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 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? Which tie should I wear for a job interview? 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 Approaches to Search for Problem Solutions INTERNAL EXTERNAL Memory Thinking Word of mouth, media, store visits, trial

10. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 10 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.

11. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 11 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.

12. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 12 Decision Making Issues Involvement level –Temporary –Enduring Consumer locus of control –Internal –External Product category complexity Consumer knowledge

13. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 13 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

14. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 14 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)

15. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 15 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.

16. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 16 Associate Network of Knowledge FAT PEANUTS MITT ROMNEY ZOO MEDICINE 7 BLIND MEN ELEPHANT PEANUT BUTTER REPUBICAN PARTY TIGER GIRAFFE TRUNK SANDWICH

17. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 17 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

18. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 18 Attitudes―components BELIEFS AFFECT (FEELING) BEHAVIORAL INTENTIONS

19. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 19 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

20. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 20 Generating Beliefs Through Advertising Statements must be –Perceived –Comprehended –Remembered –Believed (at least in part)

21. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 21 Affect Based on –Past emotional associations of product –Emotional effect of beliefs

22. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 22 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

23. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 23 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

24. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 24 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

25. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 25 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

26. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 26 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?

27. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 27 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.

28. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 28 Subliminal Perception: A Diabolical Marketing Tool? Subliminal messages in ads are illegal in U.S. Some research support for modest effects –Probably limited to one syllable words –Complex messages can probably not be processed subliminally Highly publicized Coke and popcorn “studies” never actually took place

29. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 29 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)

30. BUAD 307 CONSUMER BEHAVIOR Lars Perner, Instructor 30 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