Consumer Behavior and Advertising Strategies, Exams of Business Economics

Download Consumer Behavior and Advertising Strategies and more Exams Business Economics in PDF only on Docsity! Econ 3100 Exam 2 Questions with Highly Verified Answers 2024 Test Consumer Behavior - Correct Answers the buying behavior of consumers- the individuals, families, and households who buy goods and services for personal consumption Needs and Individuals' Relationships with their Goods - Correct Answers Self Concept Attachment- products establish user's identity Nostalgic Attachment- link to one's past Interdependence- part of daily routine Love- product elicits strong emotion Stethoscope, Barbie vs. Brats Buying Process - Correct Answers Pre Purchase 1. Assessing Need 2. Searching for Information 3. Evaluating Alternatives 4. Selecting Purchase 5. Buying Post Purchase 6. Evaluating Pre-Purchase - Correct Answers The consumer tried to determine how much pleasure or pain will be derived form a product or service 1. Assessing Need (vs. Wants) - Correct Answers consumers sense a discrepancy between current state and desired state 2. Searching for Information - Correct Answers Involves sorting behavior. Information either internally (go over in mind) or externally (looking at outside info) is accessed External Information Search - Correct Answers in the economic theory of choice, the assumption is that the consumer has perfect information. information makes choice meaningful. consumers cannot make a good decision unless they have adequate information. Challenges to Obtaining Information - Correct Answers A. # of products or varieties is overwhelming B. Complexity of goods C. Time costs are great D. Consumers have high expectations E. False sense of security F. Some information is useless or inaccurate A. Choice is overwhelming - Correct Answers deregulation has brought with it more choices as well as increased competition. it is a sign of a healthy economy to have a larger number of products and services, but this diversity may create confusion for consumers. ex. telephone service, airline tickets B. Complexity of goods - Correct Answers assessment becomes difficult. new technology is more complex therefore assessment is more complex and the information is either more complex or not available. C. Time costs are significant - Correct Answers it takes time to find information. the time has to come from somewhere. what are you going to give up doing so that you can gather information? D. Consumer expectations are high - Correct Answers increased levels of education translate into consumers who demand more information and accurate information. E. False sense of security - Correct Answers consumers assume that they are protected in the marketplace, and do not practice caveat emptor ("let the buyer beware") F. Useless or inaccurate information - Correct Answers useless info: on a hair dryer, do not use while sleeping. some information that is given may be inaccurate. it then is up to the consumer to be wary and judge whether the information is correct. Consumer Information should be: - Correct Answers a) objective b) valid and credible c) understandable d) complete e) up-to-date a) objective information - Correct Answers non-biased, source of information is not making a profit. Consumer Reports is a good source of objective information. Why? They do not accept advertisements. b) valid information - Correct Answers information comes from reliable sources. credible research has been done. information could be proven to be correct. 5. Buying (Purchase) - Correct Answers Ultimately a choice is made to "purchase", including where, when, and how. Which store to patronize? Timing Matters... holiday sales. How to pay for goods? (Cash/Credit) 6. Evaluating (Post Purchase) - Correct Answers How a consumer feels after the purchase is very important since "Post Purchase Feelings" can stimulate brand loyalty, re-purchases, and "Word of Mouth Advertising" Post Purchase Satisfaction - Correct Answers Consumer Satisfaction is a function of consumer expectations and perceived product performance. Performance < Expectations = Disappointment Performance = Expectations = Satisfaction Performance > Expectations = Delight Satisfaction is important because: - Correct Answers delighted consumers engage in positive word-of-mouth. unhappy customers tell on average 11 other people. it costs more to attract new customers than it does to retain an existing customer. Cognitive Dissonance/Buyer's Remorse is common Motivations of Marketers - Correct Answers Maximize: -consumer awareness -consumption -loyalty -consumer satisfaction Marketing Strategies and Tools - Correct Answers All marketing strategies have the goal of creating a sustainable competitive advantage for a firm. An advantage where other companies cannot provide the same offering or value. Target Market - Correct Answers Group of People toward whom the firm decides to direct its marketing efforts The Marketing Environment - Correct Answers Competitive Political-Legal Economic Technological Social-Cultural Competitive Marketing Influences - Correct Answers Even if you know what consumers want, it may be that the competitive environment means that it is not worth pursuing particular parts of the market for a whole range of strategic reasons, such as the threat of a price war, or legal or ethical considerations. You will need to know if your competitors are doing things better than you are, or more dangerously, whether they are looking to change the basis of competitive in the market, for instance by moving to a direct sales model, or by introducing some revolutionary new product or technology. Competitive Market Analysis: Five Forces - Correct Answers Power of Buyers Power of Suppliers Threat of Substitutes Barriers to Entry Competitors -the idea is that change in your market is likely to come as the basis of one of these five areas Political-Legal Marketing Influences - Correct Answers Legal Environment: Concern for targeting consumers (children), product safety issues, concern for product patents (generally 20 years) Economic Marketing Influences - Correct Answers interest rates, unemployment rates, inflation rates. if the economy is heading into a recession will you see an increase or decrease in the marketing of expensive cars? replacement car parts? Technological/technology Marketing Influences - Correct Answers influences both to whom we target our marketing strategies, and also how we target our products. radio reaches which population? internet? TV? Social-Cultural Marketing Influences - Correct Answers culture and subculture: African American marketing strategies, Asian marketing strategies, Hispanic marketing strategies Family Characteristics affecting consumer behavior - Correct Answers heterosexual families gay/lesbian families (book launched a minor industry in providing books for the children of gay/lesbian parents) Products for Gay/Lesbian Population - Correct Answers In 1998, Surrey, B.C. Kindergarten teacher James Chamberlain attempted to read the books, Ash’s Mums and One Dad, Two Dads, Brown Dad, Blue Dads to his class. The BOE banned the books citing, "grammatical" failings as the reason. The BOE pursued the ban all the way up to the Supreme Court of Canada where they lost their case. Surrey School Board is financially liable for all court costs, which totaled $1.2M Elements of a Marketing Strategy - Correct Answers Blending the four strategy elements of marketing decision-making to satisfy chosen target markets 1. Product 2. Price 3. Distribution 4. Promotion 1. Product Strategy - Correct Answers what goods or services to offer, customer service, package design, brand names, warranties, product life cycle, positioning 2. Price Strategy - Correct Answers deals with the methods of setting profitable and justifiable prices. goal is to get equilibrium price. 3. Distribution Strategy - Correct Answers planning that ensures that consumers find their products in the proper quantities at the right times and places. modes of transportation, warehousing, inventory control, order processing 4. Promotional Strategy - Correct Answers blending together the various elements of promotion to communicate most effectively with the target market. informing, persuading, and influencing a consumer's purchase decision. Companies and Competition - Correct Answers Companies respond to competition by: -reducing prices -increasing advertising -introducing new or improved products -buying out the competition -trying to inspire brand loyalty Brand Perception and Image - Correct Answers "an image of a product, person, brand, or place is formed when people develop beliefs, ideas, perceptions, or impressions about a product, person, or place" brand image: refers to the set of perceptions that consumers have formed about a brand. Case Study: Harley Davidson - Correct Answers Building Success: Understanding the customers' emotions and motivation, determining the factors of loyalty, translating this info to effective advertising Measuring Success: currently 22% of all US bike sales, demand above supply, sales doubled in the past 5 years with earnings tripled Trademark - Correct Answers How a brand name can be protected by law Counterfeiting - Correct Answers occurs with a replica of a product Pirating - Correct Answers occurs when an original idea or product is stolen and sold Population Trends - Correct Answers some states are growing in population more than others. much of the future growth in the US will come from immigration. the average age of the population is increasing. there is increased diversity in the population. households Distribution- builds intensive distribution Advertising- builds awareness and interest in the mass market Sales Promotion- reduce expenditures to take advantage of consumer demand Product Life Cycle: Maturity - Correct Answers sales peak. low cost per customer. high profits. middle majority are targeted. competition begins to decline Marketing Strategies: Maturity Stage - Correct Answers Product- diversify brand and models Price- set to match or beat competition Distribution- builds more intensive distribution Advertising- stress brand differences and benefits Sales Promotion- increase to encourage brand switching Product Life Cycle: Decline - Correct Answers declining sales. low cost per customer. declining profits. laggards are targeted. declining competition. Marketing Strategies: Decline Stage - Correct Answers Product- phase out weak items Price- cut price Distribution- use selective distribution; phase out unprofitable outlets Advertising- reduce to level needed to retain hard-core loyalists Sales Promotion- reduce to minimal level Parkinson's Law - Correct Answers Beware of Parkinson's Law in regards to time -a job expands to fill the time available to accomplish the task, such as finding and purchasing a product. -shows the elasticity of time and consumption behavior ex. this is why people spend the entire day shopping and buying the same thing they could have over a lunch break Pareto Principle - Correct Answers 80-20 Rule 20% of the time expended produces 80% of the results. 80% of the time expended results in only 20% of the results. Means that people waste a lot of time on non-productive activities Rules of Thumb - Correct Answers principles that guide such as only buying certain brands or only shopping at certain stores or buying certain styles. i.e., shortcuts. ex. Seals of Approval, Trademarks (brands) Rules of Thumb: Price - Correct Answers Price along with our income and our preferences helps determine our consumption choices. Most consumers try to stay within their budget constraints Indifference Curve - Correct Answers an individual should choose to consume goods to the point where the most preferred available indifference is tangent (touches) to their budget constraint. that is, the indifference curve tangent to the budget constraint represents the max. utility obtained utilizing the entire budget of the consumer. Budget Constraint - Correct Answers the quantity of goods that you can buy given: -set prices -limited income it shows all possible combinations of good x and good y the consumer can buy when spending all her income *also known as the consumption possibility frontier Ability to Trade - Correct Answers any point on the budget constraint line is indicative of a person's ability to trade between the 2 foods the line slops down/negatively because it represents a tradeoff between good x and good y you have to give up some of one good to gain some of the other good Budget Set - Correct Answers all combinations of goods that lie on or inside the budget line Price Discrimination - Correct Answers different prices charged by hotels, airlines, depending on group affiliation or who is making the purchase. can be illegal if based on gender, race, and age. All or Nothing Price Discrimination - Correct Answers you can buy a group of items, but can't buy them individually. ex. four light bulbs, but not a single bulb. candy bars at movie theatres, large size. Two Part Pricing - Correct Answers a price for the privilege of buying items, and a price per item. ex. country club and green fees. cover charge to enter and a price per drink. Advertising - Correct Answers producer generated information about products and services. the activity of attracting public attention to a product or business, by paid announcements in the print, broadcast, or electronic media. Can read masses of geographically dispersed buyers. can repeat a message many times. is impersonal, one-way communication. $470B industry Why do we do advertising? - Correct Answers Personal Selling is preferred but it is so effective- but it is expensive sometimes to contact every potential customer this way. Advertising allows the seller to reach more potential customers. Advertising - Correct Answers has been used for centuries. US advertisers spend more than $237B and worldwide spending approached $470B An effective advertisement encompasses: - Correct Answers memory exposure attention grabbing power interpretation or understanding Advertising Benefits - Correct Answers Increased Sales Increased Consumer Base Fosters Economic Growth Advertising Costs - Correct Answers The actual dollar amount Loss of sales if ad is bad Advertising: Classified by Purpose - Correct Answers Inform Persuade Compare Remind Infomercials - Correct Answers program long advertisements that can run for an hour or more Commercials - Correct Answers short ads shown throughout TV programs. timing is targeted to specific viewers during specific programs. Commercial Components - Correct Answers Familiarity Humor (positive association) Sexuality Animals One step ahead of us... - Correct Answers advertisers know that we to TV programs and fast forward through commercials so they have gone on to product placement Product Placement - Correct Answers products and logos used in movies and TV programs. ex. actors drinking Pepsi or wearing Nike clothing Consumer space - Correct Answers a system in which companies sell with consumers. -number of times a person is exposed to an ad Media Impact -the qualitative value of a message exposure through a given medium Deciding on Media Timing - Correct Answers must decide how to schedule the advertising over the course of a year -follow seasonal pattern -oppose seasonal pattern -same coverage all year America's Top 5 Advertisers - Correct Answers Proctor and Gamble Phillip Morris General Electric Time Warner Walt Disney Federal Trade Commission's (FTC) Role in Advertising - Correct Answers -can issue a consent decree -can ask for ad substantiation -can issue a cease or desist order -can require a corrective ad Corrective Advertising - Correct Answers also called counter advertising FTC requires company found liable for deceptive advertising to issue advertising anew that corrects the earlier misinformation FTC Concerns: Targeting Children - Correct Answers marketing to children because children do not have the cognitive ability to understand many advertisements. The "average man" rule doesn't work "Average Man" rule - Correct Answers used by FTC; if the average person would be deceived by the advertisement- if so, then it is true that the ad is misleading Redress - Correct Answers consumers have a "right to redress" which is the right to seek and obtain satisfaction for damages incurred through the use of a product or service Complaint Procedure - Correct Answers Local Business-place where you purchased Manufacturer Non-governmental organizations Government protection agencies Small claims court Class action suits Effective Consumer Redress - Correct Answers No emotional outburst. Act promptly. Know your rights. Get organized (receipts, when where, model #, etc.) Records - Correct Answers recommend consumers keep a file for sales receipts, contracts, warranty info, operating instructions, and owner's manuals for major purchases or services. these records should be easily accessible for future use. Redress: Step One - Correct Answers Returning to the place where the item was purchased or service rendered. Currently no laws regulate refunds and stores are not required to post their policy, but some do. Individual stores set their own refund policies. Be prepared to explain the problem. Redress: Step Two - Correct Answers Contact the company's HQ by phone, email, or letter. The following information should be included when a complaint is in writing: 1. Describe the purchase or service 2. The date and place of purchase or service 3. Name of the product or person who provided service. 4. The serial number of the product. Effective Consumer Redress - Correct Answers opening of letter should be positive. states acts in objective manner. put requests before justification. state conclusions before discussions. use attachments (copy of receipt) send copies of your complaint to 3rd party if appropriate Redress: Step Two (continued) - Correct Answers The consumer must state the problem and the history. Ask for a specific action to resolve dispute. State how you can be reached and enclose copies of documents. Include a reasonable response time to the issue. Evidence that it works - Correct Answers in a 1993 study: 80% received responses within 3 weeks 43% complied with the requests 64% of the students were satisfied with the responses Student with no response will probably no longer do business with the company. tell 11 people when you are not happy Still not resolved after step 2 - Correct Answers if the local business or he doesn't rectify the problem, the manufacturer may be of help. most companies have a consumer affairs department to help customers and handle complaints. still need to keep records on any conversations, letters received or sent. Non-Governmental Organization - Correct Answers Better Business Bureau Arbitration and mediation (consumer action panels) Media Professional Organizations (AMA, State Bar, etc.) Better Business Bureau - Correct Answers they strongly encourage consumer to first attempt to resolve complaints directly with the company, however the BBB will not reject a complaint if a consumer has not taken this step. all complains are processed by local BBBs, most often the Bureau where the company is located. Historically over 70% of complaints through the BBB are resolved Arbitration and Mediation - Correct Answers the process by which the parties in the dispute submit their differences to the judgment of an impartial person or group appointed by mutual consent. The goal is conciliation or to make pleasant again. Besides the BBB, the Automotive Consumer Action Program (AUTOCAP), and Center for Auto Safety (CAS) can help resolve disputes Media - Correct Answers if still no resolution to the problem, then use the media. such as the local news. consumer advocates like Clark Howard. Local newspapers. Professional Organizations - Correct Answers American Medical Association State Bar Associations Government Protection Agencies - Correct Answers Governor's Office of Consumer affairs FTC- advertising, credit, warranties FDA- problems with food, drugs, cosmetics Consumer Protection Safety Commission- product safety National Hwy and Traffic Safety Admin (NHTSA) - automobile safety SEC- investment fraud US Postal Service- mail fraud Federal Laws that might help - Correct Answers FTC mail or telephone order rule (covers online shopping and fax machines) FTC Cooling-off Rule Fair Credit Billing ACT, Truth in Lending Law that say you do not have to pay for or return an item you receive if you did not order it Legal Remedies - Correct Answers Small Claims Courts or Civil Courts -has a max limit -usually without an attorney Class Action Suits -claims and right of many people are handled by a single hearing