Consumer Behavior Notes: Part I

Pathway to purchase – process of arriving at a purchase decision Step 1: Consumer recognizes need Step 2: Gather information to satisfy need Step 3: Evaluate brands Step 4: Make purchase Step 5: Post-purchase decision

o Overall, greater information has given customer more choices and power

Push Strategy: marketer controlled, more passive (ex/ TV ad) Traditional approach to consumer behavior – brand to consumer

interaction Consistent messaging across consumer groups

Pull Strategy: consumer has majority of input and control (ex/ social, search) Newer approach to consumer behavior – greater consumer to consumer

interaction Custom created for each customer

Article #1: Digital in Pathway to Purchase Consumers now seek out information for all goods, no matter price Greater level of pre-store decision making (search reviews online) Greater word of mouth pull than ever – gives more feedback to company

Why Some Brands Fail: Pepsi Am – difficult to change ingrained product and market perceptions Kodak – Organizational culture failed to embrace change and adopt digital Volvo – little distinct brand appeal in new strategy, alienated core

customers

Marginal Utility of Information: opportunity cost of getting information in terms of time (low for complex decisions, high for limited decision making)* Customer should search for information until MV = MC

Four Types of Consumer Decisions:High Invovlement Low Involvement

Decision Making Complex Decision Making

Limited Decision Making

Habit Brand Loyalty Inertia

Complex Decision Making – high cognitive activity and personal relevanceo More risk and greater information processed

Types of Risk – Financial, Social, Performance, Psychological o High marginal utility of information

Limited Decision Making – moderate cognitive activity and low relevanceo Little motivation to search, limited brand evaluationo Customer makes decision because of deviations from norm

Ex: variety seeking, regular product isn’t available

Brand Loyalty – low cognitive activity and high relevanceo High level of commitmento Repeat buying based on reinforcemento Attempt to optimize selection process

Inertia – low cognitive activity and low relevanceo Consumer can be easily switchedo Satisfice rather than optimize selection processo Give customer a stimulus – the reminder effect

Decision Quicksand – a rather simple decision becomes complex when there are a large number of choices available (information and choice overload) Goal for CPG is to reduce difficulty and increase importance The consumer confuses difficulty with importance

The Apple Ecosystem: Seamless connection with cloud computing – integration

o Company is emphasizing consistency Decreasing switching costs within Apple but increased outside

Should Companies Split Segments? Might be useful is behaviors of segments are radically differently When in doubt, market to the higher involvement segment

o Low involvement segment will want to emulate higher one

How Brand Loyalty and Inertia are Similar: Habit – Routinized Buying Satisfaction based purchasing Minimal information search Low marginal utility to additional information

Learning Reinforcement Curve: the more often you purchase an item, the greater the probability you will purchase that item again Satisfaction is based on reinforcement and conditioning

Habits: Pros – more efficient time allocation, minimal decision quicksand Cons – encourages complacency, restricts choices, decision can be

suboptimal

Has The Web Increased or Decreased Information Overload? Increased – search engines, greater customization, social networks Decreased – filters and limits information, curates, comparison shoppingUsually depends on the person and their experience with the web and making similar decisions in the past

Complex Decision HabitAdvertising Information symbolic ReminderProduct Differentiated CommodityPlace Selective Intensive Distribution

Shopping Craft Experience Make Things Easier

Over time, products tend to move from informational to symbolic Ex/ Apple iPod – Features vs. Feelings

Process of High Involvement Decision Making: Needs -> Brand Perceptions -> Brand Eval -> Purchase -> Post-Purchase

Eval

Need-Gap Analysis – the gap between what people need and what’s available Cognitive Algebra – can predict buying behaviors based on formula

o Lowest score of Importance x (Ideal – Brand) Importance – how much does customer value attribute Ideal – what level of the attribute is the customer looking for Brand Rating – how does customer perceive brand on

attribute Flaw is that it is only based on rational side of decision making

o Doesn’t take into account emotion (ex/ New Coke failure) Strategic Implications

o Identifies benefit segments based on ideal ratings – Mtn Dew Code Red

o Use segments to guide new products – ex/ Pepsi Maxo Revitalize existing brands to get close to ideal – New Coke, Diet

Pepsi

Perceptual Map: visual representation of need-gap analysis The larger the circle on the map, the larger the segment Marketers should look for large underserved segments and cater their

products towards these groups of consumerso Hard to launch a product without defining the opportunity

Decision Heuristics –rules that can simplify decision-making Conjunctive Elimination – eliminate if anything has too low of a rating Lexicographic – select based on most important attribute, eliminate a

choice each time, going down line of attributesIn each situation, the heuristic leads to a suboptimal choice

High Involvement – cognitive algebra Evaluate brands across attributesLow Involvement – decision heuristics Evaluate attributes across brands

(Ir)rationality of Consumer Behavior: Decision Heuristics – satificing vs. optimizing

o But saves time and minimizes opportunity costs Framing Effect - suboptimal decision when using credit instead of cash

o But credit card gives immediate gratification Endowment Effect – a product is worth more to consumer after purchase

o But represents time and effort in decision making

Sunk Cost Effect – use less satisfactory product (ex/ ATT vs. Verizon)o But high switching costs

Choice Deferral Effect – if two choices are close, delay decisiono But customer is getting more information

Two Types of Habitual Behavior: Inertia – behaviorist approach

o Conditioning – stimulus and reminder Step 1: Unconditioned Stimulus (ex/ cowboy) Step 2: Unconditioned Response (ex/ macho association) Step 3: Conditioned Stimulus (ex/ transferred to Marlboro) Step 4: Conditioned Response (ex/ make purchase)

o Low retention rate and thus lower consumer lifetime valueo Primary Effect – stronger association is made first time symbol is

used Repositioning is easier when there is a clean slate (ex/ Miller)

o Strategic Requirements: Contiguity – symbol, jingle, tagline Continuity – frequent repetition and industry penetration

Brand Loyalty – cognitive approacho Learning and Reinforcement – stress features and benefits (info)

When Does Stimulus Association Work Best? Primary Effect – conditioned association is new Avoids Blocking Effect – no other previous association with stimulus Avoids Pre-Exposure Effect – stimulus isn’t overly familiar Avoids Overshadowing Effect – no other stimulus overshadows the

conditioned

“I Like it but I Don’t Know Why.” Even highly motivated participants were unable to overcome conditioning Conditioning can neutralize negative information about products Advertising might not be as powerful as it was in the past

o Limited forces “outside rational control.”

Why Do Brands Bring Back Retro Ads? Rely on past stimulus and response associations

o Ex/ VW Beetle Cheaper to rely on past brand equity and old ads have resonance Reminder of emotional nostalgia – comfort marketing

o Ex/ Honda CRV Ferris Bueller Ad

“Comfort Marketing” Reading: Argues that in times of change, people are more likely to try new things

than rely on past comforts and tendencies Study was isolated – doesn’t mean comfort marketing doesn’t work

o Might depend on size of change and demographics

Why Is A Behavioralist Approach Harder To Implement: Contiguity tends to work best for a mass market

o But today there are more fragmented, targeted markets As choice and info increases, consumers give more focus to brand

evaluation Greater consumer savvy today than in the past

o Greater reliance on WOM Marketingo Less reliance on ads for information

Result of Shift From Behavioralist to Cognitive Approach: From mass to micro marketing

o From TV and print ads to online and mobileo From Baby Boomers to Gen Yo From advertising to viral marketing focus

When Is Conditioning Most Relevant? Low involvement

o But TV is still greatest part of advertising budgets Time poverty

o Lends itself to decision heuristics More distractions today

Frequent purchases In-Store decisions – Reminder Effect

o Putting product at eye level generates the best results

Strategic Implications of Switch To Cognitive: More focus on message content than peripheral cues Shift from repetition to focus on benefit delivery (don’t use GRP’s)

o Gross Ratings Points = Reach x Frequency Create more frequent campaign changes More emphasis on viral marketing More focus on younger consumers

Behavioralist Approach Is Less Effective with Gen Y: Proliferation of mobile technology and social media Gen Y is more skeptical of claims Young age group makes them likely to become influencers

Learning: Behaviorist Approach – Conditioning

o Create learning through reminder effect Cognitive Approach – Reinforcement

o Create learning by associating with self-image

Forgetting: Consumers still associate brand with benefits and features Ex/ Nestea Plunge Takes longer than extinction to removeExtinction: Brand satisfaction is quickly cut off Ex/ The BP Oil Spill

Three Types of Learning:1) Purposeful Learning – High Involvement

a. Brand Loyalty2) Incidental Learning – Low Involvement

a. Inertia3) Vicarious Learning – Visibility

a. Bottom Up: Children sharing learning with parents (ex/ iPhone)b. Top Down: Parents sharing learning with children (ex/ food

brands)c. Acculturation: being in a new environment

Involvement: personal importance of object to a consumer Greater if the product is…

o Tied to image (ex/ Clothing)o Has symbolic meaning (ex/ Hybrid)o Has an important functional or experiential role (ex/ Netflix)o Tied to group norms (ex/ Blackberry)o High visibility (ex/ Hair Products)o High perceived risk (ex/ New Piano)

Strategic Importance of Involvement:High Involvement Low Involvement

Advertising Benefit Oriented, Central Cues

Attention Oriented, Peripheral Cues

Product Positioning Benefit Maximization Problem MinimizationPrice Inelastic ElasticSegmentation Live To Shop Shop To Live

Central Cues: message-oriented (meant to evoke benefits) Elaborate on message through support argumentation (in favor), counter

argumentation (against), and source derogation (question credibility)

Peripheral Cues: stimulus oriented (meant to evoke feelings)

Brand Extensions: Most successful when there is concept consistency Ex/ Bic Perfumes didn’t work because disposability is low involvement

conceptSegmenting By Involvement:

1) Separate Productsa. Ex/Cereal – Nutrition vs. Taste

2) One Product, Separate Ad Campaignsa. Ex/Starbucks – Fast Food vs. Experientialb. Potential Problems –

i. Alienating High Involvement Productsii. Confusing Customersiii. Undermining Brand Equity

3) One Product, Same Ad Campaignsa. Ex/Harley Davidson

Reasons For Increasing Involvement:

Increase brand equity Increase emotional bond – engagement Increase loyalty – increased profits Increase involvement – viral effects Easier to leverage brand – can transfer brand equity for new products

Strategies for Increasing Involvement For High Involvement Products: Create an experiential context for the product

o Ex/AMD – make people care about specs Get consumers to generate content

o Ex/Mastercard – Priceless campaign contest Increase level of customization

o Ex/Nike ID Establish Community of Users:

o Ex/ Harley Social Networks

Strategies to Increase Involvement for Low Involvement Products: Link the product to an involvement issue

o Ex/Clorox - Salmonella Create an emotional context for the product

o Ex/Tide – Father and Son Ad Change the focus of benefits

o Ex/Kellogg’s Crunchy Nut – focus on taste over health Create community

o Ex/Pampers – Mom Bloggers Enhance the importance of product by associating with social

responsibilityo Ex/Pepsi Refresh Product

Successful when cause and product are linked Use high involvement media to increase involvement

o Ex/ Facewash Dispensers – gave to bloggers, preorders on Amazon

How to Expand Primary Demand: changing industry behaviors1) Find new users2) Get existing users to use more

Secondary Demand – brand specific

Three Categories Of Decisions:1) Low Involvement - Inertia2) High Involvement – Utilitarian Needs

a. Functional Attachment – benefits and characteristics3) Highest Involvement – Hedonic Needs

a. Emotional Attachment The goal of brands is to move from number two to number three

Maslow’s Hiearchy of Needs: from bottom to top Physiological, Safety, Love, Esteem, Self-Actualization

In Time Of Scrimping, Fun Stuff Is Still Selling: During recessions, people are more likely to buy luxury, hedonic items

o Comfort Marketing – overcome future uncertaintyo Brand matters more – value is more well-known

Utilitarian Needs Hedonic NeedsFunctional Attributes Emotional Benefits

Informational Focus (product features)

Symbols and Imagery

Focus on Purchase Process Focus on Consumption ProcessAppease Financial and Performance

RiskAppease Social and Psychological

Risk

Enduring Involvement: continuous interest in product on day to day basis Keep by emphasizing product line, using social networks, & brand

differentiation Ex: An avid video game player

Situational Involvement: process and evaluate information when you only have to Ex: Buying a new computer

Characteristics of High Involvement Media: Purposeful Under Consumer Control Encourages Interaction With Medium Encourages Interaction With Other Customers

Types of Media (from high to low involvement): Social Networks Internet and Mobile Magazines and Newspapers Cable and Network TV

Help For Watching TV: More television networks are using second screens to engage with viewers

o 65-70% of smartphone/tablet users use their device while watching Research has concluded that when utilized correctly, second screens can

increase engagement and loyalty by as much as 30%o Community fosters engagement over distraction

Ultimate question is whether the second screen enhances or distractso TV might ultimately be the second screen for millennials

Media Multi-Tasking Is Really Multi-Distracting: Unlike other article, emphasizes that people who multitask lose

concentration During a 20 minute show, people look back and forth between screens

127 times

Perceptions: the attention to organization and interpretation of marketing and nonmarketing stimuli Marketing Stimuli – The Four P’s

o Completely determined by brand Nonmarketing Stimuli – Neutral Sources, Consumer Generated, WOM

o Not completely determined by brand

Place Perceptions: Ex/ Target Store Image Bigger emphasis on design and experience

o Quality perceptions Can a salesperson really promote an image?

Selective Perceptions: Perceptual Defense – Select information to confirm to past beliefs

o Consumers reject inconsistent info that violates preconceptions Ex: Pepsi AM, Bic Perfume, VW Phaeton

o Also reject inconsistent concepts or threatening information Ex: Smokers and anti-smoking ads, Global Warming

Perceptual Vigilance – Select information most relevant to needso Avoid information and choice overload

Confuses consumer and delays decision makingo Information Overload – decision curve is an inverted Uo Choice Overload – decision curve is a backwards squiggleo Post-Purchase Dissonance – decision curve is a U

Coke or Pepsi: It’s In The Head Different parts of the brain light up if we are drinking Coke or Pepsi

o Reward and Performance come from two different parts of the brain Why is disparity between taste and selection bigger with Coke?

o Pepsi is sweetero Coke has been able to develop a consistent brand image

Confirmation Bias Shapes How We Read Online: We cope with information overload through selective viewing

o Parse out information we don’t want to seeo More likely to accept negative information when there is no

overload

Brand Image – the total perception of brand consumer forms by processing information from various sources

Schema – positive associations with a brand Strong schema requires consistent image over time and an image that

relates to the product Ex: McDonalds – Ronald, I’m Loving It, Arches, Gold, Big Mac

Perceptual Generalization: Brand Leveraging – generalize perceptions from one brand to another

extensiono Need strong brand equity, concept consistency, and company

loyaltyo Ex: iPhone, iPad, and iMac

Anchoring – associations from attributes or benefits to producto Ex: Red Cars are faster than other colored cars

Family Branding – using company name as an umbrellao Create a halo-effecto Ex: Colgate, Heinz

Cannibalization – too much generalization, little differentiationo Ex: Diet Pepsi Drinks

Generalizing from Brand to Category – brand become a common termo Harder for brand to maintain its unique advantage. Less likely to

use when it reflects the company name itselfo Ex: Kleenex, YoYo

Perceptual Discrimination: ability to notice changes in marketing stimuli Just Noticeable Difference (JND) – point where customer does not notice

changes in priceo Weber’s Law – the JND is a constant ratioo Brands shouldn’t increase prices above JND but should decrease

prices below the JND for customers to notice Adaptation Level –repeated exposures reduce ability to perceive stimuli

o Advertising Wearout – additional advertising doesn’t increase recall Law of diminishing returns

o Duration of Promotion – customers get used to permanent price decreases and resent increases

When Marketers Don’t Want Stimulus Noticed:o Price Increases (Reading 13)– JND is around 10% for retail.

Customers mostly accepted the price increases. But what if not luxury goods?

o Decreases In Product Size (Reading 14) – Marketers hiding increasing food costs by increasing prices or decreasing content. Brings up question of what is the best way to hide from consumers?

Changes in Information Search In Past Decade: Greater Variety

o Ex: Mobile Advertising Increased Cross-Platform Exposure –sequential exposure generates more

retention than simultaneous exposureo Ex: ESPN and World Cup

Better Comparison Shoppingo Ex: BOTS

More Access to Buzzo Ex: Viral Marketing

Search Engineso Ex: Google

Twitter and Advertising Reading: Most of Twitter’s advertising revenue is generated from mobile Time and place utility from mobile Greater visibility but harder to get a true ROI

Offline Sources of Consumer Information:Personal Impersonal

Marketer Controlled - Salespeople- CRM- Viral Marketing (guerilla marketing, opinion leaders, and referrals)

- Media Advertising- Sales Promotions- Packaging

Non-Marketer Controlled

- Word of Mouth (most influential element in marketing)

- Publicity- Neutral (ex/ review sites)

Online Sources of Consumer Information:

Personal ImpersonalMarketer Controlled - Viral (Youtube,

Facebook, Twitter)- Buss Agents (enlisting brand advocates)

- Web Advertising(can be based on sites visited, customer info)

Non-Marketer Controlled

- Social Networks- Independent Blogs

- Search Engines- Content Aggregators- BOTS

When Do Marketer Controlled Influences Outweigh Social Influences? First Adopters/Innovators

o Educational Process – make sure consumer understands product Low Involvement Products

o Motivated primarily by price, promotions, and advertising

Diffusion Curve: Innovators (4%), Early Adopters (16%), Early Majority (32%), Late Majority (32%), Laggards (16%)

Why Youtube Is Getting More Important: More active medium

o Television is more passive Helps complement television advertising

o Access to exclusive informationo Generates buzz

Remember: Greater access to information has empowered consumers but increases choice and information overload, delaying the decision process

Marketer Empowerment Through Online Media: Social Media

o Get feedback, determine regional preferences, anticipate trends Conduct Online Surveys

o Test pilots, recruit participants, track reactions Keep A Pulse On Market

o Anticipate market trends and manage negative information

Social Media Are Giving A Voice To Taste Buds Reading: Benefits:

o Social networks are helping brands get feedback about products, both positive and negative

o Helps retailer make informed, just in time decisions about inventory Possible Downsides:

o Get extreme opinions onlineo Self-selection/less opinion deptho Youth bias

Implications of Changes In Information Sources In Past Decade: Changes in media mix – shift from TV to web

o Silos to Synergy – media isn’t comprised of individual entities anymore

Whole is greater than sum of partso Decrease in live viewing but same content is being consumedo TV to Web is more effective than Print and Web

Combination of a visual and a static medium Targeting – recommendations and rules based

o Offline – demographic information (ex/ income)o Online – behavioral information (ex/ past sites visited)

Customization and Narrowcasting Relationship Marketing

Single-Source Data: getting both exposure and behavior to household Opportunity to see with an opportunity to act

When is multi-tasking interactive (instead of distractive)? Results/Contest Based – American Idol, Superbowl, Oscars, etc. Collective Experience – care about opinions of others Second Screen – complementary viewing Live Viewing – non-DVR, current

Using Google Data To Reach Customers Reading: Vicks targeted its product to moms who lived within two miles of a store

carrying its product based on flu data Brings up question of when microtargeting is too invasive?

Reasons for Limited Information Search: Learning Cognitive Economy – continue search only as long as value of last unit of

information is greater than the cost Utilitarian vs. Hedonic

o Utilitarian – focus on the importance of the informationo Hedonic – enjoy browsing the internet

Information & Choice Overload Complexity of Search

Cost of Information Searcho Timeso Monetaryo Delayso Frustrationo Product Trial

How to Reduce Costs of Information Search: Recommendation Systems Free Trials Mediated Shopping (ex/Ebay) BOTS

Information retention is more likely if there is a consistent message that is related to product benefits -> helps facilitate multiple schema

What factors inhibit retrieval from memory? Forgetting Extinction Ambiguity – ex/ Volvo Inconsistent Info – ex/ Burger King

Strategic Roles of Attitudes:1) Predictive – what attitude needs shifting?2) Diagnostic – develop strategies from predictions3) Evaluative – how effective was the brand in changing attitudes?

Positive attitudes don’t always lead to purchase (difference between followers and owners)

Perceptions – Cognitive – “I think” Advertised through product attributes (TD Ameritrade)Attitudes – Affective – “I like” Advertised through emotion or humor (E-Trade)Intentions – Conative – “I plan to” Advertised by showing product in use (ex/ if a day trader was shown

making trade)

Google Advertisements Reading: Google is trying to create an affective emotional connection to increase customer loyalty and minimize differentiation Wanted to stand out against Apple, Bing, etc. in a rather undifferentiated

marketo Generalization strategy – umbrella products

Predictive Role of Attitudes: Based on likability and effectiveness (ex/ Bristol Meryers) Based on exposure (ex/ CBS surveys in LV and online)

Attitudes Best Predict Behavior When: Involvement is high (ex/ Reality TV vs News)

Measuring change in attitudes (ex/ same audience) Measuring attitudes towards ownership rather than brands themselves

o Theory of Reasoned Action (ex/ BMW and College Students) Combat by advertising product in context of usage

Value Expressive Role: focus on me Ex/ Nike Just Do It – Empowerment CampaignEgo-Defensive Role: focus on we Ex/ Listerine and Bad Breath – Fear Appeals and Social Consequences

Why Attempts At Change Are Often Difficult: Hard to change long-held beliefs without alienating core customers

o Ex: Oldsmobile, Kodak, Volvo Hard to change if contradict societal norms

o Ex: Kelloggs attempt to get Asian consumers to eat cerealo Easier when there is a similar enough anchor (adults and cereal)

Going Against Cultural Tideo Ex: Eat Beef Campaigno But Got Milk was successful because it rode tide

Only advertise your negatives when you refute those claims in the same ad

Post-Purchase Evaluation: where the money is Focus on retention over acquisition

o Determines loyalty and profitability A 1% decrease in retention lowers profits by 5%

o But most marketing strategy is primarily focused on acquisition Most brand managers are evaluated on market share –

misaligned Satisfaction:

o High Involvement – reinforcement (brand loyalty)o Low Involvement – conditioning (inertia)

Dissatisfaction: disconfirmation of expectationso Reduces purchase likelihood and increases post-purchase

dissonance Dissonance:

o Most likely to occur when conflicting information, close call between choices, high risk and involvement, peer pressure

How Customers Can Reduce Dissonance: Accept dissonant information Rationalize the negative Lower expectations Seek positive information Seek support of others Convince others to make same choice Endowment effect

Exchange vs. Communal Relationships Reading:

Exchange Relationships: relationship primarily based on economic factors and the balance of inputs and outcomes

o Ex: Walmarto Respectful treatment means more when there is fair deal in terms

of input and outputo To make an unfair outcome right, give discount

Communal Relationships: draw consumers in based on caring, trust, and partnership

o Ex: State Farmo Respectful treatment means more in generalo To make unfair outcome right, give a written, sincere apology

Strategic Imperitives: Increase Involvement (degree of association with product or person) Increase Engagement After Purpose (degree of interaction

McKinsey Video: Emphasis on consumer experience

o Is spend in line with the pathway to purchase? Social media is a pull strategy -> engaging with brand by digital media

Strategies to Increase Consumer Engagement Post-Purcahse: Encourage feedback and interaction

o Ex: Ford Instant Cars Personalize communications

o Ex: Remind of Service Needs Create community

o Ex: Nike Running App, Harley Owners Club Satisfaction surveys Encourage consumer generated content

o Ex: Facebook Contest Loyalty programs

Mini-Cooper’s Strategy: Ads to reinforce purchase (retention over acquisition)

o Ex: Mini Decoder Customer relationship management post-purchase

o Emails on product careo Buyer education

Establish ownership community

How to Reduce Dissonance on Web: Easy Returns Home Try On Communication with Company

Demographics: geography, income, etc.Psychographics: lifestyle and personality information

Strategic Applications of Demographics: Target – identify segments by demos

o Ex: Avon Media – select media with some profile as target

o Ex: Scion IQ advertising on media Advertising – use norms associated with demo group

o Ex: Pepsi generation Product: separate product lines to targeted segments

o Ex: Old Navy and Banana Republic

Buyer Profile: what percentage of brand owners are in target populationBuyer Concentration Index: % brand owners/ % population

Any index over 100 is a strong score

Disparity in Media: Most money is allocated for TV

o TV has a greater reach Less money is spent on Web/Social

o But digital can have a higher ROI More targets and precision More engaging medium Potential multiplier effect

Age Cohorts: age groups with similar values and shared memories Ex: Gen Y – 9/11, Obama Election, Social Media, Lady Gaga

Main Cohorts: Mature Market – born before 1948 (65+)

o About 59 million peopleo Three cohorts within market: depression era (80+), WWII (71-

80), older boomers (65-70) Baby Boomers – born between 1948-1964 (48-65)

o About 76.5 million people in US Generation X (at crossroads) – born between 1965-1976 (36-48)

o About 50 million people in US Generation Y (coming together) – born between 1977-1993 (19-35)

o About 77.2 million people in US Generation Z (finding a path) – born after 1994 (under 18)

o Echo Bust

Strategies to Target Gen Y: Positioning Strategies – benefit oriented, trying to evoke lifestyle

o Ex: Scion, Nissan Cube Repositioning Strategies – from inertia to more brand loyalty

o Ex: Levi’s Jeans Dual Targeting With Several Age Cohorts

o Ex: Honda Element (adventure to Gen Y, Roomniness to Boomers)

o Can either be trickle up or trickle down

Ford and Zipcar Reading: Ford and Zipcar agreed to deal to include Ford Zipcar’s on college

campuseso Less college students own cars than before

Move by Ford to introduce vehicle to this cohort, influencing buying decisions

o But will be difficult to change existing brand perceptions

Gen Y’s Conventional Wisdom on Values: Most desirable target based on LTV

o But less brand loyal Greater reliance on social networks for WOM

o But don’t use every network equally More willing to buy new products

o But depends on category (ex/ technology vs. CPG) Less focus on traditional media

o But decrease in traditional media is overstated and still consuming content

Greater control over technology More secure and optimistic in American Dream Opinion leaders in fashion and technology

o But role of parental influence can’t be discounted

Themes of Generation X: New Reality – more financial insecurity More conservative and pragmatic Less homogeneous (called Gen X because of lack of commonalities) Fewer defining events

Value Segments for Gen X: Pessimists – new reality Materialists – more optimistic Anti-Institutional – capture lifestyle of the 1960’s

Implications of Enter Mature Market: Increased discretionary income Focus on youthfulness rather than youth More techno-savvy mature market

Dimensions of Youth Bias: Mature market controls 77% of net assets but disproportionally higher

cost of media to those targeted under the age of 35 Only 6-7% of TV commercials are targeted to mature market

o If targeting mature market, focus on portraying youthfulness rather than youth

CBS Strategy (From Reading): Target the older demographic – go where the money is

Follow the baby boom generation More likely to buy items advertised on TV

Rationale For Youth Bias In Marketing: Younger customers represent greater potential over time

o But category dependent Easier to get younger consumers to switch brands Youth are trend setters – trickle up effect

o Early adopters – parents follow them for some categorieso If target younger, older will follow

Generation Z: Children of Gen X Most tech and social media savvy cohort

o Lifelong users of the web Less brand loyal Most racially diverse – little homogeneity

Why Has Gen Z Gotten Little Attention From Marketers? Wants change constantly at younger ages Resemble Gen Y closely in behaviors

o Also influenced by older siblings Make few purchase decisions on own

o Mostly determined by their parents Privacy issues – parents hesitant for their kids to be marketed to

Psychographics: measurements of personality and lifestyle variables Personality – enduring and consistent patterns of behavior

o Ex: detached, passive, Lifestyle – mode of living and tastes in day to day activities

o Ex: Group oriented, innovators Important to make distinctions when demographic profile is same

o Ex: SUV vs MiniVan

Self-Concept Theory: three selves Actual Self – buy products consistent with self image – ego

o Ex: Ikea Ideal Self – be a better person – superego

o Ex: Nissan save the planet Ideal Self #2 – unrestrained by social norms, fantasy self, freedom to or

from– IDo Ex: Harley Davidson

Self Esteem is lowest when there is the greatest disparity between the actual self and the fantasy self

Beauty Ads and Reading: Females consider themselves in a less positive light when viewing

advertisements

o Depends on medium and type of ad – does it reflect you or them?

Makes you think about product and context differentlyo Dove Campaign For Real Beauty – tried to squash trends

Aspirational vs. Relatable

The Extended Self: identified by constellation of products we own Influenced by how we see ourselves and how others see us Implications – co branding (ex/ Mountain Dew Code Red), product

placements (Outdoors gear), logical acquisition strategies

Motivational Theory: determines hidden needs and motives through depth interviews and projective techniques Depth Interviews - interviewed individually to find deep-seeded motives Projective Techniques - open-ended questions to solicit responses to

sticky or hard to answer situations

When is Qualitative Research Most Relevant? Consumer is not aware of need or motive Consumer has difficulty communicating When product is either related to self-identity, fantasy oriented, related to

childhood, or risk oriented (more anxiety)

Why Shift From Motivational To Lifestyle Research? More actionable More easily determined and measurable More closely related to purchases More empirical

Sources of Lifestyle Information: AIO Inventories – activities, interests, and opinions

o Use factor analysis to reduce questions through coorelation Narrow down what is relevant to that specific audience

o Opinion leaders, information seekers, etc. VALS – based on annual surveys of ideals, achievements, resources, self-

expressionso Thinkers, innovators, achievers, strivers, survivors, etc.

Importance of Personal Influence: Friend and family influence over 50% of purchases Word of mouth is estimated to be six times more powerful than paid

media

Types of Personal Influence: Expert – seeking knowledge

o Early Adoptero Most important for new product – ex/ 3DTV

Comparative/Referent – looking for confirmation, emotional reinforcemento Majorityo Most important for mainstream product – ex/ iPhone

Normative – pressure to abide by norms, group orientedo Late Adopter

Reading 28: More likely to pay more for a product used by someone you like

o Benign Envy But also you will pay more for another product if you don’t look up to

themo Malicious Envy

Reading 29: People don’t like being copies Resent emulation when put in a lot of effort or tied to their self image

Dimensions of Comparative Influence: Social Multiplier Effect – keeping up with the Joneses

o Requires visibility and diffusion Comparative Consumption – seeking shared experiences Conspicuous Consumption – badge value

o If a product is very cheap or extremely expensive, there is a lower likelihood a brand name is shown

Dimensions of Normative Influence: Product Advertising

o Rewards of Using – ex/ Sure (social acceptance)o Risks of Not Using – ex/ Bad Breath Spray (fear appeal)

Social Responsibility Advertisingo Risks Of Using – ex/ Anti-Smokingo Rewards Of Not Using – ex/ Above The Influence

Reactance – rejection of normative influenceo Questions about effectiveness of social responsibility advertising

exist

Use of Spokespersons In Advertising:Expert Referent

Celebrity Knowledgeable Spokesperson directly tied to product (ex/ Lebron James for Nike)

Symbolic (ex/ Sam Waterson for TD Ameritrade) or Aspirational (ex/ Jennifer Hudson for Weight Watchers)

Non-Celebrity Unbiased Source (ex/ Rite Aid)

Typical Consumer (ex/ Jet Blue Experience)

Advantages of Non-Celebrity Referents: Don’t have to worry about the negative consequences of the

spokesperson’s actionso Ex: Tiger Woods, Lance Armstrong

Minimal saturation

More relevant and relatable

Elements Of Word Of Mouth In Groups: Opinion Leaders – who influences the others in the group Connectors – diffusion of influence, acts as opinion leader among groups

o All connectors are opinion leaders but not all opinion leaders are connectors

Web’s Effect On Word Of Mouth Communications: Hypothesis A: Web enhances word of mouth

o Because of interactivity, anonymity (more free to express opinion), number of vehicles for word of mouth, viral multiplier effect, the e-fluential generation (16% of internet users generate 75% of the content)

Hypothesis B: Influence of WOM on web is overstatedo Online conversation isn’t always two-way, web population is not

representative of total population, only 10% of word of mouth comes from online (vs 73% which comes from face to face conversations)

Reading 32: Internet has become panopticon – online influence is so great that

consumers are becoming marketers (brand advocates) through referrals, sharing, etc.

Negative Word Of Mouth: Dissatisfied consumers are three times as likely to communicate their

experiences Consumers pay more attention to negative word of mouth

o 80% chance consumer will follow through after hearing

Diffusion Process: Strength of Weak Ties – connectors that tie groups together help push a

product or innovation into mass adoption Leapfrogging – multiplier effect of reaching multiple connectors

Characteristics That Encourage Diffusion: Relative advantage Compatibility with past usage Simplicity of use Observability

Trailability

Some characteristics that discourage diffusion include value barrier, usage barrier, complexity, lack of information, and a lack of usage experience

Rate of Diffusion: tipping point accelerates diffusion (need a factor or event) Ex: Email – triggered by 40% adoption level, Car – triggered by pass

production Rapid Rate of Diffusion – triggers a quick increase in use

o Slow and No Diffusion situations either see constant increases or no increases