CONSUMER BEHAVIOUR

ASSIGNMENT-2
Submitted to Prof. Anupam Narula

Submitted By:

Ayush Goel (113071)

Q1: “Consumers do not buy drill bits-they buy ways to make
holes”. Assuming that this is true, what consumers are really
purchasing when they buy the following two items (a) Lipstick (b)
Life insurance policy?

A1. (a) When a consumer buys lipstick, she is actually purchasing

confidence and hope that comes with the belief that the lipstick will make
her look more attractive and presentable.

(b) While buying a life insurance policy, the customer is actually

purchasing peace of mind in knowing that he/she has secured the future
of their family members.

Q2: How downstream activities provide a way to build new forms of

customer value and lasting differentiation for companies operating in
maturing industries? Explain with examples?

A2. While upstream activities focus more on what can be sold to the
customers, downstream activities focus on shaping customer’s perception
and reducing their costs and risks. These downstream activities involve
the following:

1. Shaping customer perception

- Define competitive set
- Change purchase criteria
 - Build trust

2. Innovation
- Tailor offering to consumption circumstances
- Reduce customer costs and risks

3. Building accumulative advantage

- Harness network effects
- Accrue and deploy customer data

For example, one will not find Facebook’s competitive advantage locked
up somewhere in its sparkling offices in Menlo Park, or even roaming
free on the premises. The employees are smart and very productive, but
they’re not the key to the company’s success. Rather, it’s the one billion
people who have accounts on the website that represent the most valuable
downstream asset. For Facebook, it’s all about network effects: People
who want to connect want to be where everybody else is hanging out.
Facebook does everything possible to keep its position as the preeminent
village square on the internet: The data that users post on Facebook is not
portable to any other site; the time lines, events, games, and apps all
create stickiness. The more users stay on Facebook, the more likely their
friends are to stay. Network effects constitute a classic downstream
competitive advantage: They reside in the marketplace, they are
distributed and they are hard to replicate.

To this extent, downstream activities are more effective for maturing

industries where the products are increasingly commoditized and new
forms of customer value and last differentiation can be built.
Q3: What are the differences among the three problem-solving
decision-making approaches? What type of decision process would
you expect most consumers to follow in their first purchase of a new
product or brand in each of the following areas: (a) Sugar, (b) Smart
phone (c) Men’s aftershave lotion (d) Luxury Car.

A3. There are three primary problem solving decision making process for
consumers;

1. Extensive Problem Solving Decision Making:

In this, the customer buys product infrequently or once in a blue
moon. For example, while purchasing a real estate property, a
customer uses the extensive problem solving decision-making
method because albeit having general rules while buying property
there is no sure shot established criteria for judging the same.
2. Routinized Response Behavior:
This is used while customers are buying daily requirements
products and services. This applies mostly to FMCG products
where a customer has many options for the same product. For
instance, while buying toothpaste the brand that comes to mind is
Colgate because of its reputation and instantly recognized by
customers.
3. Limited Decision Making:
This is the grey area between the above two mentioned extreme.
The involvement in this is moderate, such that few brands are
considered before making the purchase decision. However, not a
lot of time or research is involved. For example, clothing.
 (a) Sugar - Routinized Response Behavior Decision Process
(b) Smart Phone - Limited Decision Making
(c) Men’s aftershave lotion - Routinized Response Behavior
Decision Process
(d) Luxury Car - Extensive Problem Solving Decision Making

Q4: Locate two examples (e.g., advertisements, articles, etc.)

depicting practices that are consistent with the societal marketing
concept and two examples of business practices that contradict this
concept. Explain your choices.

A4. Societal Marketing is based on the principle of societal welfare. It

emphasizes that an organization must make strategic marketing decisions
keeping in mind the consumer wants, the organizational needs and most
important the long term interests of the society.

Examples of practices that are consistent with this concept:

(a) The Body Shop is a cosmetic company founded by Anita Roddick

in 1976.. The company uses only natural, vegetable based materials
as ingredients for its products. It is totally against animal testing,
advocates community trade, as well as complete protection of
planet. Thus it engrosses the concept of Societal Marketing.

(b) Ariel runs special fund raising campaigns for less privilege classes
of the world, mainly the developing countries. It also contributes a
share of its profits from every bag sold for the societal
development.
Examples of practices that contradict this concept:

(a) The demand for flights in and out of the country is high; however,
as we all know, it is terrible for the environment. Through the
theory of societal marketing, a company would stop providing the
flights, as the harm done to the environment outstrips the
satisfaction provided to customers. The flight company should
therefore focus on providing as many flights as they can legally.
(b) Tobacco companies meet resistance from consumers when they
undertake socially oriented campaigns aimed at mitigating the
effects of their products.

Q5: Discuss the advantages and disadvantages of using demographics

as a basis for segmentation. Can demographics and psychographics
be used together to segment markets? Illustrate your answer with
specific example?

A5. Demographic segmentation is market segmentation according to age,

race, religion, gender, family size, ethnicity, income, and education.
Demographics can be segmented into several markets to help an
organization target its consumers more accurately. With this type of
segmentation, an organization can categorize the needs of consumers.
Advantages:
One of the main advantages of demographic segmentation is that the
information you need is readily available for you. You can pull census
data to determine who, where, and how you want to market your product.
For example, automobile industries can market their cars to different age
groups, income levels, and genders.

Another way that businesses, such as automobile industries, don't miss

out on the growing market is by providing employees who are bilingual
to work with their customers. It is now very common to see business, TV,
and newspapers in Spanish as well as English.

Another advantage of demographic segmentation is customer retention

and loyalty. When an organization spends time focusing on its customers
and their wants and needs, customers will typically come back for repeat
business. In our automobile industry example, customers will come back
or recommend their friends and family if thsy were satisfied with their
purchase.

Disadvantages:
One of the main disadvantages of demographic segmentation is that it can
make an organization vulnerable to competitors. Competitors may try to
use the same marketing techniques and potentially take away customers.
Another disadvantage is that an organization may spend all of its time
and efforts on a specific demographic only to find out its efforts were
wasted on the wrong section of the market.

Moreover, this segmentation approach is also based on an assumption

that consumers in the same demographic group would have similar needs.
In essence, demographic data not really provide the most relevant
analysis to find and target specific groups of buyers.
This is where psychographics comes into play to better analyze and
classify target buyers by psychological attitudes such as aspirations,
interests, attitudes, opinions, lifestyle, behavior, etc. Demographics
provide information on who typically buys or will buy a particular
product or service based on tangible characteristics. Psychographics
provides more insight into who is most likely motivated to buy.
A simple example would be what comes in mind if talked about a Harley
Davidson Biker. Mostly responses will be people who are unshaven, tall,
manly who like to live a rough lifestyle. That’s the personality built for
the brand over time. Thus brands target their customers even based on
their personality.

Overall, these factors are intangible in nature and need in depth market
research to determine which lifestyle or social class to target.

Q6: Many marketers have found that a relatively small group of

heavy users account for a disproportionately large amount of the
total product consumed. What are the advantages and disadvantages
of targeting these heavy users?

A6. Advantages of targeting heavy users:

(a) Increase in profits:

You can concentrate your promotional efforts on customers who
have already proven their loyalty to your company. This results in
 significant profit for your company, since you can market to clients
based on the type of items they purchase most from your company.
(b) Reducing costs:
When you know whom you should market to, you don't have to
spend extra advertising dollars marketing to individuals who may
not be interested in your company. Customer relationship
marketing can be as simple as sending a short email to established
customers to remind them of an upcoming sale or using word of
mouth to tell clients about a new product in the store when they
visit your establishment.
(c) Word of Mouth marketing:
The customers who have been patronizing your business for a
while are likely to tell their friends and family about your
company. This will prompt more people to inquire about your
business, without your marketing team having to spend money to
get the word out about your company.

Disadvantages of targeting heavy users:

(a) Missing out on potential customers:

Since customer relationship marketing focuses on the customers
who are already purchasing goods and services, you may miss the
chance to market to possibly interested customers. Conducting
smaller marketing efforts that attract potential clients is best, so
you can create an even larger customer base.
(b) Over – advertisement:
Even though your clients love hearing about new products and
sales, don't overdo it when it comes to advertising. A monthly
newsletter is a way to let customers know about discounts without
 sending out daily or weekly emails. Don't overwhelm your
customers with text messages or direct mail fliers. Regular
customers like to be kept up to date on new items and promotions,
but don't overwhelm your clients, as this may turn them off to your
company and reduce your sales.
(c) Security obligations:
The security issues associated with maintaining sensitive data are a
major disadvantage of customer relationship marketing. Personal
customer information is often stored on servers and in
computerized databases, which puts the business at risk for
liabilities. Some customers will refuse to share some of their
information, making it more difficult to take full advantage of the
concepts behind customer relationship marketing. Protecting
personal data is costly for businesses because electronic security
measures must be executed. In addition, companies need to tell
customers how their data is used, when it might be shared and why.

Q7: Under which circumstances and for what types of products

should a marketer segment the market on the basis of (a) awareness
status, (b) brand loyalty, and (c) usage-situation?

A7. (a) Awareness Status:

With a new product or market the awareness level is low, so when a
marketer segment markets, it is easier to market existing products or to
existing markets. Thus when certain level of brand equity is created or
when the product is in its growth stage, specifically in case of well-
established brands for the product, for example Cadbury in case of
chocolates, the marketer can use awareness status.

(b) Brand Loyalty:

When the brand enjoys a monopoly in the market, like Netflix or when its
product is at its maturity, the marketers can conveniently rely on brand
loyalty for their products to sell. Different strategies can be created for
loyal customers, occasional customers or irregular customers to ensure
maximum efficiency and profits.

(c) Usage situation:

When the product is offering a service or utility that is one of its kinds or
is offering seasonal product that none of the competitors are, then usage
situation can be used to segment the market.
For example, the marketer may want to identify various segments of
users for a particular product category or users of the company’s brand.
In other cases, one may want to segment users into those who buy
frequently versus those who only buy occasionally (either product or
brand), or into those users who usually purchase just one brand versus
those who switch from brand to brand. It may also be useful for the
marketer to understand how segments how segments arise based on
different product usage situations.

Q8: Discuss the difference between the absolute threshold and the
differential threshold. Which one is more important to marketers?
Explain your answer and why?
A8. Absolute threshold is the lowest level at which an individual can
experience a sensation. The point at which a person can detect a
difference between “something” and “nothing” is that person’s absolute
threshold for that stimulus. WHEREAS, the minimal difference that can
be detected between two similar stimuli is called the differential threshold
or the just noticeable difference.

Let's consider a guy who buys a BMW, a guy who really loves his car for
the sheer feel of power as it moves out onto the highway. His absolute
threshold involves the fact that he will not buy a car that is not known as
a "performance car," that doesn't at least have the reputation of being a
performance car.
Let's say he's considering two different cars to buy. If you offer him a
nice family sedan with enough power to move along the highway
carrying four kids and a dog, he's not interested. If you offer him a
vintage sports car that used to have power but since it got the crack in the
engine block will not go up a hill at anything faster than 40 km, he is not
interested. Let's say you even offer him another performance car, but not
the BMW. He is still not interested. Compared to the BMW, these other
cars have different levels of performance. He wants a minimum level of
performance and that is his absolute threshold, but beyond that, he wants
what the BMW has to offer, not lower levels of performance. That is
differential threshold.

Thus, differential threshold is more important for a marketer because they

are more descriptive in nature and attempt to understand the customer in
more depth.
Q9. Describe a situation in which you acquired an attitude toward a
new product through exposure to an advertisement for that product.
Describe a situation where you formed an attitude toward a product
or brand on the basis of personal influence.

A9. Advertisement of Oxemberg products (Siyaram’s new product

category). Oxemberg provides ready made men garments. After going
through their advertisement it influenced me a lot to go through their
brand store and I really find the products very nice as they were portrayed
in the advertisement.

Personal Influence – Patanjali products

I doubted using Patanjali products initially as I was more towards using

HUL products. But after I went at my cousin’s house and I got to use
their hair shampoo, I found it very nice. So, I tried Patanjali and now
using their products only.

Q10. Discuss the techniques marketers use to change consumers'

attitudes?

A10. The 4 Strategies to influence consumer attitudes are:

 Increasing or changing the strength or belief rating of a brand on an

important attribute
 This is the first strategy commonly used by brand managers. They
identify an attribute that is important and remind consumers how well
their brand performs on this attribute. Unilever’s “Omo Makes White
Whiter and Coloured Brighter” campaign is a good example of a
strategy designed to create a belief and reinforce it through
advertising.

 Changing consumers’ perceptions of the importance or value of an

attribute

Brand Managers often attempts to influence consumer attitudes by

changing the relative importance of a particular attribute. This second
strategy involves getting consumers to attach more importance to a
particular attribute in forming their attitude toward a brand. Brand
Managers using this strategy want to increase the importance of an
attribute their particular brand has. For example, you may be able to
get people to buy an electric car because it will save them money in
fuel, which may induce consumers to purchase the car because it
becomes an important means of saving money verses because they
think it will help the environment, which may be less important to
them.

 Adding a new attribute to the attitude formation

process

The third strategy for influencing consumer attitudes is to add or

emphasize a new attribute that consumers can use in evaluating a
brand. Brand Managers often do this by improving their products or
focusing on additional benefits associated with using the brand.

 Changing perceptions of belief ratings for a competing brand

A final strategy brand managers use is to change consumer beliefs
about the attributes of competing brands or product categories. This
strategy has become much more common with the increase in
comparative advertising, where brand managers compare their brands
to competitors’ on specific product attributes. An example of this is
the Ariel Detergent Powder advert, where the brand compares what it
has to offer to what others offer.

THANK YOU