Mark 3000 1st Edition Lecture 4 Outline of Last Lecture I Marketing Environment II Immediate Environment III Macro Environmental Factors Outline of Current Lecture I Types of competitors II Important regulations III Consumer behavior IV Risk with making purchases V Decision making process Current lecture S Types of competitors Direct competition Brand competition similar or same product Ex Pepsi vs Coke Indirect Competition Product competition Competition between different types of product that serve a similar function Sustainable items Ex Drinking coke or orange juice Competition for discretionary spending Other possible uses for the money instead of buying the product Ex Instead of buying a new TV we can go on vacation Important regulations Sherman anti trust act Made it illegal to have monopolies and regulated monopolistic actions Clayton act Declares hat certain enumerated practices in interstate commerce are illegal Federal trade commission FTC is empowered to prevent unfair methods of competition Robinson Patman act Requires firms to charge the same price for same quantity of products cannot price discriminate Wheeler Lee act Whatever a firma advertises must be true These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute North American Free Trade Agreement NAFTA Created one of the world s largest free trade zones and laying the foundations for strong economic growth and rising prosperity for Canada the United States and Mexico Consumer Behavior Consumer Behavior Includes the process of buying and answers the questions of why we buy the products that we do There are two types of purchasing decisions 1 High involvement Usually a high dollar value item involves greater attention and deeper processing Develop strong attitudes and purchase intentions a Important to consumer high risk b Spends time researching c Ex Buying a car 2 Low involvement Usually a low dollar value item less attention peripheral processing Generates weak attitudes and increased habit a Not important low risk Routine b Marketers try to influence by in store promotions c Ex Buying tooth paste Risk with making purchases Actual or perceived risk 1 Performance risk will it work 2 Financial risk Will it pay off 3 Social risk how will society react 4 Physiological risk Is it safe 5 Psychological risk The way people will feel if the product does not convey the right image a Does it affect my self esteem High Involvement items Consumers see substantial differences between alternatives and use an extensive process Use the Extended Decision Making Process 1 Need recognition The need to recognize that a product is needed a Would like to go from their actual state to a desired state b Functional needs pertain to the performance of a product or service ex Car c Psychological needs pertain to the personal gratification consumers associated with a product ex Shoes d Vast majority of goods satisfy both these needs e Internal stimuli internal need for the product f External stimuli ads people telling you to get the product 2 Information search Search for information about the various options that exist a Internal search involves searching his or her own memory and knowledge about the product or service b External search involves searching information beside personal knowledge to help make the buying decision i Marketing controlled information involves advertisements ii Non marketing controlled information involves third party sources and reviews 1 Involves what friends and family say which is the most influential c Factors affecting consumer s search process i Perceived benefits vs Perceived costs of search is it worth the time and effort ii Locus of control 1 Internal locus of control belief that people themselves have some control over the outcomes of their actions and therefore do more research 2 External locus of control Believe that external factors control all outcomes d Attribute sets of informational search i Universal set all the ones in the world all the car manufacturers in the world ii Retrieval set The ones that you can remember the car manufacturers that you remember iii Evoked set The ones you consider buying the car manufacturers you consider buying 3 Evaluation of alternatives a Evaluative criteria Things that you choose to compare important attributes about a particular product b Determinant attributes The most important factors for each individual buyer i Something special to differentiate one product from the other c Consumer decision rules are the set of criteria that consumers use consciously or subconsciously to quickly and efficiently select form alternatives i A compensatory model evaluates the different factors and one factor is compensate by another 1 Ex If you list out all the qualifications you want in a car and fuel economy is more important than horsepower ii Multi attribute model looks at the attributes and uses a weighted average score based on the importance of various attributes and performance iii A noncompensatory model doesn t look at the other factors only looks at one factor 1 Ex All that you care about is fuel economy 4 Purchase a Important for consumer to go through negotiation establish a form a payment and delivery b Important for seller to keep in mind conversion rates the percentage of customers who buy the product after viewing it i Can increase by having stocked up shelves clean stores etc 5 Post Purchase behavior a The seller wants to increase customer satisfaction and customer loyalty while decreasing cognitive dissonance second guessing their decision i Friends try to reduce cognitive dissonance by giving comfort ii Companies try to reduce this buy making the customer feel good about their product