Consumer Behavior and Purchase Process

What leads to customer loyalty and favorable word-of-mouth communication?

Consumer involvement is largely determined by the price of the product.

What is the formula for calculating satisfaction?

Post-purchase behavior aims to reduce __________.

Match the factors increasing consumer involvement with their descriptions:

What is the first stage of the consumer purchase process?

Consumers always gather information on all products in a category before making a decision.

Name one type of attribute that consumers gather information about when considering electric cars.

The consumer purchase process includes the stages: Need Recognition, __________, Compare Alternatives, and Purchase.

Match the following sources of information with their category:

What can influence a consumer's purchase behavior?

Consumers with identical perceptions of products will always have the same preferences.

What is the outcome of the purchase intention stage?

Which advantage is associated with a local marketing strategy?

A global marketing strategy ensures that different products are marketed in every region.

What does a hybrid partnership strategy aim to combine?

Apex's internal partnership for direct customer interaction is through their ______.

Match the following strategies to their benefits:

What is a potential operating advantage of a local marketing strategy?

Political stability does not affect international marketing strategies.

Which method can help reduce customer attraction costs?

Unearned media involves communications that the firm does not pay for.

What is one consumer advantage of a global marketing strategy?

What is the purpose of using emotional messages in marketing?

Comparative advertising is used if a brand is not the __________ in the market.

Match the types of media with their descriptions:

What is a strategy to reduce retention costs?

Fear appeals are typically effective in commercial advertising only.

Name one advantage of using rational messages in marketing.

What is the formula for calculating market share in units?

Raising prices will always lead to an increase in unit sales.

What does the break-even volume (BEV) in units indicate?

The gross margin ratio on selling price is calculated as GM[selling price] = (P[selling] - COGS) / ______.

Match the following terms with their definitions:

What is one effective strategy to reduce perceived risk for consumers?

Framing refers to the way consumer decisions are influenced by the context in which they are made.

What are the three characteristics of a good market segment?

The strategy of targeting specific consumer groups instead of mass marketing is known as __________.

Match the following types of consumer segments with their descriptions:

What is the main goal of a segmentation strategy?

Mass marketing effectively meets all consumers' needs.

Why is demographic segmentation popular among marketers?

In marketing, "weak ties" exist when?

Nonresponse error in marketing surveys

Firms who place online ads using programmatic buying

One major limitation of cost-plus pricing is

A consumer's involvement level in a purchase decision tends to increase

Large firms that want to introduce a steady supply of new products to the market

Which of the following is not one of the major dimensions of brand personality?

If it costs $5 million for Nike to place a 30 second TV ad on the Super Bowl football game, and the game is watched by 100 million viewers, then the CPM for this ad

Rose is a salesperson at Equinox gyms, who have gyms throughout the United States. She sells two types of Equinox gym memberships - memberships for individuals, and memberships for businesses who want to their employees to be able to use Equinox gyms to stay healthy. She interacts - in person, over the phone, or electronically - with potential customers interested in purchasing memberships. We have discussed six important personal selling skills that Rose should use in her interactions with potential customers. For each of these six personal selling skills, (i) describe that skill and (ii) give an example of how Rose could apply that skill in an in-person sales interaction with a potential customer. (one or two sentences to describe skill and one or two sentences for how Rose can apply skill). (12 pts.)

Equinox must decide how to compensate Rose and its other gym salespeople. Suppose Equinox is trying to decide between compensating salespeople using only salary or using only commission. Discuss two advantages of using only salary and two advantages of using only commission. (one to two sentences per advantage or disadvantage) (4 pts.)

Suppose Equinox decides to pay its salespeople a commission that is 8% of sales revenue. For example, if a salesperson sells an Equinox membership for $1000, they will receive an $80 commission. Explain in words why this commission structure may not be optimal fo Equinox, based on the information about Equinox provided in this question and in the previous Equinox question (Two or three sentences) (3 pts.)

Provide a simple numerical example of an alternative commission structure that Equinox can use for its salespeople, which we discussed in class, which will be better for Equinox, and explain why this alternative commission structure is better for Equinox. (5 pts.)

Crunch is another chain of gyms, and competes with Equinox. To attract new customer, suppose Crunch Gyms is offering a free trial where interested consumers can use Crunch gyms for free for a week and also receive 2 free hours of individual, personal training from one of Crunch's certified gym trainers to help them in the gym skills of their choice. Crunch predicts that 30% of the customers who use the free trial will join the gym, and remain customers at Crunch for an average of 3 years. Each year, Crunch offers its existing customers, including those who joined in that year, 4 hours of free personal training. Gym membership costs $1000 per year and Crunch makes a 45% gross margin on selling price on gym memberships. Crunch usually charges $40 per hour for personal training, and its gross margin on selling price for personal training is 35%. This pricing and margin structure applies both to the personal training that potential customer get as part of the free trial, and for personal training that Crunch offers to existing customers. Beyond the personal training, there are no additional expenses for Crunch from having potential customers who are trying Crunch for a week be in Crunch gyms – they do take up space in the gym, but you can ignore that. Crunch uses an 8% annual discount rate to value future cash flows. Calculate the net present value to Crunch of a customer attracted using the free trial. Show all work and explain your calculations. (14 pts.) Please note that there is no separate "first purchase" in this problem. The "first purchase" is the first year of Crunch membership.

Michelin is worried about losing sales to smaller tire companies with much smaller market shares, whose tires cost much less than Michelin's. Michelin has decided to use TV commercials that show a person at a tire store buying Roadrunner tires for their car and delighting in how much money they are saving. However, later that week they are driving alone in a heavy rainstorm and try to stop quickly to avoid a truck stuck in the road, but the Roadrunner tires will not stop the car in the heavy rain. The ad then shows the driver's car hitting the truck, shows the driver being very badly injured, and then dying. The ad shows another car, with Goodyear tires, that did stop in time, so that car's driver is safe. The ad then says “You may think you are saving money if you buy Roadrunner tires, but think again. Buy Michelin, because you never know when the weather is going to change.” This proposed TV ad uses two kinds of message strategies that are appropriate for a Michelin ad, but uses each message strategy incorrectly. For each of these message strategies, (i) describe the message strategy that is being used, and how it is being used in the TV ad, (ii) explain why you feel that message strategy is being used incorrectly in the ad, and (iii) recommend how you would change the ad to use that same message strategy correctly. (for each message strategy, about two sentences for (i) and one or two sentences for (ii) and (iii) ) (12 pts.) Write about one of the message strategies here.

Write about the other message strategy here.

In late 2022 General Motors will introduce a "Super Cruise" self-driving feature on its GMC Sierra pickup truck, which allows a driver to take their hands off the wheel when the car is moving. Super Cruise can be used when driving on a highway, even when towing a boat or trailer behind the truck, and when parking with the boat or trailer connected to the truck. Super Cruise is an option that will cost an extra $2500 when buying a Sierra. Although Super Cruise will not be introduced until late 2022, GM is already placing ads that feature Super Cruise. However, GM is concerned that truck buyers considering buying Super Cruise may experience perceived risk for Super Cruise, which will prevent them from purchasing Super Cruise. We have discussed four types of perceived risk. For each type of perceived risk (i) describe this type, (ii) give an example of why potential Sierra buyers may experience this type of perceived risk for the Super Cruise feature, and (iii) describe message content that GM could use in its advertising to reduce this type of perceived risk. (for each type, about one sentence for (i), one or two sentences for (ii), and one or two sentences for (iii) (12 pts.)

The tkts theater program allows people to purchase tickets to plays in New York City, in Broadway theaters and smaller theaters, for half of the usual price that people pay if they buy tickets from the theater box office. tkts tickets for a play that evening can only be purchased on the day of a play's performance. In the morning, interested customers must get in lines, which can be long, at one of the two tkts ticket booths in Manhattan. Then, when their turn comes, they can buy tickets for whatever plays are still available for that evening. Some plays sell out early at tkts, and very popular plays, such as Hamilton or The Lion King, may not offer tickets at tkts. The tkts app indicates which plays have tickets available at tkts the start of the day, but some plays sell out while people are still in the tkts line, so they need to think about a second or third choice. The tkts program is a form of price discrimination, also called segmented pricing.

Define price discrimination and explain why tkts is a form of price discrimination. (two or three sentences). (3 pts.)

How does using price discrimination with tkts allow theaters to increase their profits? (three or four sentences) (3 pts.)

We discussed three conditions that must be met for successful price discrimination. For each of these conditions (i) describe that condition, (ii) explain why that condition is important for price discrimination to succeed, and (iii) explain why the tkts program satisfies, or does not satisfy, that condition for successful price discrimination. You can make any reasonable assumptions about tkts beyond the information stated on the previous page, but please state those assumptions briefly if they affect your answer (about one or two sentences for each of (i), (ii), and (iii) for each of the three conditions). (9 pts.)

Logitech makes computer accessories, including webcams. Suppose that Logitech would like to increase sales of its webcams by creating a free-standing store display featuring Logitech webcams, to put in electronics and department stores that sell Logitech, such as Best Buy, Target, Walmart, etc. These displays increase the chance that a consumer will see Logitech webcams. Logitech estimates that it will cost $1,800,000 to create these displays and insall them in these retail stores.

Suppose you have the following information:

Retail price that stores charge for Logitech webcam $100 Retailer's gross margin on cost for webcam 25% Logitech's gross margin on selling price for webcam 45%

Logitech sells the webcam directly to retailers, so Logitech's selling price is the retailer's cost of good sold (COGS)

What are the cost of goods sold (COGS) (i) for Logitech and (ii) for the retailer. (4 pts.)

How many additional webcams must Logitech sell to break even on the plan for the in-store displays? (3 pts.)

Jed Weissberg of Mobiquity discussed how his firm had changed the information products it focused on over time, moving from focusing on one information product, then to another, and then to another. Describe these three different information products. (two or three sentences) (4 pts.)

Jed also discussed three mistakes that firms often make in collecting and analyzing market research data to help with marketing decisions. Describe two of these three mistakes. (4 pts.)

Jed also advised that students interested in someday starting their own firm should acquire four skills. Describe two of these four skills. (4 pts.)