4.

Consumer Analysis

Introduction to Marketing
Prof. Ting Zhu

 Extra Credits

Class Liaisons
Thank you for your help!

Overview of the Marketing Process

Understand
marketplace/
Identify Market
Opportunities
Design
Marketing
Analyze
Strategy

CUSTOMER

COMPANY

Current
Situation
SEGMENTATION

Identify POSITIONING
Business
TARGETING

1) Customer Analysis

3) Company Analysis
PRODUCT

for Future

Product/Market
Expansion Grid

2) Competitor Analysis
Marketing
Mix

COMPETITION

PRICE

PROMOTION

PLACE

4) SWOT Analysis
5) Evaluate current Business:
Business Portfolio Analysis

21

Energy Drinks: Should Ads for Youth Be

Banned?
Should Energergy Drink be Banned?

Today
How do consumers make purchase decisions
How do consumers evaluate products
What psychological factors influence
consumers decisions

Model of Consumer Behavior

Stimulus-Response
Product
Price
Place
Promotion
Buyers
decision
process

Product choice
Brand choice
Dealer choice
Purchase timing
Purchase quantity

Marketing and
Other Stimuli

Buyers Black Box

what & how

Buyers Response

Economic
Technological
Political
Cultural
Psychological
factors affecting
buying behavior

Purchase Decision Process

Perceives a difference between ones ideal and actual

situations
The difference is big enough to trigger a decision
Self generated (hunger)
Prompted by marketing stimuli (fitness centers)

Motivation Hierarchy of Needs

Purchase Decision Process

Internal Search
Experiential: Handling, examining, & using the product

External Search
Personal: Family, friends, neighbors (most influential source)
Commercial: Advertising, salespeople (most frequent source)
Public: Mass Media Consumer-rating groups

Purchase Decision Process

Select criterion for purchase (e.g., all related attributes)

Yields possible alternatives (a list of brands)
Develops value perceptions

Purchase Decision Process

Example: Laptop
Price

Compaq
IBM
Mac
HP

Hard Disk

Speed

RAM

Purchase Decision Process

Example: Laptop
Price

Hard Disk

Speed

RAM

A. Compaq

B. IBM

C. Mac

10

D. HP

Fishbeins Multi-Attribute Model

brand k

Attitudek = bik ei
perception that
brand (k)
possesses
attribute (i)s
benefit

importance
of attribute (i)

Purchase Decision Process

Example: Laptop
Price

Hard Disk

Speed

RAM

0.4

0.3

0.2

0.1

Compaq

IBM

Mac

10

HP

Importance

Purchase Decision Process

Example: Laptop
Price

Hard Disk

Speed

RAM

0.4

0.3

0.2

0.1

Compaq

IBM

7.7

Mac

10

7.7

HP

6.7

Importance

Attitude

Purchase Decision Process

Example: Laptop
Price

Hard Disk

Speed

RAM

0.4

0.3

0.2

0.1

Compaq

IBM

7.7

Mac

10

7.7

HP

6.7

Importance

Attitude

Popular Consumer Decision Making

Rules

Purchase Decision Process

Example: Laptop
Price

Hard Disk

Speed

RAM

Disjunctive
Rule

0.4

0.3

0.2

0.1

best feature

Compaq

IBM

Mac

10

HP

Importance

Purchase Decision Process

Example: Laptop
Price

Hard Disk

Speed

RAM

Disjunctive
Rule

0.4

0.3

0.2

0.1

best feature

Compaq

IBM

Mac

10

HP

Importance

Purchase Decision Process

Example: Laptop
Price
Importance

Hard Disk

Speed

RAM

Lexicographic
Rule
most import.
best feature

0.4

0.3

0.2

0.1

Compaq

IBM

Mac

10

HP

Purchase Decision Process

Example: Laptop
Price
Importance

Hard Disk

Speed

RAM

Lexicographic
Rule
most import.
best feature

0.4

0.3

0.2

0.1

Compaq

IBM

Mac

10

HP

Purchase Decision Process

Example: Laptop
Price
Importance

Hard Disk

Speed

RAM

Conjunctive
Rule
no bad
features

0.4

0.3

0.2

0.1

Compaq

IBM

Mac

10

HP

Purchase Decision Process

Example: Laptop
Price
Importance

Hard Disk

Speed

RAM

Conjunctive
Rule
no bad
features

0.4

0.3

0.2

0.1

Compaq

IBM

Mac

10

HP

Purchase Decision: Buying Value

Decide
which to buy,
from whom to buy,
when to buy.

Post-purchase Behavior: Value in

Consumption or Use
Compare actual experience with expectations
Satisfaction = (Performance - Expectations)

Customer satisfaction is critical

Brand loyalty
Word of mouth

Cognitive dissonance
To alleviate it, search for info to reinforce the purchase
decision.

Variations in Buying Process

Involvement (high vs. low)
refers to the personal, social and economic significance
of the purchase to the consumer
High
# brands examined
# sellers considered
# product attributes
evaluated
# of external info
sources used
Time searching

Involvement
<-------------------------->

Low

Many
Many
Many

Several
Several
Moderate

One
Few
One

Many

Few

None

A lot

Little

Minimal

Consumer Involvement, Knowledge,

and Problem-solving Variations

Low

High

Consumer involvement

Routine problem solving

(e.g., milk and bread)

Limited problem solving

(e.g., small appliances)

Extended problem solving

(e.g., stocks, cars)
High

Consumer knowledge

Low

Implications for Marketing Program

Routine (habitual) problem solving

Use ad repetition to create brand familiarity
Encourage product trial use with sales promotions
Take good shelf space

Extended problem solving

Educate consumers & sales people on product
attribute importance
Show how the companys brand performs on these
attributes

Factors Influencing the Buying process

Marketing mix
influences

Psychological
Influences

Consumer
Decision
Process

Situational
Influences

Sociocultural
Influences

Framing Effect

Identical samples of burger

Group A

Group B

Beef was 75% lean

Beef was 25% fat

Higher quality
Less Greasy
Better tasting

Choosing a Gas Station

Station A: Sells gasoline for
$2.30 per gallon, and gives a
$0.10/gallon discount if the
buyer pays with cash
Station B: Sells gasoline for
$2.20 per gallon, and charges a
$0.10/gallon surcharge if the
buyers pays with a credit card
Which would you choose?

Survey Answers
Station A: 55%

Station B: 45%

Prospect Theory Value Function

Gas station example
+ subjective
Value

Changes are
evaluated
with respect
to reference
points.
Losses loom
larger than
gains

Gains

Subjective value
of cash discount
10
10

objective
Value

Reference
Point:
$2.30 or
$2.20

Diminishing
marginal
returns.

Losses

Subjective value of
credit surcharge

subjective
Value

objective
Value

Applications of Prospect Theory

Price increases hurt more than price
decreases help
You cannot make-up for a 5% price increase by
an equivalent discount of 5% later on

Labels on products
50% lean versus 50% fat

Because of loss aversion, the status quo is

(too) often chosen

The Attraction Effect

Compaq

high
IBM

Attraction Effect
When IBM is introduced
to the consideration set,
market share for
Compaq goes up

Speed
HP

low
high

low

Price

The Compromise Effect

Microwave oven choice

42%

0.7 cubic feet

$69

1.0 cubic feet

$97

58%

0.7 cubic feet

$69

1.0 cubic feet

$97

1.3 cubic feet

$125

12%

63%

25%

The Boathouse Restaurant

Questionnaire Africa

Is the number of African countries in the UN higher

or lower than 10 / 65?
10: Higher= 43%
How many? 11

65: Lower= 92%

How many? 30

Actual: 53

Willingness to pay
Write down your last 2-digit SIN
Indicate WTP for various products

Why does this happen?

Anchoring
When people are provided with an anchor
(a value along a particular dimension) they
insufficiently adjust away from that anchor
in making judgments.

Anchors and Pricing

Works with random numbers
Works on novices and (relative) experts.
Real-estate agents
Identical house, listing price manipulated.
Asked to give recommended price.

Listing
119,900
129,900
139,900
149,900

Average Recommended
117,745
127,836
128,530
130,981

Marketing Implications?
MSRP
Manufacturer's suggested retail price

Regular Prices
Default options

Takeaways
Customers choose the product that offers the most
value
The value of a product depends on
1. Its attributes
2. The weight customers put on each attribute

Understanding consumer behavior requires

knowledge beyond standard economic theory

Framing effect
Prospect theory
Attraction effect
Compromise Effect
Anchoring effect

Next Class

Choose a team leader

Brainstorm on project topics
Sample project on connect
Textbook
STP(Chapter 9)