1. CONSUMER BEHAVIOR BUAD 307 MARKETING FUNDAMENTALS

2. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 2 Learning Outcome Objectives Understand how consumer cognitive (thinking) processes and limitations, affect, beliefs, social influences, and other contextual factors influence consumer decision making, choices, and behavior Appreciate how these insights can be used to design and implement effective marketing strategies Appreciate individual and segment differences in process and outcome

3. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 3 CONSUMER PERCEPTION/ SENSATION COGNITION AFFECT BELIEFS SOCIAL AND OTHER INFLUENCE INFO SEARCH CHOICES PREFERENCES COMMUNICATION MARKET RESEARCH STRATEGY Influences on and of Consumer Behavior

4. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 4 True or False? 1.If you have bad breath, you cannot smell it yourself. 2.If you eat a balanced diet, you do not need vitamin supplements. 3.Using a razor with five blades will reduce the likelihood of cutting yourself and will result in less skin irritation. 4.Dell Computers tend to be of higher quality than those made by HP and Sony. 5.Rust stains on clothes can be removed with the use of lemon juice. Bleach actually makes these stains worse.

5. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 5 Questions Faced By Consumers Are soft drinks sweetened with high fructose corn syrup worse than those sweetened with cane sugar? Are veggie burgers actually healthy? What makeup should you use to get an “even” skin tone? Do I get any useful benefits from spending more than $125 on a digital camera? Should I get a “make-over?” What am I looking for? What should I do? Is my mechanic honest? Should I give my wife roses, chocolate, or software?

6. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 6 Consumer Problems and Recognition Consumer problem: Discrepancy between ideal and actual state--e.g., consumer: –Has insufficient hair –Is hungry –Has run out of ink in his or her inkjet cartridge Problems can be solved in several ways -- e.g., stress reduction  vacation, movie, hot bath, medication

7. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 7 CONSUMER DECISIONS: Theory and Reality in Consumer Buying INFORMATION SEARCH PROBLEM RECOGNITION EVALUATION OF ALTERNATIVES PURCHASE POSTPURCHASE EVALUATION/ BEHAVIORS Theory Complications

8. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 8 Post Purchase Behavior

9. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 9 Usefulness of the Model of Consumer Decision Making Most useful to determine how search for a particular consumer need or a product category may systematically differ from others –Importance of different steps –What may happen in each step (e.g., brand switching) –Extent of overlap of stages –Likeliness of different types of post purchase behaviors (e.g., WOM, positive or negative review, returning product) Not as useful for assessing search for frequently used products

10. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 10 Approaches to Search for Problem Solutions INTERNAL EXTERNAL Memory Thinking Word of mouth, media, store visits, trial

11. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 11 Options Identified and Considered UNIVERSAL SET RETRIEVED SET EVOKED/ CONSIDERATI ON SET All possible options Options that readily come to mind Options that will be considered by the consumer Note: Retrieved and evoked sets will vary among different consumers. Brand awareness is important since this is required for the brand to be in the evoked and retrieved sets.

12. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 12 REMINDER For low involvement products, efforts aimed at affecting internal search tend to be more effective—the consumer is usually not willing to expend energy on external search. External search is more likely for higher involvement products.

13. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 13 Decision Making Issues Involvement level –Temporary –Enduring Consumer locus of control –Internal –External Product category complexity Consumer knowledge

14. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 14 Temporary Involvement CONSUMER NEEDS TO MAKE A DECISION IN AN IMPORTANT PRODUCT CATEGORY OF LIMITED PERSONAL INTEREST EXTENSIVE RESEARCH AND ANALYSIS IN ORDER TO MAKE A GOOD DECISION READING REVIEWS LOOKING AT PRODUCTS ASKING FRIENDS THINKING ABOUT OPTIONS DECISION PURCHASENEED FILLED NO NEED TO REMAIN INVOLVED UNTIL NEXT PURCHASE Note that temporary involvement can be quite high while it takes place.

15. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 15 Enduring Involvement CONSUMER HAS AN INHERENT INTEREST IN THE PRODUCT CATEGORY EXTENSIVE RESEARCH AND ANALYSIS TO SATISFY CURIOSITY READING REVIEWS LOOKING AT PRODUCTS ASKING FRIENDS THINKING ABOUT OPTIONS DECISION MAY OR MAY NOT NEED TO BE MADE AT THIS TIME PURCHASE MAY OR MAY NOT BE NEEDED AT THIS TIME CONSUMER REMAINS INTERESTED IN PRODUCT CATEGORY

16. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 16 Evaluation Type –Compensatory: Decision based on overall value of alternatives (good attribute can outweigh bad ones) –Non-compensatory: Absolutely must meet at least one important criterion (e.g., car must have automatic transmission) –Hybrid: Combination of the two (e.g., one non-compensatory measure, then compensatory tradeoffs on other attributes –Abandoned strategy: Consumer finds initial criteria unrealistic and proceeds to less desirable solution IMPORTANT LESS IMPORTANT

17. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 17 Heuristics—Low Involvement Decision Rules If either Coke or Pepsi is on sale, buy that brand; otherwise, buy Coke The larger the navels, the better the orange The larger package is likely to offer a lower unit price (not true in reality)

18. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 18 Consumer Information Processing PERCEPTION CONSCIOUS PRE-CONSCIOUS LINKS TO OTHER ITEMS IN MEMORY  ASSOCIATION COMPREHENSION CORRECT OR INCORRECT ELABORATE OR SHALLOW ATTENTION LIMITED—SUBJECT TO PRIORITY DIVIDED STORAGE (IN MEMORY) RETRIEVAL (ACTIVATION) TRIGGERS (“REMINDERS” TO ACTIVATE MEMORY) ELABORATION (THINKING BRINGS ABOUT NEW LINKS AND THOUGHTS) BEHAVIOR Note: This is a simplified conceptual model that should not be taken too literally. The boundaries between the steps are actually rather “blurry.” No “guaranteed” arrow— triggers may or may not happen.

19. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 19 Associate Network of Knowledge FAT PEANUTS MITT ROMNEY ZOO MEDICINE 7 BLIND MEN ELEPHANT PEANUT BUTTER REPUBICAN PARTY TIGER GIRAFFE TRUNK SANDWICH

20. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 20 APPLE FRUIT DESKTOP INNO- VATION PORTABLE iPAD HEALTHY LAPTOP CASKET DEAD STEVE JOBS E-MAIL GOSSIP iPHONE SOAP OPERAS SPREAD- SHEET TRAVEL TV PEAR TEXTING REPORT JUICY iTUNES PRINTER MONITOR GRANDMA FINANCE FUNERAL

21. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 21 Attitudes―components BELIEFS AFFECT (FEELING) BEHAVIORAL INTENTIONS

22. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 22 Attitude Components Beliefs –Can be positive, negative, or neutral –May or may not be accurate –May contradict other beliefs held by the other person Affect –May be positive or negative –May take on specific dimension (e.g., pleasure, disgust) Behavioral Intentions –An individual’s plan or expectations of what he or she will do –May appear inconsistent with beliefs –May not predict well what the individual will do in reality

23. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 23 Generating Beliefs Through Advertising Statements must be –Perceived –Comprehended –Remembered –Believed (at least in part)

24. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 24 Affect Based on –Past emotional associations of product –Emotional effect of beliefs

25. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 25 Attitude Change Strategies, Part I Changing Affect –Classical conditioning: “Pairing” the brand or product with desired stimulus—e.g., a car with a beautiful woman –Attitude toward the ad: A likable ad for a brand in a mundane product category— e.g., Energizer Bunny Snuggles (fabric softener) –Mere exposure: Items (e.g., advertisements) that have been seen before tend to be better liked

26. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 26 Attitude Change Strategies II Changing behavior (e.g., sampling): Consumers tend to infer attitudes from behavior (e.g., I buy the product  I must like it or It must be good) Changing a belief component –Changing existing beliefs Difficult Advertiser’s motives are suspect –Changing the importance of attributes –Adding beliefs

27. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 27

28. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 28 Adding Beliefs (True or Not): Examples Brushing and flossing do not reach all areas of the mouth People under stress need more vitamins Baking soda will reduce odor of refrigerators Fragmented hard drives may cause computer errors

29. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 29 REMINDER Changing currently held beliefs tends to be difficult—people know the marketer has an ulterior motive Adding new beliefs that are not inconsistent with what is already believed may be more effective

30. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 30 One-sided vs. two sided appeals One-sided: only saying what favors your side Two-sided: stating your case but also admitting points favoring the other side –Why is this effective?

31. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 31 The Means-End Chain Large engine Fast acceleration Performance Feeling of power Self-esteem Promotion/ positioning should be aimed at higher levels of chain! Attributes Consequences Values Note additional details on the handout.

32. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 32 Subliminal Perception: A Diabolical Marketing Tool? Subliminal messages in ads are illegal in U.S. Almost certainly not a useful method to sell products –At most one or two syllables can be “registered” or understood –Complex messages cannot be processed subliminally

33. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 33 The Mythical Theater Experiments An advertising executive claimed in 1957 to have “spliced” messages of “EAT POPCORN” or “DRINK COCA COLA” into film footage (24 frames per second in traditional movie films) –A frame with the message inserted every, say, 20 th frame –Not consciously notable Claimed that popcorn sales increased 57% and Coca Cola sales by 18% on days the respective message was used Admitted to be a hoax These messages are much longer than the 1-2 syllables the brain can pick up Tachistoscope research: People giggle at brief “dirty” (“four letter”) words exposed for a fraction of a second but not at neutral ones (those exposed to dirty words do not consciously know specifically what they saw)

34. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 34 Procedural Knowledge: One Component of Ability Knowledge—some conscious and some unconscious—of how to do something –Drive a car –Draw in 3D –Handwrite –Hit a baseball with a bat –Touch type –Tie a tie –Walk in high heels Usually contains a large unconscious component (over time, clumsy conscious actions become semi-automatic with practice) Often involves a component of fine motor skills Lack of training may prevent consumers from buying and using certain products—e.g., manual transmission car, motorcycle Some products can be optimized to reduce the effort needed to gain sufficient procedural knowledge

35. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 35 Some Consumer Behavior Issues That Will Come Up Elsewhere in the Course Demographics (segmentation) Lifestyle (segmentation) Culture/subculture (segmentation, international marketing) Diffusion of innovation (product) Attention (promotion)

36. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 36 Organizational Buyers Types –Industrial –Reseller –Government and non-profit organizations Purchase types –Straight rebuy –Limited decision making –Extended decision making Characteristics –Greater involvement –Bureaucracy –Long term relationships –Price is important but may not be the most important factor