Marketing Mix: Products, Pricing, & Consumer Behavior PDF

Marketing Mix Product: What Is It? good or service, characterized by tangible and intangible attributes, that might satisfy a need or want tangible = physical characteristics that are discernible by the senses (colour, taste, smell) intangible attributes = symbolic or subjective cha...

Marketing Mix Product: What Is It? good or service, characterized by tangible and intangible attributes, that might satisfy a need or want tangible = physical characteristics that are discernible by the senses (colour, taste, smell) intangible attributes = symbolic or subjective characteristics (stylish, reliable comfortable) good = physical or virtual item capable of being delivered to purchaser example of physical good: dog, shoe, physical textbook virtual good: e textbook, app service: actions, skills, knowledge, labour for which the customer pays ex: haircut ex: salt is a pure commodity good used to make other goods another ex: fast food services are an equal balance between goods and services Types of Products 1. effort put into purchase 2. frequency of purchase Types of Products convenience widely available and inexpensive purchased frequently with minimal effort ex: groceries, toiletries, cleaning products for marketers: packaging, price, availability (as many places as possible) small amount of effort to purchase (if you were to purchase toothpaste, you don't put a lot of thought and research into it) lots of competition in convenience products (important to make your product stand out) shopping less widely available (i.e., selective distribution) and moderately priced purchased less frequently with moderate effort (comparison, research) ex: clothing, furniture, appliances for marketers: effective messaging, positioning specialty limited availability (i.e., low breadth of distribution) and high price purchased rarely, deliberately sought (low comparison) ex: luxury and high end items (watches, cars, handbags)  for marketers: targeted promotion, build brand status unsought unknown to customers or undesirable to customers delay of bene ts are common feature e.g., insurance, re extinguishers for marketers: extensive promotion (awareness, value, counter negative views) can't enjoy the product right now which is why we thing we might not need it such as insurance Total Product Concept process of developing a product that helps to identify its major bene ts core product: basic de nition of a product what product were making fundamental bene ts derived from using the product nd the basic purpose ex: bicycle (core bene t is transportation) actual product: product that is sold to customers point of product differentiation more exciting, valuable and enticing than what our competitors are doing includes: o design o features o quality o packaging o labelling augmented product: create better customer experience non tangible, service related features example: warranty, delivery, assembly Pricing Approaches COST BASED PRICING: setting prices based on the cost of manufacturing, distributing, and promoting a product VALUE BASED PRICING: setting prices based on the customers’ perception of COMPETITION BASED PRICING: setting prices based on the activities of competing organizations Penetration Pricing: set a low initial price on a product, then increase the price generates interest in new product fi fi fi fi fi fi fi  attracts customers from competitors may not retain customers (gradual price increase recommended) ex: stream services "use free for 30 days and then must pay) Skimming: set the highest initial price that consumers desiring the product are willing to pay, lower the price once demand of these consumers are satis ed generates revenue early creates perception of high quality can encourage entry of companies ex: Chel or Madden Prestige: product price is set high and remains high effective for products intended to be status symbols creates perception of high quality high pro ts (Rolex: approximately. $550 materials/labour; approx. 12,000$ retail) potential for limited customer base Prestige Pricing (Plassman et al., 2008): higher ratings of enjoyment greater activity in regions of brain association with pleasure price capable of changing people's experiences with a product Odd-Even Pricing: set prices a few dollars or cents under a target price creates the illusion of a bargain promotes impulse and higher-volume purchases product may be perceived as being of lower quality Loss Leader Pricing subset of products are priced below cost to stimulate the sales of other pro table goods can be short-term (Black Friday) or long-term (kids' meals) attracts customers and increases sales can attract "cherry picking" buyers Effect of Currency Symbols Yang et al. (2009) studying the effects of currency symbols on spending (check totals for lunch at New York restaurant) “pain of paying” currency symbols more likely to cause discomfort associated with monetary loss experiment: menu with no $ sign customers bought more off of Place fi fi fi  Retailer Classi cation categorizing retailers on the basis of ownership retailers = businesses that sell products to customers (focus on physical retailers) Independent Retailer owned by individual, family, partnership makes all business decisions few retail locations (typically up to 3) higher prices due to lower stock Corporate Chain numerous outlets under common ownership largely centralized control (corporate decision making) comparable shopping experience lower prices larger inventory Contractual System (franchise) agreement between an individual and a business to operate a retail location individual gains access to resources business pro ts from the retail location greater independence Retailing Utility usefulness or value provided by a retailer placing products in locations where customers can most easily access them includes: o convenient locations o online and in-person purchasing increasing ease of owning a product includes: o numerous payment options degree to which product and its design meets customer needs includes: o customized products o product alterations making products available when customers need them includes: o extended hours o seasonal items year-round Promotion Promotion: What Is It? fi fi  communication or activity intended to persuade target market of the merits of a given product bene cial in generating interest, encouraging sales, improving brand image Sales Promotion provides short-term incentives to generate interest in a product ex: coupons, contests, rebates encourages immediate purchase may result in lower revenue Public Relations activities meant to build and maintain a positive image for a products, brand, or organization includes: press release, press conference, content on websites/social media platforms re ects a form of earned media earned media: unpaid content generated about a product, brand or organization (news, social media reviews, brand mentions) messaging can be seen as more objective and trustworthy limited control of messaging Experiential Marketing (engagement marketing) create an interactive experience between customers and a product/brand consumers not viewed as passive message recipients can create emotional connection to product/brand (breeds customer loyalty) taxing on time and resources Advertising paid form of media used to communicate to consumers about a product/brand includes: billboards, print advertisements, television commercials, radio commercials, online advertisements controlled messaging can be seen as nuissance (negative impact on attitudes) Shock Appeals in Advertising words, images, and/or actions intended to deliberately startles and offend may contain controversial, disturbing, provocative intended to capture attention may have a negative impact on brand image Shock Appeals in Advertising Dahl et al. (2003) role of shock appeals in the promotion of health behaviours Dahl et al. (2003) write down descriptions of posters you remembered seeing identify which poster captured your attention the most indicate which posters you saw from a list of options shock appeal led to greatest attention, recall, recognition fl fi  Sexual Appeals in Advertising words, images, and/or actions intended to deliver a message designed to evoke sexual thoughts, feelings, and/or arousal in a target audience may be explicit or subtle may be related or unrelated to product appear to attract consumer attention appear to distract from processing of advertised message Findings Meta-Analyses sexual appeals had no signi cant effect on: memory of product/brand intention to purchase product sexual appeals resulted in more negative attitudes toward a brand sexual ads were evaluated less favourably than non sexual ads sexual appeals resulted in more negative attitudes toward a brand (but gender differences were noted) Consumer Behaviour (Part 1) Consumer Behaviour: What Is It? study of the actions consumers takes when buying and using products purchase decision process (how consumers acquire products) factors that affect purchasing (psychological, social, personal, situational) consumption activities: when, where, how, why people use products purchase activities Purchase Decision Process series of steps that a consumer will take to make a purchasing decision Purchase Decision Process: Problem Recognition problem = suf ciently large disconnect between two states current state → who a person presently is and how they feel ideal state → who a person wants to be and how they want to feel Needs Recognition: identify need, actual state declines, act to reach ideal state need → a state of felt deprivation Opportunity Recognition: identify opportunity, ideal state moves up, act to reach ideal state fi fi  opportunity → desirable circumstances that can improve our current state (want) - not central or core to our lives Purchase Decision Process: Information Search: nd information about what products may address the problem Internal: effective when prior knowledge exists delve into memories re ect on personal experiences External effective when no or limited prior knowledge includes various sources: o personal (trusted others) o public (social media) o commercial (businesses) Purchase Decision Process: Evaluation of Alternatives evaluate and compare all products on attributes that have the ability to deliver the bene t that they are seeking evoked set (consideration set) → positive impression - left a positive impression on you inert set → no impression (left no impression, didn't nd any helpful info about them, won't buy them inept set → negative impression (any product that left a bad impression on you, ex: bad reviews) will only buy from the evoked set Purchase Decision Process: Purchase Decision What? → what will be purchased Where? → from who to purchase/seller (price point, return policy, convenience, reputation of the seller) When? → time of purchase (immediate or delay) - sales/promotions, time pressure to buy, nances Purchase Decision Process: Post-Purchase Evaluation: compare product to expectations to assess satisfaction impacts future behaviours: -if product will be purchased again -if additional products from the same brand will be purchased -if the product/brand will be recommended Cognitive Dissonance Theory (Leon Festinger) fi fi fl fi fi  state of simultaneously holding con icting beliefs results in tension or anxiety is uncomfortable and people are motivated to reduce it change beliefs, rationalize existence of the two con icting beliefs occurs when we as people have 2 beliefs and they are at odds with one another. We get anxious (we don't like to feel anxious) so we change one of the beliefs or we rationalize the existence of the beliefs: Example not related to CB: belief 1 - I like to smoke belief 2 - smoking is harmful "I don't know wether I should be smoking", you will feel motivated to do something : 1. stop smoking (embrace that smoking is harmful) 2. deny health impact of smoking (embrace the "I like smoking" belief rather than the harmful belief 3. rationalize why smoking makes sense (why holding these 2 beliefs make sense and why their not con icting post-purchase cognitive dissonance may occur purchase of one product contrasted against positive aspects of other products tension from comparisons can be reduced by follow up from seller Involvement in the Purchase Decision Process effort, energy, time differs based on consumer involvement consumer involvement: interest and importance that a consumer attaches to the purchase and consumption of a product high involvement if: expensive bought infrequently impact social change (public persona) The Problem With Choice Consumer Behaviour and Choice substantial increase in product variety over time (new product lines, greater variety in product lines) variety seen as positive Choice Overload Hypothesis: What Is It? (aka. the paradox of choice) suggests that extensive choice can be paralyzing and demotivating because it is cognitively taxing fl fl fl  Iyengar and Lepper (2000) conducted series of studies to investigate *people freeze up when there are so many options that it causes people to walk away from making a purchase Customers with extensive choice Jam were more attracted to the booth were equally likely to sample jams were less likely to purchase Essay Topics Students with extensive choice: were less likely to turn in the assignment received lower grades on their assignments (lower quality) chocolates Participants with extensive choice: spent more time deciding found decision-making process to be dif cult were less satis ed with their chosen chocolate (greater cognitive dissonance) Choice Overload Hypothesis: Evaluation choice overload is not impactful when: o decision-making self-ef cacy is high o a clear prior preference exists o one is experiencing positive affect decision making self ef cacy: an individual's con dence in their ability to make effective decisions, in general Situational In uences on the Purchase Decision Process Situational In uences factors pertaining to considerations, time, and location that impact the purchase decision process Physical Surroundings physical characteristics of retail space layout: design of oor space (everyday essentials positioned far apart) atmospherics: controllable factors that set ambience and create a sensory experience (lights, scent, sounds) ex: more calories consumed, more satis ed with dining experience Social Surroundings interactions with others during purchasing fi fl fl fl fi fi fi fi fi  social shopping versus solitary shopping (greater enjoyment, more purchases made, greater spending) role of others in our lives matter (greater impulsive buying with friends vs family) Temporal Effects effect of time on purchasing time of day (more variety as day progresses) time of year amount of time available (time pressure = repeat purchase, lowest price, most recognizable) Antecedent States effect of momentary conditions on purchasing negative vs. positive emotional state (familiarity vs novelty) high energy vs. low energy (self-regulation vs impulsive buying) cash on hand when people are in a good mood, they are more likely to try new things Purchase Task goal of shopping trip casual shoppers versus goal-directed shoppers embarrassing items = more items purchased Sensory Marketing: What Is It? marketing that engages the senses appeals to sight, sound, taste, touch, smell evokes memories and emotions creates emotional connection to product/brand Sensory Marketing: Congruence sensory marketing is most effective when it is congruent congruent = alignment between a retail environment and the sensory experience Sensory Marketing: Sound (Music) genre: category of music directed at target market to attract customers can affect spending ex: jazz, rock, hip hop... classical music is known to have the most in uence volume: loudness of music high volume increases stress response and arousal (feeling of excitement) low volume can be unwelcome in places that sell alcohol, when music volume is loud, people are more likely to make a purchase fl tempo: speed of beat (beats per minute; bpm) affects shopping pace longer browsing at slower tempos can help control customer traf c Sensory Marketing: Smell ambient scents capable of: o attracting customers o increasing browsing time o increasing product interaction o improved product evaluation o increasing spending elevate mood, lower anxiety Sensory Marketing: Smell (Odor Preference) Innate View: we are born with a predisposition to like or dislike speci c odors Learned View: odor is initially meaningless odor takes on meaning through our experiences associative learning: process by which we come to associate odors with emotions Mint: North America: scent preferred (found in candy) FranceL scent not preferred (found in medical settings) Psychological In uences on the Purchase Decision Process Psychological In uences internal factors that pertain to cognitive processes individual in nature capable of impacting our behaviour include: motivation, self-concept, perception, learning, attitudes Psychological In uences: Motivation energizing force that stimulates behaviour to satisfy a need starts with the identi cation of unmet needs needs → state of felt deprivation (motivational drivers) Maslow’s Hierarchy of Needs people are motivated to meet needs needs are classi ed in a hierarchy (certain needs take precedence over others) fi fl fl fl fi fi fi  largely subconscious Physiological Needs (basic needs) basic physical requirement for human survival universal ex: water, water sleep Safety Needs freedom from harm and fear sense of security, stability, comfort ex: nancial security, well being (surveillance systems, products: nancial advising services, exercise classes, vitamins Social Needs need to connect with others and form meaningful relationships e.g: love, affection, friendship, belonging products: dating apps, brand will have ads that promote social needs Esteem Needs lower esteem needs: need for recognition from others (desire for status), want to feel unique (stand out) ex: high end companies (luxury cars) higher esteem needs: need for positive self-image (con dence sense of achievement) ex: ads that promote that you are worthy... Self-Actualization need to reach full potential desire for personal growth expressed in differing ways support for socially responsible organizations Maslow’s Hierarchy of Needs: Limitations ★ theory developed using restricted samples (healthy, high-achieving college students) ↓ needs are dynamic need priorities differ across lifespan (baby = physiological; adolescent = social; elderly = safety) need priorities differ across cultures (individualistic = esteem; collectivist = social) Psychological In uences: Self-Concept collection of ideas and beliefs about oneself that tends to change as we age (physical characteristics, hobbies, roles, personality traits, etc.) fi fi fl fi  1. real self (actual self) = who we truly are 2. self-image = who we think we are 3. looking glass-self = how we believe others perceive us 4. ideal self = who we want to be "who we want to be and how we want to be perceived is important to marketers" Psychological In uences: Perception process by which an individual selects, organizes, interprets, responds to information to create a meaningful picture of the world Ex in class: blue dress/white dress, Yanny /Laurel, rabbit vs duck image Neuromarketing use of neuro-imaging tools (e.g., fMRI) and physiological measures (e.g., eye tracking, heart rate) to understand consumer behaviour examine brain and physiological responses to marketing stimuli consumer behaviour can be predicted based on brain activity or physiological changes Neuromarketing: Coca-Cola vs. Pepsi (McClure et al., 2004) chemical compositions are very similar most people don’t have the sensory ability to discriminate between the two (according to blind taste tests) most have a strong preference for one vs the other and perceive differences to exist functional magnetic resonance imaging (fMRI) technology used to assess responding during two taste tests Taste test #1 (anonymous): coke and Pepsi were equally preferred activity in reward centres of brain Taste test #2 brand-cued): greater preference for Coke activity in brain structures associated with emotions, memories, learning Neuromarketing: Chip Packaging (Frito-Lay) preference for matte potato chip bag over glossy potato chip bag original hypothesis suggested that matte bag is visually unique Behavioural Learning behaviours as learned habits acquired through association between a stimulus and a consequence Drive → Cue → Response → Reinforcement Drive = condition that impels a person to act (motivates us to take action) fl  Ex: you have a night class and are feeling tired, this can be a drive and encourage you to seek help (product) Cue = stimulus that tell you how to respond ex: tired - cues might be someone walking by you with a coffee or someone else has a tea, ad of a red bull... Response = reaction to the cue(s) (selecting a product or service that addresses the initial need) ex: going to buy a coffee Reinforcement = evaluate the response (desired effect vs learning dilemma) ex: does the coffee keep us up or does it make us go to sleep during class. Based off this, we are likely to use this experience when we are in this scenario again in the future learning dilemma = had an expectation for the product but it did not live up to the expectations, we are unlikely to buy that product again Behavioural Learning: Stimulus Generalization occurs when a learned response to one cue is evoked by another similar cue increases with cue similarity relevant to the introduction of new products and copycat brands ex: transfer to an alternative similar to your current response Behavioural Learning: Stimulus Discrimination one’s ability to perceive differences among similar products or brands brands use unique packaging and messaging in an effort to stand out (i.e., product differentiation, positioning) Cognitive Learning learning is an immersive and active process we acquire information through our senses we store information and retrieve it through our own effort we use rational thought to inform actions beliefs → assumptions we believe to be true based on past experience and available information (how a product performs) values → principles, standards, or qualities that are held in high regard (honesty, equality, loyalty, compassion) evaluation of an ideas, event, object, or person Beliefs Values cleans dishes well environmentally conscious smells nice donate bottles to international Bird rescue % the Marine Mammal Center “50% less scrubbing”  above: refers to dish soap Attitude Change (people who initially don't like our product and trying to get them to change their views)\ 1. change beliefs about extent to which product has certain attributes bring awareness to bene cial features 2. change the perceived importance of attributes convince customers that an attribute is relevant 3. add new attributes develop new and improved products Socio-Cultural In uences on the Purchase Decision Process Socio-Cultural In uences in uences that stem from one’s relationships with others includes social in uences and cultural in uences Socio-Cultural In uences: Reference Group group of people with common interests who in uence an individual’s attitudes and behaviours 3 types of reference groups: 1. Membership: group to which you belong most easily identi able by marketers make purchases to t in or "keep up" 2. aspiration: group to which you want to belong anticipatory (membership likely) or symbolic (membership not likely) make purchases to emulate aspiration group members ex: ppl looking up to celebrities/pro athletes 3. dissociative: group to which you do not want to belong make purchases that differ from this group “don’t be that person” advertising Socio-Cultural In uences: Family Consumer Socialization socialization = process through which people are taught to be pro cient members of a society fl fi fl fl fl fl fl fi fi fl fl fi  consumer socialization = process by which people acquire the skills, knowledge, and attitudes necessary to function as consumers occurs through direct discussion and modelling/observation peers more impactful in adolescence Socio-Cultural In uences: Family family life cycle : family’s progression from formation to retirement each phase bringing distinct needs and purchasing behaviour Bachelor ( rst home, independent life, living on own for rst time, looking for signi cant other) personal care entertainment and social activities basic home furnishings impulsive purchases Newly Married: nancial stability joint decision making durable goods vacations and gifts Full Nest: numerous stages home necessities child needs savings (child's education, retirement) Empty Nest (couple left in home after kids move out): retirement travel and leisure hobbies medical needs Solitary Survivor (signi cant other passes away and individual left on their own) reduction in income downgrade property (moving to smaller house, apartment, retirement home) security medical costs Socio-Cultural In uences: Culture set of values, ideas, and attitudes that are learned and shared among the members of a group consumers’ purchasing decisions are often aligned with their culture Individualistic Cultures (e.g., United States) fi fi fl fl fi fi fi ★ prioritization of individual needs over group needs key values: individuality, freedom, ambition (re ected in promotional materials) preference for products that express individual style and customization variety and choice are highly preferred Collectivist Cultures (e.g., Japan) ★ prioritization of group needs over individual needs key values: cooperation, tradition, belongingness (re ected in promotional materials) more open to product recommendations from close others greater degree if brand loyalty more community focused Communication in Promotion: Welch’s Study (Briley & Aaker, 2006) → Welch's grape juice → point of study was what type of messaging is preferred in indivualstix vs collectivist culture Indivudlastic: promotional (bene ts gained energizing great-tasting fun to drink Collectivist: Preventative (to avoid) reduce risk of heart disease avoid thirst fi fl fl