysis is the process of analyzing changing consumer trends, current and potential competitors, company strengths and resources, and the technological, legal, and economic environments. All these factors add dimension and insight to the potential success of a plan for a new product or service. Market Analysis Components i) Consumer Insight and Product Development: When marketers attempt to get consumers to buy their products, most of the time they fail. Why is this failure rate so high? The answer is simple and straightforward – a new product must satisfy customers’ needs, wants, and expectations, not those of a management team, and they must do it better than existing solutions. Although formal analyses might point to product life-cycles, poor performance, or ineffective communication, often the bottom-line issue is a failure to understand the intended market. For example, many firms don’t understand how targeted consumers are likely to react to new products. Different consumers possess different levels of innovativeness, affecting which advertising and positioning strategies will be most effective. For example, highly innovative consumers attach more importance to stimulation, creativity, and curiosity, characteristics that marketers can use to target product offerings and advertising to specific segments. Organizations around the world continue to spend billions of dollars annually on product concepts that would never be introduced to the marketplace if they had been more closely tested against consumer insight. Consumer insight can be defined as an understanding of consumers’ expressed and unspoken needs and realities that affect how they make life, brand and product choices. This process combines facts (either from primary or secondary research, sales data, or customer information) with intuition, resulting in an insight that can lead to a new product, existing product innovation, brand extension, or revised communication plan. As companies turn to consumer feedback for new product guidance and ideas, researchers and marketers search for ways to channel ideation (the process of forming and relating ideas) to allow consumers to be more focused and productive, providing better information to marketers. ii) Company: A firm must fully understand its own ability to meet customer needs. This involves evaluating all aspects of the firm, including its financial condition, general managerial skills, production capabilities, research and development capabilities, technological sophistication, reputation, and marketing skills. Marketing skills would include new-product development capabilities, channel strength, advertising abilities, service capabilities, marketing research abilities, market and consumer knowledge, and so forth. Failure to adequately understand one’s own strengths can cause serious problems. IBM’s first attempt to enter the home computer market with the PC Jr. was a failure in part for this reason. Although IBM had an excellent reputation with large business customers and a very strong direct salesforce for serving them, these strengths were not relevant to the household consumer market. iii) Current and Potential Competitors: A thorough market analysis also examines current and potential competitors. A traditional approach to this type of analysis focuses strategic thinking on staying ahead

of the competition, which might include looking at existing competitive products and figuring out how to add a feature that might make a product “just a little better” in the mind of consumers. Other, more innovative firms pay less attention to matching and beating their rivals, but focus instead on using innovation to weaken or make competitors irrelevant in the marketplace. How does a firm accomplish this, how easy will it be for competitors to enter the market, and how will current competitors react? Firms can construct alternative scenarios to anticipate reactions of current competitors and anticipate how firms, though not necessarily competitors at present, might respond with similar products. iv) Conditions: The state of the economy, the physical environment, government regulations, and technological developments affect consumer needs and expectations as well as company and competitor capabilities. The deterioration of the physical environment has produced not only consumer demand for environmentally sound products but also government regulations affecting product design and manufacturing. International agreements such as NAFTA (North America Free Trade Agreement) have greatly reduced international trade barriers and increased the level of both competition and consumer expectations for many products. The development of computers has changed the way many people work and has created new industries. Clearly, a firm cannot develop a sound marketing strategy without anticipating the conditions under which that strategy will be implemented. In India, each region, each state, provides a different environment. Tastes and combinations of food products would change significantly across states. Logistics and infrastructure across the interiors of Maharashtra and M.P. would require radically different strategies. 2) Market Segmentation: Perhaps the most important marketing decision a firm makes is the selection of one or more market segments on which to focus. A market segment is a portion of a larger market whose needs differ somewhat from the larger market. Since a market segment has unique needs, a firm that develops a total product focused solely on the needs of that segment will be able to meet the segment’s desires better than a firm whose product or service attempts to meet the needs of multiple segments. To be viable, a segment must be larger enough to be served profitably. Market segment involves four steps: i) Identifying product related need sets. ii) Grouping customers with similar need sets. iii) Describing each group. iv) Selecting an attractive segment(s) to serve. i)

Product-Related Need Sets: Organization should identify needs of the market and offer a product, features, services according to their capabilities may be a reputation, an existing product, a technology, or some other skill set. With these potential capabilities they should develop such product that satisfy more than one need, cater to a large segment thus proving itself to be economical to the market segment need.

ii) Customers with Similar Need Sets: The next step is to group consumers with similar need sets. For example, the need for moderately priced, fun, sporty automobiles appears to exist in many young single individuals, young couples with no children, and middle-aged couples whose children have left home. These consumers can be grouped into one segment as far as product features and perhaps even product image are concerned despite sharply different demographics. This step generally involves consumer research, including focus group interviews, surveys, and product concept tests. It could also involve an analysis of current consumption patterns. iii) Description of Each Group: Once consumers with similar need sets are identified, they should be described in terms of their demographics, lifestyles, and media usage. In order to design an effective marketing program, it is necessary to have a complete understanding of the potential customers. It is only with such a complete understanding that we can be sure we have correctly identified the need set. In addition, we cannot communicate effectively with our customers if we do not understand the context in which our product is purchased and consumed, how it is thought about by our customers, and the language they use to describe it. Thus, while many young single individuals, young couples with no

children, and middle-aged couples whose children have left home may want the same features in an automobile, the media required to reach each group and the appropriate language and themes to use with each group would likely differ. iv) Attractive Segment(s) to serve: Once we are sure we have a thorough understanding of each segment, we must select our target market – that segment(s) of the larger market on which we will focus our marketing effort. This decision is based on our ability to provide the selected segment(s) with superior customer value at a profit. Thus, the size and growth of the segment, the intensity of the current and anticpirated competition, and the cost of providing the superior value, and so forth are important considerations. 3) Marketing Strategies: Marketing strategy involves a plan to meet the needs and desires of specific target markets by providing value to that target better than competitors. Such a plan must specify the essential components of the marketing mix, often described as the four P’s (product, place, price, and promotion). Consumer research is critically important in developing segmentation strategy as well as formulating the marketing mix, and both also are affected by the decision process of consumers. i)

Product: The largest ethical concern regarding the product portion of the marketing mix is whether the products are harmful to the consumer or to society as a whole. Products can often lead to shortterm consumer satisfaction, but they also may lead to long-term problems for both the consumer and society.

The failure to disclose that a product will not function properly without necessary components is unethical. Generally, products fall into four categories pertaining to social responsibility; these categories represent how long a consumer expert the benefits of the product to last: a) Deficient Products: These products have little to no potential to create value of any type. An example might be a faulty appliance. Obviously consumer wants to avoid offering products that are considered deficient. b) Salutary Product: These products are good for both consumers and society in the long-run. Salutary products offer practical value, but they do not provide pleasure value. For example, vehicle air bags have great value but they do not necessarily provide pleasure or entertainment. c) Pleasing Products: These products provide pleasure value to consumers, but they can be harmful in the long-run. For example, consumers enjoy cigarettes and alcohol but these products obviously can be harmful to consumer’s health and the health of others. The pleasing products category is usually the one where ethical issues come-up. But it is important to realize that individual responsibility and freedom are important factors when it comes to the consumer’s decision to use these products. d) Desirable Products: These products deliver high practical value alongwith pleasurable value. Plus they help consumers immediately and have long-running benefits. For example, weight-loss products which give consumers immediate results by curbing their appetites. When used correctly, these products have the long-run benefit to consumers of losing weight. ii) Distribution: The second element of the marketing mix is place (or distribution). In this phase, firms decide the most effective outlets through which to sell their products and how best to get them there. Where will consumers expect and want to buy this product – through mass retailers, electronic retailing, direct selling, or catalogs? An expensive or highly complex product like jewelry might sell better in a specialty store in which consumers receive personal assistance with product choice and operations instructions, whereas simple, everyday products might sell better in mass retail outlets.

iii) Price: Price will also have its emotive as well as functional content. It is well documented that the relationship between price and perceived value will always interplay in people’s minds when choosing particular products. Price ← Continuous movement → Added value Consumer concerns will pitch backwards and forward between price and added value depending on both functional and emotional concerns. It is mostly in the interest of marketing managers to push consumers toward the added value end of the spectrum where more customer satisfaction can be given, highest prices charged and greater profits made. It is also common for consumers to complain about marketing efforts that lead to overall higher prices. For example, a company that pays millions of dollars for a Super Bowl commercial will often face criticism from consumers and push back on price. Marketers use the “price” as a statement of value received from an offering that may or may not be monetary – it is important that consumers see that same value. An unethical use of pricing is to state that a regular price is a sales price. This practice is actually prohibited by law as well. iv) Communications: As marketers use promotion to communicate a product’s value through techniques such as advertising, sales promotion, and word-of-mouth marketing. Unfortunately, many times consumers believe that products are promoted in ways that are “too good to be true”. This creates skepticism and a decline in trust toward the promotional message. Promoting an item as being on sale and then informing the consumer that the product is out of stock and hat a more expensive item should be bought is unethical. This practice, which is known as the bait-and-switch method, is prohibited by law. Marketing communications include advertising, salesforce, public relations, packaging, and any other signal that the firm provides about itself and its products. An effective communications strategy requires answers to the following questions: a) With Whom Businesses Want to Communicate: While most messages are aimed at the targetmarket members, others are focused on channel members or those who influence the target-market members. For example, pediatric nurses are often asked for advice concerning diapers and other non-medical infant care items. A firm marketing such items would be wise to communicate directly with these individuals. b) What Effects do Businesses Wants its Communications to have on the Target Audience: Often a manager will state that the purpose of advertising and other marketing communications is to increase sales. While this may be the ultimate objective, the behavioral objective for most marketing communications is often much more immediate. That is, it may seek to have the audience learn something about the product, seek more information about the product, like the product, recommend the product to others, feel good about having bought the product, or a host of other communications effects. c) What Message will achieve the Desired Effect on Audience: What words, pictures, and symbols should we use to capture attention and produce the desired effect? Marketing messages can range from purely factual statements to pure symbolism. The best approach depends on the situation at hand. Developing an effective message requires a thorough understanding of the meaning the target audience attaches to words and symbols, as well as knowledge of the perception process. d) What Means and Media should be used to reach the Target Audience: Should we use personal sales to provide information? Can we rely on the package to provide needed information? Should we advertise in mass media, use direct mail, or rely on consumers to find us on the Internet? If we advertise in mass media, which media (television, radio, magazines, newspapers, Internet) and which specific vehicles (television programs, specific magazines, websites, and so forth) should we use? Answering these questions requires an understanding both of the media that the target audiences use and of the effect that advertising in those media would have on the product’s image.

e) When Should Business Communicate with the Target Audience: Should we concentrate our communications near the time that purchases tend to be made or evenly throughout the week, month, or year? Do consumers seek information shortly before purchasing our product? If so, where? Answering these questions requires knowledge of the decision process used by the target market for this product. v) Service: Here, service refers to auxiliary or peripheral activities that are performed to enhance the primary product or service. Thus, we would consider car repair to be a product (primary service), while free pickup and delivery of the car would be an auxiliary service. Service as a separate component of the marketing mix plays critical role in determining market share and relative price in competitive markets. A firm that does not explicitly manage its auxiliary services is at a competitive disadvantage. Auxiliary services cost money to provide. Therefore, it is essential that the firm furnish only those services that provide value to the target customers. Providing services that customers do not value can result in high costs and high prices without a corresponding increase in customer value. 4) Consumer Decisions: The consumer decision process intervenes between the marketing strategy (as implemented in the marketing mix) and the outcomes. That is, the outcomes of the firm’s marketing strategy are determined by its interaction with the consumer decision process. The firm can succeed only if consumers see a need that its product can solve, become aware of the product and its capabilities, decide that it is the best available solution, proceed to buy it, and become satisfied with the results of the purchase. 5) Outcomes i) Firm Outcomes a) Product Position: The most basic outcome for a firm or a marketing strategy is its product position – an image of the product or brand in the consumer’s mind relative to competing products and brands. This image consists of a set of beliefs, pictorial representations, and feelings about the product or brand. It does not require purchase or use for it to develop. It is determined by communications about the brand from the firm and other sources, as well as by direct experience with it. Most marketing firms specify the product position they want their brands to have and measure these positions on an ongoing basis. This is because a brand whose position matches the desired position of a target market is likely to be purchased when a need for that product arises. Our total product Competitors’ total products

Consumer decision process

Superior value expected

Sales

Perceived value delivered

Customer satisfaction

Creating Satisfied Customer

b) Sales: Sales are a critical outcome, as they produce the revenue necessary for the firm to continue in business. Therefore, virtually all firms evaluate the success of their marketing programs in terms of sales. Sales are likely to occur only if the initial consumer analysis was correct and if the marketing mix matches the consumer decision process. c) Customer Satisfaction: Marketers have discovered that it is generally more profitable to maintain existing customers than to replace them with new customers. Retaining current customers requires that they be satisfied with their purchase and use of the product. Thus, customer satisfaction is a major concern of marketers. As figure above indicates, convincing consumers that your brand offers superior value is necessary in order to make the initial sale. Obviously, one must have a thorough understanding of the potential consumers’ needs and of their information acquisition processes to succeed at this task. However, creating satisfied customers, and thus future sales, requires that customers continue to believe that your brand meets their needs and offers superior value after they have used it. You must deliver as much or more value than your customers initially expected, and it must be enough to satisfy their needs.

ii) Individual Outcomes a) Need Satisfaction: The most obvious outcome of the consumption process for an individual, whether or not a purchase is made, is some level of satisfaction of the need that initiated the consumption process. This can range from none (or even negative if a purchase increases the need rather than reduces it) to complete. Two key processes are involved – the actual need fulfillment and the perceived need fulfillment. These two processes are closely related and are often identical. However, at times they differ. b) Injurious Consumption: While we tend to focus on the benefits of consumption, we must remain aware that consumer behavior has a dark side. Injurious consumption occurs when individuals or groups make consumption decisions that have negative consequences for their long-run well-being. For most consumers, fulfilling one need affects their ability to fulfill others due to either financial or time constraints. For example, some estimates indicate that most Americans are not saving at a level that will allow them to maintain a lifestyle near their current one when they retire. The cumulative impact of many small decisions to spend financial resources to meet needs now will limit their ability to meet what may be critically important needs after retirement. iii) Society Outcomes a) Economic Outcomes: The cumulative impact of consumers’ purchase decisions, including the decision to forgo consumption, is a major determinant of the state of a given country’s economy. Their decisions on whether to buy or save affect economic growth, the availability and cost of capital, employment levels, and so forth. The types of products and brands purchased influence the balance of payments, industry growth rates, and wage levels. Decisions made in one society, particularly large wealthy societies like the United States, Western Europe, and Japan, have a major impact on the economic health of many other countries. A regression in the United States or a strong shift toward purchasing only American-made products would have profound negative consequences on the economies of many other countries, both developed and developing. b) Physical Environment Outcomes: Consumers make decisions that have a major impact on the physical environments of both, their own and other societies. The cumulative effect of American consumer’ decisions to rely on relatively large private cars rather than mass transit results in significant air pollution in American cities as well as the consumption of non-renewable resources from other countries. c) Social Welfare: Consumer decisions affect the general social welfare of a society. Decisions concerning how much to spend for private goods (personal purchases) rather than public goods (support for public education, parks, health care, and so forth) are generally made indirectly by consumers’ elected representatives. These decisions have a major impact on the overall quality of life in a society. Injurious consumption, affects society as well as the individuals involved. The social costs of smoking-induced illnesses, alcoholism, and drug abuse are staggering. To the extent that marketing activities increase or decrease injurious consumption, they have a major impact on the social welfare of a society

1.2. MARKET SEGMENTATION

In 2004, Hindustan Lever Limited (HLL) was the largest Fast Moving Consumer Goods (FMCG) Company in India. The segments where HLL was present included skin care (Fair & Lovely and Ponds), oral care (Pepsodent and Close-up), hair care (Sunsilk and Clinic), deodorant (Axe, Ponds, and Rexona), color cosmetics (Lakme), ice-cream (Kwality-Walls), food (Kissan, Annapurna atta, Knorr-Annapurna and Modern Foods), beverages (Brooke Bond, Bru, Lipton), fabric wash (Surf, Rin, and Wheel), personal wash (Lifebuoy, Liril, Lux, and Breeze), and household care (Vim). HLL is a highly consumer-focused company with different brands catering to different consumer segments with different needs and purchasing power. While Surf caters to the high-end consumers, Rin is aimed at the mid-market segment, and Wheel caters to the lower end of the market. In deodorants, while Axe is targeted at men, Ponds and Rexona are for women. In Lakme, Elle 18 line of color enamel is targeted at early teens and young adults. In shampoos, while Sunsilk is targeted as the hair expert for different hair kinds, Clinic is for healthy hair, especially Clinic AllClear anti-dandruff shampoo, which caters to the need of a large segment of population having dandruff. Most marketers today, deal in a large variety of products targeted at various consumer segments, each solving some problem or catering to some consumer need. A lot of research is put in before a marketer segments the market or recognizes a consumer segment. This research provides the marketer with the vital information on the basis of which he eventually enters a consumer market with a relevant product. Gone are the days when one product suited all. Consumers now are much more demanding and the need for products suiting their tastes and preferences has increased. Their needs, wants, and preferences are different and so the products they buy will have to match these; what they wear, eats, drink, drive, or where they live, is a statement of their individuality. The era of mass markets has now given way to micro-markets with a highly individualistic profile. This phenomenon has led marketers to segment markets. There are several important reasons why businesses should attempt to segment their markets. These are: 1) Better Matching of Customer Needs: Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution. 2) Enhanced Profits for Business: Customers have different disposable income. They are, therefore, different in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits. 3) Better Opportunities for Growth: Market segmentation can build sales. For example, customers can be encouraged to “trade-up” after being introduced to a particular product with an introductory, lower-priced product. 4) Retain More Customers: Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life (“life-cycle”), a business can retain customers who might otherwise switch to competing products and brands. 5) Target Marketing Communications: Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that: i) The key customers are missed, and ii) The cost of communicating to customers becomes too high / unprofitable. By segmenting markets, the target customer can be reached more often and at lower cost. 6) Gain Share of the Market Segment: Unless a business has a strong or leading share of a market, it is unlikely to be maximizing its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the

preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones.

1.2.1.

Meaning and Definition of Market Segmentation

The concept of market segment is based on the fact that the markets of commodities are not homogenous but they are heterogeneous. Market represents a group of customers having common characteristics but two customers are never common in their nature, habits, hobbies, income and purchasing techniques. They differ in their behavior and buying decisions. On the basis of these characteristics, customers having similar qualities are grouped in segments. According to Philip Kotler, “Market segmentation is sub-dividing a market into distinct and homogeneous subgroups of customers, where any group can conceivably be selected as a target market to be met with distinct marketing mix”. According to William J. Stanton, “Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several sub-market or segments, each of which tends to be homogeneous in full significant aspects”. According to R. S. Davas, “Grouping of buyers or segmenting the market is described as market segmentation”. The main aim of market segmentation is to prepare separate programmes or strategies to all segments so that maximum satisfaction to consumers of different segments may be provided. According to Philip Kotler, “The purpose of market segmentation is to determine difference among them or marketing to them”.

B

2 1 3

1.2.2.

No market segmentation

Complete segmentation

Market segmentation of Income classes 1, 2, 3, Figure 7.2

Levels of Market Segmentation

A Market segmentation by Age classes A and B

Levels of market segmentation are as follows: 1) Segment Marketing: A market segment consists of a large identifiable group within a market with similar wants, purchasing power, geographical location, buying attitudes, or buying habits. For example, an auto company may identify four broad segments: car buyers who are primarily seeking basic transportation or high performance or luxury of safety. 2) Niche Marketing: A niche is a more narrowly defined group, typically a small market whose needs are not well served. Marketers usually identify niches by dividing a segment into sub segments or by defining a group seeking a distinctive mix of benefits. For example, the segment of heavy smokers includes those who are trying to stop smoking and those who don’t care. 3) Local Marketing: Target marketing is leading to marketing programs being tailored to the needs and wants of local customer groups (trading areas, neighborhoods, even individual stores). Citibank provides different mixes of banking services in its branches depending on neighborhood demographics. 4) Individual Marketing: The ultimate level of segmentation leads to “segments of one,” “customized marketing,” or “one-to-one marketing”. For centuries, consumers were served as individuals: the tailor made the suit and the cobbler designed shoes for the individual

1.2.3.

Bases for Market Segmentation

Companies cannot connect with all customers in large, broad, or diverse markets. But they can divide such markets into groups of consumers or segments with distinct needs and wants. A company then needs to identify which market segments it can serve effectively. This decision requires a keen understanding of consumer behavior and careful strategic thinking. To develop the best marketing plans, managers need to understand what makes each segment unique and different. Consumer market can be segmented into various segments by using different basis. Basis of consumer market segmentation can be broadly divided into four broad categories which are shown in figure below. Basis for Segmenting Consumer Markets Geographic Segmentation Demographic Segmentation Psychographic Segmentation Behavioral Segmentation

1.2.3.1.

Geographic Segmentation

This is generally the starting point of all market segmentation strategies. The geographic location of customers does help the firm in planning its marketing offer. This type of segmentation is quite common in dividing the rural and urban consumer market. Geographic segmentation refers to segmenting markets by region of a country or the world, market size, market density, or climate. Market density means the number of people within a unit of land, such as a census tract. Climate is commonly used for geographic segmentation because of its dramatic impact on residents’ needs and purchasing behavior. Snow-blowers, water and snow skis, clothing, and air-conditioning and heating systems are products with varying appeal, depending on climate. Consumer goods companies take a regional approach to marketing for four reasons, which are as follows: 1) Many firms need to find new ways to generate sales because of sluggish and intensely competitive markets. 2) Computerized checkout stations with scanners give retailers an accurate assessment of which brands sell best in their region. 3) Many packaged-goods manufacturers are introducing new regional brands intended to appeal to local preferences. 4) A more regional approach allows consumer goods companies to react more quickly to competition. For example, Cracker Barrel, a restaurant known in the South for home-style cooking, is altering its menu outside its core southern market to reflect local tastes. Customers in upstate New York can order Reuben sandwiches, and those in Texas can get eggs with salsa. Miller Lite developed the “Miller Lite True to Texas” marketing program, a state-wide campaign targeting Texas beer drinkers.

1.2.3.2.

Demographic Segmentation

The next commonly used basis for market segmentation is the demographic characteristics of the market. In demographic segmentation the market is divided into groups on the basis of variable such as age, family size, family life-cycle, gender, income, occupation, education, religion, race, generation, nationality and social class. Demographic variables are the most popular bases for distinguishing customer groups. Some of the demographic variables used are: 1) Age and Life-Cycle Stage: Consumers wants and liabilities change with age. On the basis of age, a market can be divided into four parts viz., children, young, adults and old. 2) Gender and Sexual Orientation: When God created human being he made Males and Females and gave them distinct survival needs. The gender segmentation is one of the most common forms of segmentation as around the globe man and woman have always been vocal about their separate needs.

3) Marital Status: Life style of a person depends on whether he is married or not. An unmarried bachelor prefers to enjoy life and his purchase behavior will show more of food and entertainment and less of furniture. But a married person will purchase house and the furniture. 4) Income: Income varies along the population in any country. In India it is as diverse as from few hundred rupees a month to millions a month. In this scenario the customers will behave differently in terms of wants as per their income. 5) Social Class: It has a strong influence on preference in cars, clothing, home furnishings, leisure activities, reading habits etc. Many Companies design products and services for specific social classes. 6) Family Size: The size of the family affects the amount and size of purchases. The consumption pattern of a big-sized joint family differs from a small-sized nucleus family. 7) Occupation: Various occupations can influence the buying behavior. People in sales and people in academic training will have different purchase behavior. 8) Educational Level: The academic standard segments people with same income i.e. with a similar ability to buy into their different likelihood to buy. 9) Religion: Religious rituals, traditions and cultures also differentiate and segment the market.

1.2.3.3.

Psychographic Segmentation

Often it has been seen that two consumers with the same demographic characteristics may act in an entirely different manner. Even though the two may be of the same age, from the same profession, with similar education and income, each of the customers may have a different attitude towards risk-taking and new product and stores. This is because of the following psychographic variables: 1) Life Styles: Life style concept is also considered as another important variable determining buyer behavior. Life style reflects the overall manner in which persons live and spend time and money. It is behavioral concept enabling us to grasp and predict buyer behavior. Life style concept has interdisciplinary approach as it involves sociology, culture, psychology and demography. Life style concept as a basis for segmentation is quite reasonable and desirable. 2) Personality: Marketers have used personality variables to segment markets. They endow their products with brand personality that corresponds to consumer personalities. 3) Values: Some marketers segment by core values, i.e. belief systems that underlie consumer attitudes and behavior. Core values go much deeper than behavior or attitude and determine, at a basic level, people’s choices and desires over the long term. Marketers who segment by values believe that by appealing to people’s inner selves it is possible to influence their outer-selves, their purchase behavior. 4) Beliefs: This is one of the parameters of segmentation used by marketers to sell products. People according to their situation and bringing up develop their own beliefs. For example, people develop religious beliefs as per the religion they follow. And their purchase behaviors are greatly influenced by their beliefs. Not only during festivals but in normal life also people with different religious beliefs develop different lifestyles and different behavior as consumer. It is important to place the role of psychographic targeting in context of demographics, the form of targeting that historically preceded it and which now is practiced in conjunction with psychographics. Marketers for many years based their targeting decisions almost exclusively on their audiences’ demographic characteristics – considerations such as the market’s age group, gender, income level, and race/ethnicity. However, sophisticated practitioners eventually realized that demographic information tells only part of the story about consumers’ buying preferences and purchase behaviors. It is for this reason that marketing communicators also began investigating consumers’ psychographic characteristics as a means of obtaining a richer understanding of consumer behavior and how best to influence consumers to respond positively to marketing efforts. In general, psychographics refers to information about consumers’ attitudes, values, motivations, and lifestyles as they relate to buying behavior in a particular product category. Numerous marketing research firms conduct psychographic studies for individual clients. These studies are typically customized to the client’s specific product category. In other words, the questionnaire items included in a psychographics study are selected in view of the unique characteristics of the product category.

In addition to psychographic studies that are customized to a client’s particular needs, Brand Managers can purchase “off-the-shelf” psychographic data from services that develop psychographic profiles of people independently of any particular product or service. One of the best known of these is SRI Consulting Business Intelligence’s (SRIC-BI’s) VALS system. VALS segments, consists of eight general psychographic segments as shown in figure 7.3. This classification is based on Maslow’s hierarchy of needs. At the bottom are the people with minimal resources and, on the top are the people with abundant resources. This divides the consumer into three general groups or segments. Each of these segments has a distinctive lifestyle, attitude, and decision-making. The figure shows their characteristics as well. The eight segments also differ in their resources and orientations. The resources, possessed by those at the bottom are very little and as move upwards the resources increase. Besides money and physical resources, people at the bottom lack in education, social resources, psychological resources and in self-confidence. This study was made on American people. The demographic characteristics like, age, income, occupation, role, religion, sex education, marital status can easily be identified. However, it is more difficult to identify psychographic characteristics of attitudes, beliefs, interests, benefits, lifestyle, etc. This can be done by VALS segmentation. Abundant resources Principle

Status

Actualize r

Fulfilled

Achiever

Believer

Striver

Action Experienc er Maker

Struggler

Minimal resources

Figure 7.3: Values and Lifestyle Segments (VALS)

For a segment to be worthwhile, it must have a proper size, i.e., enough number of people in the segment to make it feasible. It must be stable, so that the people belonging to a segment not only remain there, but the segment must also grow in size. The segment must also be accessible, so that the marketer is able to reach the segment in an economical way. They can be reached through various media. Marketers also are on the look-out for new media that can reach the audience with minimum waste, circulation, and competition. The segment should be such that profits can be gained. By catering to a segment, profits must be ensured. Profits are the backbone of any organization. The target segment has to be profitable. 1) Fulfilled: As the name suggests, they are satisfied and mature people who are well-educated, value order, knowledge, and responsibility. They are practical consumers and conservative. They look for products which are durable, have value and function properly. They are well-informed about the world, and are ready to increase their knowledge. They prefer leisure at home. 2) Believers: They are in the principle-oriented category. They are conservative, conventional people, with their needs, strong faiths, and beliefs. They have modest resources sufficient to meet their needs. They are conservative and predictable. They use established brands. 3) Actualizers: They have abundant resources and are sophisticated in their taste and habits. They are active, and have high self-esteem. They develop, explore, and express themselves in a variety of ways. They have taste and are leaders in business, and in government. They have wide interests and are concerned with social issues and are open to change. 4) Achievers: They are also placed high in the Maslow’s hierarchy of needs and are career and work-oriented. They make their dreams come true. They are workaholics. Work provides them with a sense of duty, material rewards and prestige. They live conventional lives, authority and image is important to them. They also favor established products and show their success around.

5) Strivers: They are a status-oriented category, but have a low income as they are striving to find a secure place in life. They are low in economic, social, and psychological resources. They are concerned about the opinion of others. They see success with money. They like to be stylish. They wish to be upwardly mobile and strive for more. 6) Stragglers: These are poor people, struggling for existence. Education is low, low skilled, without strong social bonds. They are despairing and, have a low status in society. Their chief concern is to fulfill their primary needs of physiological security and safety needs. They represent a modest market and are loyal to their favorite brands. 7) Experiencers: They are action-oriented, young, vital, enthusiastic, impulsive, and rebellious. They have enough resources and experiment in new ventures. They indulge in exercise, sports, outdoor recreation and social activities. They are avid consumers and spend much on entertainment, clothing, food, music, videos, movies, etc. This pattern of behavior changes, as they are enthusiastic to new ideas. 8) Makers: They are in the action-oriented category. They have construction skills and value self-sufficiency. Makers experience the work by working on it. They are people engaged in construction work and work with their hands and in the industry. They are politically conservative, suspicious of new ideas; they buy stuff which helps them in achieving their purpose. They buy tools, pick-up trucks and, all that helps them in practical work.

1.2.3.4.

Behavioral Segmentation

In behavioral segmentation, buyers are divided into groups on the basis of their knowledge of, attitude towards, use of, or response to a product. Many marketers believe that behavioral variables – occasions, benefits, user status, usage rate, loyalty status, buyers-readiness stage, and attitude – are the best starting points for consulting market segments. Buyer ‘readiness’ or preparedness is one of the important variable used for segmenting the market. At any given time, buyers are at different stages of readiness. There are unaware buyers, people who are aware but not interested, people who are interested and are desirous to buy and lastly, those who will positively buy the product. The major behavioral variables used by marketers to segment the market are as follows: 1) Occasions: Buyers can be distinguished according to the occasions on which they develop a need, purchase a product, or use a product or when they get the idea to buy. Occasion segmentation helps boost product usage. For example, some consumers may only purchase flowers, wine or boxes of chocolates for celebrating birthdays or Christmas, whereas other consumers may buy these products on a weekly basis. Marketers often try to change customer perception of the best time to consumer a product by promoting alternative uses for a product. For example, recently Kellogg’s has attempted to change the image of cereals to that of an ‘any time’ snack, rather than simply a breakfast meal. Another example of occasional segmentation is orange juice which is most often consumed at breakfast, but orange growers have promoted drinking orange juice as a cool and refreshing drink at other times of the day. In contrast, Coca-Cola’s “Coke in the Morning” advertising campaign attempts to increase Coke consumption by promoting the beverage as an early morning pick-me-up. According to the occasions buyers develop a need, purchase a product or use a product. It can help firms expand product usage. A company can consider critical life events to see whether they are accompanied by certain needs. There can be 2 types of occasions: i) Regular: Like Holi, Diwali, Eid, Independence Day, Republic Day etc. ii) Special: Marriage, Anniversary, Winning moments etc. 2) Benefits: Here, the marketer identifies benefits that a customer looks for when buying a product. This has been a very effective method of segmenting the market for watches, where a customer may buy for just knowing the time, or durability, or as a gift/ an accessory/ a dress item/ a jewellery item. Buyers can be classified according to the benefits they seek. On a purchase of same product different customer look for different benefit because of which they buy products from different companies which satisfy their specific needs. Let us take the example of a car. The basic function of a car is transportation. But people prefer different cars because they seek different benefits. The benefits can be of four types. Let us explain them with the choice of cars:

i)

Quality: There are people for whom the quality matters most in any purchase. So when they buy cars they buy Mercedes Benz, Skoda Octavia.

ii) Service: At times people buy things to avail some specific service. At this stage more than quality or price the service that the product can give matters more. For example, politicians mostly use Hindustan Motors Ambassador bulletproof car. iii) Economy: For most of the people belonging to the middle and lower income group price is the most important deciding factor in case of any purchase. These people look for the economy in every purchase. These people when go for a purchase of any car apart before quality and service their first criteria of choice will be the price of the car and their preference will be for cars like Maruti 800. iv) Specially: People can be adventurous and sporty in purchase decisions for car and they would prefer Ferari etc. 3) User Status: Markets can be segmented into following classes depending on the user status. Let us explain the category of user with an example of a product say Deodorant. Let us see how we can divide the users of deodorant in different categories: i) Non-User: A 10-year child or 70-year old in our country generally do not use deodorant. ii) Potential Users: This is the category where the usage rate is expected to be highest. In our example fashionable teenager, corporate people are the potential users of deodorant. iii) First time Users: The users who use it for the first time. For example, the teenagers first deodorant used may be in his college days. iv) Regular User: A corporate big-wig always in big party or conference, a fashion conscious lady or a regular corporate and nowadays because of fall in its price students also are the regular users. v) Ex-User: Somebody who stopped using for some reasons may be due to allergies or due to switching to some substitutes like perfume are the ex-users of the product. 4) Quantity Consumed/Usage Rate: The quantity consumed at any given time has also been the basis for segmenting the beverages (tea, coffee), soft drinks, breweries, and cigarette markets. Accordingly, the following market segments are visible: i) Light: These are the categories of the users who are very infrequent users. In case of cosmetics an average housewife who is not very fashion conscious is a light user of the cosmetics. ii) Medium: The fashion-conscious teenagers are the medium users of cosmetics i.e. they use it very frequently. iii) Heavy: There are people for whom the cosmetics are the most important purchase and they are heavy users of it. Celebrities in entertainment world, the models etc. need cosmetics on a regular basis, as it is the most important part of their profession. The differentiation between them is based on the benchmark quantity defined by the marketer for each segment. 5) Buyer-Readiness Stage: Another variable used for segmenting the market is buyer ‘readiness’ or preparedness to buy the product. At any given time, buyers are at different stages of readiness. There are unaware buyers, people who are aware but not interested, people who are interested and are desirous to buy and lastly, those who will positively buy the product. A market consists of people in different stages of readiness to buy a product. These various stages are: i) Unaware: People not following technology trend and completely unaware about its improvement and new innovations. ii) Aware: People who have seen the advertisements but do not have enough knowledge about the technology. iii) Informed: These people get information from friends, colleagues, relatives who are users or technical people. iv) Interested: People who have information and hence are variety-seekers. v) Desired: These are the people who have gathered detailed knowledge, probably have taken a trial, but may lack money to purchase the product.

vi) Intended to Buy: People who have the knowledge, has the purchasing capacity and desire and are ready to buy. 6) Loyalty Status (Competition Related): Consumers have varying degrees of loyalty to specific brands, stores and other entities. Buyers can be divided into four groups according to brand loyalty status: i) Hard Core Loyals: Hard core loyals are those customers who continue to buy the same brand over and over again. Newspaper readers, cigarette smokers and tea drinkers are some customer groups where such hard-core loyalties are commonly visible. ii) Soft Core Loyals: Those who are loyal to two or three brands in a product group are called soft-core loyals. For example, a housewife who buys lux, lux, lux; cinthol, cinthol, cinthol; and pears, pears, lux; in her nine shopping expeditions will be considered as a soft core loyal. The marketer needs to watch such customers and motivate them to shift to the hard core loyalty segment. iii) Split Loyals: Consumers who shift their loyalty from one brand to other and isolate between it. Pepsodent after its launch found some customers of Colgate switching between the two brands. iv) Switchers: Switchers are those customers who never stick to a brand. These are the customers for whom brand switching is as easy as changing a shirt. They may switch for a variety or for a special deal. 7) Attitude: People have different attitudes towards different aspects of life, which affect their consumption pattern also. Some people who develop a very negative attitude towards life do not enjoy and hence behaves in a very different manner from the person whose attitude is to always have fun and live life to the fullest. Hence the marketing decision makers have taken this as a parameter to segment the population. Five attitude groups can be found in a market. For example, in a credit card market they can be distinguished as follows: i) Enthusiastic: These are people having tendency of impulsive purchase. They may not carry cash all the time but suddenly decide to buy something. They definitely need credit cards. ii) Positive: They are serious but mobile people who need to buy suddenly at any time. iii) Indifferent: There are some people who are technology averse with systematic purchasing pattern. They would prefer to purchase with cash after thinking over the need for purchase. They do not prove to be potential users of credit cards. iv) Negative: People can be spendthrifts who fear of loosing money or misusing it. They would never ever go for a credit card. Hostile: People at times become very much irritated either by salespeople calling or meeting anytime, giving false promise or by the service provided. For example, in case of credit cards, there are some hidden costs which are not clarified by the salesperson during selling

1.2.4.

Market Segmentation of Some Consumer Markets

1) Toothpaste Market: The toothpaste market in India can be divided into five segments. As per the 1988 data, the segment sizes were as follows: i) Cosmetic Segment: This segment occupies 83% of the market. This consists of brands like Colgate, Promise, Cibaca Top, Close-up, Pepsodent, Ponds and Anchor white. These brands mostly emphasize on freshness, foam, cleanliness, and overall dental care. ii) Fluoride Segment: This group of buyers constituted above 15% of the market. Here, brands like Forhans, Cibaca, and Colgate Fluoride project an element of gum-care, hygiene and special protection of the teeth. iii) Herbal Segment: This segment has captured barely 2% of the market. The popular brands are Neem, Vicco, Babool, Dabur etc., where each brand emphasizes on the natural or herbal constituents in it. iv) New Segment: In 2007, Colgate Active Salt and Close-up Maxfresh were first introduced and today this new segment is facing intense competition.

2) Two Wheeler Market: The two-wheeler market can be segmented with respect to consumer behavior as follows: i) Married People: Who generally look for fuel-efficiency, price and safety? ii) Young People: Who generally settle for aesthetics or good looks? That is why the 100 cc motorcycle is their first choice. iii) Low Income Group: Prefer mopeds primarily because they provide individual mobility at the lowest possible cost. For example, Bajaj’s Pulsar, Hero Honda’s Ambition. iv) Rural Buyers: Are primarily concerned about maneuverability through rough terrain. This is the main reason why they opt for heavier motorcycles (175 cc or above). 3) Soap Market: Price is the major basis for segmenting the toilet soap market. Accordingly, the market segments formed are as follows: i) Popular Segment: This segment accounts for about 87% of the market in terms of quantity and 70% of the market in terms of value (size about ` 1,000 crore). The popular segment may further be subdivided by price again, the segment consisting of brands like Lifebuoy and Lux. The Lifebuoy soap brand is the single largest band selling annually ` 4,000 million. ii) Economy Segment: It consists of brands like Hamam, Lux, Santoor and Rexona. Another recent development in the popular segment has been the emergence of a new segment between the ‘Janata’ and the ‘economy’ segment due to changes in the excise structure. In this category, known as the ‘discount segment’, soaps are priced reasonably. Brands include Breeze, Vigil. Tarun and Nirma Chemicals. But over the years, their prices have increased. iii) Premium Segment: High-priced soaps account for roughly 13% of the market in terms of quantity, and 30% of the market in terms of value. The total size of the premium soap market was ` 350 crore in January, 1992 and there were more than 70 brands. The leading brands and companies in the premium segment are, Cinthol Lime, Dove, Fa, Liril and pears, Dettol, and Margo and Mysore Sandal. This segment caters to by and large urban territories, with equal emphasis on strategies to target the rural population.

1.2.4.1.

Market Segmentation Procedure/ How to Segment the Market

It is an accepted view that the market segmentation procedure consists primarily of three stages: 1) Survey Stage: This is divided into two parts, viz. i) Focus group discussions and in-depth interviews with a view to get an insight into consumer motivation, attitudes and behavior, and ii) Based on this insight developing a questionnaire which is administered to a sample group of consumers. The objective of this questionnaire is to collect data on: a) Attributes sought in a product and their priority ratings, b) Brand awareness and rating of different brands, c) Product usage patterns, d) Customer attitudes towards the generic product or product category itself, e) Demographics, psychographics, and media habits of sample respondents. 2) Analysis Stage: After collecting the data, it is analyzed using factor analysis. This is used to identify factors that differentiate customer groups. Cluster analysis is now used to cluster customers into maximally different groups. 3) Profiling Stage: In this stage each cluster is profiled in terms of demographic, psychographic, media habits, attitudes, behavior, and consumption habits. The marketer can give each segment a name based on a dominant distinguishing characteristics.

1.2.4.2.

Factors Influencing Segmentation

The major factors which influence segmentation are shown in figure below and must be taken into consideration. 1) Size, Objectives and Resources of the Company: The size of the company and the

Factors Influencing Segmentation Size, Objectives and Resources of the Company Competitive Structure of the Industry Life Cycle Stage

Type of Product and Market Nature of Market Competitive Strategy of Firm

2)

3)

4) 5) 6)

resources it has available will dictate to a great extent how it segments its market. For example, the Ford Motor Co. will want to sell to the world and so segment on a global scale whilst the local hairdresser will service a very small catchment area and segment accordingly. Resources of company also determine the extent of segmentation, as company having moderate resources will have limited segmentation whereas company having substantial resources will have broad segmentation. Type of Product and Market: Some companies have a simple product portfolio that lends itself to easy segmentation, for example, bread, potatoes, petrol, industrial cleaning products, whilst others have a more complex product mix making it much harder, for example, catering and hospitality services, financial services, fashion clothes. Competitive Structure of the Industry: In the main the more competitive the market the more each organization will look toward differentiating their product so as to gain competitive advantage. The greater the selection on offer the more consumers will demand choice and the greater will be the need for tight segmentation. An example of this might be the change that has happened with the traditional English pub. Competition and the need to attract more customers have led to the theme pub offering an ever greater choice of food and real ales. In the past a pub might have offered a choice of two different beers and a salad sandwich or a sausage roll. Now many pubs offer a choice of over 20 different beers and food as diverse as Italian, Thai, French and American to be eaten as a snack, at lunch time or as a full three or four course dinner, all at prices that match their targeted customer’s expectations. Nature of Market: Nature of market also influences the segmentation decision. Segmentation strategies differ according to market such as segmentation strategies differ in competitive market from non – competitive market. Life Cycle Stage: Lifecycle stage of a product also affects segmentation decisions. Competitive Strategy of Firm: Competitive strategy of a firm also has an influence on segmentation. Organizations that choose to segment the consumers and focus on target markets are more successful in highly competitive environments.

1.2.4.3.

Benefits of Market Segmentation

Several benefits of market segmentation are as follows: 1) Adjustment of Product and Marketing Appeals: Market segmentation presents an opportunity to understand the nature of the market. The seller can adjust his thrust to attract the maximum number of customers by various publicity media and appeals. 2) Better Position to Spot Marketing Opportunities: The producer can make a fair estimate of the volume of his sale and the possibilities of furthering his sales. In the region where response of the customers is poor, the strategy of approach can be readjusted accordingly to push the sales on the basis of marketing research. 3) Allocation of Marketing Budget: It is on the basis of market segmentation that marketing budget is adjusted for a particular region or locality. In the place where the sales opportunities are limited, it is no use allocating a huge budget there. 4) Fighting Competition Effectively: The segmentation helps the producers to face the competition of competitors effectively by making a deep study of the products, policies and strategies of competitors in all the segments. This helps in adopting different policies, programmes and strategies for different markets based on rivals’ strategies, policies and programmes. 5) Understanding and Meeting the Needs of Consumers: It helps the marketer to fully understand the needs, behavior, habits, tastes and expectations of the consumers of different segments so that precise and clear decisions can be taken to harness marketing opportunities. It is possible to satisfy a variety of customer needs with a limited product range by using different forms, bundles, incentives and promotional activities. The computer manufacturer Dell, for instance, does not organize its website by product groups (desktops, notebooks, servers, printers etc.), but by customer groups (privates, small businesses, large businesses, public/state organizations). 6) Minimizing Aggregation Risk: By dividing the market and designing specific marketing mix to each segment, segmentation reduces the risk of aggregation, which is defined as the risk of not being able to satisfy customer needs with one marketing mix to all segments. For example, in case of highly mobile customers, who may not notice ads carefully, the use of personal selling is better marketing tool.

7) Targeted Marketing: Targeted marketing plans for particular segments allow to individually approach customer groups that otherwise would look out for specialized niche players. By segmenting markets, organizations can create their own 'niche products' and thus attract additional customer groups. 8) Benefits to the Consumers: The segmentation benefits the customers as the company produces and supplies products that serve customers' interest and satisfy their needs and wants. Moreover when segmentation attains higher levels of sophistication and perfection, customers and companies can conveniently settle down with each other, as at such stage, they can safely rely on each others’ discrimination. 9) Filling Gaps: Segmentation can help in finding out the unfilled gaps in a market, which can then be satisfied through unique product or promotional offerings. 10) Stimulating Innovation: It is necessary to communicate in a segment-specific way even if product features and brand identity are identical in all market segments. Such a targeted communications allows stressing those criteria that are most relevant for each particular segment (e.g. price vs. reliability vs. prestige). 11) Higher Market Shares: In contrast to an undifferentiated marketing strategy, segmentation supports the development of niche strategies. Thus, marketing activities can be targeted at highly attractive market segments in the beginning. Market leadership in selected segments improves the competitive position of the whole organization in its relationship with suppliers, channel partners and customers. It strengthens the brand and ensures profitability. On that basis, organizations have better chances to increase their market shares in the overall market. 12) Better Utilization of Marketing Resources: More resources can be allocated to segments in which there are more possibilities of selling the products and fewer resources may be allocated to the segments in which there are fewer possibilities.

1.2.4.4.

Limitations of Market Segmentation

The major limitations of market segmentation are as follows: 1) Markets are not made up of segments with different wants because buyers of one brand buy other brands as well. This is because the same buyer may buy products in different segments of the market for different family members, or for different occasions or for a change etc. Hence segmentation does not mean that those within a segment buy only in that segment. 2) Buyers often choose from a repertoire or a list of acceptable brands. Given the fact that people alternate between the brands of their list, it would be incorrect to presume and believe that a brand can be successfully positioned to appeal to a very narrow segment. 3) The various brands may be indistinguishable in product form yet differ widely in market share. Hence, no concept of differentiation among products is needed to explain market success. 4) The markets examined by them were not heavily segmented as the differences between brands were too insignificant to matter. 5) Market segmentation can be an expensive process for both the producer and the marketer. From marketing point of view the marketer has to develop different marketing mixes for different segments. From production point of view, the producer producing in mass quantities is much cheaper than making variety of products.

1.3. CONSUMER LEARNING 1.3.1.

Meaning and Definition of Learning

Learning may be described as “The process of acquiring the ability to respond adequately to a situation which may or may not have been previously encountered, the favorable modification of response tendencies consequent upon previous experience, particularly the building of a new series of complex coordinated motor response; the fixation of times in memory so that they can be recalled or organized; the process of acquiring insight into situation”. Thus, learning can be defined as a relatively permanent change in behavior as a result of prior experiences. According to E. R. Hilgard, “Learning is a relatively permanent change in behavior that occurs as a result of prior experience”.

Ironically, it can be said that change in behavior indicates that learning has taken place and that learning is a change in behavior. According to W. McGehee, “Learning has taken place if an individual behaves reacts; respond as a result of experience in a manner different from the way he formerly behaved”.

1.3.2.

Nature of Learning

Consumers’ learning is an important component of their behavior. Learning certainly occurs intentionally, as when a problem is recognized and information is acquired about products which might solve the problem. Consumer learning can occur unintentionally and this type of learning can strongly influence the behavior of consumers. Learning mechanism helps consumers to adapt to a changing environment. Consequently, knowledge of learning principles can be useful in understanding how consumers’ wants and motives are acquired and how their tastes are developed. Learning is essential to the consumption process. In fact, consumer behavior is largely learned behavior. People acquire most of their attitudes, values, tastes, behaviors, preferences, symbolic meanings, and feelings through learning. Culture and social class through such institutions as schools and religious organizations, as well as family, friends, mass media, and advertising, provide learning experiences that greatly influence the type of lifestyle people seek and the products they consume. Learning is any change in the content or organization of long-term memory or behavior. Thus, learning is the result of information processing.

1.3.3.

Conditions for learning

There are following two conditions: 1) Whatever knowledge is being acquired, it should be reflected in the behavior, i.e., knowledge should be implemented. 2) Change should last for a considerable period of time, i.e., it should not be temporary, and rather it should be permanent.

1.3.3.1.

Learned Behavior

A learned behavior is a behavior that was observed by an individual that they find it to be beneficial to them in some way, there's a motivating factor behind it, and also it can be conditioned. The learned behavior is a conditioned response to a stimulus through either voluntary or unvoluntary intent. A learned behavior is some type of action or reflex that learns. For example tying r shoes is a learned behavior crying is not. It is adaptive modification of behavior by experience. Genetic constraints may limit what can be learned.

1.3.3.2.

Types of Learned Behavior

1) Physical Behavior: Generally, we learn many physical behavior patterns useful in responding to a variety of situation faced in everyday life. For example, all healthy humans learn to walk, talk, and interact with others. As consumers, we also learn methods of responding to various purchase situations. These may take the forms of learning to act dissatisfied when hearing the first price quote on a car, or learning to read closely the fine print in purchase contracts. 2) Symbolic Learning and Problems Solving: People learn symbolic meanings that enable highly efficient communication through the development of languages. Symbols also allow marketers to communicate with consumers through such vehicles as brand names (Kodak and Sony), slogans (“got the right one, Baby” for Diet Pepsi), and signs (Mc Donald’s Golden Arches).

3) Affective Learning: Humans learn to value certain elements of their environment and dislike others. This means that consumers learn many of their wants, goals, and motives as well as what products satisfy these needs. Learning also influences consumers’ development of favorable attitudes toward a company and its products. These attitudes will affect the tendency to purchase various brands.

1.3.4.

Characteristics of Learning

1) Strength of Learning: What is required to bring about a strong and long-lasting learned response? Advertisements of most brands hammer into the customer the benefits and qualities of their respective brands so that the customer does not forget them. The strength of learning is heavily influenced by four factors: importance, reinforcement, repetition, and imagery. i) Importance refers to the value that the consumer places on the information to be learned. ii) Reinforcement is anything, which increases the likelihood that a given response will be repeated in the future. iii) Repetition increases the strength and speed of learning. Very simply, the more times person is exposed to information, or practice a certain kind of behavior, the more likely person is to learn it. iv) Imagery refers to the images created by words. These words may either be a brand name or a corporate name. 1) Extinction: Person can “unlearn” material or behavior that has been previously learned. This unlearning process is termed extinction and occurs when over time, a learned response is made to a stimulus but reinforcement does not occur. The greater the number of non-reinforced trials, the less likely the response is to occur; but complete extinction is rare. Resistance to extinction also strengthens when: i) Impelling motives are strong, ii) The number of previously reinforced trials is large, iii) The amount of reward during learning trials is large, iv) Reward is delayed during the learning process, and v) A partial reinforcement schedule occurs during learning. For example, if the advertisements for a particular brand are withdrawn for a considerable period of time, both from the print and the electronic media, the probability of the brand being forgotten by the consumers is very high. 2) Stimulus Generalization: Learning to discriminate between various objects or events is important for consumers, because it helps them adapt to their environment. Discrimination is learned over time when the same response to two similar but noticeably different stimuli leads to different consequences (reinforcement). Stimuli which the consumer can use to distinguish between various items in their environment are often termed discriminative stimuli. . Thus, a consumer who has learnt over repeated use the Surf detergent is effective and washes the best will assume that their surf Excel will also be very effective. Thus, the consumer has engaged in stimulus generalization. 3) Stimulus Discrimination: Learning to discriminate between various objects or events is important for consumers, because it helps them adapt to their environment. Discrimination is learned over time when the same response to two similar but noticeably different stimuli leads to different consequences (reinforcement). Stimuli which the consumer can use to distinguish between various items in their environment are often termed discriminative stimuli. 4) Response Environment: It appears that consumers generally learn more information than they are able to retrieve. That is, consumers frequently have relevant information stored in memory that firm cannot access when desired. One factor that influences the ability to retrieve stored information is the strength of the original learning. The stronger the original learning. The more likely relevant information will be retrieved when required.

1.3.5.

Elements of Learning

Consumers learn in several ways. Primarily, there are four elements of learning: motivation, cues, response, and reinforcement. 1) Motivation: The concept of motivation is important to learning theory. Remember, motivation is based on needs and goals. Motivation acts as a spur to learning. 2) Cues: A cue may be viewed as a weak stimulus not strong enough to arouse consumers, but capable of providing direction to motivated activity. That is, it influences the manner in which consumers respond to a motive. The shopping environment is packed with cues, such as promotions and product colors, which consumers can use to choose between various response options in a learning situation. 3) Response: A response may be viewed as a mental or physical activity the consumer makes in reaction to a stimulus situation. Responses appropriate to a particular situation are learned over time through experience in facing that situation. The occurrence of a response is not always observable. Therefore, it must again be emphasized that the inability to observe responses does not necessarily mean that learning is not taking place. 4) Reinforcement: Perhaps the most widely acceptable view of reinforcement is anything that follows a response and increases the tendency for the response to reoccur in a similar situation. Because reinforced behavior tends to be repeated. Consumers can learn to develop successful means of responding to their needs of changing conditions. Conditions Relevant to High and Low Involvement Strategies.

1.3.6.

Conditions Relevant to High and Low Involvement Strategies

A moment’s reflection will reveal that people learn things in different ways. People can identify clothes that are stylish even though they never really think much about clothing styles. Learning may occur in either a high-involvement or a low-involvement situation. A high-involvement learning situation is one in which the consumer is motivated to process or learn the material. For example, an individual reading laptop buyer’s guide prior to purchasing a computer is probably highly motivated to learn relevant material dealing with the various computer brands. A low-involvement learning situation is one in which the consumer has little or no motivation to process or learn the material. A consumer whose television program is interrupted by a commercial for a product he or she does not currently use or feel a desire for generally has little motivation to learn the material presented in the commercial. Figure shows the two general situations and the two specific learning theories that are as follows:

Learning approach

Situation

Specific learning theory

Learning approach

Situation

Classical

Conditioning HighInvolvement Learning Situation

Operant

Conditioning LowInvolvement Learning Situation

Iconic Rote

Cognitive

Vicarious/ Modeling

Cognitive

Reasoning/ Analogy

Commonly used Occasionally used Learning Theories in High- and Low-Involvement Situations

1.3.7.

Types of Learning

Various theories have been developed to explain different aspects of learning. As figure 1.17 depicts, the first major division is among the Behavioral/connectionist, cognitive and socialistic schools of thought. While cognitive interpretations place emphasis on the discovery of patterns and insight, connectionists argue that what humans learn are connections or associations between stimuli and responses and according to social learning theory people learn through different means like observation of others, direct experiences and indirect experiences. Types of learning theories are: 1) Behavioral Learning Theory 2) Cognitive Learning Theory Learning Theories 3) Social Learning Theory

Behavioural

Classical conditioning (S - R)

Cognitive

Operant conditioning (R - S)

Social Learning

S - Stimulus R - Response

Figure 1.17: Classification of Learning Theories

1) Behavioral/Connectionist Learning Theory: Some learning theorists maintain that learning involves the development of connections between a stimulus and some response to it. That is, the association of a response and a stimulus is the connection that is learned. A portion of this group minimizes the importance of reinforcement to learning, while others stress its crucial role. Reinforcement is employed in conjunction with two fundamentally different methods of learning connections: classical and operant conditioning. i) Classical Conditioning: A type of conditioning in which an individual responds to some stimulus that would not ordinarily produce such a response. Ivan Pavlov, a Russian physiologist conducted experiments to teach dogs to salivate in response to the ringing of a bell. A simple surgical procedure allowed Pavlov to measure accurately the amount of saliva secreted by a dog. When Pavlov presented the dog with a piece of meat, they exhibited a noticeable increase in salivation. Unconditioned Stimulus: (US) Meat paste

Conditioned Stimulus: (CS) Bell

Conditioned Stimulus: (CS) Bell

Unconditioned Response: (UR) Salivation

Conditioned Response: (CR) Salivation

Figure 1.18: Pavlovian Model of Classical Conditioning

When Pavlov withheld the presentation of meat and merely rang a bell, the dog did not salivate. Then Pavlov proceeded to link the meat and the ringing of the bell. After repeatedly hearing the bell before getting the food, the dog began to salivate as soon as the bell rang. After a while, the dog would salivate merely at the sound of the bell, even if no food was offered. In effect, the dog had learned to respond – i.e., to salivate – to the bell. The meat was an unconditioned stimulus; the reaction that took place whenever the unconditioned stimulus occurred was called the unconditioned response. The bell was an artificial stimulus, or which is called as conditioned stimulus. The last key concept is the conditioned response. This describes the behavior of the dog; it salivated in reaction to the bell alone. Classical conditioning has some important implications for understanding human behavior. Since higher-order conditioning for learning by human beings is important, its implication must be recognized. For example, higher-order conditioning can explain how learning can be transferred to stimuli other than those used in the original conditioning. Another implication of higher-order conditioning is that reinforcement can be acquired. A conditioned stimulus conditioning is that reinforcement can be acquired. A conditioned stimulus becomes reinforcing under higher-order conditioning. Classical conditioning is passive. Something happens and person reacts in a specific way. It is voluntary rather than reflexive. Requirements for Utilizing Classical Conditioning If advertisers are to use classical conditioning concepts to influence consumers, several conditions must occur. McSweeney and Bierley cite four conditions: a) There should be no other Stimuli that could Over-shadow the Unconditioned Stimulus: For example, assume the Marlboro cowboy was always portrayed on a white horse. It is possible the white horse might have over-shadowed the cowboy as a stimulus, thus weakening the association between the cowboy and the product. This is known as the over-shadowing effect. b) Unconditioned Stimuli should have no Previous Associations to other Brands or Product Categories: Assume a beer company decides to use a cowboy in its advertising to convey a macho image to its target group. The campaign would be ineffective because of the association already established by the Marlboro cowboy. This is referred to as the blocking effect. c) Unconditioned Stimulus should not be Overly Familiar and should be Presented Alone: Consumers could become over-saturated with certain stimuli that frequently appear in the mass media (known as a pre-exposure effect). Such stimuli are unlikely to be effective as the unconditioned stimulus. For example, the tuxedo has been shown so often as a symbol of luxury that it has probably lost its effectiveness. d) Classical Conditioning is more Effective when the Conditioned Stimulus is New: Consumers have established associations for well-known products. Given Pillsbury’s strong association with the doughboy, it would be difficult for the company to link its products with a new unconditioned stimulus. ii) Operant Conditioning: A type of conditioning in which desired voluntary behavior leads to a reward or prevents a punishment. People learn to behave to get something they want or to avoid something they don’t want. Operant behavior means voluntary or learned behavior in contrast to reflexive or unlearned behavior. The tendency to repeat such behavior is influenced by the reinforcement or lack of reinforcement brought about by the consequences of the behavior. Reinforcement, therefore, strengthens a behavior and increases the likelihood that it will be repeated.

The Harvard psychologist B.F. Skinner did research for operant conditioning, Skinner argued that creating pleasing consequences to follow specific forms of behavior would increase the frequency of that behavior. People will most likely engage in desired behaviors if they are positively reinforced for doing so. Rewards are most effective if they immediately follow the desired response. In addition, behavior that is not rewarded, or is punished, is less likely to be repeated.

The Individual

Operant Behavior and their Consequences Behaviors Works Talks to others Enters a restaurant Enters a library Increases productivity Completes a difficult assignments

Consequences Is paid Meets more people Obtains food Finds a book Receives merit pay Receives praise promotion

and

One can see illustrations of operating conditioning everywhere. A simple example of the operant behavior is the application of brake by a vehicle driver to avoid accident. Here, the possibility of accident without application of brake is stimulus situation, application of brake is the behavior and avoidance of accident is the consequence of behavior. Through this process, human beings learn what behaviors will be rewarding and they engage in those behaviors. Difference between Classical and Operant Conditioning Classical Conditioning Responses are elicited from a person (reactive). Responses are fixed to stimulus (no choice). CS is stimulus such as sound, an object, a person. Conditioning is implemented before response. First stimulus is produced and then desired behavior is expected.

Operant Conditioning Responses are emitted by a person (proactive). Responses are variable in types and degrees (choice). CS is a situation such as office, a social setting, a specific set of circumstances. Conditioning is implemented after response. First behavior pattern is got and then either by reward or by avoidance of punishment, behavior is reinforced.

Marketing Applications of Behavioral Learning Theories Behavioral learning theories have had a greater impact on research that addresses assessment and treatment of severe behavior problems of persons with mental retardation than with any other clinical group. While cognitive, psychodynamic, client-centered, Gestalt, and other therapies have captured the interest of many professionals working with other client populations, behavioral procedures have remained unrivaled as the dominant treatment orientation with mentally retarded persons. Operant learning concepts and procedures are, therefore, reviewed using treated problem behaviors to exemplify past and current trends. 2) Cognitive Learning Theory: Instead of viewing learning as the development of connections between stimuli and responses, cognitive theorists stress the importance of perception, problem solving, and insight. This viewpoint contends that much learning occurs not as a result of trial and error or practice but through discovering meaningful patterns which helps in solving problems. Cognitive learning involves learning ideas, concepts, attitudes, and facts that contribute to person’s ability to reason, solve problems, and learn relationships without direct experience or reinforcement. Cognitive learning can range from very simple information acquisition to complex, creative problem solving. Figure 1.19 illustrates some underpinnings of the cognitive view of learning. Feedback

Steps 1: In the cognitive view. People draw on their experiences and uses past learning as a basis for present behavior. These experiences represent presumed knowledge or cognitions. Perceived Behavioral Prior Learning

Choice

consequences

Figure 1.19: Cognitive Theory of Learning

Steps 2: People make choices about their behavior. The employee recognizes his or her two alternatives and chooses one. Steps 3: People recognize the consequences of their choices. Thus, when the employee finds the job assignments rewarding and fulfilling, he or she will recognize that the choice was a good one and will understand why. Steps 4: People evaluate those consequences and add them to prior learning, which affects future choices. Faced with the same job choices next year, the employee very likely will choose the same one. Various forms of cognitive learning could be: i) Iconic Rote Learning: Involves learning the association between two or more concepts in the absence of conditioning. ii) Vicarious Learning/Modeling: Is another important way in which consumer learning takes place. It is not necessary for consumers to directly experience a reward to learn. Instead, the consumer can observe the behavior of other and adjust that of his accordingly. Likewise, he may also use image to anticipate the outcome of various courses of action. Reasoning: Represents the most complex form of cognitive learning. In reasoning, individuals engage in creative thinking to restructure and recombine existing information as well as new information to form new associations and concepts. Marketing Applications of Cognitive Learning Theory Cognitive learning is relevant in understanding the process of consumer decision-making. Consumers recognize a need, evaluate alternatives to meet that need, select the product they believe will most likely to satisfy them (insight), and then evaluate the degree to which the product meets the need (goal achievement). A study of the purchasing patterns of recent residents of a community reflects a process of cognitive learning. Andreasen and Durkson studied the purchasing patterns of three groups of households selected according to the time they had been living in the Philadelphia area – less than three months, one and a half to two years, and three years or more. The researchers believed there would be little difference among the three groups for national brands. However for local brands, they predicted that the longer a family lived in the area, closer brand awareness and purchasing would be to those of established residents. Results confirmed their hypothesis. The families living in the area one and a half to two years were closer to the purchase patterns of the established residents than were families living in the area three months or less. Andreasen and Durkson identified three learning tasks in a new market environment: i) Brand identification, ii) Brand evaluation, and iii) Establishment of regular behavioral patterns with respect to the evaluated brands. This perspective clearly reflects a cognitive orientation to learning. 3) Social Learning Theory: People can learn through observation and direct experience. Learning comes from watching models – presents, teachers, peers, motion picture and television performers, bosses, and so forth. Social learning theory is an extension of operant conditioning, i.e., it assumes that behavior is a function of consequences it also acknowledges the existence of observational learning and the importance of perception in learning. Social learning involves several processes as shown in figure 1.20:

Model

Observer

Behavior

Pay attention to model remember what model did

Practice mode’s behavior

Imitate model’s behavior

Motivated to imitate model?

Figure 1.20: Observation Learning: An Overview

i)

Attention Processes: People learn from a model only when they recognize and pay attention to its critical features. People tend to be most influenced by models that are attractive, repeatedly available, important, or similar in estimation.

ii) Retention Processes: A model’s influence will depend on how well the individual remembers the model’s action after the model is no longer readily available. iii) Motor Reproduction Processes: After a person has seen a new behavior by observing the model, the watching must be converted to doing. This process then demonstrates that the individual can perform the modeled activities. iv) Reinforcement Processes: Individuals will be motivated to exhibit the modeled behavior if positive incentives or rewards are provided. Behaviors that are positively reinforced will be given more attention, learned better, and performed more often.

Theory Classical Conditioning

Operant Conditioning

Iconic Rote Learning

Summary of Learning Theories with Examples of Involvement Level Description High-Involvement Example Low-Involvement Example A response elicited by The favorable emotional The favorable emotional response one object will be response elicited by the word elicited by a song comes to be elicited by the second America comes to be elicited by elicited by a brand name, i.e., object, if both objects the brand Chrysler after a consistently paired with that song frequently occur consumer reads that Chrysler even though the consumer does not together. plans to use only American- pay attention to the advertising. made parts. A response, i.e., given A suit is purchased and the A familiar brand of peas is reinforcement is more purchaser finds that it does not purchased without much thought. likely to be repeated wrinkle and generates several They taste “all right”. The when the same situation compliments. A sport coat made consumer continues to purchase arises in the future. by the same firm is then this brand. purchased. Two or more concepts A jogger learns about various A consumer learns that Apple become associated brands of running shoes as a makes home computers, without without conditioning. result of closely reading many ever really thinking about Apple shoe advertisements that he or advertisements, or products. she finds enjoyable.

Vicarious Learning or Modeling

Reasoning/Analogy

1.3.8.

Behaviors are learned by watching the outcomes of others’ behaviors or by imagining the outcome of a potential behavior. Individuals use thinking to re-structure and recombine existing information to form new associations and concepts.

A consumer watches the reactions people have to her friend’s new short skirt before deciding to buy one.

A child learns that men do not wear dresses without ever really thinking about it.

A consumer believes that baking soda removes odors from the refrigerator. Noticing an unpleasant aroma in the carpet, the consumer decides to sweep some baking soda into the carpet.

Finding that the store is out of black pepper, a consumer decides to substitute white pepper.

Measures of Consumer Learning

For many marketers, the dual goals of consumer learning are increased market share and brand-loyal consumers. These goals are interdependent: Brand-loyal customers provide the basis for a stable and growing market share, and brands with larger market shares have proportionately larger groups of loyal buyers. Marketers focus their promotional budgets on trying to teach consumers that their brands are best and that their products will best solve the consumers’ problems and satisfy their needs. Thus, it is important for the marketer to measure how effectively consumers have “learned” its message. Various measures of consumer learning: recognition and recall measures, cognitive measures, and the attitudinal and behavioral measures of brand loyalty. 1) Recognition and Recall Measures: Recognition and recall tests are conducted to determine whether consumers remember seeing an ad, the extent to which they have read it or seen it and can recall its content, their resulting attitudes toward the product and the brand, and their purchase intentions. Recognition tests are based on aided recall, whereas recall tests use unaided recall. In recognition tests, the consumer is shown an ad and asked whether he or she remembers seeing it and can remember any of its salient points. In recall tests, the consumer is asked whether he or she has read a specific magazine or watched a specific television show, and if so, can recall any ads or commercials seen, the product advertised, the brand, and any salient points about the product. A number of syndicated research services conduct recognition and recall tests, such as the Starch Readership Service, which evaluates the effectiveness of magazine advertisements. After qualifying as having read a given issue of a magazine, respondents are presented with the magazine and asked to pointout which ads they noted, which they associated with the advertiser, and which they read most. They are also asked which parts of the ads they noted and read most. An advertiser can gauge the effectiveness of a given ad by comparing its readership recognition scores to similar-sized ads, to competitive ads, and to the company’s own prior ads. A recent study using Starch readership scores demonstrated that consumers received more information from advertisements for shopping products (i.e., high-priced clothing and accessories) than from ads for convenience goods (i.e., low-priced items purchased routinely) and, surprisingly, from ads for search products (i.e., very expensive, durable items purchased infrequently following an extensive information search). These findings show that marketers may be under-informing consumers when advertising search products. 2) Cognitive Responses to Advertising: Another measure of consumer learning is the degree to which consumers accurately comprehend the intended advertising message. Comprehension is a function of the message characteristics, the consumer’s opportunity and ability to process the information, and the consumer’s motivation (or level of involvement). To ensure a high level of comprehension, many marketers conduct copy testing either before the advertising is actually run in media (called pre-testing) or after it appears (post-testing). Pre-tests are used to determine which, if any, elements of an advertising message should be revised before major media expenses are incurred. Post-tests are used to evaluate the effectiveness of an ad that has already run, and to identify which elements, if any should be changed to improve the impact and memorability of future ads.

3) Attitudinal and Behavioral Measures of Brand Loyalty: The attitudinal and behavioral measures of brand loyalty are: i) Brand Loyalty: It is the ultimate desired outcome of consumer learning. There is no single definition of this concept. ii) Attitudinal Measures: They are concerned with consumers’ overall feelings (i.e., evaluation) about the product and the brand, and their purchase intentions. iii) Behavioral Measures: They are based on observable responses to promotional stimuli – purchase behavior, rather than attitude toward the product or brand. A basic issue among researchers is whether to define brand loyalty in terms of consumer behavior or consumer attitudes. i) Behavioral Scientists: Behavioral scientists who favor the theory of instrumental conditioning believe that brand loyalty results from an initial product trial that is reinforced through satisfaction, leading to repeat purchase. ii) Cognitive Researches: Cognitive researches, on the other hand, emphasize the role of mental processes in building brand loyalty. They believe that consumers engage in extensive problem-solving behavior involving brand and attribute comparisons, leading to a strong brand preference and repeat purchase behavior. To cognitive learning theorists, behavioral definitions (such as frequency of purchase or proportion of total purchases) lack precision, because they do not distinguish the “real” brand-loyal buyer. Often consumers buy from a mix of brands within their acceptable range (i.e., their evoked set). An integrated conceptual framework views consumer loyalty as the function of three groups of influences: a) Consumer drivers, b) Brand drivers, and c) Social drivers. These influences produce four types of loyalty: a) No loyalty (no purchase at all and no cognitive attachment to the brand), b) Covetous loyalty (no purchase but strong attachment and predisposition towards the brand that was developed from the person’s social environment), c) Inertia loyalty (purchasing the brand because of habit and convenience but without any emotional attachment to the brand), and d) Premium loyalty (high attachment to the brand and high repeat purchase). This framework also reflects a correlation among consumer involvement and the cognitive and behavioral dimensions of brand loyalty. Loyalty programs are generally designed with the intention of forming and maintaining brand loyalty.

1.3.9.

Brand Equity

Brand equity refers to the value inherent in a well-known brand name. From a consumer’s perspective, brand equity is the added value bestowed on the product by the brand name. Brand equity facilitates the acceptance of new products and the allocation of preferred shelf space, and enhances perceived value, perceived quality, and premium pricing options. For many companies, their most valuable assets are their brand names. Well-known brand names are known as megabrands.

As brand that has been promoted heavily in the past retains a cumulative level of name recognition, companies buy, sell, and rent (i.e., license) their brand names, knowing that it is easier to buy than to create a brand name with enduring strength. Brand equity enables companies to charge a price premium – an additional amount over and above the price of an identical store brand. A relatively new strategy among some marketers is co-branding (also called double branding). In co-branding, two brand names are featured on a single product. It uses another product’s brand equity to enhance the primary brand’s equity. Brand equity is important to marketers because it leads to brand loyalty, which in turn leads to increased market share and greater profits. To marketers, the major function of learning theory is to teach consumers that their product is best, to encourage repeat purchase, and to develop loyalty to the brand name.

1.3.10. Brand Loyalty The term brand loyalty is used to describe the behavior of repeat purchases, as well as those that offer good ratings, reviews, or testimonials. Brand loyalty describes the tendency of a customer to choose one business or product over another for a particular need. In the packaged goods industry, customers may be described as being “brand loyal” because they tend to choose a certain brand of soap more often than others. Note the use of the word “choose” though; brand loyalty becomes evident when choices are made and actions taken by customers. Customers may express high satisfaction levels with a company in a survey, but satisfaction does not equal loyalty. Loyalty is demonstrated by the actions of the customer; customers can be very satisfied and still not be loyal. According to Bloemer and Kasper, “Brand loyalty implies that consumers bind themselves to products or services as a result of a deep-seated commitment”. To exemplify this point, they rendered a distinction between repeat purchases and actual brand loyalty. In their published research, they assert that a repeat purchase behavior “is the actual re-buying of a brand” whereas loyalty includes “antecedents” or a reason/fact occurring before the behavior. Loyalty may be explained further. Suppose a buyer visits a shop in anticipation of selecting a brand or opting for a specific service, the buyer would prefer not to buy any substitute in case of non-availability of the brand he has specifically opted for. He would prefer waiting for the brand of his preference. Loyalty in sense is a willful commitment to the brand in view of perceived satisfaction. The action of loyalty is a positive, repeated behavior of preferring one brand of a product from among the several brands available.

1.3.10.1.

Features of Brand Loyalty

Following are the essential features of customer loyalty for a brand: 1) It is biased (not random). 2) It is a form of behavioral response (act of purchase). 3) It is expressed over time by some decision-making unit. 4) It exists with respect to one or more alternative brands. 5) It is a function of psychological process.

1.3.10.2.

Importance of Brand Loyalty

Loyalty leaders are successful because they have designed their entire business systems around brand loyalty. Building a highly loyal customer base must be integral to the basic business strategy. Customer loyalty can be defined as the strength of the relationship between an individual’s relative attitude and repeat patronage with a supplier. It is a self-reinforcing system in which the company delivers superior value consistently to find and keep highquality customers. The economic benefits of high brand loyalty are measurable. When a company consistently delivers superior value and win brand loyalty, market share, revenues, and profitability all go up, and the cost of acquiring new customers goes down. Customer loyalty is very essential for the growth of organization because loyal customer:

1) 2) 3) 4) 5)

Purchase products and services again and again over time. Increase the volume of their purchases and buy beyond traditional purchases, across product-lines. Refer company’s products and services to others. Become immune to the pull of the competition. Give the benefit of the doubt to the company when something goes wrong.

1.3.10.3.

Levels of Brand Loyalty

Brand loyalty is not a dichotomous construct. It may operate at different levels. Five levels of brand loyalty can be distinguished, extending from committed buyer at one extreme to switcher or indifferent buyer at the other extreme. The other three are in-between states. Each state implies a different type of brand equity asset and different types of marketing challenges. 1) Indifferent Buyers: At the lowest level, the indifferent buyer does not attach any importance to the brand. The buying is done on a basis other than brand, like availability or price. These buyers are switchers and are indifferent to the brand. 2) Habitual Buyers: The second category of buyers comprises the ones satisfied with the brand (absence of dissatisfaction). These buyers have no reason to switch but may actually switch given the stimulations from the competitors. These can be called ‘habitual buyers’. They are vulnerable and can succumb to benefits offered by the competition. 3) Switching-Cost loyal Customers: The third category of buyers is satisfied with the brand, though they have switching costs in terms of time, money, and risk. This category is somewhat safe because they would switch only when competition is able to overcome switching costs for them. This set can be called ‘switching-cost loyal’ customers. In all these categories of customers, a virtually negligible element of attitudinal commitment to the brand is visible. They all signify different shades of behavioral loyalty. 4) Affect Driven Loyalty Customers: The fourth category of loyalty implies that the buyers like the brand. They tend to have some sort of emotional attachment to the brand. This attachment may get developed as the result of prolonged relationship (usage over a long period of time) or use experience or perceived high quality. People in this category consider a brand as a friend. It is an affect driven loyalty. 5) Committed Customers: At the next level of loyalty, the customers tend to be committed to the brand. The commitment is “an enduring desire to continue the relationship and to work to ensure its continuance”. Customers get committed to a brand when the brand achieves personal significance for them. It happens when buyers perceive it to be a part of them. They identify with the brand. It becomes a vehicle of self expression. The strong identification may be based on functionality or images/symbolism that it signifies.

1.3.10.4.

Building Brand Loyalty

Many business firms neglect their loyal customer base in pursuit of new customers. However, since the cost to attract new customers is significantly more than to maintain their relationship with existing ones, their efforts toward building brand loyalty will certainly pay-off. There are following ten ways of building brand loyalty as: 1) Communicate: Whether it is an e-mail, newsletter, monthly flier, a reminder card for a tune-up, or a holiday greeting card, reach-out to the steady customers. 2) Customer Service: Go the extra distance and meet customer needs. Train the staff to do the same. Customers remember being treated well. 3) Employee Loyalty: Loyalty works from the top down. If a company is loyal to its employees, they will feel positively about their jobs and pass that loyalty along to the customers. 4) Employee Training: Train employees in the manner that they like to interact with customers. Empower employees to make decisions that benefit the customer. 5) Customer Incentives: Give customers a reason to return to the business. For example, because children outgrow shoes quickly, the owner of a children’s shoe store might offer a card that makes the tenth pair of

shoes half price. Likewise, a dentist may give a free cleaning to anyone who has seen him regularly for five years. 6) Product Awareness: Know what the steady patrons purchase and keep these items in stock. Add other products and/or services that accompany or compliment the products that the regular customers buy regularly. And make sure that staff understands everything they can about the products. 7) Reliability: If a purchase will arrive on Wednesday, deliver it on Wednesday. Be reliable. If something goes wrong, let customers know immediately and compensate them for their inconvenience. 8) Be Flexible: Try to solve customer problems or complaints to the best. 9) People over Technology: The harder it is for a customer to speak to a sales man when he/she has a problem, the less likely it is that salesman will see that customer again. 10) Know their Names: Get to know the names of regular customers or at least recognize their faces.

1.3.10.5.

Need for Loyal Customers

Loyal customers are the assets of an organization. Loyal customers play six important roles, and through each role they contribute effectively towards the betterment of the organization. The roles played by loyal customers are those of: 1) The partner, 2) The advisor, 3) The custodian, 4) The resource provider, 5) The change driver, and 6) The experience shaper. As partners and advisors, the loyal customers involve themselves in the organization’s regular activities. Many companies recruit loyal customers in their customer panel and tap their creativity for application in various activities such as new product development, new promotion strategy formulation, packages design, developing incentive schemes, etc. Loyal customers serve as their major idea sources.

1.3.10.6.

Process for Reaching Loyal Customers

The reach of loyal customers involves a sequence of actions, starting with identification of the right market for the product concerned. The sequence has been illustrated as below: Identification of Prospects

Categorization of Prospects

Conversion of Prospects into Customers

Conversion of Customers to Loyal Customers Figure 4.3: Process towards Reaching Loyal Customers

1) Market Identification: The market for a brand constitutes the potential customers for the brand. When the brand already exists, the market comprises of current customers for brand would have been manufactured in tune with the market requirements or in tune with the brand’s characteristics, a market is to be developed. For the purpose of market identification, the organization may go in for a Marketing Audit Program. Marketing Audit is a purposeful examination of marketing environment, marketing activities, and its effectiveness. It is a systematic approach to review the activities of marketing functions towards reaching marketing goals. Marketing Audit enables to find appropriate markets and also shape the role that the

organization has to play in the identified market. The organization, in terms of its market share is expected to play any one of the following roles as: i) Market Leader: A market leader has the largest market share and it leads the other competing firms with regard to all marketing-related activities particularly pricing-related activities. Market challenger is a close competitor organization to the market leader. ii) Market Challenger: Market challenger challenges the market share of the market leader. iii) Market Follower: Market follower is the main follower of market leader. They simply fall in line with the strategies of market leaders, as those strategies have registered proven success. iv) Market Nicher: Market nicher is a small player, who identifies market niches and operates. Nichers confine their operations in a much-limited way. Nichers often identify profitable nichers and carry-on their marketing operations. The organization can have its market entry in one of the identified markets. Having made the market entry, appropriate strategies are to be worked-out towards market existence and market expansion. Market existence depends on the number of loyal customers the organization can develop. For the purpose of market existence and expansion, the organization may adopt any one of the following strategies: i) Market Penetration: Market penetration strategy refers to the organization’s efforts to expand the market share by increasing sales of the existing brand in the current market. ii) Product Development: Product development strategy is concerned with developing new brands and products for the current market. iii) Market Development: On these lines, market development strategy refers to developing new markets for the current brand of the organization. iv) Diversification Strategy: Diversification strategy on the other hand refers to the organization’s attempt to market a line of closely related products. It also involves development of new products. It is likely that many organizations simultaneously pursue multiple strategies so as to have market entry, existence, and expansion. 2) Segmented and Target Market: From mass marketing, the marketers have switched over to targeting segmented markets. This approach is because of a number of advantages being associated therewith. Under the mass marketing approach, the marketers consider the whole market as an undifferentiated one and adopt the same marketing mix strategies without any differentiation to attain marketing goals. This approach would work as long as the market size is small and easily approachable. In today’s context, market size has expanded in all respects. The consumers have started showing highly differential needs. Therefore, a single, undifferentiated approach would no longer be relevant and purposeful. As such customers are to be grouped on a common base and a strategy relevant to the group has to be framed to win the game marketing. Market segmentation therefore refers to grouping of customers on the basis of selected criteria. Those criteria include: i) Age, ii) Marital status, iii) Income, iv) Gender, v) Location, vi) Volume of purchase, vii) Type of customers, viii) Buying habits, ix) Lifestyle, x) Benefit expected, and xi) Extent of loyalty. Today, the focus is towards customized marketing approach, which refers to considering every individual customer as a market and developing appropriate strategies to satisfy the customer’s need. Industrial

marketers and service-marketing organizations have started adopting this approach towards a very effective marketing performance. From among the market segments, the target market would be identified. Target market refers to a welldefined set of prospective customers, whose requirements have been identified, and the organization can meet those requirements profitably. Selection of target market would be governed by factors such as the organization’s capabilities, future prospects, return on investments, competing forces, and so on. In the light of the characteristics of the target market, suitable marketing strategies would be evolved. 3) Prospective Customers: In the target market, potential customers would be identified by means of a systematic approach. The method of getting prospective customers may be any one of the following or a combination of more than one method like: i) Referral letters, ii) Through friends and relatives, iii) Various directories, iv) Through trade associations, v) Advertisements, vi) Blind telephone calls, vii) Developing database, viii) Cold canvassing, ix) Follow-up of the competitor’s customers, and x) Customers of related products, etc. Effective prospecting would help in identifying a large number of potential customers in the target market, who form the foundation of loyal customers, and therefore the prospect identification could be called as the lifeblood of the entire scope of marketing activities. 4) Customers: In a broader sense, all those who are involved in the process of transfer of ownership of a product from the production center to the consumption center are customers, and not merely the one who ultimately enjoys the benefits of a product or service. There are three terms normally used in this context, viz., the buyer, the consumer, and the customer. In a very strict sense, the buyer refers to the one who buys a product or a service and it is immaterial whether he consumes it or not. A consumer is one who consumes a product of an organization, and it is immaterial whether he is involved in the purchase activity or not. Customer is one who repeatedly buy from one source. From among the prospective customers, the organization identifies customer in terms of their purchase intention as most promising prospect to the least promising prospect. This categorization must follow relevant strategies to convert the prospects into customers. The sequence may be illustrated as: In order to reach the loyal customer, a careful marketing action plan should therefore be evolved and implemented effectively. 5) Loyal Customer Ladder: A customer reaches the status of a loyal customer by passing through a series of stages. An analytical look at the process of reaching the status Customer by of loyal customer would reveal the following Loyalty sequences: Customer by Insistence Customer by Repetition Customer by Choice Customer by Occasion Customer by Chance Figure 4.4: Loyal Customer Ladder

i)

Customer by Chance: Thanks to the influence of marketing efforts, or by own attempts a prospective customer buys the brand and thereby he becomes the customer by chance. The customer by chance may be a person who previously may not have used the brand, or may have used the competitor brand, or not felt the need for such a product category. The casual choice he made by chance will help him towards arriving at a further decision to continue or discontinue the purchase he made.

ii) Customer by Occasion: The customer by occasion would be an occasional customer. Perhaps these categories of customers’ exhibits divided loyalty status at this stage. He may have a preferred set of brands already. He would include the present brand also in his preferred set and show interest towards buying this brand. However, the marketer should accept the fact that the customer keeps the brand under evaluation status only. iii) Customer by Choice: From the occasional customer, a customer may move further to the status of customer by choice under the conditions in which he perceives that the brand would satisfy him more as compared to other brands. Thus, his level of preference towards the brand moves upward. iv) Customer by Repetition: His choice of the present brand gets repeated and this would mean that the customer reaches the stage of customer by repetition. v) Customer by Insistence: During the repeat purchase period, depending on the extent of his need fulfillment and other associated factors, the customer insists upon the same brand and becomes a customer by insistence. At this stage, the customer is slowly moving towards the status of undivided loyalty to the brand, and ultimately reaches the status of customer’s by loyalty that is to be maintained and improved by means of developing appropriate relationship with the customers concerned. vi) Customer by Loyalty: Reaching of loyal customers requires careful marketing approach and systematic planning and execution of all aspects connected with marketing functions. The organization must view the product, process, and the people behind it from the customers and competitors’ point-ofview and make appropriate marketing decisions.

1.3.10.7.

Influence of brand loyalty on Consumer Behavior

In today’s highly competitive environment, improving consumer’s loyalty to brands permit marketers to maintain a comfortable and lasting position in the marketplace. The new millennium is not just a new beginning; it is a continuation of trends in human behavior that have been following cyclical patterns throughout the country’s history. Just because we have entered a new era, does not mean marketers have to start from scratch when it comes to interpreting why certain consumers are loyal to certain brands, and what type of factors influence these allegiances. Brand loyalty is the consumer’s conscious or unconscious decision, expressed through intention or behavior, to re-purchase a brand continually. It occurs because the consumer perceives that the brand offers the right product features, image or level of quality at the right price. Consumer behavior is habitual because habits are safe and familiar. In order to create brand loyalty, advertisers must break consumer habits, help them acquire new habits, and reinforce those habits by reminding consumers of the value of their purchase, and encourage them to continue purchasing those products in the future. The image surrounding a company’s brand is the principal source of its competitive advantage and is therefore a valuable strategic asset. Unfortunately, many companies are not adept at disseminating a strong, clear message that not only distinguishes their brand from the competitors’, but distinguishes it in a memorable and

positive manner. The challenge for all brands is to avoid the pitfalls of portraying a muddled or negative image, and instead, create a broad brand vision or identity that recognizes a brand as something greater than a set of attributes that can be imitated or surpassed. In fact, a company should view its brand to be not just a product or service, but as an overall brand image that defines a company’s philosophies. A brand needs more than identity; it needs a personality. Just like a person without attention-grabbing characteristics, a brand with no personality can easily be passed right over. A strong symbol or company logo can also help to generate brand loyalty by making it quickly identifiable.

1.3.11. Issues in Brand Loyalty For building brand loyalty for a particular brand, the brand must carry following issues in the form of attribute or characteristic: 1) Trust: Trust is the customer’s willingness to rely on the brand. It comes when the brand stands for reliability, i.e., it performs what it promises to do. It is about a brand’s integrity. Brands which have integrity inspire trust. Trust is a major building-block in building brand and customer relationship. Loyal customers have confidence in the brand they buy. 2) Consistency: Consistency is absence of variations or deviations. Does the brand deliver what it promises to consistently over time? Lack of consistency creates a situation of uncertainty for the customers. Good brands are consistent in their performance – their performance can be predicted with great confidence. It is this consistency and confidence that helps a brand to forge ties with customers. 3) Accessibility: How accessible is the company behind the brand? Accessibility is crucial for the development of strong brand relationships. Good companies make themselves available and easily accessible to their customers, who feel vastly re-assured when this happens. In times of need, the customer can bank upon the brand’s larger system. This is especially true for industrial and service brands. 4) Responsiveness: How quickly and earnestly does a brand respond to customer complaints and inquiries? Good brands exhibit a high degree of willingness to help their customers. The need for responsiveness is greater in industrial and service exchanges, where the interface is of long-term duration and involves high risk. 5) Commitment: How dedicated is the company to its customers? Customers become loyal when they perceive that a brand is genuinely interested in its customers, i.e., customers’ end goals and needs are truly addressed by the brands. The brand does not exhibit opportunistic behavior to exploit its customers. 6) Affinity: Strong brand-customer relationships are formed when customers are able to identify with the brand or the company. They relate well with other people who patronize the brand. Harley-Davidson achieved great success through its HOG (Harley Owners Group) affinity program. 7) Social Bonds: Any exchange between individuals first tends to be a social exchange. Social bonding is one of the oldest ways of forging relationships. Recall the old-time village grocer or miller who interacted with customers personally. Opportunities for social bonding are much more in service and industrial selling situations, where customer-seller interaction tends to be for long-term duration, and where both parties come together to form a social dyad. 8) Psychological Bonds: Sometimes, brand-customer relationships could be based on psychological constructs like personality, self-concept, and lifestyle. Quite often, brands are preferred for their ability to deliver psychological satisfactions – their ability to help customers to express themselves in a desirable manner or to satisfy esteem needs. 9) Financial Bonds: Customer bonds could also be based on economic or financial benefits that a brand seeks to offer to its customers. These rewards come in the form of discounts or financial gains that could be accumulated over time. The frequent flier programs in airlines or frequent buyer program in the retail or hotel industry are some examples of financial bonding strategy. This strategy uses financial rewards as the primary weapon to retain customers for longer duration. 10) Structural Bonds: Customer relationships could be based on a physical connection which could be created between buyer’s system and seller’s system. For example, firms in auto component industries develop

structural ties in the form of just-in-time supply system with automobile manufacturers. Some pharmaceutical firms have developed online communication-based bonds with hospitals. These forms of bonding are common in the industrial marketing scenario. However, even small retail brands develop structural bonds with their neighborhood customers with online communication systems or even through cable TV ads.

1.3.12. Brand Equity The concept of brand equity began to be used widely in the 1980s by advertising practitioners. Important academic contributors throughout the 1990s were Aaker, Srivastava and Shocker, Kapferer, and Keller. However, a universally accepted brand equity content and meaning as well as measure has not been forthcoming. Almost all conceptualizations of brand equity agree today that the phenomena involve the value added to a product by consumers’ associations and perceptions of a particular brand. The concept of brand equity is based on the idea that a brand has a value greater than the sum of its tangible assets. Brand equity is by definition an intangible asset. Brand equity refers to a “set of assets and liabilities linked to a brand, its name and symbol that add to or subtract from the value provided by a product or service to a firm and or to that firm’s competitors”. In other words, brand equity (or subtracts) value to a firm in the form of price premium, trade leverage, or competitive advantage. Brand equity is the subject of seminars, of advertising agency presentations and of negotiation by acquirers of companies. There is even a coalition devoted to the fostering and preservation of brand equity. It does not exist in nature in the manner that the specific gravity of elements exists as a physical entity. It cannot be assayed like the gold content in a piece of ore. Those who argue that brand equity cannot be measured, miss the essential point. Its measurement depends on how it is defined. That definition must have pragmatic value to a marketer of consumer products or services. It should help to improve marketing effectiveness and efficiency by providing a yardstick with which to evaluate these things. Also, the definition should reflect the role of the brand in the dynamics of consumer choice in a competitive environment.

1.3.12.1.

Meaning and Definition of Brand Equity

The concept of brand equity began to be used widely in the 1980s by advertising practitioners. Important academic contributors throughout the 1990s were Aaker, Srivastava and Shocker, Kapferer, and Keller The concept of brand equity is based on the idea that a brand has a value greater than the sum of its tangible assets. Brand equity is by definition an intangible asset. Brand equity can be defined as the stored value built up in a brand for achieving competitive advantage. Brands are valued for their equity. Brands add value. Everyone in the marketing profession agrees that brands can add substantial value. It is also true, sometimes, that brands become a burden. The brand can be both a value enhancer and a value driller. A variety of opinions exist about brand equity. Some of these are as follows: “Brand Equity” refers to “a set of assets and liabilities linked to brand, its name and symbol that add to or subtract from the value provided by the product or service to a firm and or that firm’s competitions”. According to Aaker, “Brand equity is a set of brand assets and liabilities linked to a brand, its name and symbol add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers”. According to Biel, “Brand equity can be thought of as the additional cash flow achieved by associating a brand with the underlying product or service”. According to Chernatony and McDonald, “Brand equity consists of differential attributes underpinning a brand which gives increased value to the firm’s balance sheet”.

According to Keller, “Brand equity is defined in terms of marketing effects uniquely attributable to the brands. For example, certain outcomes result from the marketing of a product or service because of its brand name, which would not have been occurred if the same product or service did not have the brand name”. The marketing literature is laden with works which explore, interpret, and ‘demystify’ (clarify) the concept of brand equity. The advantages of brand equity direct academic and managerial attention to its measurement and management.

1.3.12.2.

Conceptualizing Brand Equity

There appears to be a broad consensus on the value of brand equity but it comes with a slight area of darkness around it. At the most fundamental level, different views guide what the brand equity exactly is. Brand equity definitions more or less converge on some crucial points. There are similarities beneath apparent divergence in thoughts. However, three types of leanings seem visible: 1) The brand, 2) The customer, and 3) The financial value. The best way of integrating these different views is by conceptualizing the brand equity in terms of the inputthroughput-output model. The product and its attributes – both tangible and intangible – are the inputs to the equity model. It is the brand which is the basis of equity or value. In the absence of a brand, achieving equity is impossible. It is the fundamental core/block. The value that a brand generates is not self-generated. It is generated through the discriminating response that customers exhibit in favor of a brand, or the willingness to pay more for a brand. All these are outcomes. It is monetization of these that is called financial worth or value that is added by the brand. But the most crucial link between the input and output is the consumer – the consumer’s mental framework, to be more precise. It is the consumer’s knowledge structure, or image or perceptions that a customer has about the brand that drive the outcomes. A brand’s ability to draw customers again and again and command premium is directly related to what it stands for in a customer’s mind. The brand perception or image is the key driver of brand pull and push. Brands strength lies in this intervening variable. A powerful brand symbolizes a loyal customer base. It is this which leads to financial benefits and reduced costs. At the heart of brand equity is customer equity – an unwavering customer franchise which stands by the brand. Drive toward or against brand

Product

Perception/ Knowledge Structure

Brand communication and contacts

Customer Behavior Discrimination and Value

Worth of the Brand

Brand Equity (Surplus ±)

Figure 2.1: Conceptualizing Brand Equity

1.3.12.3.

Value Creation by Brand Equity

A brand adds value in a number of ways. According to Aaker, “Brand equity creates value both for the marketer and the customer”, which can be explained as follows: 1) Value to Customers: Brand equity assets can enhance or decrease value for customers. A brand’s equity is valuable to customers because: i) It helps customers in information processing. A brand is useful in aiding customers in interpreting, processing, and storing information about products and brands. It simplifies this process. Brands are taken by customers as chunks of information which are easily decoded (drawn meaning thereof) and

stored in a proper order (classification). It considerably reduces chaos possibilities that may occur in the absence of branding. ii) A brand’s assets enhance customer confidence in the purchase decision. One feels more confident in purchasing a brand (imagine buying an unbranded product, like tooth paste). It happens because of familiarity with a brand. Familiarity creates confidence. Brand stands for consistency and assurance. It provides guarantee of promised delivery. iii) The final value to the customer comes in the form of usage satisfaction. For example, satisfaction from drinking Nescafe is different from drinking an unbranded coffee. Brands transform customer experience. The brand associations and quality move the product beyond its ‘thingness’ boundary enveloping it with images that customers value and identify with. 2) Value to Marketer: Brand equity also plays a critical role in enhancing value for the marketer. A firm benefits from the equity in the following ways: i) The effectiveness and efficiency of marketing programs is increased by brand equity assets. The expenditure associated with a brand to achieve a goal generally tends to be less than an unbranded product aiming to achieve the same goal. For example, retaining a customer is much less costly than retention when a product is unbranded; it may partially happen due to lack of brand loyalty and preference. Similarly, launching of a new product with extension may be much simpler, easy, and less costly. ii) Brand equity dimensions allow a firm to have greater customer loyalty. The customers can exhibit preference and commitment to a brand only. A greater number of loyal customers in the basket automatically reduce the expenditures that need to be incurred in maintaining a customer base. iii) Brand equity allows a firm to charge premium. That is, a customer may willingly support a brand in spite of greater sacrifice that needs to be made. In fact, brands with premium pricing are the ones which enjoy strong equity in the market. iv) Brand equity provides great opportunities for growth. In fact, most firms now rely on brand extensions to achieve growth rather than launch new brands. Brand equity makes growth easier for the firms. It is how the value is added. For example, RCI has grown into many product categories by relying on the brand equity of ‘Dettol’. v) Brand equity is a good source of achieving leverage in distribution channels. It is easier to get access in the distribution chain when the brand has equity. Trade partners’ exhibit skepticism in dealing with a brand without equity because of the uncertainties it brings along with it. Brand equity is an implicit assurance of success. Therefore, channels welcome brands with equity and give access to point of purchase displays, shelf space, etc. vi) Finally, brand equity is a provider of competitive advantage. It imposes barriers on the entry of competitors. Brands can build equity occupying positions and attribute associations in a preemptive fashion. Once these become proprietary to a brand, other brands are at a disadvantage. For example, ‘Dettol’ has so strongly entrenched itself with ‘antiseptic’ that other competitors are just not able to make a dent in its market. Johnson & Johnson’s ‘Savlon’ is hardly able to compete in the market. The same may be true for ‘Fair & Lovely’ in the fairness cream market. A brand blocks entry of rivals in a customer’s mind on the same turf. Brand equity holds immense potential to create economic value for the markets. The advantages listed above make compelling reasons in favor of creation, protection, and enhancement of equity of a brand. It can only be done once it is understood what drives brand equity.

1.3.12.4.

Keller’s Approach of Brand Equity

Keller talked about customer-based brand equity as brand equity is seen from the perspective of the consumer. Two questions often arise regarding brands – ‘What makes a brand strong?’ and ‘How to build a strong brand?’ To answer these questions, introduces the Customer-Based Brand Equity (CBBE) Model. This model incorporates theoretical advances and managerial practices in understanding and influencing consumer behavior. Although useful perspectives concerning brand equity have been put forth, the CBBE model provides a unique point of view as to what brand equity is and how it should be built, measured, and managed.

The basic premise of the CBBE model is that the power of a brand lies in what customers have learned, felt, seen, and heard about the brand as a result of their experiences. In other words, “the power of a brand lies in what resides in the minds of customers”. The challenge for marketers in building a strong brand is ensuring that customers have the right type of experiences with products and services and their accompanying marketing campaigns so that the desired thoughts, feelings, images, beliefs, perceptions, and opinions become linked to the brand. “Customer-based brand equity is defined as the differential effect that brand knowledge has on consumer response to the marketing of that brand.” A brand is said to have positive customer-based brand equity when consumers react more favorably to a product and the way it is marketed when the brand is identified than when it is not (e.g., when the product is attributed to a fictitious name or is unnamed). Thus, a brand with positive customer-based brand equity might result in consumers being more accepting of a brand extension, less sensitive to price increases and withdrawal of advertising support or more willing to seek the brand in a new distribution channel. On the other hand, a brand is said to have negative customer-based brand equity if consumers react less favorably to marketing activity for the brand compared with an unnamed or fictitiously named version of the product. There are three ingredients to this definition: 1) Differential Effect: Brand equity arises from differences in consumer response. If no differences occur, then the brand name product is essentially a commodity. Competition, most likely, would then be based on price. 2) Brand Knowledge: These differences in response are a result of consumers’ knowledge and experience of the brand. Thus, although strongly influenced by the marketing activity of the firm, brand equity ultimately depends on what resides in the minds of consumers. 3) Consumer Response to Marketing: The differential response by consumers that makes-up the brand equity is reflected in perceptions, preferences, and behavior related to all aspects of the marketing (e.g., choice of a brand, recall of copy points from an ad, actions in response to a sales promotion, or evaluations of a proposed brand extension).

1.3.12.5. 1.3.12.6.

Aaker’s Approach of Brand Equity Brand Knowledge

From the perspective of the CBBE model, brand knowledge is the key to creating brand equity, because it creates the differential effect that drives brand equity. What marketers need, then, is an insightful way to represent how brand knowledge exists in consumer memory. An influential model of memory developed by psychologists is helpful in that regard. The associative network memory model views memory as a network of nodes and links in which nodes represent stored information or concepts and links represent the strength of association. Any type of information can be stored in the memory network, including information that is verbal, visual, abstract, or contextual in nature. Consistent with the associative network memory model, brand knowledge is conceptualized here as consisting of a brand node in memory with a variety of associations linked to it. In particular, brand knowledge can be characterized in terms of two components as shown in figure 6.13. Brand equity Brand knowledge

Brand awareness

Brand Recall

Brand Recognition

Simple recall Top of the Mind (TOM) recall Dominant recall

Brand image

Brand Associations

Favorability of Associations

Attribute association Benefit association Attitude association Figure 6.13: Brand Knowledge

Strength of associations

Uniqueness of Associations

1) Brand Awareness: It consists of: i) Brand Recognition: It relates to consumers’ ability to confirm exposure to the brand when given the brand as a cue. In other words, brand recognition requires that consumers can correctly discriminate the brand as having been seen or heard before. For example, when consumers go to a shop, is it the case that they will be able to recognize the brand as one to which they have been exposed? ii) Brand Recall: It relates to consumers’ ability to retrieve the brand from memory when given the product category, the needs fulfilled by the category or a purchase or usage situation as a cue. So, brand recall requires that consumers correctly generate the brand from memory when given a relevant cue. For example, recall of Kellogg’s Corn Flakes will depend on consumers’ ability to retrieve the brand when they think of the cereal category or of what they should eat for breakfast or eat for a snack at the shop (when making a purchase), at home (when making a consumption choice), or wherever. The relative importance of brand recall and recognition will depend on the extent to which consumers make product-related decisions with the brand present or not. For example, if decisions are made in the shop, brand recognition may be more important because the product will be present. Outside the shop or in any situation where the brand is not present, on the other hand, it is probably more important that the consumer be able to recall the brand from memory. For this reason, brand recall is critical for service and online brands, consumers must seek the brand and therefore be able to retrieve it from memory when appropriate. 2) Brand Image i) Brand Association: A positive brand image is created by marketing campaigns that link strong, favorable, and unique associations to the brand in memory. The definition of customer-based brand equity does not distinguish between the source of brand associations and the manner in which they are formed; all that matters is the resulting favorability, strength, and uniqueness of brand associations. This realization has important implications for building brand equity. Besides marketer-controlled sources of information, brand associations can also be created in a variety of other ways: by direct experience; from information communicated about the brand from the firm or other sources (e.g., magazine reviews or other media) and word-of-mouth; and by assumptions or inferences from the brand itself (e.g., its name or logo) or from the identification of the brand with a company, country, channel of distribution or some particular person, place, or event. There are basically three types of brand associations as: a) Attribute Association: These descriptive features which are used to characterize a product or service. Attribute association can be product-related (safe, water resist, functions, performance, etc.) and can be non-product-related (price, packaging, user, usage etc). b) Benefit Association: Consumer less interested in product attributes but more interested in its benefits. Benefit associations are suggestions as to what a product or service can do for them. Benefit association can be functional (speeds faster, powerful, etc.), experiential (adventure, thrill, humorous, etc.), symbolic (prestige, completeness, part of selected group, etc.). c) Attitude Association: Attitude is an important psychological construct. It determines buying decisions. Attitude has three component as cognitive (knowledge perception that a person has about a brand), affective (emotion and feelings that someone has towards a brand), and finally co-native component (behavioral or action-oriented, intension to behave in certain manner, e.g., likelihood to buy the brand). The all association discussed above are required to be favorable, unique, and strong in their nature. ii) Strength of Brand Associations: Making sure that associations are linked strongly to the brand will depend on how the marketing campaign and other factors affect consumers’ brand experiences. Associations will vary in the strength of their connection to the brand node. Strength is a function of both the amount, and quantity, of processing that information receives as well as the nature, or quality, of that processing. The more deeply a person thinks about product information and relates it to existing

brand knowledge, the stronger the resulting brand associations. Two factors facilitating such strength of association are the relevance of the information and the consistency with which this information is presented over time. iii) Favorability of Brand Associations: Favorable associations for a brand are those associations that are desirable to consumers and are successfully highly convenient, reliable, effective, efficient, colorful, and so on. In terms of desirability, how important or valued is the image association to the brand attitudes and decisions made by consumers? Desirability depends on three factors: a) How relevant consumers find the brand association? b) How distinctive consumers find the brand association? c) How believable consumers find the brand association? iv) Uniqueness of Brand Associations: Brand associations may or may not be shared with competing brands. The essence of positioning is that the brand has a sustainable competitive advantage or ‘unique selling proposition’ that gives consumers a compelling reason why they should buy that particular brand. These differences may be communicated explicitly by making direct comparisons with competitors or may be highlighted implicitly. Furthermore, they may be based on product-related or non-product-related attributes or benefits. In fact, in many categories, non-product-related attributes, such as user type or usage situation, may more easily create unique associations (e.g., the rugged Western image of Marlboro cigarettes).

1.3.12.7.

Aaker’s Approach of Brand Equity

To understand the dynamics of brand, Aaker provides a framework called equity. Brand equity refers to a “set of assets and liabilities linked to a brand, its name and symbol that add to or subtract from the value provided by a product or service to a firm and or to that firm’s competitors”. In other words, brand equity provides (or negatively subtracts) values to a firm in the form of price premium, trade leverage or competitive advantage. The brand’s assets can be categorized in five groups, as listed below: 1) Brand loyalty 2) Brand name awareness 3) Brand’s perceived quality 4) Brand association in addition to the perceived quality and 5) Other proprietary brand assets like patents, trademarks, channel relationships, and so forth. Aaker illustrates the influence of these factors on brand equity and its contribution to the customer and the manufacturer or owner firm. Aaker’s approach of brand equity is represented in figure 6.14. Brand Loyalty

Reduced marketing cost Attracting new customers

Brand Awareness

Anchor to which other associations can be attached Familiarity/Liking Signal of commitment Brand to be considered

Perceived Quality

Reason to buy Differentiate/Position Price Extensions

Brand Associations

Other Proprietary Brand Assets

Help process information Create positive attitude/feelings Reason to buy Differentiate/Position Extensions Competitive Advantage Figure 6.14: Factors Influencing Brand Equity

Value to Customer by Enhancing Processing of information Confidence in purchase decision Use satisfaction

Value to Firm by Enhancing Effectiveness of marketing program Brand loyalty Prices/Margins Brand extensions Trade leverage Competitive advantage

1.3.12.8.

Aaker’s Guidelines for Building Strong Brands

1) Brand Identity: Have an identity for each brand. Consider the perspective of the brand-as-person. Brandas-organization and brand-as-symbol, as well as the brand-as-product. Identify the core identity. Modify the identity as needed for different market segments and products. Remember that an image is how you are perceived, and an identity is how you aspire to be perceived. 2) Value Proposition: Know the value proposition for each brand that has a driver role. Consider emotional and symbolic benefits as well as functional benefits. Know how endorser brands will provide credibility. Understand the customer/brand relationship. 3) Brand Position: For each brand, have a brand position that will provide clear guidance to those implementing a communication program. Recall that a position is the part of the identity that is actively communicated. 4) Execution: Execute the communication program so that it not only is on target with the identity and position but achieves brilliance and durability. Generate alternatives and consider options beyond media advertising. 5) Consistency over Time: Have as a goal a consistent identity, position, and execution over time. Maintain symbols, imagery, and metaphors that work. Understand and resist organizational biases toward changing the identity, position, and execution. 6) Brand System: Make sure the brands in the portfolio are consistent and synergistic. Know their roles. Have or develop silver bullets to help support brand identities and positions. Exploit branded features and services. Use sub-brands to clarify and modify. Know the strategic brands. 7) Brand Leverage: Extend brands and develop co-branding programs only if the brand identity will be both used and reinforced. Identify range brands and, for each, develop an identity and specify how that identity will be different in disparate product contexts. If a brand is moved up or down, take care to manage the integrity of the resulting brand identity. 8) Tracking Brand Equity: Track brand equity over time, including brand awareness, perceived quality, brand loyalty, and especially brand associations. Have specific communication objectives. Especially note areas where the brand identity and positioning and communication objectives are not reflected in the perceptions of the brand. 9) Brand Responsibility: Have someone in charge of the brand who will create the identity and positions and coordinate the execution over organizational units, media, and markets. Beware when a brand is being used in a business where it is not the cornerstone. 10) Invest in Brands: Continue investing in brands even when the financial goals are not being met.

1.3.12.9.

Relative Superiority Approach of Brand Equity

Brand equity is the relative superiority of a brand over the others. “Brand equity may be defined as the enhancement in perceived utility and desirability that a brand name confers on a product. It is the customer’s perception of the overall superiority of a product carrying that brand name compared with other brands.” Brands add perceived superiority by bringing in all that they stand for. Brands bring alongwith them a set of associations. For example, the name Haldiram’s brings with it an assurance of quality and authenticity of taste to what are otherwise simple snacks; Singer lends heritage and expertise to sewing machines, and Arrow guarantees ‘shirt engineering’ and perfection to the shirts it sells. Five dimensions were identified by Lasser, Mittal, and Sharma. These are as follows:

1) Performance: This aspect of equity focuses on the operational aspect of the brand. How fault-free and longer lasting is the brand? Is the brand flawless in its product’s physical construction? Performance dimension is the customer’s judgment on these aspects of the brand. 2) Social Image: What is the social image of the brand? That is, in what esteem (if at all) is the brand held by the social or reference group of the customer? 3) Value: Value refers to the perception of value delivered by the brand. That is, what is ratio between what is received and what is sacrificed? 4) Trustworthiness: It is the customer’s faith in the brand. A brand’s trustworthiness is based on beliefs that a brand would not compromise on quality, it would always take care of a customer’s interests, and the people behind the brand can be relied upon. 5) Identification: It is identification of customers with the brand. Sometimes, customers feel attached to the brand they use. They enjoy their association with it. Brand identifications is based on its ability to strike a chord with what they are psychologically and what they want to be. Customers identify with what a brand represents in terms of its symbolism and imagery.

1.3.12.10. Brand Report Card Building and properly managing brand equity has become a priority for companies of all sizes, in all types of industries, in all types of markets. After all, from strong brand equity flow customer loyalty and profits. The rewards of having a strong brand are clear. The problem is, few managers are able to step back and assess their brand’s particular strengths and weaknesses objectively. Most have a good sense of one or two areas in which their brand may excel or may need help. But if pressed, many (understandably) would find it difficult even to identify all of the factors they should be considering. When one is immersed in the day-to-day management of a brand, it is not easy to keep in perspective all the parts that affect the whole. On the basis of the attributes shared by the world’s topmost brands, a brand report card could be constructed. Ten attributes shared by the world’s top brands are: 1) Brand Excels at Delivering the Benefits Customers Truly Desire: Why do customers really buy a product? Not because the product is a collection of attributes but because those attributes, together with the brand’s image, the service, and many other tangible and intangible factors, create an attractive whole. In some cases, the whole is not even something that customers know or can say they want. For example, consider Starbucks - It is not just a cup of coffee. In 1983, Starbucks was a small Seattle-area coffee retailer. Then while on vacation in Italy, Howard Schultz, now Starbucks chairman, was inspired by the romance and the sense of community he felt in Italian coffee bars and coffee houses. The culture grabbed him, and he saw an opportunity. 2) Brand Stays Relevant: In strong brands, brand equity is tied both to the actual quality of the product or service and to various intangible factors. Those intangibles include “user imagery” (the type of person who uses the brand); “usage imagery” (the type of situations in which the brand is used); the type of personality the brand portrays (sincere, exciting, competent, rugged); the feeling that the brand tries to elicit in customers (purposeful, warm); and the type of relationship it seeks to build with its customers (committed, casual, seasonal). Without losing sight of their core strengths, the strongest brands stay on the leading edge in the product arena and tweak their intangibles to fit the times. For example, Gillette pours millions of dollars into R&D to ensure that its razor blades are as technologically advanced as possible. 3) Pricing Strategy is Based on Consumers’ Perceptions of Value: The right blend of product quality, design, features, costs, and prices is very difficult to achieve but well worth the effort. Many managers are woefully unaware of how price can and should relate to what customers think of a product, and they therefore charge too little or too much. For example, in implementing its value-pricing strategy for the Cascade automatic-dishwashing detergent brand, Procter & Gamble made a cost-cutting change in its formulation that had an adverse effect on the

product’s performance under certain – albeit somewhat a typical – water conditions. Lever Brothers quickly countered attacking Cascade’s core equity of producing “virtually spotless” dishes out of the dishwasher. In response, P&G immediately returned to the brand’s old formulation. The lesson to P&G and others is that value pricing should not be adopted at the expense of essential brand-building activities. By contrast, with its well-known shift to an “Everyday Low Pricing” (EDLP) strategy, Procter & Gamble did successfully align its prices with consumer perceptions of its products’ value while maintaining acceptable profit levels. In fact, in the fiscal year after Procter & Gamble switched to EDLP (during which it also worked very hard to streamline operations and lower costs), the company reported its highest profit margins in 21 years. 4) Brand is Properly Positioned: Brands that are well-positioned occupy particular niches in consumers’ minds. They are similar to and different from competing brands in certain reliably identifiable ways. The most successful brands in this regard keep-up with competitors by creating points of parity in those areas where competitors are trying to find an advantage while at the same time creating points of difference to achieve advantages over competitors in some other areas. For example, the Mercedes-Benz and Sony brands hold clear advantages in product superiority and match competitors’ level of service. Saturn and Nordstrom lead their respective packs in service and hold their own in quality. Calvin Klein and Harley-Davidson excel at providing compelling user and usage imagery while offering adequate or even strong performance. 5) Brand is Consistent: Maintaining a strong brand means striking the right balance between continuity in marketing activities and the kind of change needed to stay relevant. By continuity, it is meant that the brand’s image does not get muddled or lost in a cacophony of marketing efforts that confuse customers by sending conflicting messages. 6) Brand Portfolio and Hierarchy make Sense: Most companies do not have only one brand; they create and maintain different brands for different market segments. Single product lines are often sold under different brand names, and different brands within a company hold different powers. The corporate, or companywide, brand acts as an umbrella. A second brand name under that umbrella might be targeted at the family market. For example, third brand name might nest one level below the family brand and appeal to boys or be used for one type of product. Brands at each level of the hierarchy contribute to the overall equity of the portfolio through their individual ability to make consumers aware of the various products and foster favorable associations with them. At the same time, though, each brand should have its own boundaries; it can be dangerous to try to cover too much ground with one brand or to overlap two brands in the same portfolio. 7) Brand makes Use of and Coordinates a Full Repertoire of Marketing Activities to Build Equity: At its most basic level, a brand is made-up of all the marketing elements that can be trademarked – logos, symbols, slogans, packaging, signage, and so on. Strong brands mix and match these elements to perform a number of brand-related functions, such as enhancing or reinforcing consumer awareness of the brand or its image and helping to protect the brand both competitively and legally. Managers of the strongest brands also appreciate the specific roles that different marketing activities can play in building brand equity. For example, the brand Coca Cola makes excellent use of many kinds of marketing activities. These include media advertising (such as the global “Always Coca-Cola” campaign); promotions (e.g., the recent effort focused on the return of the popular contour bottle,); and sponsorship (its extensive involvement with the Olympics). They also include direct response (the Coca-Cola catalog, which sells licensed Coke merchandise) and interactive media (the company’s website, which offers, among other things, games, a trading post for collectors of Coke memorabilia, and a virtual look at the World of Coca-Cola museum in Atlanta). 8) Brand’s Managers Understand what the Brand Means to Consumers: Managers of strong brands appreciate the totality of their brand’s image, i.e., all the different perceptions, beliefs, attitudes, and behaviors customers associate with their brand, whether created intentionally by the company or not. As a result, managers are able to make decisions regarding the brand with confidence. If it is clear what customers like and do not like about a brand and what core associations are linked to the brand, then it should also be clear whether any given action will dovetail nicely with the brand or create friction.

9) Brand is given Proper Support and that Support is Sustained Over the Long-Run: Brand equity must be carefully constructed. A firm foundation for brand equity requires that consumers have the proper depth and breadth of awareness and strong, favorable, and unique associations with the brand in their memory. Too often, managers want to take shortcuts and bypass more basic branding considerations – such as achieving the necessary level of brand awareness – in favor of concentrating on flashier aspects of brand building related to image. 10) Company Monitors Sources of Brand Equity: Strong brands generally make good and frequent use of indepth brand audits and ongoing brand-tracking studies. A brand audit is an exercise designed to assess the health of a given brand. Typically, it consists of a detailed internal description of exactly how the brand has been marketed (called a “brand inventory”) and a thorough external investigation, through focus groups and other consumer research, of exactly what the brand does and could mean to consumers (called a “brand exploratory”). Brand audits are particularly useful when they are scheduled on a periodic basis. It is critical for managers holding the reins of a brand portfolio to get a clear picture of the products and services being offered and how they are being marketed and branded. It is also important to see how that same picture looks to customers.

1.3.12.11. Drivers of Brand Equity There are many ways for a brand to communicate its benefits. In Managing Brand Equity, David Aaker summarizes them well as perceived quality, name awareness, brand associations, brand loyalty, and other proprietary assets. These are the drivers of brand equity, and they are outlined in figure 2.2. 1) Perceived Quality: There is no question that perceived quality is essential, as evidenced by the tremendous attention given to the Baldrige Awards for quality management and the J.D. Power and Associates Satisfaction Research. Regardless of how one chooses to rate perceived quality, ultimately it is only as good as the consumer perceives it. Brand Drivers

2) Name Awareness: or familiarity is also a driver of overall brand

equity; however, the more differentiated the better. Awareness’s without differentiation produces well-known commodity brand names that can become marginally profit-able, exhibit little loyalty, and become vulnerable to extinction. 3) Brand Associations: Organizations are discovering the benefits of

Brand Associations

Perceived Quality Name Awareness

Brand Equity

Brand Loyalty

Other Proprietary Assets

associating their brand with other images, icons, and especially other Figure 2.2 brands. Brand associations can be very helpful to consumers in their processing of information about a brand. Starbucks associated with Marriott, Nike with Michael Jordan, McDonald’s with Disney, and Intel uses a distinctive audible tone to help consumers relate to their brands’ products and services. The old saying, “you can tell a person by the company she keeps” applies here. 4) Brand Loyalty: The most often forgotten driver in building brand equity is brand loyalty. There is nothing

like a satisfied customer to tell a brand’s story and influence others. Other proprietary assets such as patents, trademarks, and unique attributes can be very helpful as well when consumers must sift through the clutter of choices that exists in today’s marketplace. Customers can be characterized by a variety of loyalty descriptions. On any given day, a brand will likely have customers in each of the four primary loyalty segments outlined in figure 2.2. How does a brand create absolute loyalty? The key is to exceed customers’ expectations and pleasantly surprise them whenever possible. 5) Other Proprietary Assets: One of the common misperceptions is that the way to build loyalty is to focus

on future sales. Frequent flyer and customer loyalty programs are tools some brands utilize in an attempt to lock customers into future purchases. Genuine brands, however, set as a priority to be perceived first and foremost as a “friend” to the consumers. An overwhelming focus on future sales can become a distraction for brands, because they are buying their way to loyalty through what might be referred to as brand bribery. Brand bribery exists when a particular industry becomes perceived as a commodity (i.e., relatively undifferentiated among brand choices) and characterized by lack of outstanding service or quality. Two prime examples are large domestic airlines and supermarket chains. Many brands in these industries have

resorted to brand bribery in the form of “frequent customer” incentives and other promotional tactics because they have not been able to differentiate their offerings or have not become perceived as “real friends” to consumers. Brand bribery can backfire if customers feel that the “deal” may not really be a bargain or that the process is a hassle. Consumers become very unhappy when they can’t use their benefits (such as free airline tickets or coupons) because of restrictions, fine print, or changes in the rules. Regarding supermarkets, privacy concerns can also become a concern for consumers. Insurance companies are all too eager to learn who’s purchasing which medications, alcoholic beverages, and over-the-counter vitamins or health supplements, such as St. John’s wort. Rewarding customer loyalty is a wonderful strategy, but it should not be the only reason customers return.

1.3.12.12. Sources of Brand Equity The sources of brand equity are as follows: 1) Market Research: Introducing brand in the market needs quantities or qualitative research to get familiar with the trends and different attributes. Proper market research allows the company to launch a right brand for the right segment. 2) Quality: New product must incorporate quality ingredient because first impression is the last impression. If customers are satisfied with the quality of your product then customers will suggest other people to go for this product by sharing good thoughts. 3) Marketing Mix: The proper use of marketing mix adds value in the brand marketing. Promotion and personal relation increase brand equity. 4) Brand Extension: To polish the brand, bring some new products and services under the umbrella of same brand name. For example, Dettol soap and shampoo, Lux soap and shampoo, LG monitors and mobiles. 5) Customer Opinion: Always look for customer opinion because they know the best and worst about the product. For example, Procter and Gamble ask for the customer idea for their product through their customer portal. 6) Protecting the Brand Equity: The brand name can be establish and compete among the competitors brand only if the quality match the perception of the customer. The customer purchasing the product always willing to get more than the value he paid for the product. Organization should take care of the customer to maintain the value of brand in the marketplace.

1.3.13. Brand Leverage A brand is a very prominent asset owned by an organization. It is endowed with awareness, perceived quality, associations, and brand loyalty. An organization can leverage brand to grow bigger and better. It is one of the way to build brand equity is, in effect, to “borrow” it. That is, create brand equity by linking the brand to other information in memory that conveys meaning to consumers (see figure 4.2): Ingredients

Alliances

Company

Extensions

Country of Origin

Other Brands

Employees

People

Endorsers

Brand

Places

Channels

Things Third-Party Endorsements

Events Causes

Figure 4.2: Secondary Sources of Brand Knowledge

These “secondary” brand associations can link the brand to sources, such as the company itself (through branding strategies); to countries or other geographical regions (through identification of product origin); and to channels of distribution (through channel strategy); as well as to other brands (through ingredient or cobranding), characters (through licensing), spokespeople (through endorsements), sporting or cultural events (through sponsorship), or some other third-party sources (through awards or reviews). For example, assume Burton – makers of snowboards as well as ski boots, bindings, clothing, and outerwear – decided to introduce a new surfboard called “The Dominator”. Burton has gained over a third of the snowboard market by closely aligning itself with top professional riders and creating a strong amateur snowboarder community around the country. In creating the marketing program to support the new Dominator surfboard, Burton could attempt to leverage secondary brand knowledge in a number of different ways: 1) It could leverage associations to the corporate brand by “sub-branding” the product, calling it “Dominator by Burton”. Consumers’ evaluations of the new product would be influenced by how they felt about Burton and how they felt that such knowledge predicted the quality of a Burton surfboard. 2) Burton could rely on its rural New England origins, but such a geographical location would seem to have little relevance to surfing. 3) Burton could also sell through popular surf shops in the hope that its credibility would “rub-off” on the Dominator brand. 4) Burton could co-brand by identifying a strong ingredient brand for its foam or fiberglass materials (as Wilson did by incorporating Goodyear tire rubber on the soles of its ProStaff Classic tennis shoes). 5) Burton could find one or more top professional surfers to endorse the surfboard, or it could sponsor a surfing competition or even the entire Association of Surfing Professionals (ASP) World Tour. 6) Burton could secure and publicize favorable ratings from third-party sources such as Surfer or Surfing magazine. Thus, independent of the associations created by the surfboard itself, its brand name, or any other aspects of the marketing program, Burton could build equity by linking the brand to these other entities. Marketers resort to this method so that consumers will perceive the new brand as having some of the characteristics of the existing brand. Companies always focus on leveraging on brand value for new products and further improving the value of already existing products, as they are aware that a strong brand always improves the value to its shareholders, and its profits. Research conducted by McKinsey on the connection between brand strength and corporate performance on around 130 consumer companies, found that strong brands on an average generated Total Returns to Shareholders (TRS) of 1.9 per cent above the industry average while weaker brands stayed behind the industry average by 3.1 per cent. Leveraging is capitalizing on the existing brand name to move into other product opportunities. For example, Lux, used its brand name to move into the liquid soap and shampoo market, Godrej’s Fairglow soap brand was extended to its fairness cream, Kingfisher’s brand name was used by the UB Group to enter the airline business. There are countless such examples where companies use their existing brands to enter new product opportunities. Companies generally try to leverage on the brand equity of established brands for other new products. The fairness cream market in India is growing enormously at the rate of 25% per annum compared to the overall

cosmetic market growth rate of just 15% per annum. HLL introduced the Fair & Lovely fairness cream in 1975 and this continued to dominate the market and enjoyed a significant market share until 1998 when CavinCare introduced its Fairever cream and grabbed about seven percent of the fairness cream market. Subsequently, many players entered the fairness cream market. In 2000, Godrej introduced Fair Glow soap and later leveraged on the brand equity of the soap to introduce Fair Glow cream, which became a huge success. HLL later leveraged on the brand equity of Fair & Lovely cream and introduced Fair & Lovely fairness soap in March 2001.

1.3.14. Means of Leveraging Brand Equity Different means by which secondary brand knowledge can be created by linking the brand are shown in figure below: Means of Leveraging Brand Equity Company

Country of Origin and other Geographic Areas

Channels of Distribution Co-Branding Licensing Celebrity Endorsement Sporting, Cultural, or Other Events

Third-Party Sources

1) Company: The branding strategies adopted by the company that makes a product or offers a service are an

important determinant of the strength of association from the brand to the company and any other existing brands. Three main branding options exist for a new product: i) Create a new brand. ii) Adopt or modify an existing brand. iii) Combine an existing and new brand. Existing brands may be related to the co-ordination brand (e.g., Nokia) or a specific product brand (e.g., Nokia 8290 digital phone) and may involve names, logos, symbols, and so forth. To the extent that the brand is linked to another existing brand, as with options 2 and 3, then knowledge about the other brand may also become linked to the brand. In particular, a co-ordination or family brand can be a source of much brand equity. Leveraging a co-ordination brand may not always be useful, however, depending on the awareness and image involved. 2) Country of Origin and other Geographic Areas: Besides the company that makes the product, the

country or geographic location from which it is seen as originating may also become linked to the brand and generate secondary associations. Many countries have become known for expertise in certain product categories or for conveying a particular type of image. As noted by many, the world is becoming a “cultural bazaar” where consumers can pick and choose brands originating in different countries based on their beliefs about the quality of certain types of products from certain countries or the image that these brands or products communicate. Thus, a consumer from anywhere in the world may choose to wear Italian suits, exercise in American athletic shoes, listen to a Japanese compact disc player, drive a German car, or drink English beer. Choosing brands with strong national ties may reflect a deliberate decision to maximize product utility and communicate self-image based on what consumers believe about products from those countries. Thus, a number of brands are able to create a strong point of difference in part because of consumers’ identification of and beliefs about the country of origin.

3) Channels of Distribution: Channels of distribution can directly affect the equity of the brands they sell by the

supporting actions that they take. Retail stores can indirectly affect the brand equity of the products they sell by influencing the nature of associations that are inferred about these products on the basis of the associations linked to the retail stores in the minds of consumers. Because of associations to product assortment, pricing and credit policy, quality of service, and so on, retailers have their own brand images in consumers’ minds. Retailers create these associations through the products and brands they stock, the means by which they sell them, and so forth. To more directly shape their image, many retailers aggressively advertise and promote directly to customers. 4) Co-Branding: In co-branding strategy, as the name suggests, companies combine their efforts to introduce

a product with two different brand names in a bid to carry over the image of the two parent brands to the new product. Co-branding can take three forms: i) Ingredient Branding: In this form, a basic ingredient of the product is mentioned next to the actual products name. The advantages are that both brands can benefit from the symbiotic effects of combining two strong brands. Moreover, costs such as advertising and communications can be shared. A prerequisite for this strategy is that the ingredient has to be of essential, differentiating and high quality. For example, many desktop manufacturers use the ‘Intel Inside’ mark along with their brand names to benefit from the image of Intel chips. None of these companies can individually make a dent in the market. United, yes, they stand tall in the market. ii) Co-operative branding is the joint venture of two or more brands to form a new product or service, where both brands are well established in their respective segments. Each helps the other in improving the awareness of the other brand. A very good example is Jet Airways-Citibank Credit Cards. Both are leaders in their segments and have now come together to enhance their market share with their combined efforts. Customers also gain by using the facility. When they use the Citibank credit card to book a Jet Airways ticket, they accumulate credit points, which can be exchanged later for some other service benefits like discounts in the value of tickets or gifts. Apart from offering discounts, this strategy also leads to improving the brand image and should motivate customers to become loyal to these brands. iii) Complementary branding involves the marketing of two brands together to encourage co-

consumption or co-purchases, such as a bottle of Coke with McDonald’s burgers. McDonald’s thus restricts the availability of Coca-Cola’s rival, Pepsi, in its outlets and ensures more exposure and visibility to Coke. Coke in combination with McDonald’s also increases the brand image of the two complementary brands. 5) Licensing: Brand licensing is the process of creating and managing contracts between the owner of a brand

and a company or individual who wants to use the brand in association with a product, for an agreed period of time, within an agreed territory. Licensing is used by brand owners to extend a trademark or character onto products of a completely different nature. Brand licensing is well-established business, both in the area of patents and trademarks. Trademark licensing has a rich history in American business, largely beginning with the rise of mass entertainment such as the movies, comics and later television. Mickey Mouse's popularity in the 1930s and 1940s resulted in an explosion of toys, books, and consumer products with the lovable rodent's likeness on them, none of which were manufactured by the Walt Disney Company. This process accelerated as movies and later television became a staple of American business. The rise of brand licensing did not begin until much later, when corporations found that consumers would actually pay money for products with the logos of their favorite brands on them. McDonalds play food, Burger King t-shirts and even ghastly Good Humor Halloween costumes became commonplace. Brand extensions later made the brand licensing marketplace much more lucrative, as companies realized they could make real dollars renting out their equity to manufacturers. Instead of spending untold millions to create a new brand, companies were willing to pay a royalty on net sales of their products to rent the product of an established brand name. Breyers yogurt, TGI Friday's frozen appetizers, Dodge power tools, and Lucite nail polish are only a fraction of the products carrying well-known brand names which are made under license by companies unrelated to the companies who own the brand.

6) Celebrity Endorsement: Celebrity endorsements remain a popular tool for marketers. But too many

times brands use the wrong celebrities. Tiger Woods endorsing the Buick brand makes no sense at all. There is just no believability that Tiger is dying to drive a Buick, and without believability a celebrity endorsement is worthless. The $40 million General Motors reportedly paid Tiger for his 5-year contract ending in 2009 is not money well spent. Having a celebrity endorse your brand can be helpful for a well-known brand in need of maintaining attention for its brand and category. Celebrities are most helpful because they can star in advertising campaigns and participate in company events. Consumers might be more apt to watch your ad if it has a celebrity. Employees might feel proud of having the celebrity endorsing their company. Customers might be more apt to participate in events when a celebrity involved. A celebrity is not a replacement for an idea. A brand without a focus will never find the correct celebrity to match the brand. Using a celebrity is also not a replacement for brand PR. Too many companies use a celebrity in an attempt to establish credibility with consumers. But the only thing that builds a brand in the mind of the consumer is PR and word-of-mouth generated by an idea. The PR attention generated by a celebrity does not build your brand. People might talk about the celebrity but that rarely translates into much for the brand. The bottom line is that the only thing that makes a brand successful is owning a word in the mind. 7) Sporting, Cultural, or Other Events: Events have their own set of associations that may become linked to

a sponsoring brand under certain conditions. The main means by which an event can transfer associations is on the basis of various dimensions of credibility. A brand may seem more likable or perhaps even trustworthy or expert by virtue of becoming linked to an event. 8) Third-Party Sources: Finally, it should be noted that secondary associations can be created in a number of

different ways by linking the brand to various third-party sources. For example, the Good Housekeeping seal has been seen as a mark of quality for decades (offering product replacement or refunds for defective products for up to two years from purchase). Endorsements from leading magazines (e.g., PC magazine), organizations (e.g., American Dental Association), and experts (e.g., film critic Roger Ebert) can obviously improve perceptions of and attitudes toward brands. Third-party sources can also have an effect at a more local level.

1.4. CONSUMER PERCEPTION 1.4.1.

Meaning and Definition of Perception

Human beings are constantly attacked by numerous sensory stimulations including noise, sight, smell, taste etc, The critical question in the study of perception is why the same universe is viewed differently by different persons? The answer is the perception. Different people perceive the universe differently. Perception is the process through which the information from outside environment is selected, received, organized and interpreted to make it meaningful to us. Perception is the process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment According to Kolasa, “Perception is selection and organization of material which stems from the outside environment at one time or the other to provide the meaningful entity we experience”. According to S.P. Robbins, “Perception may be defined as a process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment”. According to Joseph Reitz, “Perception includes all those processes by which an individual receives information about his environment – seeing, hearing, feeling, tasting, and smelling”.

1.4.2.

Features of Perception

The features of perception are: 1) Intellectual Process: Perception is the intellectual process through which a person selects the data from the environment, organizes it, and obtains meaning from it. 2) Cognitive or Psychological Process: Perception is a basic cognitive or psychological process. The manner

in which a person perceives the environment affects his behavior. Thus, people's actions, emotions, thoughts, or feelings are triggered by the perception of their surroundings. 3) Subjective Process: Perception is a subjective process and different people may perceive the same

environmental event differently based on what particular aspects of the situation they choose to absorb, how they organize this information, and the manner in which they interpret it to obtain the understanding of the situation.

1.4.3.

Components of Perception

Perception is a process of sensory organs. The mind gets information through the five sense organs, viz., the eyes, ears, nose, tongue and skin. The stimulation coming to these organs may be through action, written messages, oral communication, odor, taste, touch of the product and people. The perception starts with the awareness of these stimuli. Recognizing these stimuli takes place only after paying attention to them. These messages are then translated into action and behavior. Stimuli Overt Environment Physical, Socio-cultural Work relation Covert or Internal Environment Sensor Self

Attention

Recognition

Sensory and Neural Mechanisms

Mediators and Physical organisms

Translation Response organism Decisions

Satisfaction

Performance

Expectation and Performance Evaluation

Action Satisfaction Reaction Retrospection

Behavior Overt Physical Action Covert Mental State

Figure 1.15: Components of Perception

1) Stimuli: The receipt of information is the stimulus which results in sensation. Knowledge and behavior depend on senses and their stimulation. The physical senses used by people are vision, hearing, touch, smell and taste. Intuitions and hunches are known as the sixth sense. These senses are influenced by a larger number of stimuli which may be action, information, consideration and feelings, etc. 2) Attention: Stimuli are selectively attended to by people. Some of the stimuli are reacted to while others are ignored without being paid any attention. The stimuli that are paid attention depend purely on the people’s selection capacity and the intensity of stimuli. During the attention process, sensory and neural mechanisms are affected and the message receiver becomes involved in understanding the stimuli. Taking employees to the attention stage is essential in an organization for making them behave in a systematic and required order. 3) Recognition: After paying attention to the stimuli, the employees try to recognize whether the stimuli are worth realizing. The messages or incoming stimuli are recognized before they are transmitted into behavior. Perception is a two-phase activity, i.e., receiving stimuli and translating the stimuli into action. However,

before the stage of translation, the stimuli must be recognized by the individual. The recognition process is dependent on mental acceptability. 4) Translation: The stimuli are evaluated before being converted into action or behavior. The evaluation process is translation. In the above example, the car driver after recognizing the stimuli uses the clutch and brake to stop the car. He has immediately translated the stimulus into an appropriate action. The perception process is purely mental before it is converted into action. The conversion is translation. 5) Behavior: Behavior is the outcome of the cognitive process. It is a response to change in sensory inputs, i.e., stimuli. It is an overt and covert response. The behavior of employees depends on perception which is visible in the form of action, reaction or other behavior. The behavioral termination of perception may be overt or covert. The overt behavior of perception is witnessed in the form of physical activities of the employees and covert behavior is observed in the form of mental evaluation and self-esteem. 6) Performance: Proper behavior leads to higher performance. High performers become a source of stimuli and motivation to other employees. A performance-reward relationship is established to motivate people. 7) Satisfaction: High performance gives more satisfaction. The level of satisfaction is calculated with the difference in performance and expectation. If the performance is more than the expectation, people are delighted, but when performance is equal to expectation, it results in satisfaction. Several stimuli are observed everyday by individuals. They confront these stimuli, notice and register them in their minds, interpret them and behave according to their background and understanding. Employees confronted with stimuli select only a few stimuli of their choice and leave other stimuli unattended and unrecognized. Factors influencing the selective process may be external as well as internal, organizational structure, social systems and characteristics of the perceiver.

1.4.4.

Elements of Perception

The elements of perception are sensation, absolute threshold, differential threshold, and subliminal perception. These are discussed in the following sections: 1) Sensation 2) Absolute Threshold 3) Just- noticeable-difference 4) Subliminal Perception 1) Sensation When a person is exposed to any of the marketing stimuli or an ad, the first reflex that is initiated in him is known as sensation. For example, when a person come across a beautiful ad of a Mercedes Benz ‘E-class’ on the center spread of a magazine, their first reaction will probably be one of admiration. As person enter a bakery, may smell the mouth-watering aroma of freshly baked cakes. We can feel the energy in the pulsating music played at a disco. How one responds to a stimulus received by any of the five senses is called sensation. And perception is how person understand a sensation and co-relate it with his needs and personality. Marketers try to advertise their products in such a way that they will appeal to the consumer’s senses. They not only try to leave a mark on the consumer’s mind, they also try to provide him with cues to perceive the product in a specific way. For example, the thundering light in the Rin detergent ad may lead the consumer to expect that kind of cleaning for his clothes. Marketing Implications Fast music, like that played at aerobics classes, tends to energize; in contrast, slow music can be soothing. The type of music being played in a retail outlet can have an interesting effect on shopping behavior. Specifically, a fast tempo creates a more rapid traffic flow, whereas a slow tempo can increase sales as much as 38 per cent because it encourages leisurely shopping (although consumers tend to be completely unaware of this influence on their behavior). However, a fast tempo is more desirable in restaurants because consumers will eat faster,

thereby allowing greater turnover and higher sales. Music can also affect moods. Likeable and familiar music can induce good moods, whereas discordant sounds and music in a disliked style can induce bad moods 2) Absolute Threshold The absolute threshold is the minimum level of stimulus intensity needed for a stimulus to be perceived. In other words, the absolute threshold is the amount of intensity needed to detect a difference between something and nothing. Suppose you are driving on the highway and a billboard is in the distance. The absolute threshold is that point at which you can first see the billboard. Before that point, the billboard is below the absolute threshold and not sufficiently intense to be seen. Marketing Implications The obvious implication is that consumers will only consciously perceive a marketing stimulus when it is sufficiently high in intensity to be above the absolute threshold. Thus if images or words in a commercial are too small or the sound level is too low, consumers’ sensory receptors will not be activated and the stimulus will not be consciously perceived. Just- noticeable-difference The minimal difference that can be detected between two similar stimuli is called the differential threshold, or the Just Noticeable Difference (the JND). A nineteenth-century German scientist named Ernst Weber discovered that the JND between two stimuli was not an absolute amount, but an amount relative to the intensity of the first stimulus. Weber’s law, as it has come to be known, states that the stronger the initial stimulus, the greater the additional intensity needed for the second stimulus to be perceived as different. According to Weber’s law, an additional level of stimulus equivalent to the JND must be added for the majority of people to perceive a difference between the resulting stimulus and the initial stimulus. For Example, i) JND for a car model may exist at a level of `10,000. So only when the price is changed by `10,000 or more, the consumers will notice the price change. ii) Hindustan Unilever increases the price of a 1.5kg package of Surf Excel Blue detergent from `110 to `120 or, say, the price of a 100gram pack of Lux toilet soap is raised to `21 from `18. Consumers here may perceive these as a significant change in the prices of these two brands. Marketers use the concept of JND for product pricing, packaging, and promotion decisions. 3) Just- noticeable-difference to Consumer Behavior

Book Matter [Book Code: 22.14, Page no.53 CB by Majumdar] Application of Just- noticeable-difference to Consumer Behavior Manufacturers and marketers endeavor to determine the relevant JND for their products for two very different reasons: i) So that negative changes (e.g., reductions in product size or quality, or increases in product price) are not readily discernible to the public (i.e., remain below the JND); and ii) So that product improvements (e.g., improved or updated packaging, larger size, or lower price) are very apparent to consumers without being wastefully extravagant (i.e., they are at or just above the JND). For example, some years ago, in an apparent misunderstanding of the JND, a silver polish manufacturer introduced an extension of its silver polish brand that prolonged the shine of the silver by months but raised its product price by merely pennies. By doing so, the company decreased its sales revenue. A better strategy would have been to introduce several successive versions of the polish; each version with a shine that lasts longer than

the previous version (and at or slightly above the JND) and offered at a higher price (but a price, i.e., lower than the JND). When it comes to product improvements, marketers very much want to meet or exceed the consumer’s differential threshold; i.e., they want consumers to readily perceive any improvements made in the original product. Less than the JND is wasted effort because the improvement will not be perceived; more than the JND is wasteful because it reduces the level of repeat sales. On the other hand, when it comes to price increases, less than the JND is desirable because consumers are unlikely to notice it. Marketers decrease the product quantity included in the packages, while leaving the prices unchanged – thus, in effect, increasing the per unit price. The manufacturer of Huggies reduced the number of diapers in a package from 240 to 228 (and continued pricing it at $31.99); PepsiCo reduced the weight of one snack food bag from 14.5 ounces to 13.5 ounces (and maintained the price at $3.29), the reductions in quantity were below most consumers’ JND for these products. Marketers often want to update their existing package designs without losing the ready recognition of consumers. They usually make a number of small changes, each carefully designed to fall below the JND, so that consumers will perceive minimal difference between succeeding versions. For example, Betty Crocker, the General Mills symbol, has been updated seven times from 1936 to 1996. 4) Subliminal Perception The concept of the perceptual threshold is important for another phenomenon – subliminal perception. Suppose a person sitting at a movie and is exposed to messages like “Eat popcorn” and “Drink Coke”. However, each message is shown on the screen for only a fraction of a second, so short a time that you are not consciously aware of them. Stimuli like these, presented below the threshold level of awareness, are called subliminal messages, and our perception of them is called subliminal perception. Subliminal perception is different from pre-attentive processing. With pre-attentive processing attention is directed at something other than the stimulus, e.g., at a magazine article instead of an ad in person’s peripheral vision. With subliminal perception attention is directed squarely at the stimulus. Also, with pre-attentive processing the stimulus is fully present – if a person shift attention and look directly at the ad or billboard, the person can easily see it. In contrast, subliminal stimuli are presented so quickly or are so degraded that the very act of perceiving them is difficult. Marketing Implications The question of whether stimuli presented subliminally affect consumers’ responses has generated considerable controversy in the marketing field. A widely known but fraudulent study in the advertising industry claimed that consumers at a movie theater were subliminally exposed to messages on the movie screen that read “Eat popcorn” and “Drink Coke”. Reportedly, subliminal exposure to these messages influenced viewers’ purchase of Coke and popcorn. Although advertising agencies deny using such stimuli, and the original popcorn-Coke study has been discredited, some people claim that marketers are brainwashing consumers and attempting to manipulate them. These people also believe that ads containing these stimuli are effective. This perception is perhaps fostered by the availability of self-help tapes with subliminal messages that claim to help consumers stop smoking, lose weight, and feel more relaxed.

1.4.5.

Factors Influencing Perception

Individuals may look at the same thing, but perceive it differently. A number of factors operate to shape and sometimes distort perception. These factors include: 1) Characteristics of the Perceiver (Internal Factors) i) Needs and Motives: People’s perception is determined by their inner needs. A need is a feeling of tension or discomfort when one thinks he is missing something or requires something. People with different needs usually experience different stimuli. Similarly people with different needs select different items to remember or respond to. ii) Self-concept: The way a person views the world depends a great deal on the self-concept or image he has about himself. The self-concept plays an important role in perceptual selectivity. It can be thought

of as an internal form of attention-getting and is largely based on the individual's complex psychological make-up. iii) Beliefs: A person’s beliefs have profound influence on his perception. Thus, a fact is conceived not on what it is but what a person believes it to be. The individual normally censors stimulus inputs to avoid disturbance of his existing beliefs. iv) Past Experience: A person's past experiences mould the way he perceives the current situation. If a person has been betrayed by a couple of friends in the past, he would tend to distrust any new friendship that he might be in the process of developing. v) Current Psychological State: The emotional and psychological states of an individual are likely to influence how things are perceived. If a person is depressed, he is likely to perceive the same situation differently than if he is elated. vi) Expectations: Expectations affect what a person perceives. Expectations are related with the state of anticipation of particular behavior from a person. In the organizational setting, expectations affect people’s perception. Thus, a technical manager may expect ignorance about the technical feature of a product from the non-technical people. Factors in the Situation Physical setting Social setting Organizational setting Factors in the Perceiver Needs and motives Self Concept Past Experience Beliefs Expectations Current Psychological State

Perception Factors in the Target Intensity Frequency Status Size Contrast

Figure 1.16: Factors that Influence Perception

2) Characteristics of the Target or Perceived (External Factors) i) Size: The bigger the size of the perceived stimulus, the higher is the probability that it is perceived. Size attracts the attention of an individual. It establishes dominance and enhances perceptual selection. ii) Intensity: High intensity increases the chances of selection. If the message is bright, if sentences are underlined, it gets more attention than in normal case. The greater the intensity of stimulus, the more likely it will be noticed. iii) Frequency: Repeated external stimulus is more attention-attracting than a single time. Repetition increases our sensitivity and alertness to the stimulus. Thus, greater the frequency with which a sensory stimulus is presented, the greater the chances we select it for attention. iv) Status: Perception is also influenced by the status of the perceiver. High status people can exert greater influence on perception of an employee than low status people. v) Contrast: Stimuli that contrast with the surrounding environment are more likely to be attention catching than the stimuli that blend in. A contrasting effect can be caused by color/size or any other factor that is unusual. The contrast principle states that external stimuli that stand out against the background or which are not what are expected will receive better attention. 3) Characteristics of the Situation: The context in which we see objects or events is important. Elements in the surrounding environment influence our perception. The time at which an object or event is seen can influence attention, as can location, light, heat, or any number of situational factors.

1.4.6.

Process of Perception

An individual perceive things differently with respect to other individual .There are lot of stimuli in the environment to which different meanings are given. These stimuli are the input given to start with the process of perception. The mechanism involves selection, organization and interpretation resulting into behavioral responses or action like opinion, buying etc.

1.4.6.1.

Perceptual Inputs and Perceptual Mechanism

Human beings are constantly bombarded with stimuli during every minute and every hour of everyday. The sensory world is made up of an almost infinite number of discrete sensations that are constantly and subtly changing. According to the principles of sensation, intensive stimulation “bounces off” most individuals, who subconsciously block (adapt to) a heavy bombardment of stimuli. Otherwise, the billions of different stimuli to which human being are constantly exposed might serve to confuse and keep perpetually disoriented in a constantly changing environment. However, neither of these consequences tends to occur, because perception is not a function of sensory input alone. Rather, perception is the result of two different kinds of inputs that interact to form the personal pictures – the perceptions – that each individual experiences. One type of input is physical stimuli from the outside environment; the other type of input is provided by individuals themselves in the form of certain pre-dispositions (expectations, motives, and learning) based on previous experience. The combination of these two very different kinds of inputs produces for each human being a very private, very personal picture of the world. Because each person is a unique individual, with unique experiences, needs, wants, desires, and expectations, it follows that each individual’s perceptions are also unique. This explains why no two people see the world in precisely the same way. Individuals are very selective as to which stimuli they “recognize”; they subconsciously organize the stimuli they do recognize according to widely held psychological principles, and they interpret such stimuli (they give meaning to them) subjectively in accordance with their personal needs, expectations, and experiences. The aspects of perception – the selection, organization, and interpretation of stimuli are:

1.4.6.2.

Perceptual Selection

There are a variety and a multitude of stimuli confronting us everyday affecting all our senses. Out of all these stimuli, people select only some. Perceptual selectivity refers to the tendency to select certain objects from the environment for attention such that these objects are consistent with our existing beliefs, values and needs. Without this ability of selection, the individuals will not be able to consider all available information necessary to initiate behavior. This selectivity is enhanced by two related processes. 1) Sensory Activation: First process known as, “sensory activation” assumes that human being senses are activated only by a certain type of stimuli so that some stimuli may go unnoticed if these are not strong, bright or loud enough to activate our senses. 2) Sensory Adaptation: Second process known as, “sensory adaptation” relates to human being ability to tune out certain stimuli to which he has been continuously exposed. For example, a new home owner near an airport might be excessively bothered by the noise, but such noise does not bother those who have been living there for a long time and have been exposed to this noise over this long period. Thus many objects or stimuli are stopped from entering our perceptual system by the above two processes. All the remaining stimuli must compete for attention. Various external and internal factors influence our process of stimuli selection. 1.4.6.2.1.1. Internal or Personal Factors in Perceptual Selection The internal factors relate to the perceiver and include such factors as learning and motivation. These factors are self concept, beliefs, expectations, inner needs, response disposition, response salience and perceptual defense as given below:

1) Self-Concept: The way a person views the world depends a great deal on the concept or image he has about himself. This concept plays an internal role in perceptual selectivity. It can be thought of as an internal form of attention-getting and is largely based on the individual’s complex psychological makeup. Knowing oneself makes it easier to see others accurately. People’s own characteristics affect the characteristics which they are likely to see in others. They select only that aspects which they find match with their characteristics. 2) Beliefs: A person’s beliefs have profound influence on his perception. Thus, a fact is conceived not on what it is but what a person believes it to be. The individual normally censors stimulus inputs to avoid disturbance of his existing beliefs. This is referred to as ‘maintenance of cognitive consistency’. 3) Expectations: Expectations affect what a person perceives. Expectations are related with the state of anticipation of a particular behavior from a person. Even in the organizational setting, expectations affect people’s perception. Thus, a technical manager may expect ignorance about the technical features of a product from non-technical people, or union officials use rough language. Such expectations may affect the perception. Though such expectations may change because of direct contact, and expectations may fall near actual but a mental set about beliefs, expectations and values filters perception and may be lasting and difficult to change. 4) Inner Needs: People’s perception is determined by their inner needs. The need is a feeling of tension or discomfort when one thinks he is missing something or when he feels he has not quite closed a gap in his knowledge. People with different needs usually experience different stimuli. Similarly, people with different needs select different items to remember or respond to. 5) Response Disposition: Response disposition refers to a person’s tendency to perceive familiar stimuli rather than unfamiliar ones. Thus, a person will perceive the things with which he is familiar. 6) Response Salience: Response salience is the set of dispositions which are determined not by the familiarity of the stimulus situations, but by the person’s own cognitive predispositions. Thus, a particular problem in an organization may be viewed as a marketing problem by marketing personnel, a control problem by accounting people, and human relations problem by personnel people. It indicates that type of response salience which people have affects their perception. The reason for this phenomenon lies in the background of the people for which they are trained. They are trained to look at the situation from one point of view only, not from other points of view. 7) Perceptual Defense: Perception defense refers to the screening of those elements which create conflict and threatening situation in people. They may even perceive other factors to be present that are not a part of the stimulus situation. 1.4.6.2.1.2. External Factors in Perceptual Selection External factors relate to the characteristics of objects or people that activate our senses and thus get our attention. Some of these external factors are size, intensity, contrast, repetition, novelty and familiarity, motion and order as given below: 1) Size: The larger the size of the object, the more likely that it will be noticed. We are most likely to notice things that stand out because of their size relative to other things in that area. For example, a basketball player, more than seven feet tall will stand out in a crowd. Conversely, we also become aware of the objects that are smaller in size than their surroundings. For this reason, advertising companies use large billboards and signs that capture the perceiver’s attention. This factor is shown below: 2) Intensity: The intensity principle of attention states that the more intense the external stimulus is, the more likely it is to be perceived. A loud sound, strong odor or bright light is noticed more as compared to a soft sound, weak odor, or dim light. For example, based on the intensity principle, commercials on televisions are slightly louder than the regular programmes. 3) Contrast: If an object in some way contrasts with its surroundings, it is more noticeable. For example, a warning sign in a plant, such as “DANGER” written in

black against a yellow background would be noticed more quickly because of the contrast factor. A manager who interviews twenty women and one man for a job would remember the man first because of contrast. In the following diagram, the shaded square would be noticed first because of its contrast with other squares. 4) Repetition: A repeated message is more likely to be perceived than a single message. Work instructions that are repeated tend to be received better. Marketing managers and advertisers use this principle in order to get the customers’ attention. According to Morgan and King, “a stimulus that is repeated has a better chance of catching us during one of the periods when our attention to a task is waning. In addition, repetition increases our sensitivity or alertness to the stimulus”. In the following illustration, the letter M will be more often remembered than other letters. M

M

G

M

M

M

P

M

M

M

M

M

M

M

A

B

M

M

M

O

5) Novelty and Familiarity: Novelty and familiarity principle states that either a novel or a familiar external situation can serve as attention-getter. New objects or events in a familiar setting, or familiar objects or events in new setting draw better attention. For example, in job rotation, when workers’ jobs are changed from time to time, they become more attentive to their new jobs as compared to the previous ones. Similarly, communication in familiar jargons attracts more attention. 6) Motion: Motion principle states that a moving object draws more attention as compared to a stationary object. For example, workers may pay more attention to the materials being moved by them on a conveyor belt as compared to the maintenance needs of a machine lying next to them. Advertisers use this principle in their advertising by designing signs which incorporate moving parts. For example, commercials on televisions (moving ones) get more attention than print media. 7) Order: The order in which the objects or stimuli are presented is an important factor influencing selective attention. Sometimes, the first piece of information among many pieces received, receives the most attention, thus making the other pieces of information less significant. Sometimes, the most important piece is left to the end in order to heighten the curiosity and perceptive attention. For example, a writer of a communication may intentionally build up to a major point by proceeding through several smaller and less important points.

1.4.6.3.

Perceptual Organisation

Perceptual Organization emphasizes on the subsequent activities that take place in the perceptual process after a stimulus is received. A person rarely perceives the extent of color, light or sound associated with objects. Instead he perceives organized patterns, stimuli and identifiable whole objects. 1.4.6.3.1. Factors Affecting Perceptual Organization 1) Figure and Ground: Figure-Ground principle is generally considered to be the most basic form of perceptual organization. This principle simply implies that the perceived object or person or event stands out distinct from its background and occupies the cognitive space of the individual. For example, as you read this page, you see white as the background and black as the letters or words to be read. You do not try to understand what the white spaces in the middle of black letters could mean. 2) Perceptual Grouping: Grouping is the tendency to curb individual stimuli into meaningful patterns. For instance, if we perceive objects or people with similar characteristics, we tend to group them together and this organizing mechanism helps us to deal with information in an efficient way rather than getting bogged down and confused with so many details. Some of the factors underlying his grouping are: i) Similarity: The principle of similarity states that the greater the similarity of the stimuli, the greater the tendency to perceive them as a common group. The principle of similarity is exemplified when objects of similar shape, size or color tend to be grouped together. For example, if all visitors to a plant

are required to wear white hats while the supervisors wear blue hats, the workers can identify all the white hats as the group of visitors. ii) Proximity: The principle of proximity or nearness states that a group of stimuli that are close

together will be perceived as a whole pattern of parts belonging together. For example, several people working on a machine will be considered as a single group so that if the productivity on that particular machine is low, then the entire group will be considered responsible even though, only some people in the group may be inefficient. The following figure demonstrates the proximity principle. The ten squares in the figure are seen as pairs of two, three, four or five depending on their nearness to each other:

iii) Closure: The principle of closure relates to the tendencies of the people to perceive objects as a

whole, even when some parts of the object are missing. The person’s perceptual process will close the gaps that are unfilled from sensory input. For example, in the following figure the sections of the figures are not complete, but being familiar with the shapes we tend to close the gaps and perceive it as a whole:

Speaking from the point of view of an organization, if a manger perceives a worker, on the whole, a hard worker, sincere, honest, then even, if he behaves in a contradictory way sometimes (which is a kind of a gap, the manager will tend to ignore it, because it does not fit with the overall impression, that he has about the worker. iv) Continuity: Continuity is closely related to closure. But there is a difference. Closure supplies

missing stimuli, whereas the continuity principle says that a person will tend to perceive continuous lines of pattern. The continuity may lead to inflexible or non creative thinking on the part of the organizational participants. Only the obvious patterns or relationships will be perceived. Because of this type of perception, the inflexible managers may require that employers follow a set and step by step routine leaving no ground for implementation of out of line innovative ideas. 3) Perceptual Constancy: Constancy is one of the more sophisticated forms of perceptual organization. This concept gives a person a sense of stability in this changing world. This principle permits the individuals to have some constancy or stability in a tremendously variable and highly complex world. If constancy were not at work, the world would be very chaotic and disorganized for the individual. There are several aspects of constancy: i) Shape Constancy: Whenever an object appears to maintain its shape despite marked changes in the retinal image e.g. the top of a glass bottle is seen as circular whether we view it from the side or from the top. ii) Size Constancy: The size constancy refers to the fact that as an object is moved further away from us we tend to see it as more or less invariant in size. For example, the players in cricket field on the opposite side of the field do not look smaller than those closer to you even though their images on the retina of the eye are much smaller.

iii) Color Constancy: Color constancy implies that familiar objects are perceived to be of the same color in varied conditions. The owner of a red car sees it as red in the bright sunlight as well as in dim twilight. Without perceptual constancy the size, shape and color of objects would change as the worker moved about and it would make the job almost impossible. 4) Perceptual Context: The highest and most sophisticated form of organization is ‘perceptual context’. It gives meaning and value to simple stimuli, objects, events, situations and other persons in the environment. The organizational structure and culture provide the primary context in which workers and managers do their perceiving. For example, a verbal order, a new policy, a pat on the back, a raised eye brow or a suggestion takes on special meaning when placed in the context of the work organization.] 5) Perceptual Defense: Closely related to perceptual context is the perceptual defense. A person may build a defense against stimuli or situational events in a particular context that are personally or culturally unacceptable or threatening. Accordingly, perceptual defense may play a very important role in understanding union-management and supervisor-subordinate relationship. Most studies verify the existence of a perceptual defense mechanism.

1.4.6.4.

Interpretation/Perceptual Interpretation

After the data have been received and organized, the perceiver interprets the data in various ways. Perception is said to have taken place only after the data are interpreted. Indeed, perception is essentially giving meaning to the various data received and interpreted 1.4.6.4.1.1. Factors Affecting Perceptual Interpretation Various factors contribute to this interpretation of data which are given as below: 1) Perceptual Set Previously held beliefs about objects influence perception of similar objects. These general opinions or attitudes a person has constitute the perceptual set. For example, a manager may have developed a general belief that workers are lazy, shirk work, and want to get all the advantages from an organization without giving their best to it. In such a case, the manger already has a mental or perceptual set. Manager’s subsequent perceptions will be influenced by this set. While meeting a group of workers, manager will tend to interpret their behavior according to this mental set. Another manager – having different beliefs, attitudes, and opinions – may have a different interpretation of the same phenomenon. The role of expectations (the so-called ‘Pygmalion effect’) can thus be explained by the concept of the perceptual set. Some studies made in organizations indicate how the mental set operates: People having different individual opinions about various groups of people tend to form similar individual opinions when they meet new people based on these, without checking whether their opinions or attitudes were accurate in the first instance or not. 2) Stereotyping When people form opinions about a particular class of objects or persons and act according to such opinions, it is called stereotyping. The word ‘stereotype’ has been used to indicate a generally favorable or unfavorable opinion a person holds for a particular group of people. For example, managers perceive a manager as being more honest than a worker, just as a worker perceives another worker as being more honest than a manager. Stereotyping is necessary for economy of perception. But stereotypes also lead to prejudices about various groups of people, which influence perception and interpretation of data. 3) Halo Effect In the halo effect the person develops an opinion or attitude towards a single person or object. If someone has a favorable attitude towards a person, his subsequent perceptions of the same person are influenced by this attitude. For example, if a manager has a good impression about a particular subordinates (a positive halo effect), mistakes made by the latter may be condoned or the interpretation may give the latter the benefit of

doubt. When similar mistakes are made by another person about whom the manager has an unfavorable opinion (Negative Halo effect, Rusty Halo or Horns effects) those mistakes may be perceptually exaggerated as irresponsible behavior. Further, as a result of the halo effect, the manager may tend to interpret even feedback information received according to the preconceived impression. 4) Perceptual Defense Perceptual defense is used by the perceiver to deal with conflicting messages and data. If the data a person receives threaten beliefs already held, the recipient uses perceptual defense to deal with this phenomenon. For example, if a manager gets data from a union on strike, showing that it is taking positive steps in the direction of resolving conflicts or is doing something useful for the organization, the manager may find such data in conflict with a preconceived opinion that the union is by and large negative in its approach. Defense mechanism could include: i) Denial of the information or data received ii) Some modification of the data received iii) Justification for holding on to one’s own belief 5) Perceptual Context The context in which an object is placed influences perception. The visual stimuli by themselves are meaningless. Only when the doodles are placed in a verbal context, they do take on meaning and value for the perceiver. The organizational culture and structure provide the primary context in which workers and managers do their perceiving. Thus, a verbal order, a memo, a new policy, a suggestion, a raised eyebrow, or a pat on the back takes on special meaning and value when placed in the context of a work situation. 6) Selective Perception People selectively interpret what they see on the basis of their interests, background, experience and attitudes. You are more likely to notice cars like your own, or why some people may be reprimanded by their boss for doing something that, when done by another employee, goes unnoticed. Since we can’t observe everything going on about us, we engage in selective perception. 7) Projection Attributing one’s own characteristics to other people. If we are honest and trustworthy, so we take it for granted that other people are equally honest and trustworthy. 8) Impression People who engage in projection tend to perceive others according to what they themselves are like rather than according to what the person being observed is really like. When observing other who actually are like them, these observers are quite accurate—not because they perceptive but because they always judge people as being similar to themselves. So when they do find someone who is like them, they are naturally correct. 9) Inference There is a tendency on the part of some people to judge others on limited information. For example, an employee might be sitting at his desk throughout the working hours without doing anything, but it may be inferred that he is sincere towards his duties. Thus, performance appraisal must not be based on half-cooked or incomplete information. In the above case, the productivity and the behavior of the concerned employee towards customers, fellow employees and others must also be taken into consideration. 10) Attribution When people give cause and effect explanation to the observed behavior, it is known as attribution. Perception is distorted sometimes by the efforts of the perceiver to attribute a causal explanation to an outcome. There is a tendency for the individuals to attribute their own behavior to situational factors, but explain the behavior of others by their personal dispositions. Perceptual distortion occurs because of attribution on two counts: i) Fundamental Attribution Error: The tendency to underestimate the influence of external factors and overestimate the influence of internal factors when making judgments about the behavior of others.

ii) Self Serving Bias: The tendency for individuals to attribute their own successes to internal factors while

putting the blame for failures on external factors. 11) Distortions Distortion occurs when a person twist and manipulate events either consciously or unconsciously. He often tend to distort reality when it is unfavorable to us, because it threatens our self-image. He then act in a defensive manner and distort or even totally shut out what is actually occurring. In other words, he tend to twist or avoid that which is an unpalatable threat to his ego. Thus, distortion is due to defense mechanisms that operate when one encounters data or receives information that is incongruent with one’s self-concept. 12) Self-fulfilling Prophecy Based on expectations, some bias in perception may creep in. In many cases it has been found that people try to validate their perceptions of reality (or expected performance) when those perceptions are faulty. For example, if a manager expects good results from his people, they are not likely to let him down. Thus, expectations become reality. This is called self-fulfilling prophecy.

1.4.7.

Perception and Marketing Strategy

Perception, which refers to the reception and interpretation of external stimuli by an individual, begins with the process of sensation and is a selective mental operation. Without attention being given to a stimulus, little perception will take place. People give their attention largely to those things which are novel, interesting, or from which they derive satisfaction of needs and wants. Consumers react to advertisements, products, packages and so on according to their motives, attitudes and social situation and each individual’s perception of these marketing mix elements is unique to him or her. Consumers perceive several types of risk in the purchase of many products. Managers should take active steps to reduce this perceived risk as a normal part of any marketing strategy. Perceptions of stores (store images), prices, brands and advertising messages may vary significantly from one part of a company’s market to another. Consumer behavior is process of learning of which perception is only the beginning. Information is the primary raw material the marketer works with while influencing consumers. Therefore, an understanding of the perception of information is an essential guide to marketing strategy. A study of perception is useful in the following areas: 1) Retail Strategy: Most retail environments contain a vast array of information. It is a known fact that consumers cannot process all the information. Hence, retailers need to be concerned about information overload. Retailers must ensure that consumers do not become frustrated and minimize their in-store information processing. Retailers, therefore, use exposure very effectively. Store interiors (of Ebony, Shopper’s Stop, etc.) are designed with frequently sought-out items being separated so that the average consumers will travel through more of the store. This increases total exposure. Shelf position and amount of shelf space influence on which items and brands are given more attention. Point-of-purchase displays also attract attention to sale and newly launched items. Stores are designed with highly visible shelves and overhead signs to make locating items as easy as possible. The total mix of in-store information cues (brands available, layout, point-of-purchase displays, etc.), external building characteristics, and advertising combine to form the meaning of store image assigned. The consumer forms a perception about the store, as a result. 2) Brand Name and Logo Development: Brand names are important for both consumer and industrial

products. A brand name which is difficult to pronounce and does not convey much of a visual image is not likely to find appeal amongst the target consumers.

There are companies which use linguistics and computers to create names that convey the appropriate meaning for products. For example, the brand name “Compaq” for a computer was created in such a fashion. It was originally to be called – “Gateway”. But the focus on choosing this brand name was on the total meaning conveyed by the interaction of the meaning of the name’s parts. For Compaq, ‘com’ means computer and communications, while ‘paq’ means small. The unique spelling attracts attention and also gives “a scientific” impression. From this, it is obvious that name selection influences how consumers interpret product features. Besides how a product and service is presented (its logo) is also equally important. This is the reason why companies devote so much of time, money and effort in developing a right kind of logo for all their company products. 3) Media Strategy: The fact that the exposure process is selective rather than random is the underlying basis

for effective media strategies. Marketers determine the media to which consumers in the target market are most frequently exposed and then place their advertising messages in those media. For some products and target markets (fashion items and accessories and heavy users of these items), consumers are highly involved with the product and will go to considerable lengths to secure product relevant information. Consumers of these kinds of product will search for media where relevant information is available. For other products and target markets, consumers have limited involvement with the product category. For example, Products such as carbonated drinks and detergents. For products like these, the marketer must find media the target market is interested in and place their advertising messages in those media. Advertising is also concerned about the placement of their advertisements, in appropriate media, print, and the electronic. While advertising in magazines, advertisers insist that their ads appear opposite certain articles and columns. For example, in a magazine like Femina, there is a particular column devoted to queries on skin/beauty care. Advertises of Synergie Eye Contour Gel take care to place their ads opposite this column to get maximum reader interest. Even television advertisers are concerned about where within the commercial break their ad appears and the interest level aroused by the program. 4) Advertisement and Package Design: Advertisements and packages must perform two critical tasks: i) Capture attention, and ii) Convey meaning.

A marketer should make effort to attract attention to a package or advertisements. To a large extent, what he does depends on the target market, the product, and the situation. If the target market is interested in the product category, and in that particular brand, attention does not pose much of a problem. Once consumers are exposed to the message, they will most likely attend to it sometimes it is the other way round. Consumers are not always actively interested in a product. Interest in a product tends to arise only when the need for the product arises. Since, it is difficult to reach consumers at exactly this point; marketers have the difficult task of trying to communicate with them at times when their interest level is low and non-existent. Suppose that marketer is responsible for developing a campaign designed to increase the number of users for a liquid ‘toilet cleaner’. This is essentially a low involvement product. Interest in this product arises only when the need for the same surfaces. Under such circumstances, two strategies appear reasonable: i) To utilize stimulus characteristics such as full-page ads bright colors, animated cartoons to attract attention to the advertisement, and ii) To tie the message to a topic, the market is interested in. The topic may range from using celebrities endorsing the virtues of the product or using health and cleanliness as a major plank. While using stimulus characteristics, care should be taken to ensure that the target audience interprets the message in the advertisement correctly. 5) Advertising Evaluation: A successful advertisement (or any other form of marketing message) must

accomplish four tasks: i) Exposure: It must physically reach the consumer.

ii) Attention: It must be attended to by the consumer. iii) Interpretation: It must be properly interpreted. iv) Memory: It must be stored in memory in a manner that will allow retrieval under the proper

circumstances.

1.4.8.

Perception Process and Buying behavior

Marketers at successful organizations like McDonald’s, go great efforts to understand their customers’ needs and gain a better grasp of customers’ buying behavior. A firm’s ability to establish and maintain satisfying customer relationship requires an understanding of buying behavior. Buying behavior is the decision processes and acts of people involved in buying, and using products. Consumer buying behavior refers to the buying behavior of ultimate consumers, those who purchase products for personal or household use and not for business purposes. Marketers attempt to understand buying behavior for several reasons. 1) Buyers’ reactions to a firm’s marketing strategy have a great impact on the firm’s success. 2) In the marketing concept stresses that a firm should create a marketing mix that satisfies customers. To find-out what satisfies buyers, marketers must examine the main influences on what, where, when, and how consumers buy. 3) By gaining a better understanding of the factors that affect buying behavior, marketers are in a better position to predict how consumers will respond to marketing strategies. Here, psychological influences are considered on purchasing decisions – perception, motives, learning attitudes, personality and self-concept, and lifestyles. It is concluded with a discussion of social influences that affect buying behavior, including roles, family, reference groups, and opinion leaders, social classes, and culture and sub-cultures. Consumer buying behavior is influenced by the perception also which is psychological influence. Marketers strategies make use perceptual processes to gain and retain customer.Partly determine people’s general behavior and thus, influence their behavior as consumers. Even through these perception processes operate internally, they are very much affected by social forces outside the individual. Different people perceive the same thing at the same time in different ways. An individual at different times may perceive the same item in a number of ways. Perception is the process of selecting, organizing, and interpreting information inputs to produce meaning. Information inputs are sensations received through sight, taste, hearing, smell, and touch. When a person hear an advertisement, see a friend, smell polluted air or water, or touch a product, receive’s information inputs. As the definition indicates, perception is a three-step process. Although one receives numerous pieces of information at once, only few reach one’s awareness. Person select some input and ignore others because do not have the ability to be conscious of all inputs at one time. This phenomenon is sometimes called selective exposure because an individual select which inputs will reach awareness. If you are concentrating on this paragraph, you probably are not aware that cars outside are making noise, that the room light is on, or that you are touching this page. Even though you receive these inputs, they do not reach your awareness until they are pointed-out. An individual’s current set of needs affects selective exposure. Information inputs that relate to one’s strongest needs at a given time are more likely to be selected to reach awareness. It is not by random chance that many fast-food commercials are aired near mealtimes. Customers are more likely to turn in to these advertisements at these times. The selective nature of perception, the first step may result not only in selective exposure but also in two other conditions: 1) Selective Distortion: It is changing or twisting currently received information; it occurs when a person receives information inconsistent with personal feelings or beliefs. For example, on seeing an

advertisement promoting a disliked brand, a viewer may distort the information to make it more consistent with prior views. This distortion substantially lessens the effect of the advertisement on the individual. 2) Selective Retention: In selective retention, a person remembers information inputs that support personal feelings and beliefs and forgets inputs that do not. After hearing a sales presentation and leaving a store, a customer may forget many selling points if they contradict personal beliefs. The second step in the process of perception is perceptual organization. Information inputs that reach awareness are not received in an organized form. To produce meaning, an individual must mentally organize and integrate new information with what is already stored in memory. People use several methods to organize. One method, called closure, occurs when a person mentally fills in missing elements in a pattern or statement. In an attempt to draw attention to its brand, an advertiser will capitalize on closure by using incomplete images, sounds or statements in its advertisements. Interpretation, the third step in the perceptual process, is the assignment of meaning to what has been organized. A person bases interpretation on what he or she expects or what is familiar. For this reason, a manufacturer that changes a product or its package faces a major problem. When people are looking for the old, familiar product or package, they may not recognize the new one. For example, when Smucker’s re-designed its packaging, marketers told designers that although they wanted a more contemporary package design, they also wanted a classic look so that customers would perceive their products to be the familiar ones they had been buying for years. Unless a product or package change is accompanied by a promotional program that makes people aware of the change, an organization may suffer a sales decline. Although marketers cannot control buyers’ perceptions, they often try to influence them through information. Several problems may arise from such attempts, however. First, a consumer’s perceptual process may operate such that a seller’s information never reaches that person. For example, a buyer may block-out a salesperson’s presentation. Second, a buyer may receive a seller’s information but perceive it differently than was intended. For example, when a toothpaste producer advertises that “35 per cent of the people who use this toothpaste have fewer cavities”, a customer might infer that 65 per cent of users have more cavities. Third, a buyer who perceives information inputs to be inconsistent with prior beliefs is likely to forget the information quickly. Thus, it can be said that perceptual process influences buying behavior of consumer which should be intelligently used by marketers.

1.4.9.

Consumer Imagery

Book Matter [Book Code: 22.14, Page no.111, CB By Majumdar] Consumers have a number of enduring perceptions, or images, that are particularly relevant to the study of consumer behavior. Products and brands have symbolic value for individuals, who evaluate them, on the basis of their consistency (congruence) with their personal pictures of themselves. Consumers’ perceive images of products brands, services, prices, product quality, retail stores, and manufacturers. Consumer’s imagery is concerned with: 1) Product positioning, 2) Product repositioning, 3) Positioning of services, 4) Perceived price, 5) Perceived quality, 6) Price/quality relationship, 7) Retail store image, 8) Manufacturer’s image, and

9) Perceived risk.

1.4.9.1.

Product Positioning

The way a product is perceived or positioned by a consumer is probably more important than what it actually is. Product positioning is the essence of the marketing mix. It converges what the meaning of the product is and how it can fulfill the consumer needs. It compliments the company’s segmentation strategy and selection of target markets. Successful positioning is based on consumer’s reality and familiarity. Marketers use the following to position their products:

NET MATTER The essence of successful marketing is the image that a product has in the mind of the consumer, i.e., its 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. Marketers of different brand in the same category can effectively differential their offerings only if they stress the benefits that their brands provide rather than their products’ physical features. The benefits featured in a product’s positioning must reflect attributes that are important to and congruent with the perceptions of the targeted consumer segment. In today’s highly competitive marketplace, 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 making purchase decisions. Positioning Strategies The major positioning strategies are: 1) By Attribute or Benefit: This is the most frequently used positioning strategy. For a light beer, it might be that it tastes great or that it is less filling. For toothpaste, it might be the mint taste or tartar control Important product attributes like taste are useful segmentation tools because they are easy to identify. For example, when segmenting the market for digital cameras, companies have relied on product attributes such as resolution quality to define market segments and develop appropriate products. The Kodak Company offers cameras ranging from 6 megapixels to 14 megapixels for the non-professional camera buyer. 2) By Use or, Application: The users of Apple computers can design and use graphics more easily than with Windows or UNIX. Apple positions its computers based on how the computer will be used. 3) By User: Facebook is a social networking site used exclusively by college students. Facebook is too cool for MySpace and serves a smaller, more sophisticated cohort. Only college students may participate with their campus e-mail IDs. 4) By Product or Service Class: Margarine competes as an alternative to butter. Margarine is positioned as a lower cost and healthier alternative to butter, while butter provides better taste and wholesome ingredients. 5) By Competitor: BMW and Mercedes often compare themselves to each other segmenting the market to just the crème de la crème of the automobile market. Ford and Chevy need not apply. 6) By Price or Quality: Tiffany and Costco both sell diamonds. Tiffany wants us to believe that their diamonds are of the highest quality, while Costco tells us that diamonds are diamonds and that only a chump will pay Tiffany prices. Positioning is what the customer believes and not what the provider wants them to believe. Positioning can change due the counter measures taken at the competition. Managing product positioning requires that marketer

know the customer and that he understand the competition; generally, this is the job of market research not just what the entrepreneur thinks is true.

1.4.9.2.

Product Re-Positioning

From time to time, in response to changes in the market environment, marketers re-position products. Repositioning is difficult to achieve effectively, however, and is impossible to achieve overnight. Once the image of a product is established in the consumer’s mind, consumer’s resists change. Re-positioning involves reeducating the consumer about changes in important product, price, distribution, and/or promotional or personal selling benefits. The Mercury Cougar, first introduced as a small sporty car, was successfully re-positioned as a mid-sized car, comparable to the Ford Thunderbird. Here, the segment targeted as well as the image of the car changed. The growth of the fast-food chain McDonald’s can also be viewed from the perspective of repositioning. McDonald’s restaurants, when first opened, were part of a chain similar to the Hot ‘N’ Now Hamburgers, Checkers or Rally’s of today. Consumer parked the car and went to the window to order and pickup very-low-priced burgers, fries, and shakes. All of the outlet designs were the same. Now McDonald’s offers sit-down family restaurants with an emphasis on value at lower prices, often with a fun place for the kids to play. The menu is extensive and the interior and exterior decor varies from restaurant to restaurant Regardless of how well positioned a product appears to be, the marketer may be forced to re-position 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 privatelabel 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 re-position a product or service is to satisfy changing consumer preferences. Perceptual Mapping Marketers use a method called perceptual mapping to position products against competitors. Perceptual mapping is based on the belief that when consumers think of a product category, they see it in terms of a map or grid that clusters like product of brands together. Typically, products or brands that consumers consider similar share like benefits and attributes. By understanding the perceptual maps of consumers in targeted segments, marketers can see where their products fit with others in the market. Past Experience

Subjectivity Perceptual Mapping

Expectation

Prevention Selectivity

Influences on Perceptual Mapping

Measuring consumer perceptions is an important part of positioning. Perceptual maps measure the way products are positioned in the minds of consumers and show these perceptions on a graph whose axes are formed by produce attributes. The maps provide a research tool to assess how multiple products in a category are positioned, how the attributes relating to the product are seen in the customers’ eyes and whether there are any product “gaps” in the market. Researchers create perceptual maps by surveying members of the target market, asking people to rate products across multiple product attributes. For example, if researchers were interested in soft drinks, likely attributes used in the analysis would include sweetness, carbonation, fruitiness, lightness, etc. Attribute ratings are then subjected to various statistical techniques and a perceptual map can be extracted. On the map, similar brands are

plotted close together, and dissimilar brands are plotted far apart. Thus, one thing a perceptual map tells marketers is who their direct competitors are (those plotted near to one another) and what brands represent less vigorous competition. Blank spaces on perceptual maps indicate gaps in the market. Gaps typically indicate: 1) A true opportunity in the market that marketer might be able to pursue; 2) A combination of attributes that nobody actually needs or wants, which is why there is not competitor there; and 3) A combination of attributes that is impossible to deliver to the consumer without the development of new technology. (There are many examples of products invented to fill these types of gaps, such as air pump athletic shoes and shoes with shocks, lightweight cell-phones, and mouse-pads on laptop computers). 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 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.

1.4.9.3.

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 colors, restaurant matchbooks, packaged hotel soaps and shampoos, and a variety of other specialty items. Many service companies feature real service employees in their ads (as tangible cues) and some use peoplefocused themes to differentiate themselves. 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, Marriott’s Hotels and Resorts brand claims to provide customers with “superior service and genuine care”; the Renaissance Hotels and Resorts brand provides “distinctive decor, imaginative experiences and delights its customers’ senses”; the Courtyard brand provides “essential services and amenities to business travelers”; the Residence Inn is designed for extended stays, and the Fairfield Inn provides rooms and suites at “prices that will make customers smile”.

1.4.9.4.

Perceived Price/Price Image

How a consumer perceives a price – as high, as low, as fair – has a strong influence on both purchase intentions and purchase satisfaction. For example, consider the perception of price fairness, there is some evidence that customers do pay attention to the prices paid by other customers (such as senior citizens, frequent flyers, affinity club members), 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 an airline ticket or 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. One study, focused on the special challenges of service industries in pricing intangible products, proposed three types of pricing strategies based on the customer’s perception of the value provided by the purchase: satisfaction-based pricing, relationship pricing, and efficiency pricing. Reference Prices Products advertised as “on sale” tend to create enhanced customer perceptions 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 generally uses a higher external reference price (“sold elsewhere at...”) 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 prices (or price ranges) retrieved by the consumer from memory. Internal

reference prices play a major role in consumers’ evaluations and perceptions of value of an advertised (external) price deal, as well as in the believability of any advertised reference price. However, consumers’ internal reference prices change.

1.4.9.5.

Perceived Quality

NET MATTER Consumers often judge the quality of a product or 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; others are extrinsic. Either singly or together, such cues provide the basis for perceptions of product and service quality: 1) Perceived Quality of Products: Cues that are intrinsic concern physical characteristics of the product itself, such as size, color, flavor, or aroma. In some cases, consumers use physical characteristics (e.g., the flavor of ice cream or cake) 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 (either positive or negative) as being “rational” or “objective” product choices. More often than not, however, they use extrinsic characteristics to judge quality. 2) Perceived Quality of Services: 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 (i.e., extrinsic cues) to evaluate service quality. In evaluating a doctor’s services, e.g., they note the quality of the office and examining room furnishings, the number (and source) of framed degrees on the wall, the pleasantness of the receptionist, and the professionalism of the nurse; all contribute to the consumer’s 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 (e.g., in food, in waitperson service, in haircuts, even in classes taught by the same professor), marketers try to standardize their services in order to provide consistency of quality. The downside of service standardization is the loss of customized services, which many consumers value. Unlike products, which are first produced, 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. For example, a defective haircut is difficult to correct, just as the negative impression caused by an abrupt or careless waiter is difficult to correct. During peak demand hours, the interactive quality of services often declines, because both the customer 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 marketers try to change demand patterns in order to distribute the service more equally over time.

1.4.9.6.

Price/Quality Relationship

Book Matter [Book Code:22.14, page no.67,68, CB by Majumdar]

Perceived product value has been described as a trade-off between the product’s perceived benefits (or quality) and the perceived sacrifice – both monetary and non-monetary – necessary to acquire it. A number of research studies have found that consumers rely on price as an indicator of product quality, that consumers attribute different qualities to identical products that carry different price tags, and that such consumer characteristics as age and income affect the perception of value. One study suggested that consumers using a price/quality relationship are actually relying on a well-known (and, hence, more expensive) brand name as an indicator of quality without actually relying directly on price per se. A later study found out that consumers use price and brand to evaluate the prestige of the product but do not generally use these cues when they evaluate the product’s performance. Because price is so often considered an indicator of quality, some product advertisements deliberately emphasize a high price to underscore the marketers’ claims of quality. Marketers understand that, at times, products with lower prices maybe interpreted as reduced quality. At the same time, when consumers evaluate more concrete attributes of a product, such as performance and durability, they rely less on the price and brand name as indicators of quality than while they evaluate the product’s prestige and symbolic value.

1.4.9.7.

Retail Store Image

Consumer walks into a department store with several purchases in mind. Consumer have not shopped there before, but Consumer know – both from local advertising and from conversations with others who shop there – that the store stocks the type of goods Consumer is seeking. As Consumer walk into the store, Consumer stop dead in his tracks. Something about the place is not what Consumer expected or is not quite right. It could be the layout, the lighting, the merchandise, the clerks or even the other shoppers. Perhaps it is the combination of all these that makes Consumer feet uneasy. For whatever reasons, the retail outlet image is wrong for Consumer, and Consumer turn around and leave. Outlet image, whether of a retail store, a catalog, a home shopping network, a retailer’s home page on the web or even a flea market, has a great deal to do with why consumers choose to shop there. If person feel there is a good match between the image of an outlet and person own self-image, person is more likely to shop there. Image is very much in the eye of the beholder – it is what the consumer perceives it to be and it varies from person to person. Outlet image results from a mix of functional and psychological attributes. Functional attributes include merchandise selection, price ranges, credit policies, store layout, and other factors that can be measured to some degree and used to compare one outlet objectively with its competitors. Different functional attributes suit different types of customers and different shopping situations. Although some enjoy the wide selection of a store like Office Depot, others, preferring speed and ease in shopping, find it overwhelming and would rather go to a small office supply retailer or order from a catalog. Psychological attributes are a little more difficult to identify and compare across outlets. They include such subjective considerations as a sense of belonging, a feeling of warmth or friendliness or a feeling of excitement. A shopper hoping to spend a few quiet moments wandering around a bookstore is at ease with a very different set of psychological attributes than the customer at a busy newsstand looking for a magazine to read on the train when traveling home after work. Merchandise Service Clientele Physical Facilities Convenience Promotion

Table 3-10: Image Attributes at Retail Stores Quality, selection or assortment, styling or fashion, guarantees, warranties, and pricing; in service situations, merchandise offered as part of the service. Service in general, salesclerk service, presence of self-service, ease of merchandise return, delivery service, phone ordering, and credit policies. Social-class appeal, self-image congruency (fit between self-image and store image), and store personnel. Elevators, lighting, air conditioning, rest rooms, and so on; may also include store layout, shopping ease, aisle placement and width, and carpeting and architecture. General convenience, location convenience, and parking access. Sales promotions, advertising, displays, and symbols and colors.

Store Atmosphere Institutional Factors Post-transaction Satisfaction

Atmosphere of congeniality, customers’ feelings of warmth, acceptance, or ease; decor, music, and lighting. Conservative versus modern projection of the store, reputation, and reliability. Merchandise in use and returns and adjustments policies.

Retail stores have images of their own that serve to influence the perceived quality of products they carry and the decisions of consumers as to where to shop. These images stem from their design and physical environment, their pricing strategies, and product assortments. A study of retail store image based on comparative pricing strategies found that consumers tend to perceive stores that offer a small discount on a large number of items (i.e., frequency of price advantage) as having lower prices overall than competing stores that offer larger discounts on a smaller number of products (i.e., magnitude of price advantage). Thus, frequent advertising that presents large numbers of price specials reinforces consumer beliefs about the competitiveness of a store’s prices. This finding has important implications for retailers’ positioning strategies. In times of heavy competition, when it is tempting to hold frequent large sales covering many items, such strategies may result in an unwanted change in store image. The type of product the consumer wishes to buy influences his or her selection of a retail outlet; conversely, the consumer’s evaluation of a product often is influenced by the knowledge of where it was bought. A consumer wishing to buy an elegant dress for a special occasion may go to a store with an elegant, high-fashion image, such as Saks Fifth Avenue. Regardless of what she actually pays for the dress she selects (regular price or marked-down price), she will probably perceive its quality to be high. However, she may perceive the quality of the identical dress to be much lower if she buys it in an off-price store with low-price image.

1.4.9.8.

Manufacturers’ Image

Consumer imagery extends beyond perceived price and store image to the producers themselves. Manufacturers who enjoy a favorable image generally find that their new products are accepted more readily than those of manufacturers who have a less favorable or even a “neutral” image. There is a positive correlation between pioneer brand image and an individual’s ideal self-image, which suggests that positive perceptions toward pioneer brands lead to positive purchase intentions. Consumers choose brands perceived as similar to their own actual, ideal, social, ideal-social, and situational-ideal-social images. Thus, if a consumer believes that using the brand is fun, he will buy it and use it when he is having fun with his friends and to him, brand will be worth what it costs, so long as he perceives it as fun.

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Perceived Risk

Dowling and Staelin defined risk as a consumer’s perceptions of the uncertainty and adverse consequences of engaging in an activity. Consumer behavior is motivated to reduce risk. When consumers intend to buy a product or a service, they often hesitate to make the final decision because they cannot be sure that all of their buying goals will be accomplished with the purchase. Another factor of consumers’ motivation to process information about a product or brand is perceived risk, the extent to which the consumer is uncertain about the personal consequences of buying, using or deposing of an offering. If negative outcomes are likely or positive outcomes are unlikely, perceived risk is high. Consumers are more likely to pay attention to and carefully process marketing communications when perceived risk is high. As perceived risk increases, consumers tend to collect more information and evaluate it carefully. Perceived risk can be associated with any product or service, but it tends to be higher: 1) When little information is available about the offering, 2) When the offering is new, 3) When the offering has a high price, and

4) When the offering is low priced Consumers must constantly make decisions regarding what products or services to buy and where to buy them. Because the outcomes (or consequences) of such decisions are often uncertain, the consumer perceives some degree of “risk” in making a purchase decision. Perceived risk is defined as the uncertainty that consumers face when they cannot foresee the consequences of their purchase decisions. This definition highlights two relevant dimensions of perceived risk: uncertainty and consequences. The degree of risk that consumers perceive and their own tolerance for risk taking are factors that influence their purchase strategies. It should be stressed that consumers are influenced by risks that they perceive, whether or not such risks actually exist. Risk that is not perceived – no matter how real or how dangerous – will not influence consumer behavior. The major types of risks that consumers perceive when making product decisions include functional risk, physical risk, financial risk, social risk, psychological risk, and time risk. 1.4.9.9.1. Types of Perceived Risk Every purchase decision involves some level of risk. There are several types of risk that can discourage consumers from either making a choice or delaying the purchase decision. The following are common types of risk: 1) Functional or Performance Risk: If I buy Product X, will it actually deliver the benefits it promises? 2) Financial Risk: If I buy Product X, will I lose money? Will I find it does not give the anticipated value for the money? Can I find the same product for a lower price somewhere else? 3) Psychological Risk: If I buy Product X, will owning it in any way damage my self-image, self-confidence or ego? 4) Social Risk: If I buy Product X, will other people think less of me because I made a socially unacceptable choice? 5) Physiological Risk: If I buy Product X, is there potential for physical harm because I selected a product of inferior quality, one beyond my ability to use properly or one that is poorly manufactured? 6) Time Risk: If I buy Product X and it proves inadequate, how much of my time will I have wasted in search or will my use of the item require more time than I had anticipated or am willing to give? 7) Linked-Decision Risk: If 1 buy Product X, will this result in additional purchases of other goods or services as a direct result of having selected this item? 1.4.9.9.2.

Risk Reduction Strategies

Book Matter [Book Code: 22.14, Page no.69, CB by Majumdar] 1.4.9.9.3. Variation of Perception of Risk Consumer perception of risk varies, depending on the person, the product, the situation, and the culture. The amount of risk perceived depends on the specific consumer. Some consumers tend to perceive high degrees of risk in various consumption situations; others tend to perceive little risk. For example, adolescents who engage in high-risk consumption activities, such as smoking or drug use, obviously have lower perceived risk than those who do not engage in high-risk activities. High-risk perceivers are often described as narrow categorizers because they limit their choices (e.g., product choices) to a few safe alternatives. They would rather exclude some perfectly good alternatives than chance a poor selection. Low-risk perceivers have been described as broad categorizers because they tend to make their choices from a much wider range of alternatives. An individual’s perception of risk varies with product categories. For example, consumers are likely to perceive a higher degree of risk (e.g., functional risk, financial risk, time risk) in the purchase of a plasma television set than in the purchase of an automobile; this type of risk is termed product-category perceived risk. Researchers have also identified product-specific perceived risk

The types of perceived risk are: 1) Functional Risk: Functional risk is the risk that the product will not perform as expected. 2) Physical Risk: Physical risk is the risk to self and others that the product may pose. 3) Financial Risk: Financial risk is the risk that the product will not be worth its cost. 4) Social Risk: Social risk is the risk that a poor product choice may result in social embarrassment. 5) Psychological Risk: Psychological risk is the risk that a poor product choice will bruise the consumer’s ego. 6) Time Risk: Time risk is the risk that the time spent in product search may be wasted if the product does not perform as expected. 1.4.9.9.4. How Consumers’ Handle Risk/Dealing with Perceived Risk Consumers develop various strategies to relieve perceived risk, including the following: 1) Buy the brand whose advertising has endorsements or testimonials from typical consumers, from a celebrity, or from an expert on the product. 2) Buy the brand that the consumer has used before and has found satisfactory. 3) Buy a major, well-known brand, and rely on its reputation. 4) Buy the brand that has been tested and approved by a private testing company. 5) Buy the brand offering a money-back guarantee with the product. 6) Buy the brand that has been tested and approved by a branch of the government. 7) Buy the most expensive and elaborate model of the product.