Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
The term individual buyer behavior, end user behavior, consumer behavior, and consumer buying
behavior all stands for the same. The study of consumer behavior is the study of how individuals make
decisions to spend their available resources (time, money, effort) on consumption-related items. It includes the
study of what they buy, why they buy it, when they buy it, where they buy it, how often they buy it, and how
often they use it.
Take the simple product toothpaste. Consumer researchers want to know what types of toothpaste consumers
buy (gel, regular, striped, in a tube, with a pump); what brand (national brand, private brand, generic brand);
why they buy it (to prevent cavities, to remove stains, to brighten or whiten teeth, to use as a mouthwash, to
attract romance); where they buy it (supermarket, drugstore, convenience store); how often they use it (when
they wake up, after each meal, when they go to bed, or any combination thereof); and how often they buy it
(weekly, biweekly, monthly).
Consumer behavior may be defined as the decision process and physical activity individuals engage in when
evaluating, acquiring, using, or disposing of goods and services”.
According to Belch and Belch, “Consumer behavior is the process and activities people engage in when
searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy
their needs and desires”.
According to Solomon, “Consumer behavior is the process involved when individuals or groups select,
purchase, use, or dispose of products, services, ideas or experiences to satisfy needs and wants”.
Consumer behavior may also be defined as the study of individuals, groups, or organizations and the processes
they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the
impacts that these processes have on the consumer and society”.
According to Leon G. Schiffman and Leslie Lazar Kanuk, “Consumer behavior can be defined as the
behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and
services that they expect will satisfy their needs”.
Consumer behavior focuses on how individuals make decisions to spend their available resources (time, money,
effort) on consumption related items. That includes what they buy, why they buy it, where they buy it, how often
they buy it, how often they use it, how they evaluate it after the purchase, the impact of such evaluations on future
purchases and how they dispose of it. So in Consumer behavior it is not only learnt, what is the behavior of the
consumer when he buys it but also before the consumption, during the consumption and after the consumption?
Marketing may be defined as, “The process of planning and executing the conception, pricing, promotion,
and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational
objectives”.
A sound understanding of consumer behavior is essential to the long-run success of any marketing program.
In fact, it is seen as a cornerstone of the marketing concept, an important orientation of philosophy of many
marketing managers. The essence of the marketing concept is captured in three interrelated orientations:
i) Consumer’s Needs and Wants: When the focus is on identifying and satisfying the wants and needs of
consumers, the intention of the firm is not seen as merely providing goods and services. Instead, want
and need satisfaction is viewed as the purpose, and providing products and services is the means to
achieve that end.
ii) Company Objectives: Consumers’ wants and needs are numerous. Therefore, a firm that concentrates
on satisfying a small proportion of all desires will most effectively utilize its resources. Company
objectives and any of the firm’s special advantages are used as criteria to select the specific wants and
needs to be addressed.
iii) Integrated Strategy: An integrated effort is most effective in achieving a firm’s objective through
consumer satisfaction. For maximum impact this requires that marketing efforts be closely coordinated
and compatible with each other and with other activities of the firm.
Several major activities can be undertaken by an organization that is marketing-oriented. These include
market-opportunity analysis, target-market selection, and marketing-mix determination, which include
decisions on the proper combination of marketing variables to offer consumers.
i) Market Opportunity Analysis: This activity involves examining trends and conditions in the
marketplace to identify consumers’ needs and wants that are not being fully satisfied. The analysis
begins with a study of general market trends, such as consumers’ lifestyles and income levels, which
may suggest unsatisfied wants and needs.
ii) Target-Market Selection: The process of reviewing market opportunities often results in identifying
distinct groupings of consumers who have unique wants and needs. This can result in a decision to approach
each market segment with a unique marketing offering.
Consider the soft-drink market. Here, major segments of ultimate consumers are distinguished by the
type of purchase situation:
a) The food-store segment,
b) The “cold bottle” or vending-machine segment, and
c) The fountain market, which includes fast-food outlets.
iii) Marketing-Mix Determination: This stage involves developing and implementing a strategy for
delivering an effective combination of want satisfying features to consumers within target markets. A
series of decisions are made on four major ingredients frequently referred to as the marketing-mix
variables: product, price, place and promotion. The following characterizes each area and provides a small
sampling of how knowledge of consumer behavior is relevant for decision-making.
a) Product: The nature of the physical product and service features are of concern here, among
decisions that are influenced by consumer behavior are:
What size, shape, and features should the product have?
How should it be packaged?
What aspects of service are most important to consumers?
What types of warranties and service programs should be provided?
What types of accessories and associated products should be offered?
b) Price: Marketers must make decisions regarding the prices to charge for the company’s products or
services and any modification to those prices. These decisions will determine the amount of
revenues the firm will generate. A few of the factors involving consumer behavior are:
How price-aware are consumers in the relevant product category?
How sensitive are consumers to price differences among brands?
How large a price reduction is needed to encourage purchases during new-product
introductions and sales promotions?
What size discount should be given to those who pay with cash?
c) Place: The place variable involves consideration of where and how to offer products and services
for sale. It also is concerned with the mechanisms for transferring goods and their ownership to
consumers. Decisions influenced by consumer behavior include:
What type of retail outlet should sell the firm’s offering?
Where should they be located, and how many should there be?
What arrangements are needed to distribute products to retailers?
To what extent is it necessary for the company to own or maintain tight control over activities
of firms in the channel of distribution?
What image and clientele should the retailer seek to cultivate?
d) Promotion: Of concern here are the goals and methods of communicating aspects of the firm and
its offerings to target consumers. Consumer-related decisions include:
What methods of promotion are best for each specific situation?
What are the most effective means for gaining consumers’ attention?
What methods best convey the intended message?
How often should a given advertisement be repeated?
2) Consumer Behavior and Non-profit and Social Marketing: Can crime prevention, charitable
contributions, or the concept of family planning be sold to people in much the same way that some business
firms sell soap? A number of writers have suggested that various social and nonprofit organizations can be
viewed as having services or ideas that they are attempting to market to target group of “consumers” or
constituents. Such organizations include governmental agencies, religious orders, universities, and
charitable institutions. Often these groups must also appeal to the public for support in addition to
attempting to satisfy some want or need in society. Clearly, a sound understanding of consumer decision
processes can assist their efforts.
3) Consumer Behavior and Governmental Decision-Making: In recent years the relevance of consumer-
behavior principles to governmental decision-making has become quite evident. Two major areas of activity
have been affected:
i) Government Services: It is increasingly evident that government provision of public services can
benefit significantly from an understanding of the consumers, or users, of these services. Numerous
analysts have noted that frequently failing mass-transportation systems will not be viable alternatives to
private automobile travel until government planners fully understand how to appeal to the wants and
needs of the public. In other cases, state and municipal planners must make a variety of decisions,
including where to locate highways, what areas to consider for future commercial growth, and the type
of public services (such as health care and libraries) to offer. The effectiveness of these decisions will
be influenced by the extent to which they are based on an adequate understanding of consumers. This
requires knowledge of people’s attitudes, beliefs, perceptions and habits as well as how they tend to
behave under a variety of circumstances.
ii) Consumer Protection: Many agencies at all levels of government are involved with regulating business
practices for the purpose of protecting consumers’ welfare. Some government programs are also designed
to influence certain consumer action directly (such as the use of auto seatbelts) and discourage others
(speeding, drug abuse, and so on).
4) Consumer Behavior and Demarketing: It has become increasingly clear that consumers are entering an
era of scarcity in terms of some natural gas, and even water. These scarcities have led to promotions
stressing conservation rather than consumption. The effort of electric power companies to encourage
reduction of electrical use serves as one illustration. In other circumstances, consumers have been
encouraged to decrease or stop their use of particular goods believe to have harmful effects. Programs
designed to reduce drug abuse, gambling, and similar types of consumption are examples.
These actions have been undertaken by government agencies, nonprofit organizations, and other private
groups.
The term “demarketing” refers to all such efforts to encourage consumers to reduce their consumption of a
particular product or service.
Some demarketing efforts have met with considerable success while many others have made hardly any
impact on changing long-established consumption pattern. An analysis of the success and failures of various
efforts strongly suggests that demarketing programs must be based on a sound understanding of consumers’
motives, attitudes, and historically established consumption behavior.
5) Consumer Behavior and Consumer Education: Consumer also stands to benefit directly from orderly
investigations of their own behavior. This can occur on an individual basis or as part of more formal
educational programs
For example, when consumers learn that a large proportion of the billions spent annually on grocery
products is used for impulse purchases, and not spent according to preplanned shopping lists, consumer
may be more willing to plan purchases in an effort to save money. In general, as marketers discover the
many variables that can influence consumers’ purchases, marketers have the opportunity to understand
better how they affect their own behavior.
What is learned about consumer behavior can also directly benefit consumers in a more formal sense. The
knowledge can serve as data for the development of educational programs designed to improve consumer’s
decision-making regarding products and services. Such courses are now available at the high school and
college level and are becoming increasingly popular.
The company that really understands how consumers will respond to different product features, prices, and
advertising appeals has a great advantage over its competitors. The starting point for understanding buying
behavior is the stimulus response model of buyer behavior (as shown in figure 10.1). This figure shows that
marketing and other stimuli enter the consumer’s “black-box” and produce certain responses. Marketers must
figure out what is in the buyer’s black-box.
Marketing stimuli consist of the four Ps: product, price, place, and promotion. Other stimuli include major
forces and events in the buyer’s environment: economic, technological, political, and cultural. All these inputs
enter the buyer’s black-box, where they are turned into a set of observable buyer responses: product choice,
brand choice, dealer choice, purchase timing, and purchase amount.
The marketer wants to understand how the stimuli are changed into responses inside the consumer’s black-box,
which has two parts. First, the buyer’s characteristics influence how he or she perceives and reacts to the
stimuli. Second, the buyer’s decision process itself affects the buyer’s behavior.
Marketing Other Buyers Buyers Buyers
Stimuli Stimuli Characteristics Decision Process Decisions
Product Economic Cultural Problem recognition Product choice
Price Technological Social Information search Brand choice
Place Political Personal Evaluation of alternatives Dealer choice
Promotion Cultural Psychological Purchase decision Purchase timing
It is assumed that if a sales person applies a stimulus (or sales
Postpresentation),
purchase behaviorthe prospective Purchase
buyer will respond
amount
in a predictable manner. However, the prospect may or may not buy the product, which the salesperson is trying
to sell. Salesperson should, therefore, understand
Figure 10.1:the psychological
Black -box Model aspects in buyer behavior. Psychological
of Buying
factors of buyer or consumer behavior includes attitudes, perceptions, motivations, and personality of behavior.
Behavior
Study of consumer behavior helps the salesperson to understand the psychological aspects in selling or why the
prospect is buying or not buying the product or services.
Social class can be subdivided into four categories, viz., upper class, upper middle class, middle class and
the lower class.
i) Upper Class: This class consists of people who are rich and possess considerable wealth, e.g., people
with large businesses and wealthy corporate executives.
ii) Upper Middle Class: This class consists of well-educated people holding top class positions in middle
size firms, or professionals. They have a strong drive for success and indulge in shopping for goods that
speak of their social status.
iii) Middle Class: This class consists of white collar workers like middle level and junior executives, sales-
people, small business owners, etc. These people lead a conservative lifestyle and spend moderately.
iv) Lower Class: This class consists of blue collar workers like factory laborers, semi-skilled and unskilled
laborers in the unorganized sector. These people are more family oriented and depend on their family
for economic and emotional support. Their families are usually male dominated.
‘Motive’ can be a strong desire, feeling, an urge from within, a drive, stimulus or emotion, which plays a role in
the consumer’s decision to purchase a product/service.
According to R.S. Davar, “A motive is an inner urge that moves or prompts a person to action”.
According to D.J. Durian, “Buying motives are those influences or considerations which provide the impulse
to buy, induce action or determine choice in the purchase of goods or services”.
According to W. J. Stanton, “A motive can be defined as a drive or an urge for which an individual seeks
satisfaction. It becomes a buying motive when the individual seeks satisfaction through the purchase of
something”.
Thus an understanding of buying motives will help the firm to know what are the consumers attitudes, which
make them act in a particular way while buying certain goods or services.
A consumer purchases a particular product or service because of a strong inner feeling or force, which instills in
him a strong desire to have possession of the same. A buying motive can thus be said to all the desires,
considerations and impulses, which induce a buyer to purchase a given product.
Behavior is a goal directed activity.
Goal
Motive | Need (preparing/buying)
(Hungry) Goods
(Food) Behavior Goal achievement
(Eating)
2) Social Motives
i) Social Experience: Outside the home shopping can provide opportunities for seeking new
acquaintances, encounters with friends, or just “people watching”.
ii) Status and Authority: Shopping may provide an opportunity to attain a feeling of status and power by
being waited on. It is a pleasure shopping at Big Jo’s in Delhi where the sales staff is extremely
courteous and treats customers with a great deal of respect.
iii) Pleasure of Bargaining: Shopping may offer the enjoyment of gaining a lower price through
bargaining, companion shopping, or visiting sales.
The marketer’s task is to study the buying process and its main participants and their role in the buying process. He
should initiate all of them to make the purchases of his product at different stages and through different strategies
Influencers
(Children)
Communications
Targeted at Children
(Taste, Image)
Decision-
Makers Purchasers Consumers
(Parents/ (Parents) (Children)
Children
Communications
Targeted at Parents
(Nutrition)
Information
Gatherers
(Parents)
2) Pre-purchase Information Search: An aroused consumer will be inclined to search for more information.
We can distinguish between two levels of arousal. The milder search state is called heightened attention. At
this level a person simply becomes more receptive to information about a product.
At the next level the person may enter active information search: looking for reading material, phoning
friends and visiting stores to learn about the product of key interest to the marketers, are the major
information sources to which the consumer will turn and the relative influence each will have on the
subsequent purchase decision. Consumer information sources fall into four groups.
i) Personal Sources: Family, friends, neighbors, acquaintance
ii) Commercial Sources: Advertising, salespersons, dealers, packaging, displays.
iii) Public Sources: Mass media, consumer, rating organization.
iv) Experiential Sources: Handling, examining, uses the product.
The relative amount and influence of these information sources vary with the product category and the
buyer’s characteristics. Generally speaking the consumer receives most of the information about a product
from commercial source–that is, marketers-dominated sources. But most effective information comes from
personal sources. Each information sources performs a different function in influencing the buying
decision. Commercial information normally performs an informing function, and personal sources perform
a legitimizing or evaluation function. For example, physicians often learn of new drugs from commercial
sources but turn to other doctors for evaluative information.
3) Evaluation of Alternatives: There is no single evaluation process used by all Evaluative Criteria
consumers or by one consumer in all buying situations. There are several
decision evaluation processes the most current models of, which see the
process as cognitively oriented. That is, they see the consumer as framing Beliefs
judgment largely on a conscious and rational basis.
Attitudes
Evaluation may be thought of as a system as depicted in figure 10.3:
i) Evaluative (Choice) Criteria: These are the dimensions used by
consumers to compare or evaluate products or brands. In the car Intentions
example, the relevant evaluative criteria may be fuel economy, purchase Figure 10.3: Evaluation System
price and reliability.
ii) Beliefs: These are the degrees to which, in the consumer’s mind, a product possesses various
characteristics, e.g., roominess.
iii) Attitudes: These are the degrees of liking or disliking a product and are in turn dependent on the
evaluative criteria used to judge the products and the beliefs about the product measured by those
criteria.
iv) Intentions: These measure the probability that attitudes will be acted upon. The assumption is that
favorable attitudes will increase purchase intentions, i.e., the probability that the consumer will buy.
The consumer develops a set of brand beliefs about where each brand stands on each attribute. The set of
beliefs about a brand makes up the brand image. The consumer’s brand image will vary with his or her
experience as filtered by the effects of selective perception selective distortion and selective retention.
4) Purchase Decision: In the evaluation stage, the consumer forms preference among the brand in the choice.
The consumer may also form an intention to buy the most preferred brand. However, two factors can
intervene between the purchase intention and the purchase decision.
i) The first factor is the attitudes of others. The extent to which another person’s attitude reduces, one’s
preferred alternative depends on two things:
a) The intensity of the other person’s negative attitude towards the consumer’s preferred alternative.
b) The consumer’s motivation to comply with the other person’s wishes.
ii) The second factor is unanticipated situation factors that may erupt to change the purchase intention.
Preferences and even purchase intentions are not completely reliable predictors of purchase behavior.
A consumer’s decision to modify, postpone, or avoid a purchase decision is heavily influenced by perceived
risk. The amount of perceived risk varies with the amount of money at stake the amount of attribute
uncertainty and the amount of consumer self-confidence.
In executing a purchase intention, the consumer may make up to five purchase sub decisions:
i) A brand decision (brand A);
ii) Vendor decision (dealer 2);
iii) Quantity decision (one computer);
iv) Timing decision (weekend), and
v) Payment-method decision (credit card).
Purchase of everyday product involves fewer decisions and less deliberation. For example, in buying sugar
a consumer gives little thought to the vendor or payment method.
5) Post-purchase Behavior: After purchasing the product, the consumer will experience some level of
satisfaction or dissatisfaction. The marketer’s job does not end when the product is bought. Marketers must
monitor post purchase satisfaction, post purchase actions and post purchase product uses.
i) Post-purchase Satisfaction: What determines whether the buyer will be highly satisfied, somewhat
satisfies or dissatisfied with a purchase? The buyer’s satisfaction is a function of the closeness between
the buyer’s expectations and the product’s perceived performance. If performance falls short of
expectations, the customer is disappointed; if it meets expectations the customers is satisfied; if it
beyond expectations the customer is delighted. These feelings signify a difference in whether the
customer buys the product again and talks favorably or unfavorably about the product to others.
ii) Post-purchase Actions: The consumer’s satisfaction or dissatisfaction with the product will influence
subsequent behavior. If the consumer is satisfied he or she will exhibit a higher probability of
purchasing the product again.
Dissatisfied consumer may abandon or return the product. They may seek information that confirms its
high value. The may take public action by complaining to the company, going to a lawyer, or
complaining to other groups (such as business private or government agencies). Private action includes
making a decision to stop buying the product (exit option) or, warning friends (voice option). In all
these case the seller has done a poor job of satisfying the customer.
iii) Post-purchase Use and Disposal: Marketers should also monitor how buyers use and dispose of the
product. If consumers store the product in a closet, the product is probably not very satisfying and
word-of-mouth will be not being strong. If they sell or trade the product new product sales will be
depressed. Consumer may also find new uses for the product.
1.1.7. Subcultures Buying Habits of Consumers/Levels of Consumer
Decision-Making
Consumer decision making varies with the types of buying decision. The decisions to buy toothpaste, a tennis
racket, a personal computer, and a new car are all very different. If all purchase decisions required extensive
effort, then consumer decision-making would be an exhausting process that left little time for anything else. On
the other hand, if all purchases were routine, then they would tend to be monotonous and would provide little
pleasure or novelty. On a continuum of effort ranging from very high to very low, we can distinguish four
specific levels of consumer decision-making:
High Involvement Low Involvement
1) Complex Buying Behavior/Extensive Problem Solving: At this level, the consumer needs a great deal of
information to establish a set of criteria on which to judge specific brands and a correspondingly large
amount of information concerning each of the brands to be considered.
This behavior is adopted for the purchase of low cost, frequently purchased items. Here the buyers do not
give much thought, or search or take a lot of time to make the purchase. The products in this class are
generally classified as low involvement goods. The buyers are very well aware of the product class, know
the brands and also have a clear preference among the brands. So the buyers have to take very few
decisions for the purchase of such type of goods.
2) Dissonance-Reducing Buying Behavior/Limited Problem Solving: At this level consumers already have
established the basic criteria for evaluating the product category and the various brands in the category.
However, they have not fully established preferences concerning a select group of brands. Their search for
additional information is more like “fine-tuning”; they must gather additional brand information to
discriminate among the various brands.
Here the marketer’s job is to design a communication programme, which will help the buyer to gather more
information, increase his brand comprehension and gain confidence in the brand.
3) Habitual Buying Behavior/Routinized Response Behavior: At this level, consumers have some
experience with the product category and a well-established set of criteria with which to evaluate the brands
they are considering. In some situations, they may search for a small amount of additional information; in
others, they simply review what they already know.
The marketers must understand the information gathering and evaluation activities of the prospective
consumers. They have to educate the prospective buyers to learn about the attributes of the product class,
their relative importance and the high standing of the marketer’s brand on the more important brand
attributes. In other words, the marketing communications should aim at supplying information and help the
consumer to evaluate and feel good about his/her brand choice.
4) Variety-Seeking Buying Behavior: Some buying situation are characterized by low involvement but
significant brand differences, here consumers often do a lot of brand switching.
The market leader and the minor brand in this product category have different marketing strategies. The market
leader will try to encourage habitual buying behavior by dominating the shelf space, avoiding out-of-stock
conditions, and sponsoring frequent reminder advertising. Challenger firms will encourage variety seeking by
offering lower prices, deals, coupons, free samples, and advertising that presents reasons for trying something new.
Marketing firms often adopt poor strategies when they do not understand exactly what a product truly is,
because they do not understand exactly what they are selling. With this in mind, a product is potentially
valuable bundle of benefits. Theodore Levitt was one of the most famous marketing researchers.
A sound understanding of consumer behavior is essential to the long-run success of any marketing program. In
fact, it is seen as a cornerstone of the marketing concept, an important orientation or philosophy of many
marketing managers.
The following descriptions explore the role of consumer behavior in designing and deploying three major
marketing activities:
1) Market-Opportunity Analysis: This activity involves examining trends and conditions in the marketplace
to identify consumers’ needs and wants that are not being fully satisfied. The analysis begins with a study of
general market trends, such as consumers’ lifestyles and income levels, which may suggest unsatisfied
wants and needs. More specific examination involves assessing any unique abilities the company might
have in satisfying identified consumer desires.
A variety of recent trends have resulted in many new product offerings for consumer satisfaction. For
example, companies attuned to the fitness interests of Americans have been quick to offer such new
products as exercise bicycles, weight training books, and clothing. In the healthcare field, companies
sensing consumers’ unmet medical needs have offered coin-operated blood pressure testing machines at
shopping centers and other convenient locations.
2) Target-Market Selection: The process of reviewing market opportunities often results in identifying
distinct groupings of consumers who have unique wants and needs. This can result in a decision to approach
each market segment with a unique marketing offering. Consider the soft drink market. Here, major
segments of ultimate consumers are distinguished by the type of purchase situation:
i) The food store segment,
ii) The “cold bottle” or vending machine segment, and
iii) The fountain market, which includes fast-food outlets.
Unique packaging arrangements (container type and size), point of purchase promotions, and other
variations are made for each segment.
In other cases, the marketer may decide to concentrate company efforts on serving only one or a few of the
identified target-markets. An excellent example of this occurred in the bath soap market. By segmenting
consumers according to their lifestyle patterns and personalities, the Colgate-Palmolive company was able
to identify a unique group of consumers in need of a certain type of deodorant soap. Development of Irish
Spring for this target group led to the capturing of 15 per cent of the deodorant soap market within three
years of introduction.
3) Marketing-Mix Determination: This stage involves developing and implementing a strategy for
delivering an effective combination of want-satisfying features to consumers within target-markets. A series
of decisions are made on four major ingredients frequently referred to as the marketing mix-variables –
product, price, place, and promotion.
To survive in a competitive environment, an organization must provide target customers more value than is
provided by its competitors. Customer value is the difference between all the benefits derived from a total
product and all the costs and risks of acquiring those benefits. For example, owning a car can provide a number
of benefits, depending on the person and the type of car, including flexible transportation, image, status,
pleasure, comfort, and even companionship. However, securing these benefits requires paying for the car,
gasoline, insurance, maintenance, and parking fees, as well as risking Outcomes
injury from an accident, adding to environmental pollution, and dealing Individual
with traffic jams and other frustrations. It is the difference between the Firm
total benefits and the total costs that constitutes customer value. Society
Providing superior customer value requires the organization to do a Consumer Decision Process
better job of anticipating and reacting to customer needs than the Problem recognition
competition does. As figure aside indicates, an understanding of Information search
consumer behavior is the basis for marketing strategy formulation. Alternative evaluation
Purchase
Consumers’ reactions to this marketing strategy determine the Use
organization’s success or failure. However, these reactions also Evaluation
determine the success of the consumers in meeting their needs, and they
have significant impacts on the larger society in which they occur.
Marketing Strategy
Product, Price, Distribution, Promotion,
Marketing strategy is conceptually very simple. It begins with an Service
analysis of the market the organization is considering. This requires a
detailed analysis of the organization’s capabilities, the strengths and
weaknesses of competitors, the economic and technological forces Market Segmentation
affecting the market, and the current and potential customers in the Identify product-related need sets
Group customers with similar need sets
market. On the basis of the consumer analysis undertaken in this step, Describe each group
the organization identifies groups of individuals, households, or firms Select attractive segment(s) to target
with similar needs. These market segments are described in terms of
demographics, media preferences, geographic location, and so forth.
Management then selects one or more of these segments as target markets Market Analysis
Company
Competitors
Conditions
Consumers
Next, marketing strategy is formulated. Marketing strategy seeks to provide the customer with more value than
the competition while still producing a profit for the firm. Marketing strategy is formulated in terms of the
marketing mix; that is, it involves determining the product features, price, communications, distribution and
services that will provide customers with superior value. This entire set of characteristics is often referred to as
the total product. The total product is presented to the target market, which is consistently engaged in
processing information and making decisions designed to maintain or enhance its lifestyle (individuals and
households) or performance (businesses and other organizations).
1) Market Analysis: Market analysis is the process of analyzing changing consumer trends, current and
potential competitors, company strengths and resources, and the technological, legal, and economic
environments. All these factors add dimension and insight to the potential success of a plan for a new
product or service.
2) Market Segmentation: Perhaps the most important marketing decision a firm makes is the selection of
one or more market segments on which to focus. A market segment is a portion of a larger market whose
needs differ somewhat from the larger market. Since a market segment has unique needs, a firm that
develops a total product focused solely on the needs of that segment will be able to meet the segment’s
desires better than a firm whose product or service attempts to meet the needs of multiple segments. To be
viable, a segment must be larger enough to be served profitably.
3) Marketing Strategies: Marketing strategy involves a plan to meet the needs and desires of specific target
markets by providing value to that target better than competitors. Such a plan must specify the essential
components of the marketing mix, often described as the four P’s (product, place, price, and promotion).
Consumer research is critically important in developing segmentation strategy as well as formulating the
marketing mix, and both also are affected by the decision process of consumers.
i) Product: The largest ethical concern regarding the product portion of the marketing mix is whether
the products are harmful to the consumer or to society as a whole. Products can often lead to short-
term consumer satisfaction, but they also may lead to long-term problems for both the consumer
and society.
The failure to disclose that a product will not function properly without necessary components is unethical.
Generally, products fall into four categories pertaining to social responsibility; these categories
represent how long a consumer expert the benefits of the product to last:
a) Deficient Products: These products have little to no potential to create value of any type. An example
might be a faulty appliance. Obviously consumer wants to avoid offering products that are considered
deficient.
b) Salutary Product: These products are good for both consumers and society in the long-run. Salutary
products offer practical value, but they do not provide pleasure value. For example, vehicle air bags
have great value but they do not necessarily provide pleasure or entertainment.
c) Pleasing Products: These products provide pleasure value to consumers, but they can be harmful in the
long-run. For example, consumers enjoy cigarettes and alcohol but these products obviously can be
harmful to consumer’s health and the health of others.
The pleasing products category is usually the one where ethical issues come-up. But it is important to
realize that individual responsibility and freedom are important factors when it comes to the consumer’s
decision to use these products.
d) Desirable Products: These products deliver high practical value alongwith pleasurable value. Plus they
help consumers immediately and have long-running benefits. For example, weight-loss products which
give consumers immediate results by curbing their appetites. When used correctly, these products have
the long-run benefit to consumers of losing weight.
ii) Distribution: The second element of the marketing mix is place (or distribution). In this phase,
firms decide the most effective outlets through which to sell their products and how best to get
them there. Where will consumers expect and want to buy this product – through mass retailers,
electronic retailing, direct selling, or catalogs? An expensive or highly complex product like
jewelry might sell better in a specialty store in which consumers receive personal assistance with
product choice and operations instructions, whereas simple, everyday products might sell better in
mass retail outlets.
iii) Price: Price will also have its emotive as well as functional content. It is well documented that the
relationship between price and perceived value will always interplay in people’s minds when
choosing particular products.
An unethical use of pricing is to state that a regular price is a sales price. This practice is actually
prohibited by law as well.
Promoting an item as being on sale and then informing the consumer that the product is out of stock
and hat a more expensive item should be bought is unethical. This practice, which is known as the
bait-and-switch method, is prohibited by law.
Marketing communications include advertising, salesforce, public relations, packaging, and any
other signal that the firm provides about itself and its products. An effective communications
strategy requires answers to the following questions:
a) With Whom Businesses Want to Communicate: While most messages are aimed at the target-
market members, others are focused on channel members or those who influence the target-market
members. For example, pediatric nurses are often asked for advice concerning diapers and other
non-medical infant care items. A firm marketing such items would be wise to communicate directly
with these individuals.
b) What Effects do Businesses Wants its Communications to have on the Target Audience: Often
a manager will state that the purpose of advertising and other marketing communications is to
increase sales. While this may be the ultimate objective, the behavioral objective for most
marketing communications is often much more immediate. That is, it may seek to have the
audience learn something about the product, seek more information about the product, like the
product, recommend the product to others, feel good about having bought the product, or a host of
other communications effects.
c) What Message will achieve the Desired Effect on Audience: What words, pictures, and symbols
should we use to capture attention and produce the desired effect? Marketing messages can range
from purely factual statements to pure symbolism. The best approach depends on the situation at
hand. Developing an effective message requires a thorough understanding of the meaning the target
audience attaches to words and symbols, as well as knowledge of the perception process.
d) What Means and Media should be used to reach the Target Audience: Should we use personal
sales to provide information? Can we rely on the package to provide needed information? Should we
advertise in mass media, use direct mail, or rely on consumers to find us on the Internet? If we
advertise in mass media, which media (television, radio, magazines, newspapers, Internet) and which
specific vehicles (television programs, specific magazines, websites, and so forth) should we use?
Answering these questions requires an understanding both of the media that the target audiences use
and of the effect that advertising in those media would have on the product’s image.
e) When Should Business Communicate with the Target Audience: Should we concentrate our
communications near the time that purchases tend to be made or evenly throughout the week,
month, or year? Do consumers seek information shortly before purchasing our product? If so,
where? Answering these questions requires knowledge of the decision process used by the target
market for this product.
v) Service: Here, service refers to auxiliary or peripheral activities that are performed to enhance the
primary product or service. Thus, we would consider car repair to be a product (primary service),
while free pickup and delivery of the car would be an auxiliary service. Service as a separate
component of the marketing mix plays critical role in determining market share and relative price in
competitive markets. A firm that does not explicitly manage its auxiliary services is at a competitive
disadvantage.
Auxiliary services cost money to provide. Therefore, it is essential that the firm furnish only those
services that provide value to the target customers. Providing services that customers do not value
can result in high costs and high prices without a corresponding increase in customer value.
4) Consumer Decisions: The consumer decision process intervenes between the marketing strategy (as
implemented in the marketing mix) and the outcomes. That is, the outcomes of the firm’s marketing
strategy are determined by its interaction with the consumer decision process. The firm can succeed only if
consumers see a need that its product can solve, become aware of the product and its capabilities, decide
that it is the best available solution, proceed to buy it, and become satisfied with the results of the purchase.
5) Outcomes
i) Firm Outcomes
a) Product Position: The most basic outcome for a firm or a marketing strategy is its product position
– an image of the product or brand in the consumer’s mind relative to competing products and
brands. This image consists of a set of beliefs, pictorial representations, and feelings about the
product or brand. It does not require purchase or use for it to develop. It is determined by
communications about the brand from the firm and other sources, as well as by direct experience
with it. Most marketing firms specify the product position they want their brands to have and
measure these positions on an ongoing basis. This is because a brand whose position matches the
desired position of a target market is likely to be purchased when a need for that product arises.
Our total
product
Consumer Superior Perceived
Customer
decision value Sales value satisfaction
process expected delivered
Competitors’
total products
Creating Satisfied Customer
b) Sales: Sales are a critical outcome, as they produce the revenue necessary for the firm to continue
in business. Therefore, virtually all firms evaluate the success of their marketing programs in terms
of sales. Sales are likely to occur only if the initial consumer analysis was correct and if the
marketing mix matches the consumer decision process.
c) Customer Satisfaction: Marketers have discovered that it is generally more profitable to maintain
existing customers than to replace them with new customers. Retaining current customers requires
that they be satisfied with their purchase and use of the product. Thus, customer satisfaction is a
major concern of marketers.
As figure above indicates, convincing consumers that your brand offers superior value is necessary
in order to make the initial sale. Obviously, one must have a thorough understanding of the
potential consumers’ needs and of their information acquisition processes to succeed at this task.
However, creating satisfied customers, and thus future sales, requires that customers continue to
believe that your brand meets their needs and offers superior value after they have used it. You must
deliver as much or more value than your customers initially expected, and it must be enough to
satisfy their needs.
Injurious consumption, affects society as well as the individuals involved. The social costs of
smoking-induced illnesses, alcoholism, and drug abuse are staggering. To the extent that marketing
activities increase or decrease injurious consumption, they have a major impact on the social
welfare of a society
Most marketers today, deal in a large variety of products targeted at various consumer segments, each solving
some problem or catering to some consumer need. A lot of research is put in before a marketer segments the
market or recognizes a consumer segment. This research provides the marketer with the vital information on the
basis of which he eventually enters a consumer market with a relevant product.
Gone are the days when one product suited all. Consumers now are much more demanding and the need for
products suiting their tastes and preferences has increased. Their needs, wants, and preferences are different and
so the products they buy will have to match these; what they wear, eats, drink, drive, or where they live, is a
statement of their individuality. The era of mass markets has now given way to micro-markets with a highly
individualistic profile. This phenomenon has led marketers to segment markets.
There are several important reasons why businesses should attempt to segment their markets. These are:
1) Better Matching of Customer Needs: Customer needs differ. Creating separate offers for each segment
makes sense and provides customers with a better solution.
2) Enhanced Profits for Business: Customers have different disposable income. They are, therefore, different
in how sensitive they are to price. By segmenting markets, businesses can raise average prices and
subsequently enhance profits.
3) Better Opportunities for Growth: Market segmentation can build sales. For example, customers can be
encouraged to “trade-up” after being introduced to a particular product with an introductory, lower-priced product.
4) Retain More Customers: Customer circumstances change, for example they grow older, form families,
change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers
at different stages of their life (“life-cycle”), a business can retain customers who might otherwise switch to
competing products and brands.
5) Target Marketing Communications: Businesses need to deliver their marketing message to a relevant
customer audience. If the target market is too broad, there is a strong risk that:
i) The key customers are missed, and
ii) The cost of communicating to customers becomes too high / unprofitable.
By segmenting markets, the target customer can be reached more often and at lower cost.
6) Gain Share of the Market Segment: Unless a business has a strong or leading share of a market, it is
unlikely to be maximizing its profitability. Minor brands suffer from lack of scale economies in production
and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation
and targeting, businesses can often achieve competitive production and marketing costs and become the
preferred choice of customers and distributors. In other words, segmentation offers the opportunity for
smaller firms to compete with bigger ones.
1.2.1. Meaning and Definition of Market Segmentation
The concept of market segment is based on the fact that the markets of commodities are not homogenous but they are
heterogeneous. Market represents a group of customers having common characteristics but two customers are never
common in their nature, habits, hobbies, income and purchasing techniques. They differ in their behavior and buying
decisions. On the basis of these characteristics, customers having similar qualities are grouped in segments.
According to Philip Kotler, “Market segmentation is sub-dividing a market into distinct and homogeneous
subgroups of customers, where any group can conceivably be selected as a target market to be met with distinct
marketing mix”.
According to William J. Stanton, “Market segmentation consists of taking the total heterogeneous market for
a product and dividing it into several sub-market or segments, each of which tends to be homogeneous in full
significant aspects”.
The main aim of market segmentation is to prepare separate programmes or strategies to all segments so that
maximum satisfaction to consumers of different segments may be provided.
According to Philip Kotler, “The purpose of market segmentation is to determine difference among them or
marketing to them”.
2 B
3 A
Consumer market can be segmented into various segments by using different basis. Basis of consumer market
segmentation can be broadly divided into four broad categories which are shown in figure below.
Geographic Segmentation
Demographic Segmentation
Psychographic Segmentation
Behavioral Segmentation
Geographic segmentation refers to segmenting markets by region of a country or the world, market size, market
density, or climate. Market density means the number of people within a unit of land, such as a census tract.
Climate is commonly used for geographic segmentation because of its dramatic impact on residents’ needs and
purchasing behavior. Snow-blowers, water and snow skis, clothing, and air-conditioning and heating systems
are products with varying appeal, depending on climate.
Consumer goods companies take a regional approach to marketing for four reasons, which are as follows:
1) Many firms need to find new ways to generate sales because of sluggish and intensely competitive markets.
2) Computerized checkout stations with scanners give retailers an accurate assessment of which brands sell
best in their region.
3) Many packaged-goods manufacturers are introducing new regional brands intended to appeal to local
preferences.
4) A more regional approach allows consumer goods companies to react more quickly to competition. For
example, Cracker Barrel, a restaurant known in the South for home-style cooking, is altering its menu
outside its core southern market to reflect local tastes. Customers in upstate New York can order Reuben
sandwiches, and those in Texas can get eggs with salsa. Miller Lite developed the “Miller Lite True to
Texas” marketing program, a state-wide campaign targeting Texas beer drinkers.
It is important to place the role of psychographic targeting in context of demographics, the form of targeting that
historically preceded it and which now is practiced in conjunction with psychographics. Marketers for many years
based their targeting decisions almost exclusively on their audiences’ demographic characteristics – considerations
such as the market’s age group, gender, income level, and race/ethnicity. However, sophisticated practitioners
eventually realized that demographic information tells only part of the story about consumers’ buying preferences
and purchase behaviors. It is for this reason that marketing communicators also began investigating consumers’
psychographic characteristics as a means of obtaining a richer understanding of consumer behavior and how best to
influence consumers to respond positively to marketing efforts.
In general, psychographics refers to information about consumers’ attitudes, values, motivations, and lifestyles
as they relate to buying behavior in a particular product category. Numerous marketing research firms conduct
psychographic studies for individual clients. These studies are typically customized to the client’s specific
product category. In other words, the questionnaire items included in a psychographics study are selected in
view of the unique characteristics of the product category.
In addition to psychographic studies that are customized to a client’s particular needs, Brand Managers can
purchase “off-the-shelf” psychographic data from services that develop psychographic profiles of people
independently of any particular product or service. One of the best known of these is SRI Consulting Business
Intelligence’s (SRIC-BI’s) VALS system. VALS segments, consists of eight general psychographic segments as
shown in figure 7.3.
This classification is based on Maslow’s hierarchy of needs. At the bottom are the people with minimal resources
and, on the top are the people with abundant resources. This divides the consumer into three general groups or
segments. Each of these segments has a distinctive lifestyle, attitude, and decision-making. The figure shows their
characteristics as well. The eight segments also differ in their resources and orientations. The resources, possessed by
those at the bottom are very little and as move upwards the resources increase. Besides money and physical
resources, people at the bottom lack in education, social resources, psychological resources and in self-confidence.
This study was made on American people. The demographic characteristics like, age, income, occupation, role,
religion, sex education, marital status can easily be identified. However, it is more difficult to identify psychographic
characteristics of attitudes, beliefs, interests, benefits, lifestyle, etc. This can be done by VALS segmentation.
Abundant resources
Actualize
Principle Status r Action
Fulfilled Achiever Experienc
er
For a segment to be worthwhile, it must have a proper size, i.e., enough number of people in the segment to
make it feasible. It must be stable, so that the people belonging to a segment not only remain there, but the
segment must also grow in size. The segment must also be accessible, so that the marketer is able to reach the
segment in an economical way. They can be reached through various media. Marketers also are on the look-out
for new media that can reach the audience with minimum waste, circulation, and competition. The segment
should be such that profits can be gained. By catering to a segment, profits must be ensured. Profits are the
backbone of any organization. The target segment has to be profitable.
1) Fulfilled: As the name suggests, they are satisfied and mature people who are well-educated, value order,
knowledge, and responsibility. They are practical consumers and conservative. They look for products
which are durable, have value and function properly. They are well-informed about the world, and are ready
to increase their knowledge. They prefer leisure at home.
2) Believers: They are in the principle-oriented category. They are conservative, conventional people, with
their needs, strong faiths, and beliefs. They have modest resources sufficient to meet their needs. They are
conservative and predictable. They use established brands.
3) Actualizers: They have abundant resources and are sophisticated in their taste and habits. They are active,
and have high self-esteem. They develop, explore, and express themselves in a variety of ways.
They have taste and are leaders in business, and in government. They have wide interests and are concerned
with social issues and are open to change.
4) Achievers: They are also placed high in the Maslow’s hierarchy of needs and are career and work-oriented.
They make their dreams come true. They are workaholics. Work provides them with a sense of duty,
material rewards and prestige. They live conventional lives, authority and image is important to them. They
also favor established products and show their success around.
5) Strivers: They are a status-oriented category, but have a low income as they are striving to find a secure
place in life. They are low in economic, social, and psychological resources. They are concerned about the
opinion of others. They see success with money. They like to be stylish. They wish to be upwardly mobile
and strive for more.
6) Stragglers: These are poor people, struggling for existence. Education is low, low skilled, without strong
social bonds. They are despairing and, have a low status in society. Their chief concern is to fulfill their
primary needs of physiological security and safety needs. They represent a modest market and are loyal to
their favorite brands.
7) Experiencers: They are action-oriented, young, vital, enthusiastic, impulsive, and rebellious. They have
enough resources and experiment in new ventures. They indulge in exercise, sports, outdoor recreation and
social activities. They are avid consumers and spend much on entertainment, clothing, food, music, videos,
movies, etc. This pattern of behavior changes, as they are enthusiastic to new ideas.
8) Makers: They are in the action-oriented category. They have construction skills and value self-sufficiency.
Makers experience the work by working on it. They are people engaged in construction work and work with
their hands and in the industry. They are politically conservative, suspicious of new ideas; they buy stuff which
helps them in achieving their purpose. They buy tools, pick-up trucks and, all that helps them in practical work.
The major behavioral variables used by marketers to segment the market are as follows:
1) Occasions: Buyers can be distinguished according to the occasions on which they develop a need, purchase
a product, or use a product or when they get the idea to buy. Occasion segmentation helps boost product
usage. For example, some consumers may only purchase flowers, wine or boxes of chocolates for
celebrating birthdays or Christmas, whereas other consumers may buy these products on a weekly basis.
Marketers often try to change customer perception of the best time to consumer a product by promoting
alternative uses for a product. For example, recently Kellogg’s has attempted to change the image of
cereals to that of an ‘any time’ snack, rather than simply a breakfast meal. Another example of occasional
segmentation is orange juice which is most often consumed at breakfast, but orange growers have promoted
drinking orange juice as a cool and refreshing drink at other times of the day. In contrast, Coca-Cola’s
“Coke in the Morning” advertising campaign attempts to increase Coke consumption by promoting the
beverage as an early morning pick-me-up.
According to the occasions buyers develop a need, purchase a product or use a product. It can help firms
expand product usage. A company can consider critical life events to see whether they are accompanied by
certain needs. There can be 2 types of occasions:
i) Regular: Like Holi, Diwali, Eid, Independence Day, Republic Day etc.
ii) Special: Marriage, Anniversary, Winning moments etc.
2) Benefits: Here, the marketer identifies benefits that a customer looks for when buying a product. This has
been a very effective method of segmenting the market for watches, where a customer may buy for just
knowing the time, or durability, or as a gift/ an accessory/ a dress item/ a jewellery item.
Buyers can be classified according to the benefits they seek. On a purchase of same product different
customer look for different benefit because of which they buy products from different companies which
satisfy their specific needs. Let us take the example of a car. The basic function of a car is transportation.
But people prefer different cars because they seek different benefits. The benefits can be of four types. Let
us explain them with the choice of cars:
i) Quality: There are people for whom the quality matters most in any purchase. So when they buy cars
they buy Mercedes Benz, Skoda Octavia.
ii) Service: At times people buy things to avail some specific service. At this stage more than quality or
price the service that the product can give matters more. For example, politicians mostly use Hindustan
Motors Ambassador bulletproof car.
iii) Economy: For most of the people belonging to the middle and lower income group price is the most
important deciding factor in case of any purchase. These people look for the economy in every
purchase. These people when go for a purchase of any car apart before quality and service their first
criteria of choice will be the price of the car and their preference will be for cars like Maruti 800.
iv) Specially: People can be adventurous and sporty in purchase decisions for car and they would prefer Ferari etc.
3) User Status: Markets can be segmented into following classes depending on the user status. Let us explain
the category of user with an example of a product say Deodorant. Let us see how we can divide the users of
deodorant in different categories:
i) Non-User: A 10-year child or 70-year old in our country generally do not use deodorant.
ii) Potential Users: This is the category where the usage rate is expected to be highest. In our example
fashionable teenager, corporate people are the potential users of deodorant.
iii) First time Users: The users who use it for the first time. For example, the teenagers first deodorant
used may be in his college days.
iv) Regular User: A corporate big-wig always in big party or conference, a fashion conscious lady or a
regular corporate and nowadays because of fall in its price students also are the regular users.
v) Ex-User: Somebody who stopped using for some reasons may be due to allergies or due to switching to
some substitutes like perfume are the ex-users of the product.
4) Quantity Consumed/Usage Rate: The quantity consumed at any given time has also been the basis for
segmenting the beverages (tea, coffee), soft drinks, breweries, and cigarette markets. Accordingly, the
following market segments are visible:
i) Light: These are the categories of the users who are very infrequent users. In case of cosmetics an
average housewife who is not very fashion conscious is a light user of the cosmetics.
ii) Medium: The fashion-conscious teenagers are the medium users of cosmetics i.e. they use it very frequently.
iii) Heavy: There are people for whom the cosmetics are the most important purchase and they are heavy
users of it. Celebrities in entertainment world, the models etc. need cosmetics on a regular basis, as it is
the most important part of their profession.
The differentiation between them is based on the benchmark quantity defined by the marketer for each
segment.
5) Buyer-Readiness Stage: Another variable used for segmenting the market is buyer ‘readiness’ or
preparedness to buy the product. At any given time, buyers are at different stages of readiness. There are
unaware buyers, people who are aware but not interested, people who are interested and are desirous to buy
and lastly, those who will positively buy the product. A market consists of people in different stages of
readiness to buy a product. These various stages are:
i) Unaware: People not following technology trend and completely unaware about its improvement and
new innovations.
ii) Aware: People who have seen the advertisements but do not have enough knowledge about the
technology.
iii) Informed: These people get information from friends, colleagues, relatives who are users or technical people.
iv) Interested: People who have information and hence are variety-seekers.
v) Desired: These are the people who have gathered detailed knowledge, probably have taken a trial, but
may lack money to purchase the product.
vi) Intended to Buy: People who have the knowledge, has the purchasing capacity and desire and are
ready to buy.
6) Loyalty Status (Competition Related): Consumers have varying degrees of loyalty to specific brands,
stores and other entities. Buyers can be divided into four groups according to brand loyalty status:
i) Hard Core Loyals: Hard core loyals are those customers who continue to buy the same brand over and
over again. Newspaper readers, cigarette smokers and tea drinkers are some customer groups where
such hard-core loyalties are commonly visible.
ii) Soft Core Loyals: Those who are loyal to two or three brands in a product group are called soft-core
loyals. For example, a housewife who buys lux, lux, lux; cinthol, cinthol, cinthol; and pears, pears, lux;
in her nine shopping expeditions will be considered as a soft core loyal. The marketer needs to watch
such customers and motivate them to shift to the hard core loyalty segment.
iii) Split Loyals: Consumers who shift their loyalty from one brand to other and isolate between it.
Pepsodent after its launch found some customers of Colgate switching between the two brands.
iv) Switchers: Switchers are those customers who never stick to a brand. These are the customers for
whom brand switching is as easy as changing a shirt. They may switch for a variety or for a special
deal.
7) Attitude: People have different attitudes towards different aspects of life, which affect their consumption pattern
also. Some people who develop a very negative attitude towards life do not enjoy and hence behaves in a very
different manner from the person whose attitude is to always have fun and live life to the fullest. Hence the
marketing decision makers have taken this as a parameter to segment the population.
Five attitude groups can be found in a market. For example, in a credit card market they can be
distinguished as follows:
i) Enthusiastic: These are people having tendency of impulsive purchase. They may not carry cash all the
time but suddenly decide to buy something. They definitely need credit cards.
ii) Positive: They are serious but mobile people who need to buy suddenly at any time.
iii) Indifferent: There are some people who are technology averse with systematic purchasing pattern.
They would prefer to purchase with cash after thinking over the need for purchase. They do not prove
to be potential users of credit cards.
iv) Negative: People can be spendthrifts who fear of loosing money or misusing it. They would never ever
go for a credit card.
Hostile: People at times become very much irritated either by salespeople calling or meeting anytime, giving
false promise or by the service provided. For example, in case of credit cards, there are some hidden costs
which are not clarified by the salesperson during selling
1) Toothpaste Market: The toothpaste market in India can be divided into five segments. As per the 1988
data, the segment sizes were as follows:
i) Cosmetic Segment: This segment occupies 83% of the market. This consists of brands like Colgate,
Promise, Cibaca Top, Close-up, Pepsodent, Ponds and Anchor white. These brands mostly emphasize
on freshness, foam, cleanliness, and overall dental care.
ii) Fluoride Segment: This group of buyers constituted above 15% of the market. Here, brands like Forhans,
Cibaca, and Colgate Fluoride project an element of gum-care, hygiene and special protection of the teeth.
iii) Herbal Segment: This segment has captured barely 2% of the market. The popular brands are Neem,
Vicco, Babool, Dabur etc., where each brand emphasizes on the natural or herbal constituents in it.
iv) New Segment: In 2007, Colgate Active Salt and Close-up Maxfresh were first introduced and today
this new segment is facing intense competition.
2) Two Wheeler Market: The two-wheeler market can be segmented with respect to consumer behavior as follows:
i) Married People: Who generally look for fuel-efficiency, price and safety?
ii) Young People: Who generally settle for aesthetics or good looks? That is why the 100 cc motorcycle is
their first choice.
iii) Low Income Group: Prefer mopeds primarily because they provide individual mobility at the lowest
possible cost. For example, Bajaj’s Pulsar, Hero Honda’s Ambition.
iv) Rural Buyers: Are primarily concerned about maneuverability through rough terrain. This is the main
reason why they opt for heavier motorcycles (175 cc or above).
3) Soap Market: Price is the major basis for segmenting the toilet soap market. Accordingly, the market
segments formed are as follows:
i) Popular Segment: This segment accounts for about 87% of the market in terms of quantity and 70% of
the market in terms of value (size about ` 1,000 crore). The popular segment may further be sub-
divided by price again, the segment consisting of brands like Lifebuoy and Lux. The Lifebuoy soap
brand is the single largest band selling annually ` 4,000 million.
ii) Economy Segment: It consists of brands like Hamam, Lux, Santoor and Rexona.
Another recent development in the popular segment has been the emergence of a new segment between
the ‘Janata’ and the ‘economy’ segment due to changes in the excise structure. In this category, known
as the ‘discount segment’, soaps are priced reasonably. Brands include Breeze, Vigil. Tarun and Nirma
Chemicals. But over the years, their prices have increased.
iii) Premium Segment: High-priced soaps account for roughly 13% of the market in terms of quantity, and
30% of the market in terms of value. The total size of the premium soap market was ` 350 crore in January,
1992 and there were more than 70 brands. The leading brands and companies in the premium segment are,
Cinthol Lime, Dove, Fa, Liril and pears, Dettol, and Margo and Mysore Sandal. This segment caters to by
and large urban territories, with equal emphasis on strategies to target the rural population.
3) Profiling Stage: In this stage each cluster is profiled in terms of demographic, psychographic, media habits,
attitudes, behavior, and consumption habits. The marketer can give each segment a name based on a
dominant distinguishing characteristics.
According to E. R. Hilgard, “Learning is a relatively permanent change in behavior that occurs as a result of
prior experience”.
Ironically, it can be said that change in behavior indicates that learning has taken place and that learning is a
change in behavior.
According to W. McGehee, “Learning has taken place if an individual behaves reacts; respond as a result of
experience in a manner different from the way he formerly behaved”.
Learning is essential to the consumption process. In fact, consumer behavior is largely learned behavior. People
acquire most of their attitudes, values, tastes, behaviors, preferences, symbolic meanings, and feelings through
learning. Culture and social class through such institutions as schools and religious organizations, as well as
family, friends, mass media, and advertising, provide learning experiences that greatly influence the type of
lifestyle people seek and the products they consume.
Learning is any change in the content or organization of long-term memory or behavior. Thus, learning is the
result of information processing.
A learned behavior is some type of action or reflex that learns. For example tying r shoes is a learned behavior
crying is not.
It is adaptive modification of behavior by experience. Genetic constraints may limit what can be learned.
2) Symbolic Learning and Problems Solving: People learn symbolic meanings that enable highly efficient
communication through the development of languages. Symbols also allow marketers to communicate with
consumers through such vehicles as brand names (Kodak and Sony), slogans (“got the right one, Baby” for
Diet Pepsi), and signs (Mc Donald’s Golden Arches).
3) Affective Learning: Humans learn to value certain elements of their environment and dislike others. This
means that consumers learn many of their wants, goals, and motives as well as what products satisfy these
needs. Learning also influences consumers’ development of favorable attitudes toward a company and its
products. These attitudes will affect the tendency to purchase various brands.
1) Extinction: Person can “unlearn” material or behavior that has been previously learned. This unlearning
process is termed extinction and occurs when over time, a learned response is made to a stimulus but
reinforcement does not occur. The greater the number of non-reinforced trials, the less likely the response is
to occur; but complete extinction is rare. Resistance to extinction also strengthens when:
i) Impelling motives are strong,
ii) The number of previously reinforced trials is large,
iii) The amount of reward during learning trials is large,
iv) Reward is delayed during the learning process, and
v) A partial reinforcement schedule occurs during learning.
For example, if the advertisements for a particular brand are withdrawn for a considerable period of time,
both from the print and the electronic media, the probability of the brand being forgotten by the consumers
is very high.
2) Stimulus Generalization:
Learning to discriminate between various objects or events is important for consumers, because it helps them
adapt to their environment. Discrimination is learned over time when the same response to two similar but
noticeably different stimuli leads to different consequences (reinforcement). Stimuli which the consumer can
use to distinguish between various items in their environment are often termed discriminative stimuli.
. Thus, a consumer who has learnt over repeated use the Surf detergent is effective and washes the best will
assume that their surf Excel will also be very effective. Thus, the consumer has engaged in stimulus
generalization.
3) Stimulus Discrimination: Learning to discriminate between various objects or events is important for
consumers, because it helps them adapt to their environment. Discrimination is learned over time when the
same response to two similar but noticeably different stimuli leads to different consequences
(reinforcement). Stimuli which the consumer can use to distinguish between various items in their
environment are often termed discriminative stimuli.
4) Response Environment: It appears that consumers generally learn more information than they are able to
retrieve. That is, consumers frequently have relevant information stored in memory that firm cannot access
when desired. One factor that influences the ability to retrieve stored information is the strength of the
original learning. The stronger the original learning. The more likely relevant information will be retrieved
when required.
1.3.5. Elements of Learning
Consumers learn in several ways. Primarily, there are four elements of learning: motivation, cues, response, and
reinforcement.
1) Motivation: The concept of motivation is important to learning theory. Remember, motivation is based on
needs and goals. Motivation acts as a spur to learning.
2) Cues: A cue may be viewed as a weak stimulus not strong enough to arouse consumers, but capable of
providing direction to motivated activity. That is, it influences the manner in which consumers respond to a
motive. The shopping environment is packed with cues, such as promotions and product colors, which
consumers can use to choose between various response options in a learning situation.
3) Response: A response may be viewed as a mental or physical activity the consumer makes in reaction to a
stimulus situation. Responses appropriate to a particular situation are learned over time through experience
in facing that situation. The occurrence of a response is not always observable. Therefore, it must again be
emphasized that the inability to observe responses does not necessarily mean that learning is not taking
place.
4) Reinforcement: Perhaps the most widely acceptable view of reinforcement is anything that follows a
response and increases the tendency for the response to reoccur in a similar situation. Because reinforced
behavior tends to be repeated. Consumers can learn to develop successful means of responding to their
needs of changing conditions. Conditions Relevant to High and Low Involvement Strategies.
Figure shows the two general situations and the two specific learning theories that are as follows:
Classical
High- Low-
Involvement Involvement
Learning Iconic Rote Learning
Situation Situation
Reasoning/
Analogy
Commonly used
Occasionally used
1) Behavioral/Connectionist Learning Theory: Some learning theorists maintain that learning involves the
development of connections between a stimulus and some response to it. That is, the association of a
response and a stimulus is the connection that is learned.
A portion of this group minimizes the importance of reinforcement to learning, while others stress its
crucial role. Reinforcement is employed in conjunction with two fundamentally different methods of
learning connections: classical and operant conditioning.
i) Classical Conditioning: A type of conditioning in which an individual responds to some stimulus that
would not ordinarily produce such a response. Ivan Pavlov, a Russian physiologist conducted
experiments to teach dogs to salivate in response to the ringing of a bell. A simple surgical procedure
allowed Pavlov to measure accurately the amount of saliva secreted by a dog. When Pavlov presented
the dog with a piece of meat, they exhibited a noticeable increase in salivation.
Unconditioned Stimulus:
(US)
Meat paste
Unconditioned Response:
(UR)
Salivation
Conditioned Stimulus:
(CS)
Bell
The meat was an unconditioned stimulus; the reaction that took place whenever the unconditioned
stimulus occurred was called the unconditioned response. The bell was an artificial stimulus, or which
is called as conditioned stimulus. The last key concept is the conditioned response. This describes the
behavior of the dog; it salivated in reaction to the bell alone.
Classical conditioning has some important implications for understanding human behavior. Since
higher-order conditioning for learning by human beings is important, its implication must be
recognized.
For example, higher-order conditioning can explain how learning can be transferred to stimuli other
than those used in the original conditioning. Another implication of higher-order conditioning is that
reinforcement can be acquired. A conditioned stimulus conditioning is that reinforcement can be
acquired. A conditioned stimulus becomes reinforcing under higher-order conditioning.
Classical conditioning is passive. Something happens and person reacts in a specific way. It is voluntary
rather than reflexive.
ii) Operant Conditioning: A type of conditioning in which desired voluntary behavior leads to a reward
or prevents a punishment.
People learn to behave to get something they want or to avoid something they don’t want. Operant
behavior means voluntary or learned behavior in contrast to reflexive or unlearned behavior. The
tendency to repeat such behavior is influenced by the reinforcement or lack of reinforcement brought
about by the consequences of the behavior. Reinforcement, therefore, strengthens a behavior and
increases the likelihood that it will be repeated.
The Harvard psychologist B.F. Skinner did research for operant conditioning, Skinner argued that
creating pleasing consequences to follow specific forms of behavior would increase the frequency of
that behavior. People will most likely engage in desired behaviors if they are positively reinforced for
doing so. Rewards are most effective if they immediately follow the desired response. In addition,
behavior that is not rewarded, or is punished, is less likely to be repeated.
One can see illustrations of operating conditioning everywhere. A simple example of the operant
behavior is the application of brake by a vehicle driver to avoid accident. Here, the possibility of
accident without application of brake is stimulus situation, application of brake is the behavior and
avoidance of accident is the consequence of behavior. Through this process, human beings learn what
behaviors will be rewarding and they engage in those behaviors.
2) Cognitive Learning Theory: Instead of viewing learning as the development of connections between
stimuli and responses, cognitive theorists stress the importance of perception, problem solving, and insight.
This viewpoint contends that much learning occurs not as a result of trial and error or practice but through
discovering meaningful patterns which helps in solving problems. Cognitive learning involves learning
ideas, concepts, attitudes, and facts that contribute to person’s ability to reason, solve problems, and learn
relationships without direct experience or reinforcement. Cognitive learning can range from very simple
information acquisition to complex, creative problem solving.
Steps 2: People make choices about their behavior. The employee recognizes his or her two alternatives and
chooses one.
Steps 3: People recognize the consequences of their choices. Thus, when the employee finds the job
assignments rewarding and fulfilling, he or she will recognize that the choice was a good one and will
understand why.
Steps 4: People evaluate those consequences and add them to prior learning, which affects future choices.
Faced with the same job choices next year, the employee very likely will choose the same one.
Reasoning: Represents the most complex form of cognitive learning. In reasoning, individuals engage in
creative thinking to restructure and recombine existing information as well as new information to form new
associations and concepts.
A study of the purchasing patterns of recent residents of a community reflects a process of cognitive
learning. Andreasen and Durkson studied the purchasing patterns of three groups of households selected
according to the time they had been living in the Philadelphia area – less than three months, one and a half
to two years, and three years or more. The researchers believed there would be little difference among the
three groups for national brands. However for local brands, they predicted that the longer a family lived in
the area, closer brand awareness and purchasing would be to those of established residents. Results
confirmed their hypothesis. The families living in the area one and a half to two years were closer to the
purchase patterns of the established residents than were families living in the area three months or less.
Andreasen and Durkson identified three learning tasks in a new market environment:
i) Brand identification,
ii) Brand evaluation, and
iii) Establishment of regular behavioral patterns with respect to the evaluated brands.
3) Social Learning Theory: People can learn through observation and direct experience. Learning comes
from watching models – presents, teachers, peers, motion picture and television performers, bosses, and
so forth. Social learning theory is an extension of operant conditioning, i.e., it assumes that behavior is a
function of consequences it also acknowledges the existence of observational learning and the importance
of perception in learning. Social learning involves several processes as shown in figure 1.20:
Model Observer
Practice mode’s
behavior
Motivated to imitate
model?
Imitate
model’s
behavior
i) Attention Processes: People learn from a model only when they recognize and pay attention to its
critical features. People tend to be most influenced by models that are attractive, repeatedly available,
important, or similar in estimation.
ii) Retention Processes: A model’s influence will depend on how well the individual remembers the
model’s action after the model is no longer readily available.
iii) Motor Reproduction Processes: After a person has seen a new behavior by observing the model, the
watching must be converted to doing. This process then demonstrates that the individual can perform
the modeled activities.
iv) Reinforcement Processes: Individuals will be motivated to exhibit the modeled behavior if positive
incentives or rewards are provided. Behaviors that are positively reinforced will be given more
attention, learned better, and performed more often.
Vicarious Learning Behaviors are learned by A consumer watches the A child learns that men do not
or Modeling watching the outcomes reactions people have to her wear dresses without ever really
of others’ behaviors or by friend’s new short skirt before thinking about it.
imagining the outcome deciding to buy one.
of a potential behavior.
Reasoning/Analogy Individuals use thinking A consumer believes that baking Finding that the store is out of
to re-structure and soda removes odors from the black pepper, a consumer decides
recombine existing refrigerator. Noticing an to substitute white pepper.
information to form new unpleasant aroma in the carpet,
associations and the consumer decides to sweep
concepts. some baking soda into the
carpet.
A number of syndicated research services conduct recognition and recall tests, such as the Starch
Readership Service, which evaluates the effectiveness of magazine advertisements. After qualifying as
having read a given issue of a magazine, respondents are presented with the magazine and asked to point-
out which ads they noted, which they associated with the advertiser, and which they read most. They are
also asked which parts of the ads they noted and read most. An advertiser can gauge the effectiveness of a
given ad by comparing its readership recognition scores to similar-sized ads, to competitive ads, and to the
company’s own prior ads. A recent study using Starch readership scores demonstrated that consumers
received more information from advertisements for shopping products (i.e., high-priced clothing and
accessories) than from ads for convenience goods (i.e., low-priced items purchased routinely) and,
surprisingly, from ads for search products (i.e., very expensive, durable items purchased infrequently
following an extensive information search). These findings show that marketers may be under-informing
consumers when advertising search products.
2) Cognitive Responses to Advertising: Another measure of consumer learning is the degree to which
consumers accurately comprehend the intended advertising message. Comprehension is a function of the
message characteristics, the consumer’s opportunity and ability to process the information, and the
consumer’s motivation (or level of involvement). To ensure a high level of comprehension, many marketers
conduct copy testing either before the advertising is actually run in media (called pre-testing) or after it
appears (post-testing).
Pre-tests are used to determine which, if any, elements of an advertising message should be revised before
major media expenses are incurred. Post-tests are used to evaluate the effectiveness of an ad that has
already run, and to identify which elements, if any should be changed to improve the impact and
memorability of future ads.
3) Attitudinal and Behavioral Measures of Brand Loyalty: The attitudinal and behavioral measures of
brand loyalty are:
i) Brand Loyalty: It is the ultimate desired outcome of consumer learning. There is no single definition
of this concept.
ii) Attitudinal Measures: They are concerned with consumers’ overall feelings (i.e., evaluation) about the
product and the brand, and their purchase intentions.
iii) Behavioral Measures: They are based on observable responses to promotional stimuli – purchase
behavior, rather than attitude toward the product or brand.
A basic issue among researchers is whether to define brand loyalty in terms of consumer behavior or
consumer attitudes.
i) Behavioral Scientists: Behavioral scientists who favor the theory of instrumental conditioning believe
that brand loyalty results from an initial product trial that is reinforced through satisfaction, leading to
repeat purchase.
ii) Cognitive Researches: Cognitive researches, on the other hand, emphasize the role of mental processes
in building brand loyalty.
They believe that consumers engage in extensive problem-solving behavior involving brand and
attribute comparisons, leading to a strong brand preference and repeat purchase behavior.
Often consumers buy from a mix of brands within their acceptable range (i.e., their evoked set).
An integrated conceptual framework views consumer loyalty as the function of three groups of
influences:
a) Consumer drivers,
b) Brand drivers, and
c) Social drivers.
This framework also reflects a correlation among consumer involvement and the cognitive and
behavioral dimensions of brand loyalty. Loyalty programs are generally designed with the intention of
forming and maintaining brand loyalty.
As brand that has been promoted heavily in the past retains a cumulative level of name recognition, companies
buy, sell, and rent (i.e., license) their brand names, knowing that it is easier to buy than to create a brand name
with enduring strength. Brand equity enables companies to charge a price premium – an additional amount over
and above the price of an identical store brand. A relatively new strategy among some marketers is co-branding
(also called double branding). In co-branding, two brand names are featured on a single product. It uses
another product’s brand equity to enhance the primary brand’s equity. Brand equity is important to marketers
because it leads to brand loyalty, which in turn leads to increased market share and greater profits.
To marketers, the major function of learning theory is to teach consumers that their product is best, to
encourage repeat purchase, and to develop loyalty to the brand name.
According to Bloemer and Kasper, “Brand loyalty implies that consumers bind themselves to products or
services as a result of a deep-seated commitment”.
To exemplify this point, they rendered a distinction between repeat purchases and actual brand loyalty. In their
published research, they assert that a repeat purchase behavior “is the actual re-buying of a brand” whereas
loyalty includes “antecedents” or a reason/fact occurring before the behavior.
Loyalty may be explained further. Suppose a buyer visits a shop in antici pation of selecting a brand or
opting for a specific service, the buyer would prefer not to buy any substitute in case of non-availability of
the brand he has specifically opted for. He would prefer waiting for the brand of his preference. Loyalty in
sense is a willful commitment to the brand in view of perceived satisfaction. The action of loyalty is a
positive, repeated behavior of preferring one brand of a product from among the several brands available.
It is a self-reinforcing system in which the company delivers superior value consistently to find and keep high-
quality customers. The economic benefits of high brand loyalty are measurable. When a company consistently
delivers superior value and win brand loyalty, market share, revenues, and profitability all go up, and the cost of
acquiring new customers goes down.
Customer loyalty is very essential for the growth of organization because loyal customer:
1) Purchase products and services again and again over time.
2) Increase the volume of their purchases and buy beyond traditional purchases, across product-lines.
3) Refer company’s products and services to others.
4) Become immune to the pull of the competition.
5) Give the benefit of the doubt to the company when something goes wrong.
Each state implies a different type of brand equity asset and different types of marketing challenges.
1) Indifferent Buyers: At the lowest level, the indifferent buyer does not attach any importance to the brand.
The buying is done on a basis other than brand, like availability or price. These buyers are switchers and are
indifferent to the brand.
2) Habitual Buyers: The second category of buyers comprises the ones satisfied with the brand
(absence of dissatisfaction). These buyers have no reason to switch but may actually switch given the
stimulations from the competitors. These can be called ‘habitual buyers’. They are vulnerable and
can succumb to benefits offered by the competition.
3) Switching-Cost loyal Customers: The third category of buyers is satisfied with the brand, though they
have switching costs in terms of time, money, and risk. This category is somewhat safe because they
would switch only when competition is able to overcome switching costs for them. This set can be
called ‘switching-cost loyal’ customers. In all these categories of customers, a virtually negligible
element of attitudinal commitment to the brand is visible. They all signify different shades of
behavioral loyalty.
4) Affect Driven Loyalty Customers: The fourth category of loyalty implies that the buyers like the brand.
They tend to have some sort of emotional attachment to the brand. This attachment may get developed as
the result of prolonged relationship (usage over a long period of time) or use experience or perceived high
quality. People in this category consider a brand as a friend. It is an affect driven loyalty.
5) Committed Customers: At the next level of loyalty, the customers tend to be committed to the brand. The
commitment is “an enduring desire to continue the relationship and to work to ensure its continuance”.
Customers get committed to a brand when the brand achieves personal significance for them. It happens
when buyers perceive it to be a part of them. They identify with the brand. It becomes a vehicle of self
expression. The strong identification may be based on functionality or images/symbolism that it signifies.
As partners and advisors, the loyal customers involve themselves in the organization’s regular activities. Many
companies recruit loyal customers in their customer panel and tap their creativity for application in various
activities such as new product development, new promotion strategy formulation, packages design, developing
incentive schemes, etc. Loyal customers serve as their major idea sources.
Categorization of Prospects
1) Market Identification: The market for a brand constitutes the potential customers for the brand. When the
brand already exists, the market comprises of current customers for brand would have been manufactured in
tune with the market requirements or in tune with the brand’s characteristics, a market is to be developed.
For the purpose of market identification, the organization may go in for a Marketing Audit Program.
Marketing Audit is a purposeful examination of marketing environment, marketing activities, and its
effectiveness. It is a systematic approach to review the activities of marketing functions towards reaching
marketing goals. Marketing Audit enables to find appropriate markets and also shape the role that the
organization has to play in the identified market. The organization, in terms of its market share is expected
to play any one of the following roles as:
i) Market Leader: A market leader has the largest market share and it leads the other competing firms
with regard to all marketing-related activities particularly pricing-related activities. Market challenger is
a close competitor organization to the market leader.
ii) Market Challenger: Market challenger challenges the market share of the market leader.
iii) Market Follower: Market follower is the main follower of market leader. They simply fall in line with
the strategies of market leaders, as those strategies have registered proven success.
iv) Market Nicher: Market nicher is a small player, who identifies market niches and operates. Nichers
confine their operations in a much-limited way. Nichers often identify profitable nichers and carry-on
their marketing operations. The organization can have its market entry in one of the identified markets.
Having made the market entry, appropriate strategies are to be worked-out towards market existence
and market expansion. Market existence depends on the number of loyal customers the organization can
develop.
For the purpose of market existence and expansion, the organization may adopt any one of the following
strategies:
i) Market Penetration: Market penetration strategy refers to the organization’s efforts to expand the
market share by increasing sales of the existing brand in the current market.
ii) Product Development: Product development strategy is concerned with developing new brands and
products for the current market.
iii) Market Development: On these lines, market development strategy refers to developing new markets
for the current brand of the organization.
iv) Diversification Strategy: Diversification strategy on the other hand refers to the organization’s attempt
to market a line of closely related products. It also involves development of new products.
It is likely that many organizations simultaneously pursue multiple strategies so as to have market entry,
existence, and expansion.
2) Segmented and Target Market: From mass marketing, the marketers have switched over to targeting
segmented markets. This approach is because of a number of advantages being associated therewith. Under the
mass marketing approach, the marketers consider the whole market as an undifferentiated one and adopt the
same marketing mix strategies without any differentiation to attain marketing goals. This approach would work
as long as the market size is small and easily approachable. In today’s context, market size has expanded in all
respects. The consumers have started showing highly differential needs. Therefore, a single, undifferentiated
approach would no longer be relevant and purposeful. As such customers are to be grouped on a common base
and a strategy relevant to the group has to be framed to win the game marketing. Market segmentation therefore
refers to grouping of customers on the basis of selected criteria. Those criteria include:
i) Age,
ii) Marital status,
iii) Income,
iv) Gender,
v) Location,
vi) Volume of purchase,
vii) Type of customers,
viii) Buying habits,
ix) Lifestyle,
x) Benefit expected, and
xi) Extent of loyalty.
Today, the focus is towards customized marketing approach, which refers to considering every individual
customer as a market and developing appropriate strategies to satisfy the customer’s need. Industrial
marketers and service-marketing organizations have started adopting this approach towards a very effective
marketing performance.
From among the market segments, the target market would be identified. Target market refers to a well-
defined set of prospective customers, whose requirements have been identified, and the organization can
meet those requirements profitably. Selection of target market would be governed by factors such as the
organization’s capabilities, future prospects, return on investments, competing forces, and so on. In the light
of the characteristics of the target market, suitable marketing strategies would be evolved.
3) Prospective Customers: In the target market, potential customers would be identified by means of a
systematic approach. The method of getting prospective customers may be any one of the following or a
combination of more than one method like:
i) Referral letters,
ii) Through friends and relatives,
iii) Various directories,
iv) Through trade associations,
v) Advertisements,
vi) Blind telephone calls,
vii) Developing database,
viii) Cold canvassing,
ix) Follow-up of the competitor’s customers, and
x) Customers of related products, etc.
Effective prospecting would help in identifying a large number of potential customers in the target market,
who form the foundation of loyal customers, and therefore the prospect identification could be called as the
lifeblood of the entire scope of marketing activities.
4) Customers: In a broader sense, all those who are involved in the process of transfer of ownership of a
product from the production center to the consumption center are customers, and not merely the one who
ultimately enjoys the benefits of a product or service.
There are three terms normally used in this context, viz., the buyer, the consumer, and the customer. In a
very strict sense, the buyer refers to the one who buys a product or a service and it is immaterial whether he
consumes it or not. A consumer is one who consumes a product of an organization, and it is immaterial
whether he is involved in the purchase activity or not. Customer is one who repeatedly buy from one
source.
From among the prospective customers, the organization identifies customer in terms of their purchase
intention as most promising prospect to the least promising prospect. This categorization must follow
relevant strategies to convert the prospects into customers. The sequence may be illustrated as: In order to
reach the loyal customer, a careful marketing action planbyshould therefore be evolved and implemented
Customer
effectively. Loyalty
Customer by
Choice
Customer by
Occasion
Customer by
Chance
The new millennium is not just a new beginning; it is a continuation of trends in human behavior that have been
following cyclical patterns throughout the country’s history. Just because we have entered a new era, does not
mean marketers have to start from scratch when it comes to interpreting why certain consumers are loyal to
certain brands, and what type of factors influence these allegiances.
Brand loyalty is the consumer’s conscious or unconscious decision, expressed through intention or behavior, to
re-purchase a brand continually. It occurs because the consumer perceives that the brand offers the right product
features, image or level of quality at the right price. Consumer behavior is habitual because habits are safe and
familiar. In order to create brand loyalty, advertisers must break consumer habits, help them acquire new habits,
and reinforce those habits by reminding consumers of the value of their purchase, and encourage them to
continue purchasing those products in the future.
The image surrounding a company’s brand is the principal source of its competitive advantage and is therefore a
valuable strategic asset. Unfortunately, many companies are not adept at disseminating a strong, clear message
that not only distinguishes their brand from the competitors’, but distinguishes it in a memorable and positive
manner. The challenge for all brands is to avoid the pitfalls of portraying a muddled or negative image, and
instead, create a broad brand vision or identity that recognizes a brand as something greater than a set of
attributes that can be imitated or surpassed. In fact, a company should view its brand to be not just a product or
service, but as an overall brand image that defines a company’s philosophies. A brand needs more than identity;
it needs a personality. Just like a person without attention-grabbing characteristics, a brand with no personality
can easily be passed right over. A strong symbol or company logo can also help to generate brand loyalty by
making it quickly identifiable.
The concept of brand equity is based on the idea that a brand has a value greater than the sum of its tangible
assets. Brand equity is by definition an intangible asset.
Brand equity refers to a “set of assets and liabilities linked to a brand, its name and symbol that add to or
subtract from the value provided by a product or service to a firm and or to that firm’s competitors”. In other
words, brand equity (or subtracts) value to a firm in the form of price premium, trade leverage, or competitive
advantage.
Brand equity is the subject of seminars, of advertising agency presentations and of negotiation by acquirers of
companies. There is even a coalition devoted to the fostering and preservation of brand equity. It does not exist
in nature in the manner that the specific gravity of elements exists as a physical entity. It cannot be assayed like
the gold content in a piece of ore. Those who argue that brand equity cannot be measured, miss the essential
point. Its measurement depends on how it is defined. That definition must have pragmatic value to a marketer of
consumer products or services. It should help to improve marketing effectiveness and efficiency by providing a
yardstick with which to evaluate these things. Also, the definition should reflect the role of the brand in the
dynamics of consumer choice in a competitive environment.
Brand equity can be defined as the stored value built up in a brand for achieving competitive advantage.
Brands are valued for their equity. Brands add value. Everyone in the marketing profession agrees that brands
can add substantial value. It is also true, sometimes, that brands become a burden. The brand can be both a
value enhancer and a value driller. A variety of opinions exist about brand equity. Some of these are as follows:
“Brand Equity” refers to “a set of assets and liabilities linked to brand, its name and symbol that add to or
subtract from the value provided by the product or service to a firm and or that firm’s competitions”.
According to Aaker, “Brand equity is a set of brand assets and liabilities linked to a brand, its name and
symbol add to or subtract from the value provided by a product or service to a firm and/or to that firm’s
customers”.
According to Biel, “Brand equity can be thought of as the additional cash flow achieved by associating a brand
with the underlying product or service”.
According to Chernatony and McDonald, “Brand equity consists of differential attributes underpinning a
brand which gives increased value to the firm’s balance sheet”.
According to Keller, “Brand equity is defined in terms of marketing effects uniquely attributable to the brands.
For example, certain outcomes result from the marketing of a product or service because of its brand name,
which would not have been occurred if the same product or service did not have the brand name”.
The marketing literature is laden with works which explore, interpret, and ‘demystify’ (clarify) the concept of
brand equity. The advantages of brand equity direct academic and managerial attention to its measurement and
management.
Brand equity definitions more or less converge on some crucial points. There are similarities beneath apparent
divergence in thoughts. However, three types of leanings seem visible:
1) The brand,
2) The customer, and
3) The financial value.
The best way of integrating these different views is by conceptualizing the brand equity in terms of the input-
throughput-output model. The product and its attributes – both tangible and intangible – are the inputs to the
equity model. It is the brand which is the basis of equity or value.
In the absence of a brand, achieving equity is impossible. It is the fundamental core/block. The value that a
brand generates is not self-generated. It is generated through the discriminating response that customers exhibit
in favor of a brand, or the willingness to pay more for a brand. All these are outcomes. It is monetization of
these that is called financial worth or value that is added by the brand. But the most crucial link between the
input and output is the consumer – the consumer’s mental framework, to be more precise. It is the consumer’s
knowledge structure, or image or perceptions that a customer has about the brand that drive the outcomes. A
brand’s ability to draw customers again and again and command premium is directly related to what it stands
for in a customer’s mind. The brand perception or image is the key driver of brand pull and push. Brands
strength lies in this intervening variable. A powerful brand symbolizes a loyal customer base. It is this which
leads to financial benefits and reduced costs. At the heart of brand equity is customer equity – an unwavering
customer franchise which stands by the brand.
Drive toward or against
brand
Perception/ Customer
Knowledge Behavior Worth of
Product Structure Discrimination the Brand
and Value
Brand
Brand
Equity
communication
(Surplus ±)
and contacts
Figure 2.1: Conceptualizing Brand Equity
1.3.12.3. Value Creation by Brand Equity
A brand adds value in a number of ways. According to Aaker, “Brand equity creates value both for the
marketer and the customer”, which can be explained as follows:
1) Value to Customers: Brand equity assets can enhance or decrease value for customers. A brand’s equity is
valuable to customers because:
i) It helps customers in information processing. A brand is useful in aiding customers in interpreting,
processing, and storing information about products and brands. It simplifies this process. Brands are
taken by customers as chunks of information which are easily decoded (drawn meaning thereof) and
stored in a proper order (classification). It considerably reduces chaos possibilities that may occur in the
absence of branding.
ii) A brand’s assets enhance customer confidence in the purchase decision. One feels more confident in
purchasing a brand (imagine buying an unbranded product, like tooth paste). It happens because of
familiarity with a brand. Familiarity creates confidence. Brand stands for consistency and assurance. It
provides guarantee of promised delivery.
iii) The final value to the customer comes in the form of usage satisfaction. For example, satisfaction from
drinking Nescafe is different from drinking an unbranded coffee. Brands transform customer
experience. The brand associations and quality move the product beyond its ‘thingness’ boundary
enveloping it with images that customers value and identify with.
2) Value to Marketer: Brand equity also plays a critical role in enhancing value for the marketer. A firm
benefits from the equity in the following ways:
i) The effectiveness and efficiency of marketing programs is increased by brand equity assets. The expenditure
associated with a brand to achieve a goal generally tends to be less than an unbranded product aiming to
achieve the same goal. For example, retaining a customer is much less costly than retention when a product
is unbranded; it may partially happen due to lack of brand loyalty and preference. Similarly, launching of a
new product with extension may be much simpler, easy, and less costly.
ii) Brand equity dimensions allow a firm to have greater customer loyalty. The customers can exhibit
preference and commitment to a brand only. A greater number of loyal customers in the basket
automatically reduce the expenditures that need to be incurred in maintaining a customer base.
iii) Brand equity allows a firm to charge premium. That is, a customer may willingly support a brand in
spite of greater sacrifice that needs to be made. In fact, brands with premium pricing are the ones which
enjoy strong equity in the market.
iv) Brand equity provides great opportunities for growth. In fact, most firms now rely on brand extensions
to achieve growth rather than launch new brands. Brand equity makes growth easier for the firms. It is
how the value is added. For example, RCI has grown into many product categories by relying on the
brand equity of ‘Dettol’.
v) Brand equity is a good source of achieving leverage in distribution channels. It is easier to get access in
the distribution chain when the brand has equity. Trade partners’ exhibit skepticism in dealing with a
brand without equity because of the uncertainties it brings along with it. Brand equity is an implicit
assurance of success. Therefore, channels welcome brands with equity and give access to point of
purchase displays, shelf space, etc.
vi) Finally, brand equity is a provider of competitive advantage. It imposes barriers on the entry of
competitors. Brands can build equity occupying positions and attribute associations in a preemptive
fashion. Once these become proprietary to a brand, other brands are at a disadvantage. For example,
‘Dettol’ has so strongly entrenched itself with ‘antiseptic’ that other competitors are just not able to
make a dent in its market. Johnson & Johnson’s ‘Savlon’ is hardly able to compete in the market. The
same may be true for ‘Fair & Lovely’ in the fairness cream market. A brand blocks entry of rivals in a
customer’s mind on the same turf.
Brand equity holds immense potential to create economic value for the markets. The advantages listed
above make compelling reasons in favor of creation, protection, and enhancement of equity of a brand. It
can only be done once it is understood what drives brand equity.
1.3.12.4. Keller’s Approach of Brand Equity
Keller talked about customer-based brand equity as brand equity is seen from the perspective of the consumer.
Two questions often arise regarding brands – ‘What makes a brand strong?’ and ‘How to build a strong brand?’ To
answer these questions, introduces the Customer-Based Brand Equity (CBBE) Model. This model incorporates
theoretical advances and managerial practices in understanding and influencing consumer behavior. Although useful
perspectives concerning brand equity have been put forth, the CBBE model provides a unique point of view as to
what brand equity is and how it should be built, measured, and managed.
The basic premise of the CBBE model is that the power of a brand lies in what customers have learned, felt, seen,
and heard about the brand as a result of their experiences. In other words, “the power of a brand lies in what resides
in the minds of customers”. The challenge for marketers in building a strong brand is ensuring that customers have
the right type of experiences with products and services and their accompanying marketing campaigns so that the
desired thoughts, feelings, images, beliefs, perceptions, and opinions become linked to the brand.
“Customer-based brand equity is defined as the differential effect that brand knowledge has on consumer
response to the marketing of that brand.” A brand is said to have positive customer-based brand equity when
consumers react more favorably to a product and the way it is marketed when the brand is identified than when
it is not (e.g., when the product is attributed to a fictitious name or is unnamed). Thus, a brand with positive
customer-based brand equity might result in consumers being more accepting of a brand extension, less
sensitive to price increases and withdrawal of advertising support or more willing to seek the brand in a new
distribution channel.
On the other hand, a brand is said to have negative customer-based brand equity if consumers react less
favorably to marketing activity for the brand compared with an unnamed or fictitiously named version of the
product. There are three ingredients to this definition:
1) Differential Effect: Brand equity arises from differences in consumer response. If no differences occur, then the
brand name product is essentially a commodity. Competition, most likely, would then be based on price.
2) Brand Knowledge: These differences in response are a result of consumers’ knowledge and experience of
the brand. Thus, although strongly influenced by the marketing activity of the firm, brand equity ultimately
depends on what resides in the minds of consumers.
3) Consumer Response to Marketing: The differential response by consumers that makes-up the brand
equity is reflected in perceptions, preferences, and behavior related to all aspects of the marketing (e.g.,
choice of a brand, recall of copy points from an ad, actions in response to a sales promotion, or evaluations
of a proposed brand extension).
Brand Brand
Recall Recognition Brand Favorability of Uniqueness of
Associations Associations Associations
Simple recall
Top of the Mind (TOM) Attribute association Strength of
recall Benefit association associations
Reason to buy
Perceived Quality Differentiate/Position
Price
Extensions Value to Firm by
Enhancing
Effectiveness of
Help process information marketing program
Create positive attitude/feelings Brand loyalty
Brand Associations Reason to buy Prices/Margins
Differentiate/Position Brand extensions
Extensions Trade leverage
Competitive advantage
Other Proprietary
Brand Assets Competitive Advantage
Five dimensions were identified by Lasser, Mittal, and Sharma. These are as follows:
1) Performance: This aspect of equity focuses on the operational aspect of the brand. How fault-free and
longer lasting is the brand? Is the brand flawless in its product’s physical construction? Performance
dimension is the customer’s judgment on these aspects of the brand.
2) Social Image: What is the social image of the brand? That is, in what esteem (if at all) is the brand held by
the social or reference group of the customer?
3) Value: Value refers to the perception of value delivered by the brand. That is, what is ratio between what is
received and what is sacrificed?
4) Trustworthiness: It is the customer’s faith in the brand. A brand’s trustworthiness is based on beliefs that a
brand would not compromise on quality, it would always take care of a customer’s interests, and the people
behind the brand can be relied upon.
5) Identification: It is identification of customers with the brand. Sometimes, customers feel attached to the
brand they use. They enjoy their association with it. Brand identifications is based on its ability to strike a
chord with what they are psychologically and what they want to be. Customers identify with what a brand
represents in terms of its symbolism and imagery.
On the basis of the attributes shared by the world’s topmost brands, a brand report card could be constructed.
Ten attributes shared by the world’s top brands are:
1) Brand Excels at Delivering the Benefits Customers Truly Desire: Why do customers really buy a prod-
uct? Not because the product is a collection of attributes but because those attributes, together with the
brand’s image, the service, and many other tangible and intangible factors, create an attractive whole. In
some cases, the whole is not even something that customers know or can say they want.
For example, consider Starbucks - It is not just a cup of coffee. In 1983, Starbucks was a small Seattle-area
coffee retailer. Then while on vacation in Italy, Howard Schultz, now Starbucks chairman, was inspired by
the romance and the sense of community he felt in Italian coffee bars and coffee houses. The culture
grabbed him, and he saw an opportunity.
2) Brand Stays Relevant: In strong brands, brand equity is tied both to the actual quality of the prod uct or
service and to various intangible factors. Those intangibles include “user imagery” (the type of person who
uses the brand); “usage imagery” (the type of situations in which the brand is used); the type of personality
the brand portrays (sincere, exciting, competent, rugged); the feeling that the brand tries to elicit in
customers (purposeful, warm); and the type of relationship it seeks to build with its customers (committed,
casual, seasonal). Without losing sight of their core strengths, the strongest brands stay on the leading edge
in the product arena and tweak their intangibles to fit the times.
For example, Gillette pours millions of dollars into R&D to ensure that its razor blades are as
technologically advanced as possible.
3) Pricing Strategy is Based on Consumers’ Perceptions of Value: The right blend of product quality,
design, features, costs, and prices is very difficult to achieve but well worth the effort. Many managers are
woefully unaware of how price can and should relate to what customers think of a product, and they
therefore charge too little or too much.
For example, in implementing its value-pricing strategy for the Cascade automatic-dishwashing detergent
brand, Procter & Gamble made a cost-cutting change in its formulation that had an adverse effect on the
product’s performance under certain – albeit somewhat a typical – water conditions. Lever Brothers quickly
countered attacking Cascade’s core equity of producing “virtually spotless” dishes out of the dishwasher. In
response, P&G immediately returned to the brand’s old formulation. The lesson to P&G and others is that
value pricing should not be adopted at the expense of essential brand-building activities.
By contrast, with its well-known shift to an “Everyday Low Pricing” (EDLP) strategy, Procter & Gamble did
successfully align its prices with consumer perceptions of its products’ value while maintaining acceptable profit
levels. In fact, in the fiscal year after Procter & Gamble switched to EDLP (during which it also worked very
hard to streamline operations and lower costs), the company reported its highest profit margins in 21 years.
4) Brand is Properly Positioned: Brands that are well-positioned occupy particular niches in consumers’
minds. They are similar to and different from competing brands in certain reliably identifiable ways. The
most successful brands in this regard keep-up with competitors by creating points of parity in those areas
where competitors are trying to find an advantage while at the same time creating points of difference to
achieve advantages over competitors in some other areas.
For example, the Mercedes-Benz and Sony brands hold clear advantages in product superiority and match
competitors’ level of service. Saturn and Nordstrom lead their respective packs in service and hold their
own in quality. Calvin Klein and Harley-Davidson excel at providing compelling user and usage imagery
while offering adequate or even strong performance.
5) Brand is Consistent: Maintaining a strong brand means striking the right balance between continuity in
marketing activities and the kind of change needed to stay relevant. By continuity, it is meant that the
brand’s image does not get muddled or lost in a cacophony of marketing efforts that confuse customers by
sending conflicting messages.
6) Brand Portfolio and Hierarchy make Sense: Most companies do not have only one brand; they create
and maintain different brands for different market segments. Single product lines are often sold under
different brand names, and different brands within a company hold different powers. The corporate, or
companywide, brand acts as an umbrella. A second brand name under that umbrella might be targeted at the
family market. For example, third brand name might nest one level below the family brand and appeal to
boys or be used for one type of product.
Brands at each level of the hierarchy contribute to the overall equity of the portfolio through their individual
ability to make consumers aware of the various products and foster favorable associations with them. At the
same time, though, each brand should have its own boundaries; it can be dangerous to try to cover too much
ground with one brand or to overlap two brands in the same portfolio.
7) Brand makes Use of and Coordinates a Full Repertoire of Marketing Activities to Build Equity: At its
most basic level, a brand is made-up of all the marketing elements that can be trademarked – logos,
symbols, slogans, packaging, signage, and so on. Strong brands mix and match these elements to perform a
number of brand-related functions, such as enhancing or reinforcing consumer awareness of the brand or its
image and helping to protect the brand both competitively and legally.
Managers of the strongest brands also appreciate the specific roles that different marketing activities can play in
building brand equity. For example, the brand Coca Cola makes excellent use of many kinds of marketing
activities. These include media advertising (such as the global “Always Coca-Cola” campaign); promotions
(e.g., the recent effort focused on the return of the popular contour bottle,); and sponsorship (its extensive
involvement with the Olympics). They also include direct response (the Coca-Cola catalog, which sells licensed
Coke merchandise) and interactive media (the company’s website, which offers, among other things, games, a
trading post for collectors of Coke memorabilia, and a virtual look at the World of Coca-Cola museum in
Atlanta).
8) Brand’s Managers Understand what the Brand Means to Consumers: Managers of strong brands
appreciate the totality of their brand’s image, i.e., all the different perceptions, beliefs, attitudes, and
behaviors customers associate with their brand, whether created intentionally by the company or not. As a
result, managers are able to make decisions regarding the brand with confidence. If it is clear what
customers like and do not like about a brand and what core associations are linked to the brand, then it
should also be clear whether any given action will dovetail nicely with the brand or create friction.
9) Brand is given Proper Support and that Support is Sustained Over the Long-Run: Brand equity must be
carefully constructed. A firm foundation for brand equity requires that consumers have the proper depth and
breadth of awareness and strong, favorable, and unique associations with the brand in their memory. Too often,
managers want to take shortcuts and bypass more basic branding considerations – such as achieving the necessary
level of brand awareness – in favor of concentrating on flashier aspects of brand building related to image.
10) Company Monitors Sources of Brand Equity: Strong brands generally make good and frequent use of in-
depth brand audits and ongoing brand-tracking studies. A brand audit is an exercise designed to assess the health
of a given brand. Typically, it consists of a detailed internal description of exactly how the brand has been
marketed (called a “brand inventory”) and a thorough external investigation, through focus groups and other
consumer research, of exactly what the brand does and could mean to consumers (called a “brand exploratory”).
Brand audits are particularly useful when they are scheduled on a periodic basis. It is critical for managers
holding the reins of a brand portfolio to get a clear picture of the products and services being offered and how
they are being marketed and branded. It is also important to see how that same picture looks to customers.
3) Brand Associations: Organizations are discovering the benefits of Other Proprietary Assets
associating their brand with other images, icons, and especially Figure 2.2
other brands. Brand associations can be very helpful to consumers
in their processing of information about a brand. Starbucks associated with Marriott, Nike with Michael
Jordan, McDonald’s with Disney, and Intel uses a distinctive audible tone to help consumers relate to their
brands’ products and services. The old saying, “you can tell a person by the company she keeps” applies
here.
4) Brand Loyalty: The most often forgotten driver in building brand equity is brand loyalty. There is nothing
like a satisfied customer to tell a brand’s story and influence others. Other proprietary assets such as patents,
trademarks, and unique attributes can be very helpful as well when consumers must sift through the clutter of
choices that exists in today’s marketplace.
Customers can be characterized by a variety of loyalty descriptions. On any given day, a brand will likely
have customers in each of the four primary loyalty segments outlined in figure 2.2. How does a brand
create absolute loyalty? The key is to exceed customers’ expectations and pleasantly surprise them
whenever possible.
5) Other Proprietary Assets: One of the common misperceptions is that the way to build loyalty is to focus
on future sales. Frequent flyer and customer loyalty programs are tools some brands utilize in an attempt to
lock customers into future purchases.
Genuine brands, however, set as a priority to be perceived first and foremost as a “friend” to the consumers.
An overwhelming focus on future sales can become a distraction for brands, because they are buying their
way to loyalty through what might be referred to as brand bribery.
Brand bribery exists when a particular industry becomes perceived as a commodity (i.e., relatively
undifferentiated among brand choices) and characterized by lack of outstanding service or quality. Two
prime examples are large domestic airlines and supermarket chains. Many brands in these industries have
resorted to brand bribery in the form of “frequent customer” incentives and other promotional tactics
because they have not been able to differentiate their offerings or have not become perceived as “real
friends” to consumers. Brand bribery can backfire if customers feel that the “deal” may not really be a
bargain or that the process is a hassle.
Consumers become very unhappy when they can’t use their benefits (such as free airline tickets or coupons)
because of restrictions, fine print, or changes in the rules. Regarding supermarkets, privacy concerns can also
become a concern for consumers. Insurance companies are all too eager to learn who’s purchasing which
medications, alcoholic beverages, and over-the-counter vitamins or health supplements, such as St. John’s wort.
Rewarding customer loyalty is a wonderful strategy, but it should not be the only reason customers return.
It is one of the way to build brand equity is, in effect, to “borrow” it. That is, create brand equity by linking the
brand to other information in memory that conveys meaning to consumers (see figure
Country of 4.2):
Employees Other
Brands Origin
Events Third-Party
Endorsements
Causes
For example, assume Burton – makers of snowboards as well as ski boots, bindings, clothing, and outerwear –
decided to introduce a new surfboard called “The Dominator”. Burton has gained over a third of the snowboard
market by closely aligning itself with top professional riders and creating a strong amateur snowboarder
community around the country. In creating the marketing program to support the new Dominator surfboard,
Burton could attempt to leverage secondary brand knowledge in a number of different ways:
1) It could leverage associations to the corporate brand by “sub-branding” the product, calling it “Dominator
by Burton”. Consumers’ evaluations of the new product would be influenced by how they felt about
Burton and how they felt that such knowledge predicted the quality of a Burton surfboard.
2) Burton could rely on its rural New England origins, but such a geographical location would seem to have
little relevance to surfing.
3) Burton could also sell through popular surf shops in the hope that its credibility would “rub-off” on the
Dominator brand.
4) Burton could co-brand by identifying a strong ingredient brand for its foam or fiberglass materials (as
Wilson did by incorporating Goodyear tire rubber on the soles of its ProStaff Classic tennis shoes).
5) Burton could find one or more top professional surfers to endorse the surfboard, or it could sponsor a
surfing competition or even the entire Association of Surfing Professionals (ASP) World Tour.
6) Burton could secure and publicize favorable ratings from third-party sources such as Surfer or Surfing
magazine.
Thus, independent of the associations created by the surfboard itself, its brand name, or any other aspects of the
marketing program, Burton could build equity by linking the brand to these other entities.
Marketers resort to this method so that consumers will perceive the new brand as having some of the
characteristics of the existing brand. Companies always focus on leveraging on brand value for new products
and further improving the value of already existing products, as they are aware that a strong brand always
improves the value to its shareholders, and its profits. Research conducted by McKinsey on the connection
between brand strength and corporate performance on around 130 consumer companies, found that strong
brands on an average generated Total Returns to Shareholders (TRS) of 1.9 per cent above the industry average
while weaker brands stayed behind the industry average by 3.1 per cent. Leveraging is capitalizing on the
existing brand name to move into other product opportunities. For example, Lux, used its brand name to move
into the liquid soap and shampoo market, Godrej’s Fairglow soap brand was extended to its fairness cream,
Kingfisher’s brand name was used by the UB Group to enter the airline business. There are countless such
examples where companies use their existing brands to enter new product opportunities.
Companies generally try to leverage on the brand equity of established brands for other new products. The
fairness cream market in India is growing enormously at the rate of 25% per annum compared to the overall
cosmetic market growth rate of just 15% per annum. HLL introduced the Fair & Lovely fairness cream in 1975
and this continued to dominate the market and enjoyed a significant market share until 1998 when CavinCare
introduced its Fairever cream and grabbed about seven percent of the fairness cream market. Subsequently,
many players entered the fairness cream market. In 2000, Godrej introduced Fair Glow soap and later leveraged
on the brand equity of the soap to introduce Fair Glow cream, which became a huge success. HLL later
leveraged on the brand equity of Fair & Lovely cream and introduced Fair & Lovely fairness soap in March
2001.
1) Company: The branding strategies adopted by the company that makes a product or offers a service are an
important determinant of the strength of association from the brand to the company and any other existing
brands. Three main branding options exist for a new product:
i) Create a new brand.
ii) Adopt or modify an existing brand.
iii) Combine an existing and new brand.
Existing brands may be related to the co-ordination brand (e.g., Nokia) or a specific product brand (e.g.,
Nokia 8290 digital phone) and may involve names, logos, symbols, and so forth. To the extent that the
brand is linked to another existing brand, as with options 2 and 3, then knowledge about the other brand
may also become linked to the brand. In particular, a co-ordination or family brand can be a source of much
brand equity.
Leveraging a co-ordination brand may not always be useful, however, depending on the awareness and
image involved.
2) Country of Origin and other Geographic Areas: Besides the company that makes the product, the
country or geographic location from which it is seen as originating may also become linked to the brand
and generate secondary associations. Many countries have become known for expertise in certain product
categories or for conveying a particular type of image. As noted by many, the world is becoming a “cultural
bazaar” where consumers can pick and choose brands originating in different countries based on their
beliefs about the quality of certain types of products from certain countries or the image that these brands or
products communicate. Thus, a consumer from anywhere in the world may choose to wear Italian suits,
exercise in American athletic shoes, listen to a Japanese compact disc player, drive a German car, or drink
English beer. Choosing brands with strong national ties may reflect a deliberate decision to maximize
product utility and communicate self-image based on what consumers believe about products from those
countries.
Thus, a number of brands are able to create a strong point of difference in part because of consumers’
identification of and beliefs about the country of origin.
3) Channels of Distribution: Channels of distribution can directly affect the equity of the brands they sell by the
supporting actions that they take. Retail stores can indirectly affect the brand equity of the products they sell by
influencing the nature of associations that are inferred about these products on the basis of the associations
linked to the retail stores in the minds of consumers.
Because of associations to product assortment, pricing and credit policy, quality of service, and so on,
retailers have their own brand images in consumers’ minds. Retailers create these associations through the
products and brands they stock, the means by which they sell them, and so forth. To more directly shape
their image, many retailers aggressively advertise and promote directly to customers.
4) Co-Branding: In co-branding strategy, as the name suggests, companies combine their efforts to introduce
a product with two different brand names in a bid to carry over the image of the two parent brands to the
new product. Co-branding can take three forms:
i) Ingredient Branding: In this form, a basic ingredient of the product is mentioned next to the actual
products name. The advantages are that both brands can benefit from the symbiotic effects of
combining two strong brands. Moreover, costs such as advertising and communications can be shared.
A prerequisite for this strategy is that the ingredient has to be of essential, differentiating and high
quality. For example, many desktop manufacturers use the ‘Intel Inside’ mark along with their brand
names to benefit from the image of Intel chips. None of these companies can individually make a dent
in the market. United, yes, they stand tall in the market.
ii) Co-operative branding is the joint venture of two or more brands to form a new product or service,
where both brands are well established in their respective segments. Each helps the other in
improving the awareness of the other brand. A very good example is Jet Airways-Citibank Credit
Cards. Both are leaders in their segments and have now come together to enhance their market share
with their combined efforts. Customers also gain by using the facility. When they use the Citibank
credit card to book a Jet Airways ticket, they accumulate credit points, which can be exchanged later
for some other service benefits like discounts in the value of tickets or gifts. Apart from offering
discounts, this strategy also leads to improving the brand image and should motivate customers to
become loyal to these brands.
iii) Complementary branding involves the marketing of two brands together to encourage co-
consumption or co-purchases, such as a bottle of Coke with McDonald’s burgers. McDonald’s thus
restricts the availability of Coca-Cola’s rival, Pepsi, in its outlets and ensures more exposure and
visibility to Coke. Coke in combination with McDonald’s also increases the brand image of the two
complementary brands.
5) Licensing: Brand licensing is the process of creating and managing contracts between the owner of a brand
and a company or individual who wants to use the brand in association with a product, for an agreed period
of time, within an agreed territory. Licensing is used by brand owners to extend a trademark or character
onto products of a completely different nature.
Brand licensing is well-established business, both in the area of patents and trademarks. Trademark
licensing has a rich history in American business, largely beginning with the rise of mass entertainment
such as the movies, comics and later television. Mickey Mouse's popularity in the 1930s and 1940s resulted
in an explosion of toys, books, and consumer products with the lovable rodent's likeness on them, none of
which were manufactured by the Walt Disney Company.
This process accelerated as movies and later television became a staple of American business. The rise of
brand licensing did not begin until much later, when corporations found that consumers would actually
pay money for products with the logos of their favorite brands on them. McDonalds play food, Burger
King t-shirts and even ghastly Good Humor Halloween costumes became commonplace. Brand
extensions later made the brand licensing marketplace much more lucrative, as companies realized they
could make real dollars renting out their equity to manufacturers. Instead of spending untold millions to
create a new brand, companies were willing to pay a royalty on net sales of their products to rent the
product of an established brand name. Breyers yogurt, TGI Friday's frozen appetizers, Dodge power
tools, and Lucite nail polish are only a fraction of the products carrying well-known brand names which
are made under license by companies unrelated to the companies who own the brand.
6) Celebrity Endorsement: Celebrity endorsements remain a popular tool for marketers. But too many
times brands use the wrong celebrities.
Tiger Woods endorsing the Buick brand makes no sense at all. There is just no believability that Tiger is
dying to drive a Buick, and without believability a celebrity endorsement is worthless. The $40 million
General Motors reportedly paid Tiger for his 5-year contract ending in 2009 is not money well spent.
Having a celebrity endorse your brand can be helpful for a well-known brand in need of maintaining
attention for its brand and category. Celebrities are most helpful because they can star in advertising
campaigns and participate in company events. Consumers might be more apt to watch your ad if it has a
celebrity. Employees might feel proud of having the celebrity endorsing their company. Customers might be
more apt to participate in events when a celebrity involved. A celebrity is not a replacement for an idea. A
brand without a focus will never find the correct celebrity to match the brand.
Using a celebrity is also not a replacement for brand PR. Too many companies use a celebrity in an attempt to
establish credibility with consumers. But the only thing that builds a brand in the mind of the consumer is PR
and word-of-mouth generated by an idea. The PR attention generated by a celebrity does not build your brand.
People might talk about the celebrity but that rarely translates into much for the brand. The bottom line is that the
only thing that makes a brand successful is owning a word in the mind.
7) Sporting, Cultural, or Other Events: Events have their own set of associations that may become linked to
a sponsoring brand under certain conditions.
The main means by which an event can transfer associations is on the basis of var ious dimensions of
credibility. A brand may seem more likable or perhaps even trustworthy or expert by virtue of becoming
linked to an event.
8) Third-Party Sources: Finally, it should be noted that secondary associations can be created in a number of
different ways by linking the brand to various third-party sources. For example, the Good Housekeeping
seal has been seen as a mark of quality for decades (offering product replacement or refunds for defective
products for up to two years from purchase). Endorsements from leading magazines (e.g., PC magazine),
organizations (e.g., American Dental Association), and experts (e.g., film critic Roger Ebert) can obvi ously
improve perceptions of and attitudes toward brands. Third-party sources can also have an effect at a more
local level.
Perception is the process through which the information from outside environment is selected, received,
organized and interpreted to make it meaningful to us.
Perception is the process by which individuals organize and interpret their sensory impressions in order to give
meaning to their environment
According to Kolasa, “Perception is selection and organization of material which stems from the outside
environment at one time or the other to provide the meaningful entity we experience”.
According to S.P. Robbins, “Perception may be defined as a process by which individuals organize and
interpret their sensory impressions in order to give meaning to their environment”.
According to Joseph Reitz, “Perception includes all those processes by which an individual receives
information about his environment – seeing, hearing, feeling, tasting, and smelling”.
Performance Behavior
Satisfaction
Action Overt
Expectation and
Satisfaction Reaction Physical Action
Performance
Retrospection Covert
Evaluation
Mental State
1) Stimuli: The receipt of information is the stimulus which results in sensation. Knowledge and behavior
depend on senses and their stimulation. The physical senses used by people are vision, hearing, touch, smell
and taste. Intuitions and hunches are known as the sixth sense. These senses are influenced by a larger
number of stimuli which may be action, information, consideration and feelings, etc.
2) Attention: Stimuli are selectively attended to by people. Some of the stimuli are reacted to while others are
ignored without being paid any attention. The stimuli that are paid attention depend purely on the people’s
selection capacity and the intensity of stimuli.
During the attention process, sensory and neural mechanisms are affected and the message receiver
becomes involved in understanding the stimuli. Taking employees to the attention stage is essential in an
organization for making them behave in a systematic and required order.
3) Recognition: After paying attention to the stimuli, the employees try to recognize whether the stimuli are
worth realizing. The messages or incoming stimuli are recognized before they are transmitted into behavior.
Perception is a two-phase activity, i.e., receiving stimuli and translating the stimuli into action. However,
before the stage of translation, the stimuli must be recognized by the individual. The recognition process is
dependent on mental acceptability.
4) Translation: The stimuli are evaluated before being converted into action or behavior. The evaluation
process is translation. In the above example, the car driver after recognizing the stimuli uses the clutch and
brake to stop the car. He has immediately translated the stimulus into an appropriate action. The perception
process is purely mental before it is converted into action. The conversion is translation.
5) Behavior: Behavior is the outcome of the cognitive process. It is a response to change in sensory inputs, i.e.,
stimuli. It is an overt and covert response.
The behavior of employees depends on perception which is visible in the form of action, reaction or other
behavior. The behavioral termination of perception may be overt or covert. The overt behavior of perception
is witnessed in the form of physical activities of the employees and covert behavior is observed in the form
of mental evaluation and self-esteem.
6) Performance: Proper behavior leads to higher performance. High performers become a source of stimuli
and motivation to other employees. A performance-reward relationship is established to motivate people.
7) Satisfaction: High performance gives more satisfaction. The level of satisfaction is calculated with the
difference in performance and expectation. If the performance is more than the expectation, people are
delighted, but when performance is equal to expectation, it results in satisfaction.
Several stimuli are observed everyday by individuals. They confront these stimuli, notice and register them in
their minds, interpret them and behave according to their background and understanding. Employees confronted
with stimuli select only a few stimuli of their choice and leave other stimuli unattended and unrecognized.
Factors influencing the selective process may be external as well as internal, organizational structure, social
systems and characteristics of the perceiver.
1) Sensation
When a person is exposed to any of the marketing stimuli or an ad, the first reflex that is initiated in him is
known as sensation. For example, when a person come across a beautiful ad of a Mercedes Benz ‘E-class’ on
the center spread of a magazine, their first reaction will probably be one of admiration. As person enter a
bakery, may smell the mouth-watering aroma of freshly baked cakes. We can feel the energy in the pulsating
music played at a disco.
How one responds to a stimulus received by any of the five senses is called sensation. And perception is how
person understand a sensation and co-relate it with his needs and personality. Marketers try to advertise their
products in such a way that they will appeal to the consumer’s senses. They not only try to leave a mark on the
consumer’s mind, they also try to provide him with cues to perceive the product in a specific way. For
example, the thundering light in the Rin detergent ad may lead the consumer to expect that kind of cleaning for
his clothes.
Marketing Implications
Fast music, like that played at aerobics classes, tends to energize; in contrast, slow music can be soothing. The
type of music being played in a retail outlet can have an interesting effect on shopping behavior. Specifically, a
fast tempo creates a more rapid traffic flow, whereas a slow tempo can increase sales as much as 38 per cent
because it encourages leisurely shopping (although consumers tend to be completely unaware of this influence
on their behavior). However, a fast tempo is more desirable in restaurants because con sumers will eat faster,
thereby allowing greater turnover and higher sales. Music can also affect moods. Likeable and familiar music
can induce good moods, whereas discordant sounds and music in a disliked style can induce bad moods
2) Absolute Threshold
The absolute threshold is the minimum level of stimulus intensity needed for a stimulus to be perceived. In
other words, the absolute threshold is the amount of intensity needed to detect a difference between some thing
and nothing. Suppose you are driving on the highway and a billboard is in the distance. The absolute threshold
is that point at which you can first see the billboard. Before that point, the billboard is below the absolute
threshold and not sufficiently intense to be seen.
Marketing Implications
The obvious implication is that consumers will only consciously perceive a marketing stimulus when it is
sufficiently high in intensity to be above the absolute threshold. Thus if images or words in a commercial are
too small or the sound level is too low, consumers’ sensory receptors will not be activated and the stimulus will
not be consciously perceived.
Just- noticeable-difference
The minimal difference that can be detected between two similar stimuli is called the differential threshold, or
the Just Noticeable Difference (the JND). A nineteenth-century German scientist named Ernst Weber
discovered that the JND between two stimuli was not an absolute amount, but an amount relative to the
intensity of the first stimulus. Weber’s law, as it has come to be known, states that the stronger the initial
stimulus, the greater the additional intensity needed for the second stimulus to be perceived as different.
According to Weber’s law, an additional level of stimulus equivalent to the JND must be added for the majority
of people to perceive a difference between the resulting stimulus and the initial stimulus.
For Example,
i) JND for a car model may exist at a level of `10,000. So only when the price is changed by `10,000 or
more, the consumers will notice the price change.
ii) Hindustan Unilever increases the price of a 1.5kg package of Surf Excel Blue detergent from `110 to `120
or, say, the price of a 100gram pack of Lux toilet soap is raised to `21 from `18. Consumers here may
perceive these as a significant change in the prices of these two brands. Marketers use the concept of JND
for product pricing, packaging, and promotion decisions.
For example, some years ago, in an apparent misunderstanding of the JND, a silver polish manufacturer
introduced an extension of its silver polish brand that prolonged the shine of the silver by months but raised its
product price by merely pennies. By doing so, the company decreased its sales revenue. A better strategy would
have been to introduce several successive versions of the polish; each version with a shine that lasts longer than
the previous version (and at or slightly above the JND) and offered at a higher price (but a price, i.e., lower than
the JND).
When it comes to product improvements, marketers very much want to meet or exceed the consumer’s
differential threshold; i.e., they want consumers to readily perceive any improvements made in the original
product. Less than the JND is wasted effort because the improvement will not be perceived; more than the JND
is wasteful because it reduces the level of repeat sales. On the other hand, when it comes to price increases, less
than the JND is desirable because consumers are unlikely to notice it.
Marketers decrease the product quantity included in the packages, while leaving the prices unchanged – thus, in
effect, increasing the per unit price. The manufacturer of Huggies reduced the number of diapers in a package
from 240 to 228 (and continued pricing it at $31.99); PepsiCo reduced the weight of one snack food bag from
14.5 ounces to 13.5 ounces (and maintained the price at $3.29), the reductions in quantity were below most
consumers’ JND for these products.
Marketers often want to update their existing package designs without losing the ready recognition of
consumers. They usually make a number of small changes, each carefully designed to fall below the JND, so
that consumers will perceive minimal difference between succeeding versions. For example, Betty Crocker, the
General Mills symbol, has been updated seven times from 1936 to 1996.
4) Subliminal Perception
The concept of the perceptual threshold is important for another phenomenon – subliminal perception. Suppose
a person sitting at a movie and is exposed to messages like “Eat popcorn” and “Drink Coke”. However, each
message is shown on the screen for only a fraction of a second, so short a time that you are not consciously
aware of them. Stimuli like these, presented below the threshold level of awareness, are called subliminal
messages, and our perception of them is called subliminal perception.
Subliminal perception is different from pre-attentive processing. With pre-attentive processing attention is
directed at something other than the stimulus, e.g., at a magazine article instead of an ad in person’s peripheral
vision. With subliminal perception attention is directed squarely at the stimulus. Also, with pre-attentive
processing the stimulus is fully present – if a person shift attention and look directly at the ad or billboard, the
person can easily see it. In contrast, subliminal stimuli are presented so quickly or are so degraded that the very
act of perceiving them is difficult.
Marketing Implications
The question of whether stimuli presented subliminally affect consumers’ responses has generated considerable
controversy in the marketing field. A widely known but fraudulent study in the advertising industry claimed that
consumers at a movie theater were subliminally exposed to messages on the movie screen that read “Eat
popcorn” and “Drink Coke”. Reportedly, subliminal exposure to these messages influenced viewers’ purchase
of Coke and popcorn. Although advertising agencies deny using such stimuli, and the original popcorn-Coke
study has been discredited, some people claim that marketers are brainwashing consumers and attempting to
manipulate them. These people also believe that ads containing these stimuli are effective. This perception is
perhaps fostered by the availability of self-help tapes with subliminal messages that claim to help consumers
stop smoking, lose weight, and feel more relaxed.
1.4.5. Factors Influencing Perception
Individuals may look at the same thing, but perceive it differently. A number of factors operate to shape and
sometimes distort perception. These factors include:
1) Characteristics of the Perceiver (Internal Factors)
i) Needs and Motives: People’s perception is determined by their inner needs. A need is a feeling of
tension or discomfort when one thinks he is missing something or requires something. People with
different needs usually experience different stimuli. Similarly people with different needs select
different items to remember or respond to.
ii) Self-concept: The way a person views the world depends a great deal on the self-concept or image he
has about himself. The self-concept plays an important role in perceptual selectivity. It can be thought
of as an internal form of attention-getting and is largely based on the individual's complex
psychological make-up.
iii) Beliefs: A person’s beliefs have profound influence on his perception. Thus, a fact is conceived not on
what it is but what a person believes it to be. The individual normally censors stimulus inputs to avoid
disturbance of his existing beliefs.
iv) Past Experience: A person's past experiences mould the way he perceives the current situation. If a
person has been betrayed by a couple of friends in the past, he would tend to distrust any new
friendship that he might be in the process of developing.
v) Current Psychological State: The emotional and psychological states of an individual are likely to
influence how things are perceived. If a person is depressed, he is likely to perceive the same situation
differently than if he is elated.
vi) Expectations: Expectations affect what a person perceives. Expectations are related with the state of
anticipation of particular behavior from a person. In the organizational setting, expectations affect
people’s perception. Thus, a technical manager may expect ignorance about the technical feature of a
product from the non-technical people.
Factors in the Situation
Physical setting
Social setting
Organizational setting
Factors in the Perceiver
Needs and motives
Self Concept
Past Experience
Beliefs Perception
Expectations
Current Psychological State
3) Characteristics of the Situation: The context in which we see objects or events is important. Elements in
the surrounding environment influence our perception. The time at which an object or event is seen can
influence attention, as can location, light, heat, or any number of situational factors.
One type of input is physical stimuli from the outside environment; the other type of input is provided by
individuals themselves in the form of certain pre-dispositions (expectations, motives, and learning) based on
previous experience. The combination of these two very different kinds of inputs produces for each human
being a very private, very personal picture of the world. Because each person is a unique individual, with
unique experiences, needs, wants, desires, and expectations, it follows that each individual’s perceptions are
also unique. This explains why no two people see the world in precisely the same way.
Individuals are very selective as to which stimuli they “recognize”; they subconsciously organize the
stimuli they do recognize according to widely held psychological principles, and they interpret such stimuli
(they give meaning to them) subjectively in accordance with their personal needs, expectations, and
experiences.
The aspects of perception – the selection, organization, and interpretation of stimuli are:
Without this ability of selection, the individuals will not be able to consider all available information necessary
to initiate behavior. This selectivity is enhanced by two related processes.
1) Sensory Activation: First process known as, “sensory activation” assumes that human being senses are
activated only by a certain type of stimuli so that some stimuli may go unnoticed if these are not strong,
bright or loud enough to activate our senses.
2) Sensory Adaptation: Second process known as, “sensory adaptation” relates to human being ability to
tune out certain stimuli to which he has been continuously exposed. For example, a new home owner near
an airport might be excessively bothered by the noise, but such noise does not bother those who have been
living there for a long time and have been exposed to this noise over this long period.
Thus many objects or stimuli are stopped from entering our perceptual system by the above two processes. All
the remaining stimuli must compete for attention. Various external and internal factors influence our process of
stimuli selection.
2) Intensity: The intensity principle of attention states that the more intense the external stimulus is, the more
likely it is to be perceived. A loud sound, strong odor or bright light is noticed more as compared to a soft
sound, weak odor, or dim light. For example, based on the intensity principle, commercials on televisions
are slightly louder than the regular programmes.
4) Repetition: A repeated message is more likely to be perceived than a single message. Work instructions
that are repeated tend to be received better. Marketing managers and advertisers use this principle in order
to get the customers’ attention. According to Morgan and King, “a stimulus that is repeated has a better
chance of catching us during one of the periods when our attention to a task is waning. In addition,
repetition increases our sensitivity or alertness to the stimulus”. In the following illustration, the letter M
will be more often remembered than other letters.
M M G M M
M P M M M
M M M M A
B M M M O
5) Novelty and Familiarity: Novelty and familiarity principle states that either a novel or a familiar external
situation can serve as attention-getter. New objects or events in a familiar setting, or familiar objects or
events in new setting draw better attention. For example, in job rotation, when workers’ jobs are changed
from time to time, they become more attentive to their new jobs as compared to the previous ones.
Similarly, communication in familiar jargons attracts more attention.
6) Motion: Motion principle states that a moving object draws more attention as compared to a stationary
object. For example, workers may pay more attention to the materials being moved by them on a conveyor
belt as compared to the maintenance needs of a machine lying next to them. Advertisers use this principle in
their advertising by designing signs which incorporate moving parts. For example, commercials on
televisions (moving ones) get more attention than print media.
7) Order: The order in which the objects or stimuli are presented is an important factor influencing selective
attention. Sometimes, the first piece of information among many pieces received, receives the most
attention, thus making the other pieces of information less significant. Sometimes, the most important piece
is left to the end in order to heighten the curiosity and perceptive attention. For example, a writer of a
communication may intentionally build up to a major point by proceeding through several smaller and less
important points.
2) Perceptual Grouping: Grouping is the tendency to curb individual stimuli into meaningful patterns. For
instance, if we perceive objects or people with similar characteristics, we tend to group them together and
this organizing mechanism helps us to deal with information in an efficient way rather than getting bogged
down and confused with so many details. Some of the factors underlying his grouping are:
i) Similarity: The principle of similarity states that the greater the similarity of the stimuli, the greater the
tendency to perceive them as a common group. The principle of similarity is exemplified when objects
of similar shape, size or color tend to be grouped together. For example, if all visitors to a plant are
required to wear white hats while the supervisors wear blue hats, the workers can identify all the white
hats as the group of visitors.
ii) Proximity: The principle of proximity or nearness states that a group of stimuli that are close together
will be perceived as a whole pattern of parts belonging together. For example, several people working
on a machine will be considered as a single group so that if the productivity on that particular machine
is low, then the entire group will be considered responsible even though, only some people in the group
may be inefficient. The following figure demonstrates the proximity principle. The ten squares in the
figure are seen as pairs of two, three, four or five depending on their nearness to each other:
iii) Closure: The principle of closure relates to the tendencies of the people to perceive objects as a whole,
even when some parts of the object are missing. The person’s perceptual process will close the gaps that
are unfilled from sensory input. For example, in the following figure the sections of the figures are not
complete, but being familiar with the shapes we tend to close the gaps and perceive it as a whole:
Speaking from the point of view of an organization, if a manger perceives a worker, on the whole, a
hard worker, sincere, honest, then even, if he behaves in a contradictory way sometimes (which is a
kind of a gap, the manager will tend to ignore it, because it does not fit with the overall impression, that
he has about the worker.
iv) Continuity: Continuity is closely related to closure. But there is a difference. Closure supplies missing
stimuli, whereas the continuity principle says that a person will tend to perceive continuous lines of
pattern. The continuity may lead to inflexible or non creative thinking on the part of the organizational
participants. Only the obvious patterns or relationships will be perceived. Because of this type of
perception, the inflexible managers may require that employers follow a set and step by step routine
leaving no ground for implementation of out of line innovative ideas.
3) Perceptual Constancy: Constancy is one of the more sophisticated forms of perceptual organization. This
concept gives a person a sense of stability in this changing world. This principle permits the individuals to
have some constancy or stability in a tremendously variable and highly complex world. If constancy were
not at work, the world would be very chaotic and disorganized for the individual. There are several aspects
of constancy:
i) Shape Constancy: Whenever an object appears to maintain its shape despite marked changes in the
retinal image e.g. the top of a glass bottle is seen as circular whether we view it from the side or from
the top.
ii) Size Constancy: The size constancy refers to the fact that as an object is moved further away from us
we tend to see it as more or less invariant in size. For example, the players in cricket field on the
opposite side of the field do not look smaller than those closer to you even though their images on the
retina of the eye are much smaller.
iii) Color Constancy: Color constancy implies that familiar objects are perceived to be of the same color
in varied conditions. The owner of a red car sees it as red in the bright sunlight as well as in dim
twilight.
Without perceptual constancy the size, shape and color of objects would change as the worker moved about
and it would make the job almost impossible.
4) Perceptual Context: The highest and most sophisticated form of organization is ‘perceptual context’. It
gives meaning and value to simple stimuli, objects, events, situations and other persons in the environment.
The organizational structure and culture provide the primary context in which workers and managers do
their perceiving. For example, a verbal order, a new policy, a pat on the back, a raised eye brow or a
suggestion takes on special meaning when placed in the context of the work organization.]
5) Perceptual Defense: Closely related to perceptual context is the perceptual defense. A person may build a
defense against stimuli or situational events in a particular context that are personally or culturally
unacceptable or threatening. Accordingly, perceptual defense may play a very important role in
understanding union-management and supervisor-subordinate relationship. Most studies verify the
existence of a perceptual defense mechanism.
1) Perceptual Set
Previously held beliefs about objects influence perception of similar objects. These general opinions or attitudes
a person has constitute the perceptual set.
For example, a manager may have developed a general belief that workers are lazy, shirk work, and want to get
all the advantages from an organization without giving their best to it. In such a case, the manger already has a
mental or perceptual set. Manager’s subsequent perceptions will be influenced by this set. While meeting a
group of workers, manager will tend to interpret their behavior according to this mental set. Another manager –
having different beliefs, attitudes, and opinions – may have a different interpretation of the same phenomenon.
The role of expectations (the so-called ‘Pygmalion effect’) can thus be explained by the concept of the
perceptual set. Some studies made in organizations indicate how the mental set operates: People having
different individual opinions about various groups of people tend to form similar individual opinions when they
meet new people based on these, without checking whether their opinions or attitudes were accurate in the first
instance or not.
2) Stereotyping
When people form opinions about a particular class of objects or persons and act according to such opinions, it
is called stereotyping. The word ‘stereotype’ has been used to indicate a generally favorable or unfavorable
opinion a person holds for a particular group of people. For example, managers perceive a manager as being
more honest than a worker, just as a worker perceives another worker as being more honest than a manager.
Stereotyping is necessary for economy of perception. But stereotypes also lead to prejudices about various
groups of people, which influence perception and interpretation of data.
3) Halo Effect
In the halo effect the person develops an opinion or attitude towards a single person or object. If someone has a
favorable attitude towards a person, his subsequent perceptions of the same person are influenced by this
attitude. For example, if a manager has a good impression about a particular subordinates (a positive halo
effect), mistakes made by the latter may be condoned or the interpretation may give the latter the benefit of
doubt. When similar mistakes are made by another person about whom the manager has an unfavorable opinion
(Negative Halo effect, Rusty Halo or Horns effects) those mistakes may be perceptually exaggerated as
irresponsible behavior. Further, as a result of the halo effect, the manager may tend to interpret even feedback
information received according to the preconceived impression.
4) Perceptual Defense
Perceptual defense is used by the perceiver to deal with conflicting messages and data. If the data a person
receives threaten beliefs already held, the recipient uses perceptual defense to deal with this phenomenon. For
example, if a manager gets data from a union on strike, showing that it is taking positive steps in the direction
of resolving conflicts or is doing something useful for the organization, the manager may find such data in
conflict with a preconceived opinion that the union is by and large negative in its approach. Defense mechanism
could include:
i) Denial of the information or data received
ii) Some modification of the data received
iii) Justification for holding on to one’s own belief
5) Perceptual Context
The context in which an object is placed influences perception. The visual stimuli by themselves are
meaningless. Only when the doodles are placed in a verbal context, they do take on meaning and value for the
perceiver. The organizational culture and structure provide the primary context in which workers and managers
do their perceiving. Thus, a verbal order, a memo, a new policy, a suggestion, a raised eyebrow, or a pat on the
back takes on special meaning and value when placed in the context of a work situation.
6) Selective Perception
People selectively interpret what they see on the basis of their interests, background, experience and attitudes.
You are more likely to notice cars like your own, or why some people may be reprimanded by their boss for
doing something that, when done by another employee, goes unnoticed. Since we can’t observe everything
going on about us, we engage in selective perception.
7) Projection
Attributing one’s own characteristics to other people. If we are honest and trustworthy, so we take it for granted
that other people are equally honest and trustworthy.
8) Impression
People who engage in projection tend to perceive others according to what they themselves are like rather
than according to what the person being observed is really like. When observing other who actually are
like them, these observers are quite accurate—not because they perceptive but because they always judge
people as being similar to themselves. So when they do find someone who is like them, they are naturally
correct.
9) Inference
There is a tendency on the part of some people to judge others on limited information. For example, an
employee might be sitting at his desk throughout the working hours without doing anything, but it may be
inferred that he is sincere towards his duties. Thus, performance appraisal must not be based on half-cooked or
incomplete information. In the above case, the productivity and the behavior of the concerned employee
towards customers, fellow employees and others must also be taken into consideration.
10) Attribution
When people give cause and effect explanation to the observed behavior, it is known as attribution. Perception
is distorted sometimes by the efforts of the perceiver to attribute a causal explanation to an outcome. There is a
tendency for the individuals to attribute their own behavior to situational factors, but explain the behavior of
others by their personal dispositions.
Perceptual distortion occurs because of attribution on two counts:
i) Fundamental Attribution Error: The tendency to underestimate the influence of external factors and
overestimate the influence of internal factors when making judgments about the behavior of others.
ii) Self Serving Bias: The tendency for individuals to attribute their own successes to internal factors while
putting the blame for failures on external factors.
11) Distortions
Distortion occurs when a person twist and manipulate events either consciously or unconsciously. He often tend
to distort reality when it is unfavorable to us, because it threatens our self-image. He then act in a defensive
manner and distort or even totally shut out what is actually occurring. In other words, he tend to twist or avoid
that which is an unpalatable threat to his ego. Thus, distortion is due to defense mechanisms that operate when
one encounters data or receives information that is incongruent with one’s self-concept.
Consumers perceive several types of risk in the purchase of many products. Managers should take active steps
to reduce this perceived risk as a normal part of any marketing strategy. Perceptions of stores (store images),
prices, brands and advertising messages may vary significantly from one part of a company’s market to another.
Consumer behavior is process of learning of which perception is only the beginning.
Information is the primary raw material the marketer works with while influencing consumers. Therefore, an
understanding of the perception of information is an essential guide to marketing strategy.
Retailers, therefore, use exposure very effectively. Store interiors (of Ebony, Shopper’s Stop, etc.) are
designed with frequently sought-out items being separated so that the average consumers will travel
through more of the store. This increases total exposure. Shelf position and amount of shelf space influence
on which items and brands are given more attention. Point-of-purchase displays also attract attention to sale
and newly launched items. Stores are designed with highly visible shelves and overhead signs to make
locating items as easy as possible.
The total mix of in-store information cues (brands available, layout, point-of-purchase displays, etc.),
external building characteristics, and advertising combine to form the meaning of store image assigned.
The consumer forms a perception about the store, as a result.
2) Brand Name and Logo Development: Brand names are important for both consumer and industrial
products. A brand name which is difficult to pronounce and does not convey much of a visual image is not
likely to find appeal amongst the target consumers.
There are companies which use linguistics and computers to create names that convey the appropriate
meaning for products. For example, the brand name “Compaq” for a computer was created in such a
fashion. It was originally to be called – “Gateway”. But the focus on choosing this brand name was on the
total meaning conveyed by the interaction of the meaning of the name’s parts. For Compaq, ‘com’ means
computer and communications, while ‘paq’ means small. The unique spelling attracts attention and also
gives “a scientific” impression.
From this, it is obvious that name selection influences how consumers interpret product features. Besides
how a product and service is presented (its logo) is also equally important. This is the reason why
companies devote so much of time, money and effort in developing a right kind of logo for all their
company products.
3) Media Strategy: The fact that the exposure process is selective rather than random is the underlying basis
for effective media strategies. Marketers determine the media to which consumers in the target market are
most frequently exposed and then place their advertising messages in those media. For some products and
target markets (fashion items and accessories and heavy users of these items), consumers are highly
involved with the product and will go to considerable lengths to secure product relevant information.
Consumers of these kinds of product will search for media where relevant information is available. For
other products and target markets, consumers have limited involvement with the product category. For
example, Products such as carbonated drinks and detergents. For products like these, the marketer must
find media the target market is interested in and place their advertising messages in those media.
Advertising is also concerned about the placement of their advertisements, in appropriate media, print, and
the electronic. While advertising in magazines, advertisers insist that their ads appear opposite certain
articles and columns. For example, in a magazine like Femina, there is a particular column devoted to
queries on skin/beauty care. Advertises of Synergie Eye Contour Gel take care to place their ads opposite
this column to get maximum reader interest. Even television advertisers are concerned about where within
the commercial break their ad appears and the interest level aroused by the program.
4) Advertisement and Package Design: Advertisements and packages must perform two critical tasks:
i) Capture attention, and
ii) Convey meaning.
A marketer should make effort to attract attention to a package or advertisements. To a large extent, what he
does depends on the target market, the product, and the situation. If the target market is interested in the
product category, and in that particular brand, attention does not pose much of a problem. Once consumers
are exposed to the message, they will most likely attend to it sometimes it is the other way round.
Consumers are not always actively interested in a product. Interest in a product tends to arise only when the
need for the product arises. Since, it is difficult to reach consumers at exactly this point; marketers have the
difficult task of trying to communicate with them at times when their interest level is low and non-existent.
Suppose that marketer is responsible for developing a campaign designed to increase the number of users
for a liquid ‘toilet cleaner’. This is essentially a low involvement product. Interest in this product arises
only when the need for the same surfaces. Under such circumstances, two strategies appear reasonable:
i) To utilize stimulus characteristics such as full-page ads bright colors, animated cartoons to attract
attention to the advertisement, and
ii) To tie the message to a topic, the market is interested in. The topic may range from using
celebrities endorsing the virtues of the product or using health and cleanliness as a major plank.
While using stimulus characteristics, care should be taken to ensure that the target audience
interprets the message in the advertisement correctly.
5) Advertising Evaluation: A successful advertisement (or any other form of marketing message) must
accomplish four tasks:
i) Exposure: It must physically reach the consumer.
ii) Attention: It must be attended to by the consumer.
iii) Interpretation: It must be properly interpreted.
iv) Memory: It must be stored in memory in a manner that will allow retrieval under the proper
circumstances.
Here, psychological influences are considered on purchasing decisions – perception, motives, learning attitudes,
personality and self-concept, and lifestyles. It is concluded with a discussion of social influences that affect
buying behavior, including roles, family, reference groups, and opinion leaders, social classes, and culture and
sub-cultures.
Consumer buying behavior is influenced by the perception also which is psychological influence. Marketers
strategies make use perceptual processes to gain and retain customer.Partly determine people’s general behavior
and thus, influence their behavior as consumers. Even through these perception processes operate internally,
they are very much affected by social forces outside the individual.
Different people perceive the same thing at the same time in different ways. An individual at different times
may perceive the same item in a number of ways. Perception is the process of selecting, organizing, and
interpreting information inputs to produce meaning. Information inputs are sensations received through sight,
taste, hearing, smell, and touch. When a person hear an advertisement, see a friend, smell polluted air or water,
or touch a product, receive’s information inputs.
As the definition indicates, perception is a three-step process. Although one receives numerous pieces of
information at once, only few reach one’s awareness. Person select some input and ignore others because do not
have the ability to be conscious of all inputs at one time. This phenomenon is sometimes called selective
exposure because an individual select which inputs will reach awareness. If you are concentrating on this
paragraph, you probably are not aware that cars outside are making noise, that the room light is on, or that you
are touching this page. Even though you receive these inputs, they do not reach your awareness until they are
pointed-out.
An individual’s current set of needs affects selective exposure. Information inputs that relate to one’s strongest
needs at a given time are more likely to be selected to reach awareness. It is not by random chance that many
fast-food commercials are aired near mealtimes. Customers are more likely to turn in to these advertisements at
these times.
The selective nature of perception, the first step may result not only in selective exposure but also in two other
conditions:
1) Selective Distortion: It is changing or twisting currently received information; it occurs when a person
receives information inconsistent with personal feelings or beliefs. For example, on seeing an
advertisement promoting a disliked brand, a viewer may distort the information to make it more consistent
with prior views. This distortion substantially lessens the effect of the advertisement on the individual.
2) Selective Retention: In selective retention, a person remembers information inputs that support personal
feelings and beliefs and forgets inputs that do not. After hearing a sales presentation and leaving a store, a
customer may forget many selling points if they contradict personal beliefs.
The second step in the process of perception is perceptual organization. Information inputs that reach awareness
are not received in an organized form. To produce meaning, an individual must mentally organize and integrate
new information with what is already stored in memory. People use several methods to organize. One method,
called closure, occurs when a person mentally fills in missing elements in a pattern or statement. In an attempt
to draw attention to its brand, an advertiser will capitalize on closure by using incomplete images, sounds or
statements in its advertisements.
Interpretation, the third step in the perceptual process, is the assignment of meaning to what has been organized.
A person bases interpretation on what he or she expects or what is familiar. For this reason, a manufacturer that
changes a product or its package faces a major problem. When people are looking for the old, familiar product
or package, they may not recognize the new one. For example, when Smucker’s re-designed its packaging,
marketers told designers that although they wanted a more contemporary package design, they also wanted a
classic look so that customers would perceive their products to be the familiar ones they had been buying for
years. Unless a product or package change is accompanied by a promotional program that makes people aware
of the change, an organization may suffer a sales decline.
Although marketers cannot control buyers’ perceptions, they often try to influence them through information.
Several problems may arise from such attempts, however. First, a consumer’s perceptual process may operate
such that a seller’s information never reaches that person. For example, a buyer may block-out a salesperson’s
presentation. Second, a buyer may receive a seller’s information but perceive it differently than was intended.
For example, when a toothpaste producer advertises that “35 per cent of the people who use this toothpaste
have fewer cavities”, a customer might infer that 65 per cent of users have more cavities. Third, a buyer who
perceives information inputs to be inconsistent with prior beliefs is likely to forget the information quickly.
Thus, it can be said that perceptual process influences buying behavior of consumer which should be
intelligently used by marketers.
NET MATTER
The essence of successful marketing is the image that a product has in the mind of the consumer, i.e., its
positioning. Positioning is more important to the ultimate success of a product than are its actual characteristics,
although products that are poorly made will not succeed in the long run on the basis of image alone. The core of
effective positioning is a unique position that the product occupies in the mind of the consumer.
Marketers of different brand in the same category can effectively differential their offerings only if they stress
the benefits that their brands provide rather than their products’ physical features. The benefits featured in a
product’s positioning must reflect attributes that are important to and congruent with the perceptions of the
targeted consumer segment.
In today’s highly competitive marketplace, a distinctive product image is most important, but also very difficult
to create and maintain. As products become more complex and the marketplace more crowded, consumers rely
more on the product’s image and claimed benefits than on its actual attributes in making purchase decisions.
Positioning Strategies
The major positioning strategies are:
1) By Attribute or Benefit: This is the most frequently used positioning strategy. For a light beer, it might be
that it tastes great or that it is less filling. For toothpaste, it might be the mint taste or tartar control
Important product attributes like taste are useful segmentation tools because they are easy to identify. For
example, when segmenting the market for digital cameras, companies have relied on product attributes
such as resolution quality to define market segments and develop appropriate products. The Kodak
Company offers cameras ranging from 6 megapixels to 14 megapixels for the non-professional camera
buyer.
2) By Use or, Application: The users of Apple computers can design and use graphics more easily than with
Windows or UNIX. Apple positions its computers based on how the computer will be used.
3) By User: Facebook is a social networking site used exclusively by college students. Facebook is too cool
for MySpace and serves a smaller, more sophisticated cohort. Only college students may participate with
their campus e-mail IDs.
4) By Product or Service Class: Margarine competes as an alternative to butter. Margarine is positioned as a
lower cost and healthier alternative to butter, while butter provides better taste and wholesome ingredients.
5) By Competitor: BMW and Mercedes often compare themselves to each other segmenting the market to
just the crème de la crème of the automobile market. Ford and Chevy need not apply.
6) By Price or Quality: Tiffany and Costco both sell diamonds. Tiffany wants us to believe that their diamonds are
of the highest quality, while Costco tells us that diamonds are diamonds and that only a chump will pay Tiffany
prices.
Positioning is what the customer believes and not what the provider wants them to believe. Positioning can
change due the counter measures taken at the competition. Managing product positioning requires that marketer
know the customer and that he understand the competition; generally, this is the job of market research not just
what the entrepreneur thinks is true.
Regardless of how well positioned a product appears to be, the marketer may be forced to re-position it in
response to market events, such as a competitor cutting into the brand’s market share or too many competitors
stressing the same attribute. For example, rather than trying to meet the lower prices of high-quality private-
label competition, some premium brand marketers have repositioned their brands to justify their higher prices,
playing up brand attributes that had previously been ignored.
Perceptual Mapping
Marketers use a method called perceptual mapping to position products against competitors. Perceptual
mapping is based on the belief that when consumers think of a product category, they see it in terms of a map or
grid that clusters like product of brands together. Typically, products or brands that consumers consider similar
share like benefits and attributes. By understanding the perceptual maps of consumers in targeted segments,
marketers can see where their products fit with others in the market.
Subjectivity Past
Experience
Perceptual
Mapping
Prevention Expectation
Selectivity
Researchers create perceptual maps by surveying members of the target market, asking people to rate products
across multiple product attributes. For example, if researchers were interested in soft drinks, likely attributes
used in the analysis would include sweetness, carbonation, fruitiness, lightness, etc. Attribute ratings are then
subjected to various statistical techniques and a perceptual map can be extracted. On the map, similar brands are
plotted close together, and dissimilar brands are plotted far apart. Thus, one thing a perceptual map tells
marketers is who their direct competitors are (those plotted near to one another) and what brands represent less
vigorous competition. Blank spaces on perceptual maps indicate gaps in the market. Gaps typically indicate:
1) A true opportunity in the market that marketer might be able to pursue;
2) A combination of attributes that nobody actually needs or wants, which is why there is not competitor there;
and
3) A combination of attributes that is impossible to deliver to the consumer without the development of new
technology. (There are many examples of products invented to fill these types of gaps, such as air pump
athletic shoes and shoes with shocks, lightweight cell-phones, and mouse-pads on laptop computers).
The technique of perceptual mapping helps marketers to determine just how their products or services appear to
consumers in relation to competitive brands on one or more relevant characteristics. It enables them to see gaps
in the positioning of all brands in the product or service class and to identify areas in which consumer needs are
not being adequately met. For example, if a magazine publisher wants to introduce a new magazine to
Generation Y, he may use perceptual mapping to uncover niche of consumers with a special set of interests that
are not being adequately or equally addressed by other magazines targeted to the same demographic segment.
Many service companies market several versions of their service to different market segments by using a
differentiated positioning strategy. However, they must be careful to avoid perceptual confusion among their
customers. For example, Marriott’s Hotels and Resorts brand claims to provide customers with “superior
service and genuine care”; the Renaissance Hotels and Resorts brand provides “distinctive decor, imaginative
experiences and delights its customers’ senses”; the Courtyard brand provides “essential services and amenities
to business travelers”; the Residence Inn is designed for extended stays, and the Fairfield Inn provides rooms
and suites at “prices that will make customers smile”.
Reference Prices
Products advertised as “on sale” tend to create enhanced customer perceptions of savings and value. Different
formats used in sales advertisements have differing impacts, based on consumer reference prices. A reference
price is any price that a consumer uses as a basis for comparison in judging another price. Reference prices can
be external or internal. An advertiser generally uses a higher external reference price (“sold elsewhere at...”) in
an ad offering a lower sales price, to persuade the consumer that the product advertised is a really good buy.
Internal reference prices are those prices (or price ranges) retrieved by the consumer from memory. Internal
reference prices play a major role in consumers’ evaluations and perceptions of value of an advertised (external)
price deal, as well as in the believability of any advertised reference price. However, consumers’ internal
reference prices change.
NET MATTER
Consumers often judge the quality of a product or service on the basis of a variety of informational cues that
they associate with the product. Some of these cues are intrinsic to the product or service; others are extrinsic.
Either singly or together, such cues provide the basis for perceptions of product and service quality:
1) Perceived Quality of Products: Cues that are intrinsic concern physical characteristics of the product
itself, such as size, color, flavor, or aroma. In some cases, consumers use physical characteristics (e.g., the
flavor of ice cream or cake) to judge product quality. Consumers like to believe that they base their
evaluations of product quality on intrinsic cues, because that enables them to justify their product decisions
(either positive or negative) as being “rational” or “objective” product choices. More often than not,
however, they use extrinsic characteristics to judge quality.
2) Perceived Quality of Services: It is more difficult for consumers to evaluate the quality of services than
the quality of products. This is true because of certain distinctive characteristics of services: They are
intangible, they are variable they are perishable, and they are simultaneously produced and consumed. To
overcome the fact that consumers are unable to compare competing services side-by-side as they do with
competing products, consumers rely on surrogate cues (i.e., extrinsic cues) to evaluate service quality. In
evaluating a doctor’s services, e.g., they note the quality of the office and examining room furnishings, the
number (and source) of framed degrees on the wall, the pleasantness of the receptionist, and the
professionalism of the nurse; all contribute to the consumer’s overall evaluation of the quality of a doctor’s
services.
Because the actual quality of services can vary from day to day, from service employee to service
employee, and from customer to customer (e.g., in food, in waitperson service, in haircuts, even in classes
taught by the same professor), marketers try to standardize their services in order to provide consistency of
quality. The downside of service standardization is the loss of customized services, which many consumers
value.
Unlike products, which are first produced, then sold, and then consumed, most services are first sold and
then produced and consumed simultaneously. Whereas a defective product is likely to be detected by
factory quality control inspectors before it ever reaches the consumer, an inferior service is consumed as it
is being produced: thus, there is little opportunity to correct it. For example, a defective haircut is difficult
to correct, just as the negative impression caused by an abrupt or careless waiter is difficult to correct.
During peak demand hours, the interactive quality of services often declines, because both the customer and
the service provider are hurried and under stress. Without special effort by the service provider to ensure
consistency of services during peak hours, service image is likely to decline. Some marketers try to change
demand patterns in order to distribute the service more equally over time.
Outlet image, whether of a retail store, a catalog, a home shopping network, a retailer’s home page on the web
or even a flea market, has a great deal to do with why consumers choose to shop there. If person feel there is a
good match between the image of an outlet and person own self-image, person is more likely to shop there.
Image is very much in the eye of the beholder – it is what the consumer perceives it to be and it varies from
person to person.
Outlet image results from a mix of functional and psychological attributes. Functional attributes include
merchandise selection, price ranges, credit policies, store layout, and other factors that can be measured to some
degree and used to compare one outlet objectively with its competitors. Different functional attributes suit
different types of customers and different shopping situations. Although some enjoy the wide selection of a
store like Office Depot, others, preferring speed and ease in shopping, find it overwhelming and would rather
go to a small office supply retailer or order from a catalog.
Psychological attributes are a little more difficult to identify and compare across outlets. They include such
subjective considerations as a sense of belonging, a feeling of warmth or friendliness or a feeling of excitement.
A shopper hoping to spend a few quiet moments wandering around a bookstore is at ease with a very different
set of psychological attributes than the customer at a busy newsstand looking for a magazine to read on the train
when traveling home after work.
Retail stores have images of their own that serve to influence the perceived quality of products they carry and
the decisions of consumers as to where to shop. These images stem from their design and physical environment,
their pricing strategies, and product assortments.
A study of retail store image based on comparative pricing strategies found that consumers tend to perceive
stores that offer a small discount on a large number of items (i.e., frequency of price advantage) as having lower
prices overall than competing stores that offer larger discounts on a smaller number of products (i.e., magnitude
of price advantage). Thus, frequent advertising that presents large numbers of price specials reinforces
consumer beliefs about the competitiveness of a store’s prices. This finding has important implications for
retailers’ positioning strategies. In times of heavy competition, when it is tempting to hold frequent large sales
covering many items, such strategies may result in an unwanted change in store image.
The type of product the consumer wishes to buy influences his or her selection of a retail outlet; conversely, the
consumer’s evaluation of a product often is influenced by the knowledge of where it was bought. A consumer
wishing to buy an elegant dress for a special occasion may go to a store with an elegant, high-fashion image,
such as Saks Fifth Avenue. Regardless of what she actually pays for the dress she selects (regular price or
marked-down price), she will probably perceive its quality to be high. However, she may perceive the quality of
the identical dress to be much lower if she buys it in an off-price store with low-price image.
There is a positive correlation between pioneer brand image and an individual’s ideal self-image, which
suggests that positive perceptions toward pioneer brands lead to positive purchase intentions. Consumers
choose brands perceived as similar to their own actual, ideal, social, ideal-social, and situational-ideal-social
images. Thus, if a consumer believes that using the brand is fun, he will buy it and use it when he is having fun
with his friends and to him, brand will be worth what it costs, so long as he perceives it as fun.
1.4.9.9. Perceived Risk
Dowling and Staelin defined risk as a consumer’s perceptions of the uncertainty and adverse consequences of
engaging in an activity. Consumer behavior is motivated to reduce risk. When consumers intend to buy a
product or a service, they often hesitate to make the final decision because they cannot be sure that all of their
buying goals will be accomplished with the purchase.
Another factor of consumers’ motivation to process information about a product or brand is perceived risk, the
extent to which the consumer is uncertain about the personal consequences of buying, using or deposing of an
offering.
If negative outcomes are likely or positive outcomes are unlikely, perceived risk is high. Consumers are more
likely to pay attention to and carefully process marketing communications when perceived risk is high. As
perceived risk increases, consumers tend to collect more information and evaluate it carefully.
Perceived risk can be associated with any product or service, but it tends to be higher:
1) When little information is available about the offering,
2) When the offering is new,
3) When the offering has a high price, and
4) When the offering is low priced
Consumers must constantly make decisions regarding what products or services to buy and where to buy them.
Because the outcomes (or consequences) of such decisions are often uncertain, the consumer perceives some
degree of “risk” in making a purchase decision. Perceived risk is defined as the uncertainty that consumers face
when they cannot foresee the consequences of their purchase decisions. This definition highlights two relevant
dimensions of perceived risk: uncertainty and consequences.
The degree of risk that consumers perceive and their own tolerance for risk taking are factors that influence
their purchase strategies. It should be stressed that consumers are influenced by risks that they perceive,
whether or not such risks actually exist. Risk that is not perceived – no matter how real or how dangerous – will
not influence consumer behavior. The major types of risks that consumers perceive when making product
decisions include functional risk, physical risk, financial risk, social risk, psychological risk, and time risk.
An individual’s perception of risk varies with product categories. For example, consumers are likely to
perceive a higher degree of risk (e.g., functional risk, financial risk, time risk) in the purchase of a plasma
television set than in the purchase of an automobile; this type of risk is termed product-category perceived risk.
Researchers have also identified product-specific perceived risk