Consumer Behavior and Analysis Final Essays
Terms in this set (39)
Discuss the two levels and the two dimensions of the environment. Provide examples of each.
1) Macro: large-scale, environmental factors
2) Micro: social aspects and immediate surroundings.
-people in your family
- a particular salesperson
- a clean store
1) Social Environment: social interactions
-two types of social interaction:
-direct social interaction: someone talking to a sales-representative about which shirt they like better.
-vicarious social interaction: observing what shirts other customers are buying.
2) Physical Environment: non-human, physical aspects where human behavior occurs.
3 major environment factors
-Consumer behavior is often influence by time. For example, a consumer may not purchase anything before 8 if their favorite stores don't open before that time.
-A consumer may be less likely to go out and shop if the weather is too hot or too cold
- can change a consumers mood, behavior, or anxiety level.
Discuss the five generic consumer situations and provide examples of each. For each, identify uncontrollable and controllable factors that should be considered in the development of marketing strategies.
1) Information Acquisition
- consumers gain information
- The two main information acquisitions
1) Information contact is when consumer see something like a billboard while driving on the highway (uncontrollable)
2) Communication would be a consumer asking a sales-representative about a product (controllable)
- consumer comes in contact with a store/product
- social, physical, and spacial elements
- very incontrollable factor in marketing
3) Purchase Situations
- funds transferred and a consumer receives product
- consumer going to a check out line at a grocery store
-marketer can control ease and availability of purchase
- use of a product/service
- consumption is when they drink soda
- no control over the consumption
-Dentists and hair-stylists have control
(on their premises)
- consumer disposes product or product package
- no control when the disposal is done away from premise
-If a consumer is throwing away package in grocery store, marketer could encourage the consumer recycles by providing different trash bins. This is an example of a controllable factor.
Use the Wheel of Consumer Analysis to describe how affect and cognition and behaviors interact with environmental factors in an automatic-purchase situation.
The Wheel of Consumer Analysis
1) Consumer Behavior
2) Consumer Environment
3) Consumer Affect and Cognition
(all parts form circle and affect each other: interrelated)
-An automatic-purchase situation occurs when a purchase is made extremely convenient for the consumer.
(This can be influenced by all 3 parts)
-perfect purchase situation is when all factors work together harmoniously
- if a consumer is in a good mood, has lots of energy, and it's a beautiful day out, and a farmer's market is very close by, they will be more likely to go shop and purchase there.
-Another example would be a consumer who wants to go get a hair cut. If the consumer didn't want to go out in the rain and they could only pay with a credit card, the perfect situation would start off with a nice, sunny day. Anther factor would be a close-by beauty salon that accepts credit. The consumer may also feel insecure about their current hair style, leading to a higher likelihood of getting a haircut. If all these factors come together, an automatic-purchase situation is more likely to occur.
How can marketers use situational analysis to segment markets? Identify product categories where the approach has been used to the advantage of the marketing organization.
-Situation can be defined as a goal-directed behavior and the environment where that behavior occurs.
-Situational analysis can also be used to segment markets.
-many consumer-behavior situations are common and reoccurring, a marketer can use this information to create groups or segments of consumers.
-An example would be a group of consumers living in a rural part of town. Since the consumers live far from the city, they tend to order more products online. A marketer could determine this group of consumers due to their physical situation. A marketer could then target this group by emailing coupons for their online store to this particular area. This would encourage more online ordering.
-One other example would be when a marketer changes a product to best fit the situation of a particular market segment. For example, in very cold areas, a restaurant many change their menu to offer more hot drinks. In this situation, a company is changing their product to best fit the physical environment or, more specifically, the weather.
Explain how disposition situations are of interest to marketers.
-Disposition situation is when the key area of interest is the disposal of product
- recycling and a green way of thinking has been becoming more and more important to people -disposition situations are becoming more important in marketing.
-Some people merely throw away products, some give old products to charity. Due to cost consciousness and concern for the natural environment, more recycling of waste has been taking place in areas such as the US.
-Marketers can help cater to this new trend a few ways.
1) Businesses such as fast-food restaurants can offer recycling bins for waste.
2) Companies with highly packaged products can start using recyclable materials.
3) A marketer could highly advertise that their products are recyclable and green. Eco-friendly consumers will be more likely to buy their products and will be more likely to spend higher amounts on the products.
Define culture and compare and contrast the two approaches to cultural analysis: the content of the culture versus the cultural process.
Culture: meanings or beliefs shared by a majority of a social group.
Cultural meanings: reactions, behaviors, and beliefs.
-For example, a cultural behavior in the U.S. would be a handshake when meeting someone. This is a behavior that is culturally accepted and recognized by most Americans.
two approaches to cultural analysis
1) content of culture: beliefs, values, and goals held by most people in a culture.
(It can also include physical objects or social institutions)
2) The cultural process: how cultural meanings develop or are transformed from actions of organizations.
ways in which these approaches differ
1) when a marketer focusses on the content of culture, they look in depth at current culture. A marketer who focusses on the cultural process looks at how culture changes and transforms.
2) Cultural process also looks more at how businesses influence culture rather then the meaning of culture in general. Though both of these approaches are different, they are both very important for marketers.
Describe how possession rituals can transfer meaning from products to consumers.
Possession rituals refers to establishing meaning.
-A consumer needs to be assured that they made a good purchase decision and they often gain this assurance through possession rituals.
-An example would be someone buying a new necklace and then wearing. By wearing it and getting compliments on it, the consumer is assured that they made a good choice and the product is officially theirs.
-Through possession rituals, meaning can also be transferred from products to consumers.
-meaning goes from the consumer to the product. This happens through care or admiration for a product. For example, if my product is a new watch, I may routinely clean my watch and replace the battery. Though taking care of my watch, I transfer meaning to it. That meaning is then transferred back to me since I gain satisfaction from my product.
Describe a personal experience in which you performed a divestment ritual. What personal meanings did you remove through the ritual?
A divestment ritual is the opposite of a possession ritual. Rather then acquiring meaning, a consumer is removing meaning. A product may acquire meaning through personal attachment, making it hard for consumers to let go of that product at times. I once had a shirt that I had worn on a very important day. Whenever I wore that shirt, I would envision that important day. Because of this, I placed great meaning on this shirt and I became very personally attached to it due to memories.
When my shirt became very old and got a hole in it, I still had trouble letting go of that product. My divestment ritual consisted of a few things. First I got my mom's opinion, which was the throw the shirt out. This reassured me. I then took a picture in the shirt so I could still remember it despite throwing it away. This is a just a simple example of both a possession ritual and divestment ritual.
Discuss how the three main approaches to dealing with cross-cultural factors in international marketing could be applied to the marketing of a soft drink such as Dr. Pepper. Describe one problem with each approach. Which do you recommend and why?
1) Adapting Strategy to Culture
- looks at how different consumer needs, wants, preferences, attitudes, and values are.
- referred to as Adapting Approach
- marketer adapts their product to best fit the international consumer.
2) Standardizing Strategy Across Cultures.
- also referred to as Global Marketing
- markets the same product to all markets
- standardize products to fit in all markets.
- common approach to truly international companies
- permanently engage in international business.
- This strategy also tends to save money
3) change the culture.
- more proactive marketing strategy
- seeks to change the culture to fit the product rather then changing the product to fit the culture.
- can accomplish this through advertising that convinces the consumer of something.
Define the concept of subculture, discuss stages of subcultural analysis, and provide examples of five different subcultures.
-Subculture is "distinctive groups of people in a society that share common cultural meanings."
-Subcultures share certain beliefs, behaviors, and environmental factors.
-In order for a group of people to qualify as a subculture, they must have some unique meanings only relevant in that group.
1) a subculture is broadly identified by a demographic characteristic.
-For example, a broad subculture would be teenage American girls. Other demographic characteristics that can be used to define are geography, age, ethnicity, and gender.
2) further identify that group by more demographic characteristics.
-For example, a researcher could take teenage American girls and further define that. They could say tall, blonde, teenage, American girls. A marketer can define a subculture as broadly or as specifically as needed for research.
-Two more examples of a broad subculture would be African American men and 3 month old Chinese babies.
-Two more specifically identified subcultures would be 13 year old South African Girls and 20 year old men who are in the Navy. These are more specific since there are multiple demographic characteristics that define them.
Discuss the concept of acculturation, including the stages of acculturation and the marketing implications.
Acculturation: when a person moves from one culture to another.
-During this process, the person must accept and adapt to new meanings, behaviors, beliefs, and environmental factors.
-A consumer who switches cultures must become accustomed to new buyer knowledge. A marketer needs to help new consumers become knowledgeable and skilled.
four stages to acculturation
1) Honeymoon Stage
- shallow interpretation and lack of knowledge
- enthralled with the foreign culture.
- example would be an American visiting Brazil. They may find new products and stores they've never seen and become fascinated.
2) Rejection Stage
- when old behaviors/beliefs conflict with new culture
- consumer may reject or resent differences
-example of this would be an American moving to Canada. Many products tend to be more expensive in Canada. Despite being intrigued with all the new products, a consumer may reject them due to higher prices.
3) Tolerance Stage
-people become more accustomed to the differences
- begin to accept them more
-For example, if an American lives in Canada long enough, they may come to tolerate or accept the higher prices. They also may come to appreciate the products more as they cultural understanding increases.
4) Integration Stage
-when people become fully adjusted to differences
-The consumer is able to fully function in the new environment
Define four social class groups in the United States and identify marketing implications of each.
Social class: a status determined by social and economical status
-U.S. has 4 social classes organized into hierarchy.
1) Upper Americans
-14% of population
- highest income
-high quality, prestigious brands
- known to favor travel, exclusive clubs, and expensive activities. A marketer could take this into account when marketing towards this group
2) Middle Class
- 32 % of population
- idolize the Upper Americans
- desire to have the brands and products that the Upper Americans favor.
- having the Upper Americans buy and promote their products, they will encourage sales from the Middle Class Americans.
3) Working Class
- 38 % of population
- dependent on economic support such as job promotions or opportunities
- can't afford the same products as the Upper and Middle class (but desire to keep up with the times)
-Marketers can target the Working Class by offering cheaper versions of products favored by the Upper and Middle class.
4) Lower Americans
-16% of population
- people with extremely low to no incomes.
- supported by the higher classes and the government.
- some companies donate to homeless shelters when a consumer purchases certain items. This is a good promotional strategy.
There has long been a controversy as to whether social class or income is the better variable for use in consumer analysis. Assume the role of advocate of each position and state arguments for each (pros and cons).
-Though these are both good strategies, they have pros and cons.
Social Class (not highly priced, this is more relevant)
-looks at lifestyle and beliefs rather than just income
-superior for products that are symbolic/visible
-less relevant for efficiency and affordability items
- Not all products are meant to be seen.
- For appliances and kitchen products, consumers tend to use their income as a rule of thumb.
- A consumer is less concerned with looks and more concerned with efficiency and affordability.
-it is generally believed that both of these factors should be combined for the best consumer analysis. Though they both have their strengths when it comes to certain products, the best overall results occur when a marketer observes both income and social class.
Define the term reference group. Discuss types of reference-group influence and provide examples of each.
A reference group, typically used in marketing research, includes one or more people. These people are used as a basis for comparison or analyzation. A researcher may study the group's responses and behaviors.
3 main reason why people will choose to identify with a reference group
1) to gain useful knowledge
2) to obtain rewards or punishments
3) to acquire meanings that will change or maintain their self-concept.
3 types of reference-group influence
1) Information Reference Group Influence
- when someone gains information about themselves, other people, products, stores, or services
-obtained through verbal communication or observation
3) Utilitarian Reference Group Influence
- reference group controls punishments or rewards
- group creates group norms which can result in punishment or reward when followed or rejected.
(if it is popular in a group to wear Ugg boots. If a girl decides to wear a knock-off brand instead of real uggs, she may be outcast)
4) Value-Expressive Reference Group Influence
- people's self-concepts are affected
- example would be the creation of new cultural meanings that in turn influence self-concepts.
-People long to feel meaning by identifying with certain reference groups.
(Abercrombie & Fitch was recently called out for only wanting skinny, cool people to wear their brand. In this situation, their reference group has associated this brand of clothing with being cool and skinny. Others may have a self-concept of being skinny and cool if they wear this brand)
Explain the concept of family decision making, including the roles family members play.
Family decision making: how family members interact and or influence each other when it comes to purchases.
six different decision-making roles
-give information about products or services to other members
(if a wife asked husband go get some groceries, she may inform him to buy tissues in bulk rather than separately because it's a better financially)
- control flow of information into the family
(if a new candy store opened down the road, a mother may not inform her children. If the mother didn't want her children to eat too much candy, then she wouldn't want them to know candy is close)
- determine whether or not to buy a product
(a child may want a candy bar, but it is ultimately the mothers choice of whether or not it is purchased since she has the money)
- actually purchase the product or service
(a mother may decide to buy milk and then have her son actually go purchase the milk)
-the ones who consumer or use the product
(The son may buy the milk but it may be the husband who actually consumers the milk)
- actually dispose of the products or stop the services (the husband may take out the trash every week)
Describe the six common types of family-influence strategies.
1) Expert Influence
-one family member claims to be more knowledgable then the other and uses their expert knowledge to influence their decision.
(husband knows more about cars, over-all influencing his wife's decision on what car to buy)
2) Legitimate Influence
- based on feelings or shared values.
(husband may convince his wife that he should buy the cars because he is the "man of the household" and it is his job)
3) Bargaining Influence
- one person bargains or trades on order to do something
(wife may let her husband buy the new car he wants if he lets her go on a shopping spree)
4) Reward/Referent Influence
- spouse or family member bribes another in order to get what they want
(if a child really wants to go get ice cream, they may offer to do the dishes for their mother if she agrees to take them)
5) Emotional Influence
- someone shows or displays an emotion in order to get a response (verbal or non-verbal)
(a husband refuses to get his wife a new vacuum machine, she may refuse to talk to him or she may give him the silence treatment)
6) Impression Management Influence
- most deceptive form of influence since it can involve lying or tricking a family member
(if a mother doesn't feel like taking her children to get ice cream, she may tell her children the ice cream shop is closed)
Explain the concept of family life cycle, and discuss why it is important to marketers.
The family life cycle
- changed over the years
-developed into a modern family life cycle
- can represent single parents, young singles, older singles, and married couples with children
-important in marketing analysis
1) Helps a marketers understand how culture trends affect families and consumption behavior
(if it's culturally trendy for families to buy their food at a certain grocery store, consumption behavior could be greatly affected)
2) marketer can observe the family life cycle so they can reduce shopping time and stress
-This can be done by providing information, assisting in planning, developing out-of-store selling, automating processes, and by improving delivery
3) Use the family life cycle to segment the market, analyze the market, and choose a target market.
(a marketer may choose to analyze single parents, young singles, older singles, and married couples with children. The marketer will then choose the market segment that will be most likely to adopt their product)
Define market segmentation. Discuss the steps involved in the segmentation process.
Market segmentation: marketer divides a whole market into different groups or segments.
-segments typically have some sort of similarities
- goal is to create segments that will be most likely to adopt or be interested in their products or services.
1) Analyze Consumer-Product Relationships
- consumer behavior, values, beliefs, consumption behavior, etc.
(since prestige is often a big factor, a marketer may see that their product, Lululemon pants, are mostly adopted by upperclass girls. Lululemon brand is often though of as a more prestigious brand)
2) Investigate the Segment Bases
- geographic segmentation, demographic segmentation, sociocultural segmentation, and cognitive segmentation.
(if the product is still Lululemon pants, the basis for segments might first of all be women since Lululemon pants are made for women. The next basis might be ages 15 to ages 40 since women in this age range are most likely to wear the pants)
3) Develop Product Positioning
- done in relation to competing products or services.
- can also position according to attributes, use or application, product user, product class, or competitors.
4) Select a Segment Strategy
1) if their product applies to no one, they may decide not to enter the market
2) they may decide their product applies to everyone and be a mass marketer
3) they could decide their product only applies to a small section of the market and choose just one segment
4) a marketer may decide on more then one segment and have a different strategy for each
5) design a marketing mix strategy
- This is done by finishing the marketing mix for each segment.
Describe the various segmentation bases for consumer markets.
1) Geographic Segmentation
-region, city, or climate
-Ex. people living in Denver, Colorado
2) Demographic Segmentation
- age, gender, income, education, etc.
- Ex. females that are age 22 or men whose income is over $35,000
3) Sociocultural Segmentation
-culture, subculture, race, religion or social class
- Ex. upper-class African American
4) Affective and Cognitive Segmentation
- knowledge, involvement, attitude, benefits sought, or perceived risk.
-Ex. people who are very knowledgeable about the product and have a positive attitude towards the product
5) Behavioral Segmentation
-media usage, payment methods, loyalty status, user status
6) benefit segmentation
7) psychographic segmentation (lifestyle)
8) person/situation segmentation (consumer differences)
Explain each of the five approaches to product positioning and offer an example (other than the ones in your text) for each approach.
attribute, user or application, product user, product class, or by competitors.
- positions according to specific attribute, feature, or characteristic
-focuses on the use or application of the product
(if company makes baking mix that is meant to make cake they would emphasize the fact that their baking mix is meant for cake. Later, a marketer could decide that the baking mix can be used for more then cakes. In this case, they may use the other uses in the positioning)
3) Product User
-when a marketer takes personalities or lifestyles to position a certain product.
( specialty drink company might aim their healthy drinks at people who value their health and favor a healthy lifestyle)
4) Product Class
- when a marketer positions a product in relation to other products in the same category or class.
(gluten-free snacks are in the snack category like other snacks, but they are positioned as an alternative for those with allergies)
-when a marketer uses their competition to compare and contrast their product
(A local coffee shop may position themselves in comparison to Starbucks by saying they use less sugar then Starbucks)
What options are available to an organization after it identifies segments in the market? When would each of these options represent a reasonable choice?
1) Not Enter the Market
- a company may discover that there is no niche for their product and they need to start from the drawing board
2) Target the Whole Market
- mass marketing
3) Target Single Market
- product only applies to one type of segment
4) Target More then One Segment
- a marketer will need to design a marketing strategy for each segment
Describe the process by which the consumer comes to experience satisfaction or dissatisfaction. Illustrate each result with an experience of your own.
1) Prepurchase Performance Expectations.
-A consumer may analyze a product before it is purchased and make their own conclusions.
(For example, before buying gelato from a shop called Stella Luna, I had high expectations. I had heard from others that this was the best gelato and the store looked very good)
2) Preperformance Expectations: Confirmed/ Disconfirmed.
(For example, when I had Stella Luna gelato, my high expectations were met. Since my expectations were met, I was a satisfied consumer)
3) Positive/Negative Post Purchase Performance Perception
( An example of this situation would be when I bought Aussie Full Strength Hair Spray. I had high expectations since this was a well-reviewed hairspray. After using the product, my expectations were disconfirmed. The hairspray did not work well. I was very unsatisfied and my postpurchase performance perceptions were negative)
Explain the concept of adoption curve and the five categories of adopters. In general, to which adopter category do you belong? Explain.
The adoption curve
- tool used in analyzing consumer-product relationships
- shows the amount of purchasers of a product over a certain amount of time
5 Adopter Categories
-willing to take risks.
-purchase new, risky products no one has
- little time to make a decision
2) Early Adopters
- less reckless
-some of the first to adopt new products
- tend to influence the early majority.
3) Early Majority
- avoid all risks
- tend to purchase products that have already been purchased by the early adopters
4) Late Majority
- takes a bit longer to adopt products
- skeptical and careful with purchase decisions.
- traditional and stubborn
-may eventually adopt a product
- may not even adopt it at all
- I would say I tend to fall into the early majority. I like to read reviews written by innovators and early adopters before I make a purchase decision. I am also somewhat cautious with my purchase decision. I love to get new products relatively soon after they come out though, which is why I would categorize myself as an early majority adopter.
Discuss the importance of the package in marketing strategy.
1) packaging should PROTECT
2) packaging needs to be ECONOMICAL
3) packaging should allow convenient STORAGE
4) packaging needs to PROMOTE
packaging size, colors, and labels.
- Larger packages - favored since they are often viewed as being more economical.
-Lays, use large bags but only fill them part-way.helps the consumer feel like they are getting a good deal.
-Packaging colors can draw in or repel consumers. helps consumers recognize brands from afar.
-Labeling also needs to be carefully analyzed. Consumers favor clear, easy to read labels that offer important product information.
Explain the characteristics of new products that would be useful for predicting success and for prescribing effective marketing strategies.
- how product fits in with consumer behavior, cognition, and affect
- degree in which a product can be tried/tested by consumers.
(Photoshop offers a free monthly trial to new consumers. download = very trialable product)
-degree to which a consumer can observe the effects of a product (clothes = easy, food = hard)
- how fast a consumer can experience the benefits after purchasing a product
- how easily a consumer can understand and use a product
-increase simplicity by including clear, simple instructions in packaging
6) Product Symbolism
- the meaning a consumer places on the product
-higher end products are often adopted due to the symbolism placed upon them by society and consumers
Discuss the four types of promotion. Using the beer industry as an example, define and illustrate each of the four major types of promotion strategies.
-marketer pays to promote a product, brand, company
-billboards, commercials, and newspaper ads
(A beer company may pay to have a TV advertisement. The goal of this advertisement would be to encourage consumers to purchase the new beer)
2) Sales Promotion
-similar to advertisements- more direct
-price reductions, coupons, and contests.
- meant to change consumers immediate purchase behaviors
(If a beer company may choose to hand out coupons offering a discount)
3) Personal Selling
- interaction between consumer and salesperson
-salesperson can motivate and encourage a consumer to become more involved with the company or product. (beer salesperson standing outside the store. salesperson may talk to potential consumers, encouraging them to try their new beer)
- any unpaid form of promotion
- can be both negative and positive for a company or brand
(Positive post pictures of it on Instagram
Negative: negative review of it on the internet)
Discuss the communication process, including goals of promotion communications.
The Communication Process
-procedure -communicating information to the consumer. Once the information has been communicated, the consumer then takes action.
5 Step Process
1) Source of Information
- deciding what information needs to be communicated.
2) Encode Message
- creating a brief description or image to show the consumer
3) Transmit the Message.
- through a channel such as the TV, radio, or newspaper
4) Consumer Receives Message and Takes Action
-buying the product or merely looking at it in the store.
- helps marketers start the communication process over again, letting them know where they can improve.
5 Goals of Communication
1) recognize the NEED for the product
2) become AWARE of the brand
3) FAVOR their product/ positive attitude towards brand
4) WANT to purchase the brand
5) take action and PURCHASE the brand
Describe the elaboration likelihood model (ELM). Describe how the two routes of persuasion differ, and discuss their implications for developing effective advertising strategies.
ELM, the Elaboration Likelihood Model
- two different processes
* goal: to persuade consumers
1) Central Route
-higher involvement with the product or brand
- pay close attention to the advertisement
- focus on the product-related information
-The consumer will be more likely to read a whole ad on the product
- understanding the information on a deep level
- consumers have deeper thoughts about purchase consequences and product attributes
-thoughts more elaborate
-consumers have product beliefs that lead to brand attitude
-The attitude then leads to purchase intention.
2) Peripheral Route
- low involvement with the product or message.
- consumers have little motivation to pay close attention to the product-related information
- consumer will focus more on peripheral aspects
- entertainment value or eye-catching images.
- shallower thoughts about nonproduct information.
-There is also little, if any, elaboration.
-consumer nonproduct beliefs lead to attitude towards an ad.
- This then leads to a brand attitude and eventually a purchase intention.
-This process is more lengthy then the central route.
Explain the activities involved in managing promotion strategies.
1) Analyze Consumer-Product Relationships.
- study consumer needs, goals, values, and product knowledge levels
2) Determine Promotion Objectives and Budget
- aim to meet at least one big objective
- influencing behaviors, informing, reminding, and transforming responses
- set a budget
3) Design and Implement a Promotion Strategy
-relies greatly on the consumer-product relationship earlier researched by the marketer
-use sources such as the MECCAS model to develop an advertising strategy
4) Evaluate Effects of Promotion Strategy
-compare the effects with the set objective
- see where they need improvement or where they may need to change their objectives.
Define price, and explain the differences between price strategy and other elements of the marketing mix.
Price: "the amount of money one has to pay in order to receive a product or service"
- Price refers to a monetary value
- only element that includes revenues
-more abstract or intangible compared to the other marketing mix elements
-takes the least amount of research
-just as important as the other marketing mix elements
Describe the steps involved in developing a pricing strategy.
strategy developed in order to address 3 situations
1) when a price is being chosen for a new product
2) when a long-term change is being applied to an existing product
3) when a short-term price change is being considered.
1) Analyze Consumer-Product Relationships
- analyzing the competitive advantage of the product.
-If a product has a big competitive advantage, the consumer will be more likely to pay more for the product.
2) Analyze Environmental Situation
- the competition
3) Determine Role of Price in Strategy
- marketer must decide if they should use the product price as a part of positioning
4) Estimate Relevant Production/Marketing Costs
-can greatly affect the price of a product
- If the production/marketing has high cost, the company must charge more for a product in order to avoid losses.
5) Set Pricing Objectives
- to set a target return of investment
-important to set objectives to make sure the objectives are being met
6) Develop Pricing Strategy and Set Prices
overall goal is to
-set prices that are above the production costs
-set prices that are relative to competitive prices
-set prices that will generate consumer demand
Explain the concept of price elasticity.
Price elasticity is the relative change of demand for a certain product depending on the change in monetary price. For example, the demand for a product may increase as the price decreases or vice versa. Price elasticity can be dependent on a few factors. For example, if consumers are very price sensitive, the amount of demand will change greatly according to product prices. On the other hand, a customer may be willing to pay a lot for a certain product. In this case, the demand is not as dependent on the price range.
How can price be used to position products like tennis shoes or make- up?
Price can easily be used to position products in a few ways. When positioning tennis shoes that are more expensive then competing brands, a marketer may use the price to make their tennis shoes appear more superior. Since they are more expensive, a marketer could claim they have more benefits. On the other hand, a marketer could also use a lower price to position the tennis shoes. If the tennis shoes are cheaper than competing brands, a marketer could position them a a cheaper alternative to competing brands. This could appeal more to the lower-class that are price conscious. Makeup can be positioned the same way. More expensive makeup could be positioned as being more prestigious and high-quality due to the higher prices. Makeup could also be positioned as being cheaper then the competing brands, though offering the same benefits.
Define types of pricing strategies, and provide examples of each.
There are multiple types of pricing strategies a marketer can utilize.
1) penetration pricing (common)
-when a company initially charges a low price for a brand new product. As the product stays on the market, the company will slowly raise the prices. This strategy works when the demand for a product increases over its lifetime.
2) price skimming
- opposite of penetration pricing
-occurs when a product is introduced as a relatively high price. The price will then decrease over time.
- This is a very common strategy. Products such as Apple iPhones and MacBook Laptops are an example of price skimming since the price declines overtime.
Describe the various types of store layouts, including strengths and weaknesses of each.
2 Basic Store Layouts
1) Grid Layout
- retail stores and grocery stores
- simple and includes evenly spaced rows of products
- less expensive
- allows the consumer to becomes familiar
-easily locate items
- I am able to find the products I need in any Walmart
-easier to clean
- limited creativity
- limited browsing
-boring (know what to expect)
-browsing may be discouraged
-less structured and more random
- more relaxed form
- encourages consumers to browse
- encourages impulse purchases
- boutiques or specialty stores
- flexibility and visual appeal
- ability to create visually appealing displays
-loitering and potential confusion
- easier for shoplifters to loiter and steal
-Confusion may also occur
-People who need certain items may get lost
What specific environmental factors account for the difference in atmosphere between eating at McDonald's versus eating at an expensive, upscale restaurant?
- McDonald's has a very different atmosphere from expensive, upscale restaurants.
Atmosphere: "in-store emotional state. In-store emotional state can affect things such as purchase behavior"
3 Environmental Factors
(can greatly change a store's atmosphere)
1) Store Location
( For example, McDonald's is located in areas such as malls, food courts, gas-stations, and grocery stores. More upscale restaurants, on the other hand are often located near other upscale stores and shops. Upscale restaurants may also be found in more wealthy areas)
(McDonald's in-store layout is typically much smaller than an up-scale restaurant. In McDonald's you stand in a line to get your food and then you go sit at a table. In an upscale restaurant you are typically seated by a waitress and the layout is more complex then McDonald's. This creates a more creative, interesting atmosphere)
3) In-Store Stimuli
- colors, design, merchandise, displays
(This may be the area where McDonald's and upscale restaurants differ the most. For example, McDonald's includes bright colors and plastic chairs. Upscale restaurants, on the other hand tend to include neutral colors and expensive furniture. Upscale restaurants also will typically include decor such as paintings or statues. McDonald's has very little decor. Due to these interior differences, upscale restaurants create a relaxing, luxurious, exclusive atmosphere. McDonald's creates a friendly, open to all atmosphere)
What are the advantages and disadvantages to the consumer in purchasing from a mail-order catalog rather than from a retail store?
- in-home convenience
- product assortments that aren't available in store
- catalog prices higher than in-store prices
- shipping fees
-customer cannot physically examine the product
-customer must wait for the product to arrive
From a retailer's point of view, what would be the advantages and disadvantages of mail-order selling?
There are advantages and disadvantages for retailer's when it comes to mail-order selling
- company can keep the products in any location
(This saves the retailer from sending the product to multiple store locations)
- No worry about store layout or displays
- retailer has to deal will shipping the products
- returns are more likely
- deal with refunds and returns
If you were recommending a site for a clothing specialty store, which methods or models of store location would you use and why?
The best location can differ depending on the type of store, the surrounding stores, and the types of consumers.
- Regression Model
- population size and socioeconomic characteristics are analyzed
- help a marketer determine the potential performance of a specific area
- analyze the potential locations and see which population size and demographic works best for the clothing specialty store
Since the store is a clothing specialty store, it would do well in highly populated areas where many people will be exposed. It would also do well in a higher class area. If an area is less populated and lower-class, the store may not perform as well.
- Analog Approach
- looks at similar stores and sees how they are performing.
- If another specialty store is doing well in a certain area, the clothing specialty store will likely perform well there.
-This approach works well for a specialty store since it worries less about close competition.
-This approach also looks at how far people will go out of their way to get to these specialty stores.
-If the store has a high ability to attract customers, it is likely a good place for store location.