Consumer Behavior

04 Jul

CASE: I    Starbucks

In 2003, Starbucks accomplished something that few companies ever do: It became a Fortune 500 company—a phenomenal achievement for a company that went public only 12 years earlier. The company had over 6,000 stores worldwide—all company owned, as Starbucks does not franchise its outlets—and planned to expand rapidly to over 10,000 stores.

Starbucks created not only a successful business but a thriving industry. When the company started its massive expansion in the early 1990s, the United States had about 200 coffeehouses. In 2003 there were over 14000 coffeehouses, the majority of them not Starbucks but mom-and –pops that bloomed after the dawn of the $3 cup of coffee. According to a Starbucks executive, “We changed the way people live their lives, what they do when they get up in the morning, how they reward themselves, and where they meet. That’s more important to me than just building a company.”

More than 10 million coffee lovers spend an average of $3.60 at Starbucks weekly, and 10 percent of them come in twice a day. Starbucks has 7 percent of the U.S. coffee-drinking market and less than 1 percent abroad, suggesting ample room for growth. The coffee market is huge; coffee is the second most consumed drink in the world (water is first).

Starbucks’ iced beverages, which offer larger profit margins than regular drip coffee, are big sellers in the South and Southwest. After making some adjustments, such as adding outdoor seating and couches to stores to better serve the needs of its customers, Atlanta locations have shown double-digit sales growth. Atlanta boasts 33 successful Starbucks, and plans for expansion are in the works. Plans for further expansion in cities with even more Starbucks stores, such as New York City and San Francisco, are also on the drawing board. Although 70 stores operate in New York City alone, it is estimated that growth there will continue until 200 stores are operating in the city! As for fears of market saturation, Starbucks has none. In fact, the java giant has two highly profitable outlets that face each other on Robson Street in Vancouver, British Columbia. Each store has more than $1 million in annual sales. International expansion is also taking place. In fact, the number one Starbucks in the world is located in Tokyo, and a total of 500 stores are slated to be operational in Asia in the next three years.

What is the secret of Starbucks’ phenomenal success? According to Howard Schultz, chairman and CEO of Starbucks Corporation, the company’s success is due to the experience created within the stores as well as the unsurpassed quality of the coffee. A steaming café au lait must be perfectly replicated, whether the store is in Seattle or New York City. In a world filled with people leading busy, stressful lives, Schultz believes he has created a “third place” between home and work where people can go to get their own personal time out or to relax with friends.

Schultz also attributes his company’s success to the 40,000 employees working worldwide. Starbucks’ employee training program churns out “baristas” by educating 300 to 400 new hires per month in classes such as “Brewing the Perfect Cup at Home” and “Coffee Knowledge.” Here they are taught to remind customers to purchase new beans weekly and that tap water might not be sufficient when brewing the perfect cup of coffee. They are also encouraged to share their feelings about coffee, selling, and working for Starbucks. Employees are also given guidelines to maintain and enhance self-esteem, to learn how to listen and acknowledge, and to know when to ask for help. E-mail, suggestion cards, and regular forms allow unsatisfied workers to communicate with headquarters. If the annual barista turnover of 60 percent, compared with 140 percent for hourly workers in the fast-food industry, is any indication of quality of its training programs, Starbucks seems to have a handle on how to gain and maintain employee loyalty. What about the demographic makeup of the work force? About 80 percent of the employees are white, 85 percent have some education beyond high school, and the average is 26.

The Starbucks success story is continuing into the 21st century as the company is quickly expanding into Europe and Asia. However, one question remains regarding the success of the company in countries already known for their coffee-making expertise: Will such Romans and Parisians care for Starbucks? Continued expansion and visibility has been created domestically as Starbucks has formed partnerships with companies such as United Airlines and Barnes & Noble Booksellers, both of which draw form the same type of knowledgeable customer.

More recently, Starbucks has opened several full-service dining establishments (Café Starbucks) in response to customers who want more at lunch and dinner. The menu offers full meals, breads, pastries, alcohol, and of course coffee. The company has also launched an Internet site that sells not only expensive coffee but also pricy kitchenware, home furnishings, and gourmet food. After some skepticism by analysts and a subsequent drop in share price, Schultz emphasized that “Every company must stick to its knitting, understand its core competency, know what the value proposition is for the customer, and do everything possible to get close to the customer. So you won’t see us getting far afield from what we do now” As for the present, Starbucks is not likely to fall victim to a fad-driven society any time soon. The company seems to be doing fine.

You can learn more about Starbucks at http://www.starbucks.com.

Question:

1. Based on the case information and your personal experiences, list at least five things you know about Starbucks. This list offers you some idea about your cognitions concerning the coffee shop chain.

2. List at least things you like or dislike about Starbucks. This list gives you some idea of your affect for the coffee shops.

3. List at least five behaviors involved in buying a gourmet coffee drink from Starbucks. This list gives you an idea of the behaviors involved in a coffee purchase.

 

CASE: II  Barnes & Noble

  For decades, bookstores were simply that—places that sold books. The typical mom-and-pop bookstore on the corner was small, quaint, sometimes a little musty, and bursting at the seams with books. It was a wonderful place to visit now and then, look around for a bit, find a book you like, and go home. Today that old bookstore seems like a relic of a bygone era. Barnes & Noble’s approach to book selling has revolutionized the entire industry.

Barnes & Noble has risen from rather ordinary beginnings to become the largest bookstore chain in the world. Founder and CEO Leonard Riggio began his empire by purchasing a struggling Manhattan bookstore in 1971. Riggio opened his first superstore, with 100,000 square feet of selling space, in New York in 1975. That store was so successful that he quickly opened more superstores throughout Manhattan and downtown Boston. The formula worked and the number of stores multiplied. In the early 1990s, the company began spreading the superstore concept throughout the United States. Today Barnes & Noble operates around 950 bookstores and another 426 video game and entertainment software stores. The company boasted sales of nearly $3.5 billion and operating profit of $232 million in 1999.

Riggio took a decidedly different approach to selling books. “Shopping is a form of entertainment,” he says. “To customers, shopping is a social activity. They do it to mingle with others in a prosperous-feeling crowd, to see what’s new, to enjoy the theatrical dazzle of the display, to treat themselves to something interesting or unexpected.” Riggio made sure both the layout and operation of his stores provide customers with what they want. Barnes & Noble superstores are huge, yet clubby and inviting. They typically cover about 25,000 square feet (some are much bigger) and offer a selection of up to 150,000 titles, compared to 10,000 to 20,000 at the typical independent book seller. Books usually are discounted 20-30 percent. But a Barnes & Noble superstore is not defined merely by size and volume. The atmosphere is friendly, even somewhat luxurious—almost a cross between a public library and a den. There are large, overstuffed chairs; reading tables; background music; a coffee bar; bright lighting; and even well-maintained public restrooms. Book-store used to discourage customers from reading in the store—spend more than a few minutes with a book and you would have expected an employee to tap you on the shoulder and suggest that you either buy the book or put it back. But Barnes & Noble actually wants you to pull a book or magazine off the shelf, grab a cup of coffee, flop down on a sofa, and make yourself at home. A company spokesperson explains, “The philosophy behind this is, the more customers we attract into the store and the longer they are encouraged to stay, the more books we sell.” Many Barnes & Noble locations also offer a music section where the same philosophy applies. Customers are welcome to sit down with a pair of headphones and listen to a CD before they buy it.

Barnes & Noble also works to ensure that its superstores evolve into community meeting places. Each store or region is staffed with a public relations coordinator who works to bring events to the store. Live performances, readings, and book signing are common. Classes of elementary school kinds are invited to come in and browse on a regular monthly basis. Stores even offer classes, book discussion groups, puppet shows, and story hours for children. The long store hours (9 AM to 11 PM) also provide a compelling lure. “For people who work all day, this is their leisure time,” explains Lisa Herling, vice president for corporate communications. “Whether it’s after a movie or after dinner, it’s a destination location.” Riggio puts it more succinctly: “If I get you for two hours, I’ve got you.”

In 1995, a competitor with an entirely different value proposition emerged. Amazon.com began selling books over the Internet. Barnes & Noble countered two years later with BarnesandNoble.com, which tries to replicate the superstore experience on the Web. At the site you can participate in live chats with authors and listen to audio from one of the many archived book readings (featuring such renowned writers as Kurt Vonnegut, Susan Sontag, and Salmon Rushdie). Now the largest bookseller in the U.S., BarnesandNoble.com, also offers free online courses through “Barnes & Noble University,” where you can study subjects ranging from the humor of Shakespeare to overcoming shyness. You can even purchase a bag of Starbucks coffee and select the music you want to hear while you’re browsing the site. Oh, yes, they do sell books on the site, too—750,000 titles—along with music, software, and posters. BarnesandNoble.com has attracted more than 5 million customers since 1997 and has emerged as the fourth-largest e-commerce site on the Web. Sales were up 4.5% in 2002 as were expectations that the venture would turn a positive cash flow soon.

Barnes & Noble’s success comes not so much from what it is selling but how it is selling it. Both the brick-and-mortar stores and the online site provide customers with an atmosphere that turns book buying into a warm, friendly, inviting experience.

Question:

1. What affective responses do you think the Barnes & Noble environment creates? How might consumers’ cognitive systems interpret these responses? From a marketing perspective, which is more important to Barnes & Noble—affect or cognition?

2. Rob goes to Barnes & Noble location to hang out and meet people. Lisa goes only when she wants to purchase a specific book or CD. Describe how their integration processes might convince them to choose Barnes & Noble over the myriad other options they have.

3. Many of the activities that take place at Barnes & Noble stores (or at BarnesandNoble.com) do not require a purchase. Participating in discussion groups and going to in-store performances are free. And obviously it doesn’t cost anything to simply go in, sit in a chair, and read a book. So why do people buy? How do these free activities (behaviors) influence consumers’ affect and cognition?

 

CASE: III   Rollerblade Inc.

In 2002, in-line skating ranked among the most popular sports for children ages 6 to 17, behind basketball and soccer, according to the Sporting Goods Manufacturers Association. About 7.5 million youths skate an average of over 25 times per year. This is quite a change from 1980, when Minneapolis-based Rollerblade Inc. introduced its first in-line roller skate.

Rollerblade’s founder, Scott Olson, was a hockey player with the Winnipeg Jets’ farm teams who envisioned a roller skate with the action of an ice skate that hockey players and skiers could use to train during the off-season. At first, the plan was to use modern materials to construct a model based on an 18-century design. However, Olson discovered a similar in-line skate already on the market and purchased the patent from Chicago Roller Skate Company. Olson and his brother, Brennan, perfected the design using a plastic molded ski-type boot atop a blade of polyurethane wheels. Their first sales were to Olson’s teammates as well as a few to sporting goods stores. Thus began the sport of blading

Although they generally cost twice as much as conventional roller skates, in-line skates are purchased for two reasons. First, they are faster and therefore more exciting to use than conventional skates. Second, they provide skaters with a better aerobic workout, requiring the use of more muscles. However, it is more difficult to learn how to use in-line skates because they require greater balance and their speeds may cause more severe injuries if a skater falls.

By 1986, wholesale sales of in-line skates had risen to $3.5 million. Recognizing an opportunity to get in on a growing market, a number of companies began producing competitive products. First Team Sports, Inc., also based in Minneapolis, started manufacturing its Ultra-Wheels brand skates, which included the first in-line skates for children. Roller Derby Skate Corporation in Litchfield, Illinois, a manufacturer of standard roller skates since 1936, produced an in-line skate with a toe-stopper for those accustomed to conventional skates (Rollerblades had a rubber stopper located on the heel). The ice skate manufacturer Bauer entered the market with a skate that had a leather rather than plastic boot.

Rollerblade Inc.’s sales increased when it expanded its target market. At first, the product was targeted to hockey players, who were 95 percent male and 18 to 25 years old. However, by broadening the target to include 18-to-35-year-old males and females, the company increased sales considerably.

By 1990, industry wholesale sales of in-line roller skates topped $50 million, which almost equaled sales in the conventional roller skate business.

Rollerblade Inc. maintained a 66 percent market share, First Team Sports had 22 percent, Bauer had 5 percent, Roller Derby had 3 percent, and other competitors combined had the remaining 4 percent. Rollerblade could have done better, but it could not fill store orders for several months because it ran out of inventory early in the year. By 1998 there were 30 million in-line skaters, although growth in the number of skaters was slowing down; skate boarding was taking off as a cool alternative.

The fierce competition in the industry involved not only product features but also marketing elements. Companies rushed to sign celebrities to promote their products. Competitors also moved into new retail markets, including discount and departmental stores. Rollerblade expanded its market by selling to Macy’s and Nordstrom.

Although the name of Rollerblades may become generic term for this type of skate, the company’s management will have to work hard to maintain its market lead.      “We have been pioneers and continue to maintain an edge,” a company spokesperson said. “You only get one shot at pioneering a new sport, and that’s exciting.”

Question:

1. What role do you think modeling could have played in the diffusion of this innovation?

2. How could you use modeling to teach a friend how to use Rollerblades?

3. If you were designing a commercial for Rollerblades to be used for an in-store videotape demonstration, how would you design the commercial to take advantage of your knowledge of modeling?

 

CASE: IV  The Saturn Family

Consumers are bombarded with advertisements and marketing hype everyday. When you log onto the Internet, watch television, listen to radio, read a newspaper, or open your mail, you are inevitably greeted with a plea to purchase brand X or visit store Y or website Z. In any given day, you are exposed to more information than you can realistically process. In the 1990s, marketers began to look fresh, innovative ways to make their companies stand out from the media clutter. Few have been as successful as General Motors’ subsidiary Saturn, whose 1994 “homecoming” of car owners has been described as “the mother of all marketing programs.”

Saturn’s mission statement emphasizes the concept of “family.” In an industry whose history is replete with labor conflict, Saturn has tried to erase the line between labor and management are somewhat taboo. Regardless of their positions in the company, all Saturn boasts that no one punches a time clock and that members of labor and management even eat in the same cafeteria! Moreover, the company expects its employees and dealers to make customers feel like a part of the Saturn family.

According to Joe Kennedy, Saturn’s corporate vice president of sales, service, and marketing, “Everything at Saturn hinges on our retail operations being enthusiastic about serving their customers.” Indeed, salespeople (or, as Saturn prefers to call them, “consultants”) have gone far out of their way to make current and potential customers happy. In one legendary story, a woman in Wyoming was interested in purchasing a Saturn only to find that the nearest dealership was hundreds of miles away in Salt Lake City, Utah. Not to worry. A salesperson from Salt Lake City flew to Wyoming, picked the woman up, flew back with her to the dealership in Utah, showed her the car, and made the sale. Saturn instituted a “no-haggle” pricing policy to reduce the traditionally antagonistic relationship between automobile salespeople and customers. Saturn’s television ads have featured employees discussing the family feeling at the company and actual customers sharing their own Saturn stories.

The “Saturn family” concept took hold with consumers. Soon delighted customers began calling and writing the company’s plant in Spring Hill, Tennessee (near Nashville), to learn how they could tour the facility and maybe meet other Saturn owners from across the country. So management decided to spend $1 million to hold its first “homecoming” of Saturn owners and their cars the weekend of June 24-25, 1994 in Spring Hill. It mailed out 650,000 invitations to Saturn owners and also purchased commercial time on CBS’s late Show with David Letterman.

The response was overwhelming. About 30,000 Saturns—and their owners—made the pilgrimage. If you were on the highway that week and saw a Saturn with an orange ball on the radio antenna, that car was probably headed home to Tennessee. Saturn owners came from as far as Taiwan and filled most of the 24,000 hotel rooms in the Nashville area. In fact, a dealer from Taiwan brought home the first Saturn ever sold in that country. That car was honored with its own tent. Throughout the weekend, car owners met members of the Saturn team, toured the plant, and shared their own Saturn stories. The homecoming had all the trappings of an old-fashioned outdoor revival with music, dancing, testimonials from celebrities (Olympic speed skater Dan Jansen), and food (everything from “southern Chinese egg rolls” to barbecued catfish).

Even though two Herculean thunderstorms blew over some tents, injured a few people, and forced the cancellation of a scheduled concert by country music star Wynonna, it didn’t seem to dampen many folks’ spirits. Mary Taylor, age 60, was part of a 22-car caravan that trekked 1,800 miles from Nevada to Tennessee to be part of the homecoming. She couldn’t stop raving about the dealer. “I couldn’t believe how much they cared,” Taylor said. “They know us when we walk in. It’s such a friendly atmosphere, I look forward to going to the dealership.” Another Saturn owner compared the weekend get-together with Woodstock: “This is another gathering in a field, except it’s about cars, not music.” Ruth Morrissey from South Dakota perhaps summed up the weekend best as she gushed, “We love our Saturns. We are all just a bunch of walking ads.” For those who couldn’t make it to Spring Hill, Saturn sponsored smaller-scale get-togethers at dealerships around the United States. An estimated 100,000 additional people attended those events.

The homecoming was just a part of Saturn’s overall strategy of making customers feel like part of a big Saturn family. Was this approach successful? Apparently it was. Company research in 1994 showed that out of the approximately 650,000 people who owned Saturns, 80 percent planned to buy another Saturn. Furthermore, Saturn reported that during the homecoming ad campaign (which ran from January through June 1994), sales were up 25 percent compared to a year earlier.

Other carmakers took notice and copied Saturn homecoming model. Daimler Chrysler’s Jeep division sponsored an event called Jeep 101 in which Jeep owners—many of whom drive exclusively on paved urban streets—took their vehicles off-road. Mercedes-Benz of North America invited 100,000 current and potential customers to Los Angeles for an unveiling of new models. The opportunity to ogle these pricey new automobiles—plus the lure of good food and wine—apparently was quite compelling. So many people showed up that they had to close down a highway. In another promotion, Mercedes invited 1 million people to “fall in love” with a new Mercedes by attending one of a variety of special customer bonding events at local dealerships.

To be sure, Saturn has had its share of problems since that first homecoming event in 1994. Some critics have sniped at Saturn’s boring styling and limited choice of models. Others believe Saturn has slipped compared to other carmakers in terms of performance and reliability. Sales of the L-series mid-size car were very disappointing, which forced production slowdowns and lay-offs in 2000. In addition, the harmonious relationship between labor and management hit a snag when Saturn’s 7,000 unionized employees began to express dissatisfaction with their special labor agreement with the carmaker. Seeing a problem, General Motors in 2000 pledged to invest $1.5 billion to expand the Spring Hill facility and provide Saturn with a SUV and a redesigned compact car in time for the 2002 model year. (To check out Saturn’s current model line and other company information, visit the company’s website at www.saturn.com.

But make no mistake, Saturn’s innovative marketing efforts have accomplished their goal. Even with the recent problems, surveys reveal that most consumers—especially younger people—still believe Saturn is, as its ad campaign declares, “a different kind of car company.” In 1999, Saturn held another large, successful homecoming and many industry experts believe that with new models in the offing, Saturn can regain the momentum it had in the mid-1990s.

Question:

1. Visit the Saturn website and try to determine the market segments the carmaker is targeting. What should Saturn do to better serve those segments? How might Saturn tailor its offerings to address the different stages of the family life cycle?

2. Other vehicles—such as Porsches, Mustangs, and Harley-Davidson motorcycles—also have “cult” followings. But these products also have very strong symbolic meanings associated with them. The Saturn is a solid and reliable, but basically unspectacular, car. Identify and discuss three reasons that you think Saturn has such a devoted following of involved customers.

3. An automobile is a high-involvement purchase. Discuss how the manufacturer of a lower-cost, lower-involvement product could generate greater personal relevance and long-term loyalty. Find and discuss an example of a company that has done so.

 

CASE: V   Harley-Davidson, Inc.

  Harley-Davidson, Inc., founded in 1903, is the only remaining American motorcycle manufacturer, although there are some new upstart companies. During the 1950s and 1960s, Harley-Davidson has virtual monopoly on the heavyweight motorcycle market. Japanese manufacturers entered the market in the 1960s with lightweight motorcycles backed by huge marketing programs that increased demand for motorcycles. These manufacturers, which included Honda, Kawasaki, Suzuki, and Yamaha, eventually began building larger bikes that competed directly with Harley-Davidson.

Recognizing the potential for profitability in the motorcycle market, American Machine and Foundry (AMF, Inc.) purchased Harley-Davidson in 1969. AMF almost tripled production to 75,000 units annually over a four-year period to meet increased demand. Unfortunately, product quality deteriorated significantly.

More than half the cycles came off the assembly line missing parts, and dealers had to fix them to make sales. Little money was invested in improving design or engineering. The motorcycles leaked oil, vibrated badly, and could not match the excellent performance of the Japanese products. Although hard-core motorcycle enthusiasts were willing to fix their Harleys and modify them for better performance, new motorcycle buyers had neither the devotion nor the skill to do so.

In late 1975, AMF put Vaughn Beals in charge of Harley-Davidson. Beals set up a quality control and inspection program that began to eliminate the worst of the production problems. However, Beals and the other senior managers recognized that it would take years to upgrade the quality and performance of their products to compete with the faster, high-performance of their products to compete with the faster, high-performance Japanese bikes.

To stay in business while the necessary changes in design and product were being accomplished, the executives turned to William G. Davidson, Harley’s styling vice president. Known as “Willie G.” and a grandson of one of the company founders, he frequently mingled with bikers and, with his beard, black leather, and jeans, was accepted by them. Willie G. understood Harley customers and noted:

They really know what they want on their bikes: the kind of instrumentation, the style of bars., the cosmetics of the engine, the look of the exhaust pipes, and so on. Every little piece on a Harley is exposed, and it has to look just right. A tube curve or the shape of a timing case can generate enthusiasm or be a total turnoff. It’s almost like being in the fashion business.

Willie G. designed a number of new models by combining components form existing models. These included the Super Glide, the Electra Glide, the Wide Glide, and the Low Rider. Although these were successful, Harley-Davidson was still losing market share to Japanese competitors that continued to pour new bikes into the heavyweight Market.

By 1980, AMF was losing interest in investing in the recreational market and sold the company to 13 senior Harley executives in a leveraged buyout on June 16, 1981. Although the company was starting to make money in the early 1980, its creditors wanted payment, and Harley-Davidson nearly had to file for bankruptcy at the end of 1985. However, through some intense negotiations, it stayed in business and rebounded to become a highly profitable company.

In 1996, Harley-Davidson controlled more than 47 percent of the heavyweight (651cc and larger) motorcycle market, far more than its all-time low of 23 percent. Its products are considered to have “bulletproof reliability” because of manufacturing and management changes that resulted in products of excellent quality.

Owners of Harleys are highly brand loyal, and more than 94 percent of them state they would buy another Harley. The company sponsors the Harley Owner Group (HOG), which has more than 1,200 chapters and 750,000 members worldwide. Executives of the company frequently meet with chapters to obtain suggestions for product improvements.

In 2002, Harley sold 215,454 motorcycles domestically and 48,199 in the global market. It also sold 10,943 Buell motorcycles in that year. Its net revenue for 2002 was over $4 trillion, about double its 1998 net revenue. Its net income for 2002 was $580 million compared to $213 million 5 years earlier. In 2003, its 100th anniversary product line included 7 Softail models, 7 Sportster models, 5 Dynaglide models, and 7 Touring models. In addition, its VRSCA V-Rod, a new-style, $17,000 Harley was selling quickly even though it was a departure for the retro look of traditional Harleys.

Harley-Davidson motorcycles are distributed worldwide by a network over 1,300 dealers. These dealers typically have upgraded facilities that merchandise not only motorcycles and service but also a variety of parts, clothing, and accessories. Clothing and accessories are highly profitable items that enhance the motorcycle-owning and riding experience. For more information, visit the company’s website at www.Harley-Davidson.com.

Question:

1. What kind of consumer owns a Harley?

2. What accounts for Harley owners’ satisfaction and brand loyalty?

3. What role do you think the Harley Owner Group plays in the success of the company?

Consumer Behavior

04 Jul

CASE: I  Toyota

Of all the slogans kicked around Toyota, the key one is kaizen, which means “continuous improvement” in Japanese. While many other companies strive for dramatic breakthrough, Toyota overtook Ford Motor Company to become the second largest automaker in the world. Ford had been the second largest since 1931.

Toyota simply is tops in quality, production, and efficiency. From its factories pour a wide range of cars, built with unequaled  precision. Toyota turns out luxury sedans with Mercedes-Benz-like quality using one-sixth the labor Mercedes does. The company originated just-in-time production and remains its leading practitioner. It has close relationships with its suppliers and rigid engineering specifications for the products it purchases

Toyota’s worldwide leadership in the automotive industry was built on its competitive advantage across the supply chain. Between 1990 and 1996, Toyota reduced part defects by 84 percent, compared to 47 percent for the Big 3. It also reduced the ratio of inventories to sales by 35 percent versus 6 percent. These reduction advantages occurred despite the fact the Big 3 relied on identical suppliers. A study by Jeff Dyer of The Wharton School of the University of Pennsylvania and Kentaro Nobeoka of Kobe University attributed Toyota’s success partly to its implementation of bilateral and multilateral, knowledge-sharing routines with suppliers that result in superior Interorganizational or network learning. Toyota uses six approaches to facilitate knowledge sharing: (1)a supplier association;(2) teams of consultants;(3)voluntary study groups;(4)problem-solving teams;(5)interfirm employee transfers; and (6)performance feedback and monitoring processes. This effort also involves intense levels of personal contact between Toyota and its suppliers.

Toyota pioneered quality circles, which involve workers in discussions of ways to improve their tasks and avoid what it calls the three Ds: the dangerous, dirty, and demanding aspects of factory work. The company has invested $770 million to improve worker housing, add dining halls, and build new recreational facilities. On the assembly line, quality is defined not as zero defects but, as another slogan puts it, “building the very best and giving the customer what she/he wants.” Because each worker serves as the customer for the process just before hers, she becomes a quality control inspector. If a piece isn’t installed properly when it reaches her, she won’t accept it.

Toyota’s engineering system allows it to take a new car design from concept to showroom in less than four years versus more than five years for U.S. companies and seven years for Mercedes. This cuts costs, allows quicker correction of mistakes and keeps Toyota better abreast of market trends. Gains from speed feed on themselves. Toyota can get its advanced engineering and design done sooner because, as one manager puts it, “We are closer to the customer and thus have shorter concept time.” New products are assigned to a chief engineer who has complete responsibility and authority for the product from design and manufacturing through marketing and has direct contacts with both dealers and consumers. New-model bosses for U.S. companies seldom have such control and almost never have direct contact with dealers or consumers.

The 1999 Harbour Report, a study of automaker competencies in assembly, stamping, and powertrain operations, stated that the top assembly facility in North America (based on assembly hours per vehicle) is Toyota’s plant in Cambridge, Ontario. In this plant, a Corolla is produced in 17.66 hours. Toyota was also rated number one in engine assembly, taking just 2.97 hours to produce an engine.

In  Toyota’s manufacturing system, parts and cars don’t get build until orders come from dealers requesting them. In placing orders, dealers essentially reserve a portion of factory capacity. The system is so effective that rather than waiting several months for a new car, the customer can get a built-to-order car in a week to 10 days.

Toyota is the best carmaker in the world because it stays close to its customers. “We have learned that universal mass production is not enough,” said the head of Toyota’s Tokyo Design Center. “In the 21st century, you personalize things more to make them more reflective of individual needs.”

In 1999, Toyota committed to a $13 billion investment through 2000 to become a genuinely global corporation without boundaries. In this way, it will be able to create worldwide manufacturing facilities that produce cars according to local demand. Its goal is to achieve a 10 to 15 percent global market share by 2010.

Why the drive towards customization of vehicles? Part of this is due to fierce competition that provides consumer with a multitude of choices. The Internet enables consumers to be more demanding and less compromising. They now have access to the lowest prices available for specific models of vehicles with all of the bells and whistles they design. From the comfort of their homes, they are able to bypass dealers and still find the vehicle of their dreams.

Senior management at Toyota believes that kaizen is no longer enough. The senior vice president at the Toyota USA division, Douglas West, states that his division is committed to both creating and executing a new information system to drive the fastest, most efficient order-to-delivery system in the North American market. Toyota management has come to realize Kaizen alone can no longer predict business success. The sweeping changes taking place in the business environment can no longer rely on the kaizen philosophy of small, sustained improvements. In fact, one expert in the industry believes that “pursuing incremental improvements while rivals reinvent the industry is like fiddling while Rome burns.” Competitive vitality can no longer be defined by continuous improvement alone.

Question:

1. In what ways is Toyota’s new-product development system designed to serve customers?

2. In what ways is Toyota’s manufacturing system designed to serve customers?

3. How does Toyota personalize its cars and trucks to meet individual consumer needs?

CASE: II  Exposure, Attention, and Comprehension on the Internet

The Internet universe literally grows more cluttered by the minute. According to Network Solutions, Inc., which registers the vast majority of Web addresses around the world, about 10,000 new addresses are registered each day. That means by the time you finish reading this case, about 60 new domain names will have been gobbled up. With all the clutter on the Web, how have some firms been able to stand out and attract millions of customers?

First, there are some basics to which online firms must attend. These cost little more than some time and a little  creativity. The first is creating a good site name. The name should be memorable (yahoo.com), easy to spell (ebay.com), and/or descriptive (wine.com—a wine retailer). And, yes, ideally it will have a .com extension. This is the most popular extension for e-commerce, and browsers, as a default, will automatically add a .com onto any address that is typed without extension.

The second priority is to make sure the site comes up near the top of the list on any Web searches. If you use Lycos.com to perform a search for “used books,” you get a list of more than 2.6 million websites. Studies have shown that most people will look only at the top 30 sites on the list, at most. If you are a used-book retailer and you show up as website #1,865,404 on the search list, there is a very good chance you will not attract a lot of business. A 1999 Jupiter Research study reveals that “searching on the Internet” is the most important activity, and Internet users find the information they are looking for by using search engines and Web directories. A good Web designer can write code that matches up well with search engine algorithms and results in a site that ranks high on search lists.

Virtually all popular websites have those basics down pat. So the third step is to reach out proactively to potential customers and bring them to your site. Many companies have turned to traditional advertising to gain exposure. Television advertising can be an effective option—albeit an expensive one. In late January 1999, hotjobs.com spent $2 million—half of its 1998 revenues—on one 30-second ad during the Super Bowl. According to CEO Richard Johnson, so many people tried to visit the site that the company’s servers jammed. Johnson says the number of site hits was six times greater than in the month before. A quirky ad campaign may or may not help. Pets.com, now de-func, built its image around a wise-guy sock puppet. CNET, a hardware and software retailer, ran a series of television ads featuring cheesy music, low-budget sets, and unattractive actors. One such ad featured two men—one in a T-shirt that said ”you,” another in a T-shirt labeled “the right computer” – coming together and joining hands thanks to the efforts of another guy in a CNET T-shirt. The production quality was rudimentary enough that any sophomore film student could have produced it. The spots were so bad that they stood out from the slick, expensive commercials to which viewers were accustomed. Critics ripped the campaign to shreds, but CNET called it a success.

Other Internet firms have used sports sponsorships to increase visibility. CarsDirect.com, a highly rated site that allows consumers to purchase automobiles online, once purchased the naming rights to NASCAR auto race (the CarsDirect.com400). Lycos also has tried to make the most of NASCAR’s increasing popularity. It spent hundreds of thousands of dollars to have its name and logo plastered all over the car of popular driver Johnny Benson. Meanwhile, online computer retailer Insight and furniture seller galleryfurniture.com each targeted football fans by purchasing the naming rights to college bowl games.

Of course, if you can reach consumers while they are in front of their computers rather than their television sets, you may stand an even better chance of getting them to your site. However, typical banner ads are inefficient, averaging click-through rates of only about 0.5 per cent (only one of every 200 people exposed to the ad actually clicked on the ad). Too often, banner ads are just wallpaper; consumers may see them but they usually are not sufficiently stimulated to click-through. However, Michele Slack of the online advertising group Jupiter Communications believes banner ads can be useful if used correctly. “The novelty factor is wearing off,” she says. But “when an ad is targeted well and the creative is good, click-through rates are much higher.”

An alternative way to reach people who are already online is through partnerships. One of the most visible examples of such an alliance is the one between Yahoo! And Amazon.com. Let’s say you’re working on a project on the Great Depression and you want to see what kind of information is available online. If you go to Yahoo! And type in “Great Depression,” you will not only be presented with a list of websites, but you will also see a link that will allow you to click to see a list of books on the Great Depression that are available through Amazon. Another example of a successful partnership was forged in 1998 between Rollingstone.com and the website building and hosting service Tripod. Every one of the 3,000 artist pages on Rollingstone.com contained a link to Tripod. The goal was to encourage fans to use Tripod’s tools to build webpages dedicated their favorite singers or bands. According to the research company Media Metrix, during the course of the alliance Tripod jumped from the Web’s fourteenth most popular website to number eight. Alliances with nonvirtual companies are another options. In 2003, the Internet classified firm CareerBuilder kicked off a cross-promotional campaign with major Internet firms, including AOL and MSN.

A less subtle but nonetheless effective way to build traffic is to more or less pay people visit your site. One study showed more than half of Internet consumers would be more likely to purchase from a site if they could participate in some sort of loyalty program. Hundreds of online merchants in more than 20 categories have signed up with a network program called ClickRewards. Customers making purchases at ClickRewards member sites receive frequent-flier miles or other types of benefits. Mypoints.com offers a similar incentive program in which customers are rewarded with air travel, gift certificates and discounts for shopping at member merchants. The search engine iwon.com was even more direct. It rewards one lucky visitor each weekday with a $10,000 prize. According to Forrester Research, companies in 2002 spent about $6 billion annually on online incentives and promotions.

Finally, some firms rely on e-mail to thoroughly mine their existing customer databases. The auction site Onsale (later merged with Egghead.com) proved just how successful e-mail can be. It sent out targeted e-mails to its customers based on their past bidding activities and previously stated interests. Click-through rates on these targeted e-mails averaged a remarkable 30 percent. E-mail marketing also holds promise for business-to-business firms. The Peppers and Rogers Group is a marketing firm that gives presentations around the United States. At the end of the presentations, people are invited to go to the company’s website and sign up for their e-mail newsletter, Inside 1 to 1. The newsletter invites readers to visit the Peppers and Rogers website to learn more about various articles, promote their products and services, and participate in forums. Inside 1 to 1 now boasts a subscriber base of 45,000, but the company estimates that about 200,000 people actually see it because subscribers forward it to their friends and colleagues. About 14,000 people visit the Peppers and Rogers site each week, with traffic often peaking immediately after the newsletter is sent.

As you can see, there is no one effective method for generating interest in a website. The same methods that have worked for some firms have failed for others. One certainty is that as the Internet grows and more people do business online, Internet firms will have to find ever more creative ways to expose customers to their sites and keep their attention once there.

Questions:

1. Consider the e-mail campaigns discussed in the case. Why do you think these campaigns were successful? Discuss the attention processes that were at work. Do you see any potential drawbacks to this type of marketing?

2. During the 2000 Super Bowl, ABC invited viewers to visit its Enhanced TV website. Fans could play trivia, see replays, participate in polls and chat rooms, and view player statistics. The site received an estimated 1 million hits. Why? Frame your answer in terms of exposure, attention, and comprehension.

3. Think about your own Web surfing patterns. Write down the reasons you visit sites. Which of the marketing strategies discussed in the case do you find most (and least) influential?

CASE: III  Peapod Online Grocery—2003

The online grocery turned out to be a lot tougher than analysts thought a few years ago. Many of the early online grocers, including Webvan, ShopLink, StreamLine, Kosmom, Homeruns, and PDQuick, went bankrupt and out of business. At one time, Webvan had 46 percent of the online grocery business, but it still wasn’t profitable enough to survive. The new business model for online grocers is to be part of an existing brick-and-mortar chain. Large grocery chains, like Safeway and Albertson’s, are experiencing sales growth in their online business but have yet to turn a profit. Jupiter Research estimates that online grocery sales will be over $5 billion by 2007, about 1 percent of all grocery sales, while it expects more than 5 percent of all retail sales to be online by then. A few years ago, optimistic analysts estimated online grocery sales would be 10 to 20 times that by 2005, but it didn’t work out that way.

One of the few online grocers to survive in 2003 is Peapod, the first online grocer, started by brothers Andrew and Thomas Parkinson in 1990. However, even Peapod was failing until 2001 when Dutch grocery giant Royal Ahold purchased controlling interest in the company for $73 million. Peapod operates in five markets, mainly by closely affiliating itself with Ahold-owned grocery chains. Peapod by Giant is in the Washington, DC, area, while Peapod by Stop and Shop runs in Boston, New York, and Connecticut. The exception is Chicago, where Peapod operates without an affiliation with a local grocery chain. Peapod executives claim the company is growing by 25 percent annually and has 130,000 customers, and all of its markets except Connecticut are profitable. Average order size is up to $143 from $106 three years earlier.

The online grocery business seemed like a sure winner in the 1990s. Dual-income families strapped for time could simply go online to do their grocery shopping. They has about the same choices of products that they would have had if they went to a brick-and-mortar grocery, about 20,000 SKUs (stockkeeping units). They could browse the “aisles” on their home computers and place orders via computer, fax or telephone. The orders were filled at affiliated stores and delivered to their homes in a 90-minute window, saving them time and effort and simplifying their daily lives. For all this convenience, consumers were willing to pay a monthly fee and a fee per order for packaging, shipping, and delivery. Since most of the products purchased were well-known branded items, consumer faced little risk in buying their traditional foodstuffs. Even perishables like produce and meat could be counted on to be high quality, and if consumers were concerned, they could make a quick trip to a brick-and-mortar grocery for these selections. However, while all of this sounded good, most consumers didn’t change their grocery shopping habits to take advantage of the online alternative.

Currently analysts do not expect the online grocery industry to take off in the near future, if ever. Miles Cook of Bain & Company estimates that only 8 to 10 percent of U.S. consumers will find ordering groceries online appealing, but only about 1 percent will ever do so. He concludes: “This is going to remain a niche offering in a few markets. It’s not going to be a national mainstream offering.” Jupiter Media Metrix analyst Ken Cassar concludes that “The moral of the story is that the ability to build a better mousetrap must be measured against consumers’ willingness to buy it.”

Question:

1. What behaviors are involved in online grocery shopping? How does online shopping compare with traditional shopping in terms of behavioral effort?

2. What types of consumers are likely to value online grocery shopping from Peapod?

3. Overall, what do you think about the idea of online grocery shopping? How does it compare with simply eating in restaurants and avoiding grocery shopping and cooking altogether?

 

CASE: IV         Sony

In just over half-century, Sony Corporation has from a 10-person engineering research group operating out of a bombed-out department store to one of the largest, most complex, and best-known companies in the world. Sony co-founders Masaru Ibuka and Akio Morita met while serving on Japan’s Wartime Research Committee during World War II. After the war, in 1946, the pair got back together and formed Tokyo Telecommunications Engineering Corporation to repair radios and build shortwave radio adapters. The first breakthrough product came in 1950, when the company produced Japan’s first tape recorder, which proved very popular in music schools and in courtrooms as a replacement for stenographers.

In 1953, Morita came to the United States and signed an agreement to gain access to Western Electric’s patent for the transistor. Although Western Electric (Bell Laboratory’s parent company) suggested Morita and Ibuka use the transistor to make hearing aids, they decided instead to use it in radios. In 1955, Tokyo Telecommunications Engineering Corporation marketed the TR-55, Japan’s first transistor radio, and the rest, as they say, is history. Soon thereafter, Morita rechristened the company as Sony, a name he felt conveyed youthful energy and could be easily recognized outside Japan.

Today Sony is almost everywhere. Its businesses include electronics, computer equipment, music, movies, games, and even life insurance. It employs 190,000 people worldwide and does business on six continents. In 1999, Sony racked up sales of $63 billion; 31 percent of those came from Japan, 30 percent from the United States, and 22 percent from Europe. (To visit some of Sony’s country-specific websites, go to www.sony.com and click on “Global Sites.”)

Perhaps Sony’s most famous product is the Walkman. Created in 1979, the Walkman capitalized on what some perceived as the start of a global trend towards individualism. From a technological standpoint, the Walkman, was fairly unspectacular, even by 1979 standards, but Sony’s marketing efforts successfully focused on the freedom and independence the Walkman provided. One ad depicted three pairs of shoes sitting next to a Walkman with the tag line “Why man learned to walk.” By 2000 more than 250 million Walkmans had been sold worldwide, but Sony was concerned. Studies had shown that Generation Y (ages 14 to 24) viewed the Walkman as stodgy and outdated. So Sony launched a $30 million advertising and marketing campaign to reposition the product in the United States. The star of the new ads was Plato, a cool, Walkman-wearing space creature. The choice of a nonhuman character was no accident according to Ron Boire, head of Sony’s U.S. personal-mobile group. He wanted a character that would appeal to the broadest possible range of ethnic groups—thus, the space creature. Boire explains, “An alien is no one, so an alien is everyone.”

Sony’s current vision, however, extends far beyond the Walkman: to become a leader in broadband technologies. Sony looks forward to a day when all of its products—televisions, DVDs, telephones, game machines, computers, and so on—can communicate with one another and connect with the Web on a persona network. A Sony executive provides an example of such technology in action: “Say you are watching TV in the den, and your kids are playing their music way too loud upstairs,” he says. “You could use your TV remote to call up an onscreen control panel that would let you turn down your kids’ stereo, all without having to get up from your recliner.”

Sony sees its new PlayStation2 filling a major role in the Internet of the future. In March 2000, Sony introduced the PlayStation2 in Japan and sold 1 million units within a week. Newsweek featured the PlayStation2 on its cover that spring, even though it wasn’t offered in the United States until later in the year. Most consumers probably bought PlayStation2 to play video games, but its potential goes far beyond that. It is actually powerful enough to be adapted to guide a ballistic missile. Sony envisions consumers turning to the PlayStation2 for not only games but also movies, music, online shopping, and any other kind of digital entertainment currently imaginable. Ken Kutaragi, president of Sony Computer Entertainment, predicts the PlayStation2 will someday become as valuable as the PC is today: “A lot of people always assumed the PC would be the machine to control your home network. But the PC is a narrowband device that… has been retrofitted to play videogames and interactive 3-D graphics. The PlayStation2 is designed from the ground up to be a broadband device.”

The PlayStation2 also reflects a changing attitude within Sony regarding partnerships with other companies. Toshiba helped Sony design the Emotion Engine, which powers the PlayStation2. In previous years, these kinds of alliances were the exception rather than the rule with the Sony. Sony was perceived as arrogant because it rarely cooperated with other companies, preferring to develop and popularize new technologies on its own. Recently, however, that has changed. Sony has worked with U.S. based Palm to develop a new hand-held organizer with multimedia capabilities, cooperated with Intel to create a set of standards for home networks, and launched a joint venture with Cablevision to build a broadband network in the New York metropolitan area. Nevertheless, some critics believe Sony remains too insular, looking on from the sidelines while other companies join forces to create entertainment powerhouses. Sony has no alliances with U.S. cable or television networks, raising some doubts about its ability to fully develop its home Internet services. Sony has talked with other music companies about possible joint venture, but nothing has come to fruition.

Unlike many U.S.-based multinationals, Tokyo-based Sony traditionally has marketed itself on a regional rather than a global basis. For example, Sony has almost 50 different country-specific websites from which consumers can order products. However, there are signs that strategy may be changing, at least to some degree. Sony launched www.Sonystyle.com, a website that is the company’s primary online outlet for selling movies, music, and electronic products. Sony also plans to provide product service and support on the site, and eventually software upgrades as well. The current main website (www.sony.com) is mainly a source for corporate and investor information. Also, in 1997 Sony embarked on a worldwide ad campaign to make itself and its products more relevant in the eyes of younger consumers. Ironically, much of Sony’s future growth may come from its own backyard. The primary buyers of electronic and digital products are ages 15 to 40. It is estimated that by 2010, two-thirds of the people in the world in that age bracket will live in Asia. Tokyo is already a powerful influence on Asian culture. Asia’s most popular youth magazines are published in Tokyo, and most of the music Asian young people listen to comes form Tokyo. So part of Sony’s challenge is to continue to grow on a global scale while paying close attention to the burgeoning market at home.

Immediately following World War II and for some years thereafter, the label “Made in Japan” connoted cheap, shoddy, imitation products. Today, for many people, that same label stands for excellence and innovation. Certainly Sony can take much of the credit that transformation. Now the question is whether Sony’s products and marketing efforts can keep pace (or set the pace) in the upcoming age of digital convergence. 

Question:

1. Identify and discuss some of the cultural meanings for Sony possessed by consumers in your country. Discuss how these cultural meaning were developed and how they influence consumers’ behaviors (and affect and cognition). What is the role of marketing strategies in creating and maintaining (or modifying) these cultural meanings?

2. It is often stated that the world is becoming smaller because today people communicate relatively easily across time and distance. Discuss whether that has been beneficial for Sony. What are some marketing challenges it presents?

3. What do you think about Sony’s tradition of region-specific or nation-specific marketing? Would Sony be better served by working to create a more uniform global image?

 

CASE: V   Pleasant Company

Samantha Parkington fights for women’s suffrage. Addy Walker escapes from slavery. Kirsten Larson builds a life in the frontier. Characters from feminist novel? No, these plucky heroines are part of The American Girls Collection, a line of historical dolls that are the darlings of 7- to 12 year-olds. Christmas orders piled up so fast at Pleasant Co.—the privately held doll-maker—that company vice presidents had to pack boxes in the warehouse.

Former president, Pleasant Rowland, who began the company with royalties she received from writing primary school reading books knew her vision had to be broad. Simply launching a me-too doll would have meant failure.

Before Rowland got her idea she went shopping for dolls for her two nieces. All she found were Barbies that wore spiked heels, drove pink Corvettes, and looked as if they belonged in strip joints. Though industry sources told her she couldn’t sell a mass market doll for over $40—some Barbies cost less than $10—Rowland gambled that boomer parents would pay more for one that was fun and educational.

Each of Pleasant Co.’s five dolls represents an era of American history. Addy is from the Civil War, and Samantha is described as a “bright Victorian beauty.” Parents can also buy historically accurate replicas of clothes, furniture, and memorabilia, such as the June 6, 1944, Chicago Daily Tribune headlined “Allies Invade France, made for Molly McIntire, the 1940s doll. The 18-inch dolls cost $84; add in all the accessories, including $80 dresses for the doll’s owner, and the price exceeds $1000. Every doll also stars in its own series of novels, with titles like Kirsten Learns a Lesson Samantha Saves the Day. The heroines go on adventures and cope with moral dilemmas; for example, Felicity Merriman, a colonial girl, has to decide whether to continue her tea parties while her father fights King

George Ill’s tea tax. Says Rowland: “We try to give girls chocolate cake with vitamins.”

Pleasant Co. decided early on not to compete doll to doll on toy store shelves. Defying industry wisdom, Rowland began selling only through her own catalog. She counted on her dolls’ being so different that word of mouth would take care of sales. She also coddled her customers. Pleasant Co. opened a “hospital” for broken dolls, so when brother sticks a pair of scissors through Molly’s head, Mom can return her to Pleasant Co. for repairs. For $35 the company does the surgery then mails Molly—now wearing a hospital gown and carrying a certificate of health form the house doctor—home to recuperate.

Will Pleasant Co.’s dolls have legs? Rowland says movies, CD-ROMs, and theme parks aren’t out of the question. But she’ll expand only as long as she can keep the business special. She refuses to license her products on T-shirts and lunch boxes, fearing that too much exposure would cheapen the doll’s image. Says Rowland: “It never hurts to play hard to get.”

In 1998, Mattel, Inc., purchased Pleasant Co., which continues to operate as an independent subsidiary. During the same year, American Girl Place, the company’s first retail and entertainment site, opened in downtown Chicago, and a second store opened in New York in 2003. The stores are a little girl’s delight. Visitors can purchase dolls, books, and clothing; view a musical revue; and have tea, lunch, or dinner at the Café at American Girl Place. The Chicago store sold $35 million worth of products in 2003.

Question:

1. Why do consumers pay $84 for a Pleasant Company doll when they can buy other dolls much more cheaply at retail stores?

2. Considering money, time, cognitive activity, and behavioral effort costs, are Pleasant Company dolls more or less costly than dolls that can be purchased at retail stores?

3. What recommendations do you have for Pleasant Company to increase sales and profits?

Consumer Behavior

29 Jun

CASE – 1

Tony the Tiger goes Global

Kellogg Company has distribution in more than 150 countries and yet is still “unknown to half the world’s population.” according to Arnold Langbo, Kellogg’s CEO. Langbo plans to change that.

Kellogg recently built a company—owned cereal plant in Latvia and currently has sales in Poland, Hungary and Czechoslovakia. It has also started construction on a plant in India and is entering China. However international expansion and the development of global brands will not be easy.

To become more international, the firm recently reorganized into four divisions :North America,Latin America, Europe and Australasia. According to Langbo:

The way we used to be organized, we were a US-based Multinational-a company with a big domestic business and, by the way,some international business. That was the way we were thinking; that’s the way the organization was structured.

Today, if you talk to customers in the UK, Canada, or Australia, they think of Kellogg’s as being based in the U.K or Canada or Australia. We’re global in organizational structure and business but also multidomestic.

We now have a number of truly global brands (Frosted Flakes and Corn Flakes, with Froot Loopa and Rice Krispies close, and Frosted Mini-Wheats and Honey Nut loops moving rapidly).There used to be slight variations in our food around the world, but now you’ll recognize the product wherever you go.

Expanding into many markets will involve more than trying to gain share from other cereal marketers. It will require altering long—held traditions:

In Eastern Europe it’s going to he pretty slow because we’re going to have to go in there and literally create the habit—much as we did in Germany 25 years ago or France 20 years ago. Cereal is a whole new breakfast concept for these people. However, they do eat breakfast in those countries, and they eat fairly substantial breakfasts.

In Asia, consumers are used to eating something warm, soft, and savory for breakfast—and we’re going to sell them something that’s cold, crisp, and sweet or bran tasting. That’s quite a difference.

The challenge is made greater by the presence of aggressive competition in many developed or develop-ing markets. Competition is particularly intense in Europe where Nestle and General Mills formed a joint venture called Cereal Partners Worldwide. Langbo characterizes the new competitor this way:

They are a very formidable competitor with Nestle’s distribution strength and knowledge of the European market and General Mills’ technology and cereal marketing expertise.

The result of the entry of the new competitor, which spent an estimated $35 to $50 million in advertising in the top six European markets, and the response of existing firms such as Kellogg was an increase in the growth rate of total cereal sales as well as share erosion among the weaker brands.

Competition is strong even in some countries where consumption is low. For example, in Japan, with consumption at four bowls per year per person, compared to 10 pounds in the United States, there are more than 100 products fighting for shelf space.

According to Langbo, a global brand requires a core position strategy or product benefit that will work in multiple countries and local execution of that idea to reflect local attitudes. The key ideas for three of Kellogg’s global or near-global brands are described by Langbo in the following paragraph

Frosted Flakes

Frosted Flakes is based on the concept of vitality. This idea originated in the United States but is a universal idea that both translates and travels well. Because the product has a special appeal to children, the cultural differences are not so pronounced. Tony the Tiger illustrates the vitality theme in a universally understandable manner. Tony is loved throughout the world symborizing appeals that are truly global. We use Tony and he vitality message everywhere from the United States to Taiwan in Argentina.

Corn Flakes

The basic positioning concept for Corn Flakes is simple, unadulterated food that tastes surprisingly good. This concept also has universal appeal. It is typically the first product we introduce in a new market, It is the foundation of our line, and it is the world’s most popular cereal.

All-Bran

The value proposition for All-Bran is the health benefits of fiber in the diet. This proposition does not have universal appeal without development. The concept of the value of fiber in the diet is new to many countries and is often resisted.

In 1984, we began a massive campaign to countries where the benefits of fiber were not widely accepted. campaign varied across countries due to differences in the attitudes of local medical and nutritional professionals, specific diseases that were most on the minds of the local population, and local restrictions on health claims. However, the basic approach was to educate and support the medical and nutritional community in each country. We would sponsor symposia on dietary fiber. As a country’s experts became convinced of the value of fiber, they told their story in their academic press, the general press, and in public service announcements. Today, despite competition from many other high-fiber cereals., All-Bran is one of the top 15 cereals worldwide.

Questions

1. What type of innovation would cold cereal be to a country not accustomed to this type of food?

2. Conduct an innovation analysis based for cold cereal in China.

3. What values are involved in the consumption of product such as breakfast cereal?

4. What values would support and what values would harm the chances of Kellogg succeeding the cold cereal in the following countries? What other factors would be important?

a) China

b) Mexico

c) Japan

d) France

5. What nonverbal communications factors would be important in developing an advertising campaign for a cold cereal?

6. Develop a marketing program to market one of Kellogg’s cold cereals in the following countries.

a) China

b) Mexico

c) Japan

d) France

7. Why does Tony the Tiger “travel” so well’?

8. Evaluate the communications process Kellogg used to gain acceptance for All-Bran. Could a version of this work for gaining acceptance of cold cereals in China?

 

CASE – 2

You are the Business Development Manager of an Engineering company that has developed a highly advanced machine for packaging of pharmaceutical products. The machine saves a lot of time and cost involved in the packaging as it is faster compared to other machines, it consumes lesser electricity and requires lesser manpower. One of your clients, N.K. Pharma is a 1200 crores pharmaceutical company having its head office in Mumbai. The company has six manufacturing units, one in Tarapur, two at Vapi, one in Nagpur, one in Chennai and the newest one at Baddi in Haryana. Each unit is led by a Factory Manager, who reports to the GM – Production who sits at the head office. The GM – Production, GM – R & D, GM – Marketing, and G.M. HRM report to the COO. The Accounts and Finance functions report directly to the COO. The COO is a 36 year old enthusiastic leader who enjoys immense trust of the MD (who is also the founder of the organization). The company sells through a network of 400 Medical Representatives spread all over India.

Questions

1. Analyze the buying behavior of this organization with respect to your product.

Consumer Behavior

29 Jun

1. Define Perception in context to consumer behaviour? How does perception affect consumer behavior? Discuss three marketing situations where perception influences buying behaviour.

2. What is meant by consumer perception? Explain the factors which affect consumer perception?

3. What is the significance of relationship marketing in the present marketing environment?

4. Write a note on persuasive communication.

5. Explain the characteristics of Organizational buyers? State the factors affecting the same? Please explain the individual consumer buying behavior?

6. Discuss McGuire’s comprehensive scheme of psychological motives.

7. Distinguish between rational and emotional buying motives with the help of examples?

8. Why is the scope of consumer behavior significantly increasing?

Consumer Behavior

27 Jun

A) Explain the characteristics of Organizational buyers? State the factors affecting the same? Please explain the individual consumer buying behavior?

B) Define & explain the following with respect to consumer behavior, with examples

  1. Attitude
  2. Relation between Attitude, belief & behavior

C) Please explain:

  1. Five distinct stages in the buying decision process.
  2. Personal factors affecting behavior.
  3. Buying process.

D) Explain.

  1. Actual Vs. reference price
  2. Semiotics
  3. Functions of attitude

Consumer Behavior

27 Jun

CASE 1                                                                                                                                

Sports marketing strategy: A consumer behavior case analysis in China.  Marketing research that targets consumers’ influences and financial implications is a worthwhile sports marketing effort. To implement effective marketing strategies in a specific country, it is pertinent to understand consumer behavior in that country. In this paper, 11 major findings related to the unique behavior, attitudes, and buying patterns of Chinese sports consumers are highlighted. From the results of questionnaires administered to 2,155 mainland Chinese consumers in 10 selected cities, different economic, social, and personal factors in the China’s environment are determined. The marketing implications of the Chinese culture and lifestyle are also discussed.

With a quarter of the world’s population and a fast-growing economy, China is rapidly turning into one of the busiest market centers in the world. Sports marketing has the potential to emerge not only as an effective vehicle in imitating the development of the Chinese economy, it also affects the Chinese culture and lifestyle.

Since sports marketing in China has not been analyzed or researched, it is appropriate to study the consumer as well as general financial implications. A look at American success in sports marketing will be helpful. However, implementing such strategies in China creates special considerations because of the existence of cultural and economic differences between the two countries. This study attempts to identify the proper marketing strategies in China through an analysis of Chinese consumers’ behavior, attitudes, and buying patterns.

METHODOLOGY

The methodology used in this study consisted of exploratory research of interviewing managers of retail outlets, secondary research of literature review, and primary research of a total of 4,000 questionnaires distributed in 10 selected cities (Beijing, Chendu, Guangzhou, Nanjing, Qindao, Shanghai, Shenzhen, Tianjin, Xian, and Xiamen) in China. Questionnaires were administered to a judgmental quota sample and assigned to one of four age groups with equal males and females. The rate of response was 53.9%; 2,155 questionnaires were returned.

The analysis of the data include editing, coding, analyzing coded observations, and interpreting results for solutions to the research problems. Tabulations and measures of central tendency were used to describe the distribution of characteristics in the subject population. Crosstabulation and chi square statistics were also used to show relationships between consumer segments.

SURVEY FINDINGS

Eleven major factors affecting consumer purchasing emerged from the questionnaire data analysis: 1. purchasing reasons; 2. purchasing experience evaluation; 3. income level relative to the expense level; 4. type of sporting goods purchased; 5. product factors affecting purchasing; 6. people influencing consumer purchasing; 7. sources of information about where and how to purchase;8. influence of advertisements; 9. brands consumers prefer; 10. where goods purchased; and 11. time spent in sports.

Purchasing Reasons: The major reason why people purchased sports products was “for exercise.”

Purchasing Experience Evaluation: Approximately half of the respondents indicated that their purchasing experience was “positive.”

Income Level Relative to the Expenses Level: The Chinese consumers’ income levels range from less than $173 U.S. per year to over $863 U.S. a year. The middle income level accounted for 72% of the respondents.

However, most respondents indicated they spent “less than $40 U.S. per year” on the purchase of sporting goods.

Type of Sporting Goods Purchased: “Shoes” were the No. 1 favorite type of sporting goods for Chinese consumers. Females tended to purchase apparel; males were more likely to purchase all type of sporting goods.

Product Factors Affecting Purchasing: “Quality,” “style,” and “price” were the three most important factors influencing purchasing decisions. People Influencing Consumer.

Purchasing: “Boy-and-girlfriend” had the most important influence in the decision process. “Parents” had the least important influence.

Sources of Information About Where and How to Purchase: The major information channel for Chinese consumers was their “going to a shopping mall” experience.

Influence of Advertisements: Of those responding to the survey, more than half said they either “occasionally” or “rarely” believe advertisements.

Brands Consumers Prefer: Adidas, Asics, Nike, and Reebok were identified by the Chinese consumers.

Where Goods Purchased: Most of those surveyed purchased their sporting goods from either “a sporting goods store” or “a department store.”

Time Spent in Sports Activities: Almost 90% of the Chinese consumers spent “less than 5 hours a week” participating in sports activities. However, three meaningful findings emerged: 1) those who participated “less than 5 hours per week” in sports activities spent more money purchasing sports products than those who participated “over 5 hours” per week in sports activities; 2) those in the income level of “$402 to $863 U.S.” spent more time participating in sports activities; 3) young adults and “unmarried” persons spent more time per week participating in activities than those who were “married” or elderly.

DISCUSSION ON CONSUMER INFLUENCES

The following discussion focuses on economic, social, and personal influences. These three categories have unique Chinese environmental and cultural meanings and thus need to be considered when engaging in marketing in China.

Economic Factors: Unlike the past, when most income was spent on basic necessities such as food and clothing, the current Chinese consumer spends more money on entertainment and durable goods. However, the general tendency of the Chinese consumer to have stronger purchasing power and the fact that their buying decisions reflect creative purchasing beyond bare necessities are not reflected in sports marketing. It could be concluded that not all Chinese consumers are willing to spend a certain percent of their income on sports products. This phenomenon can be explained either by consumers’ lack of sufficient income or too high a price for sports products. On the other hand, however, a great potential exits for marketers who appeal to the Chinese consumers with creative strategies. Those who know desires and needs in specific areas, while being sensitive to economic restraints, may capture a slumbering Chinese market.

Social and Culture Factors: With the implementation of an “open-door policy” in China, the lifestyle of the Chinese people changes constantly. Several social and cultural trends may stimulate marketers to be optimistic about Chinese consumers.

  • The most important trend is growing fitness consciousness. No matter the gender, age, occupation, and education of those surveyed, all tend to tie their purchase of sports products with exercise and entertainment.
  • A second trend the survey revealed is a movement toward use of sports products for casual reasons. Chinese consumers are embracing a more casual and health-conscious lifestyle.
  • There is a growing consumer preference for international products. The Chinese people, especially the younger generation, are very fond of wearing and using brand name sporting goods from around the world. Owning high grade sporting goods seems to be a symbol of wealth and a new fashion for those young consumers.

The social and culture trends just discussed will lead to different pricing, promotional, and distributional strategies.  Since marketing principles are applicable throughout the international arena, what has proved successful in the American market could basically be transferred and applied to the China market.

However, to implement a successful marketing strategy in China, several environmental differences must be taken into account:

1) “Shopping on Sundays” is a hobby for Chinese consumers. Marketers should create an
attractive shopping environment in a prestigious shopping center.

2) Chinese consumers believe what they see rather than what they hear. They know that some
imitation products exist in the market, and dishonesty in advertising is publicized. Marketers
should increase their image by eliminating imitation products and dishonesty advertising.

3) Although consumers’ attitudes toward the international sports products are positive, devotion
or loyalty to brands is subject to rapid change. Marketers should have a strategy to keep
consumers’ loyalty.

4) Non athletes have greater purchasing power than most athletes or sportspersons. Nonathletes
buy sporting goods either to impress others or simply because their friends have those items.
Marketers should consider how to design sports product with attractive sports features.

5) The type of sporting goods desired by the older and younger generations is widely dissimilar.
And a large gap exists between the desire to purchase and the ability to purchase sporting
goods. It causes problems of bringing the right products to the right person and establishing
an appropriate price policy.

6) The purchasing decision of Chinese consumers is heavily influenced by social values and the
social environment. Marketers should establish an educational program to either match or
lead a social value.

Personal Factors: Because of recent social changes, Chinese consumers have learned much from other cultures. They are more independent and more knowledgeable about commerce and business. There are at least three particular changes which may create opportunities for marketers:

1) The nuclear family has become the baic economic unit, and it has more power to make
purchasing decisions. With the implementation of the “one child per family” policy in China,
the nuclear family, consisting of parents with one child, has replaced the traditional clan
family which consisted of two or more generations living as one family.

2) Chinese wives are viewed as decision makers for goods purchased in families. Since wives
control family finances, it is important to target wives.

3) Individuals who live in the urban locations have stronger purchasing power. The Chinese
government predicts that by the end of 1995, people in large urban areas will increase to
30% of the population. This modernization movement will undoubtedly create business
opportunities.

Questions

  1. Discuss the various factor which influences consumer behavior in china?
  2. What should be the target market and what can be the marketing strategy?

 

CASE – 2                                                                                                                              

Consumer behavior: yesterday, today, and tomorrow

THE ECONOMIC PARADIGM

The 1940s view of the consumer in the marketplace was rooted in economic theory. Most scholars of economics probably still hold to the theory of Economic Man. In this paradigm, purchasing decisions are the result of largely “rational” and conscious economic calculations. The individual buyer seeks to spend his income on those goods that will deliver the most utility (satisfaction) according to his tastes and relative prices. This is a normative rather than a descriptive model of behavior, because logical norms are provided for buyers who want to be “rational.”

The model suggests useful behavioral hypotheses, such as: (a) the lower the price of the product, the higher the sales; (b) the lower the price of substitute products, the lower their sales; (c) the lower the price of complementary products, the higher their sales, provided they are not “inferior” goods; and (d) the higher the promotional expenditures the higher the sales. In striving to meet these hypotheses, consumers are not only assumed to be aware of all available alternatives in the marketplace; they are also assumed to be able to rationally rank order the available alternatives by preferences. This is the case of perfect information in the marketplace and unlimited ability of tile consumer.

In applying these assumptions to actual consumption, several problems became apparent. First of all, consumers do not have perfect information in the marketplace. Second, they do not all have the same information about the existing alternatives or attributes of known alternatives. instead, each consumer has fragmented knowledge of his or her own set of known alternatives; as a result, consumers can not always rank a set of alternatives available to them. In addition, preferences often violate utility theory, because different people prefer different styles, have different tastes, and hence make choices built on preferences rather than objective information such as price.

Problems arise with applying economic theories to gifts. Increasing the price of goods may actually make them more desirable, defying basic economic theory. Hence, inverted demand curves reflect products where increasing prices stimulate increasing sales. Perfume is a perfect example of this type of good. Most perfume or cologne is bought as a gift, and the connotations of bringing home a $2 bottle of cologne or a $50 bottle for a loved one are implicit. A relationship may not last upon receipt of the cheaper good. Hence the economic model ignores the fundamental question of how product and brand preferences are formed.

THE IRRATIONAL CONSUMER

After becoming aware that goods have “hidden meaning,” scholars of consumer behavior in the 1950s took to the notion of the consumer as an irrational, impulsive decision maker. Consumers were seen as passive, open, and vulnerable to external influences. This position was an obvious reaction to the “economic man” and also represented a time when business schools were developing. Earlier, faculty trained in economics were the first to be hired, but in the 1950s psychologists were added to the payroll. Their insights from Freud to Maslow, from personality to motivation theory, seemed ever so relevant to our study of the consumer.

The two major psychological theories underlying this era were the Pavlovian learning model and the Freudian psychoanalytic model. The Pavlovian model is based on four central concepts-those of drive, cue, response, and reinforcement. Drive or motives can be primary, such as hunger and sex, or secondary, such as fear. A drive is very general and impels a particular response only in relation to a particular configuration of cues. The Pavlovian model emphasizes the desirability of repetition in advertising. Repetition fights the tendency for learned responses to weaken in the absence of practice and provides reinforcement.

The model also provides guidelines for copy strategy. To be effective as a cue, an advertisement must arouse strong drives in the person. For candy bars, it may be hunger; for safety belts, fear; for hair tonics, sex; for automobiles, status.

In the Freudian psychoanalytic model, the guilt or shame man feels toward his sexual urges causes him to repress them from his consciousness. Through rationalization and sublimation, these urges are denied or become transmuted into socially approved expressions. These urges are never eliminated or under perfect control and they emerge in dreams, in slips of the tongue, or in neurotic or obsessive behavior.

Because of these urges, the consumer’s motivations for behavior are not obvious or deeply understood. As a result, Freudian psychology gave consumer behavior the tool of in-depth interviewing to get at the motives and symbols behind a purchase. If a consumer is asked why lie purchased an expensive foreign sports car, he may reply that he likes its maneuverability and its looks. At a deeper level he may have purchased the car to impress others, or to feel young again. At a still deeper level, lie may be purchasing the sports car to achieve substitute gratification for unsatisfied sexual strivings.

Other Freudian consumer research findings included men wanting their cigars to be odoriferous to prove they were masculine, and women being very serious when baking cakes because unconsciously they were going through the symbolic act of birth. These theories were certainly more interesting reading than the graphs and curves of economics.

One major study of this era (Haire 1950) found that when a shopping list included instant coffee rather than drip grind, the owner of the list was perceived to be a very different person. The owner of the list with instant coffee was lazy, a poor planner, a spendthrift, and a bad wife. Meanwhile, the owner of the list with drip coffee was perceived to be thrifty and a good wife. Fortunately a replication of this study was done in 1970 and housewives were no longer judged by their coffee (Wilkie 1986). However, Haire’s study provided good insight to the fact that products have meaning and significance that go far beyond the physical attributes of the products themselves. Furthermore, these hidden values were thought to be a major influence on consumer decisions. To tap into the consumers’ hidden motives for purchase, more indirect methods of data gathering were necessary.

Toward the end of the 1950s an empirical article started to throw doubt on the heavy reliance on psychological perspectives. A study by Evans (1959) sought to determine the personality characteristics of Ford versus Chevrolet owners. In the 1950s these were the major automobile manufacturers. Wider choice and Japanese imports did not exist. If the differences between the cars were not major, the train of thought was that the personality of the owner must be significantly different and motivate the consumer to buy one brand or the other. A carefully controlled survey of personality characteristics of 1,600 owners of Fords and Chevrolets showed no major significant differences in personality characteristics of the car owners. The importance of this line of behavioral research to consumer products was questioned. By this time, in the early and mid-1960s, business schools were producing their own scholars and faculty. Researchers were trained by business schools rather than only economics and psychology departments. Researchers of consumer behavior gained from this marriage of economics and psychology and began to develop their own theories of the consumer.

THE PROBLEM SOLVER

In the 1960s John Kennedy became president of the United States and gave the consumer elevated status. In his message to Congress on March 15, 1962, he put forth the Consumer Bill of Rights (1963) as a social contract between business and society. Government was tile ultimate guarantor of these rights, which included the right to safety, the right to be informed, the right to choose, and the right to be heard (redress). The government took Kennedy seriously and began an activist role

The marketplace was becoming more diversified. The concept of market segmentation became even more important. Goods that the consumer ted were now being produced, rather than just the goods the manufacturer wanted to make. Choice prevailed for the consumer, and the consumer was recognized by the highest official in the country. Consumers had the right to he informed and protected.

The government poured millions of dollars into departments whose goal was to make sure the consumer had access to information. The Federal Trade Commission flourished. Labels were put on products listing all ingredients. Advertising was regulated and measured; if it was misleading, then corrective advertising was necessary. Information was in great supply to the consumer. Ralph Nader, with his book Unsafe At Any Speed, emerged as the hero of the 1970s, taking on corporate giants in the name of the little man. Consumerism was everywhere.

As a result of this environment, consumer behavior researchers started to see the consumer as a “cognitive man.” The irrational psychotic purchaser of the 1950s and early 1960s was left behind. The consumer was now a problem solver. He or she was receptive to products or services that consciously met his or her needs. Consumers were thought to actively search for information about the products and services they bought. Consumer Reports was born. Consumers were seen as striving to make the best decisions possible given their limitations.

However, consumer researchers told us that even though consumers are given information, they often fail to use it to make decisions. In an initial experiment (Jacoby, Speller, and Kohn 1974) and a follow-up (Scammon 1975), consumers were given objective product information concerning several brands available in the marketplace. The results of the first study showed that consumers felt better about their brand selections with more information, but actually made poorer choices. The study by Scammon corrected for weaknesses in the original study but still found that recall of product attributes decreased with increasing information. Consumers were still limited by the extent of their knowledge about the marketplace and their capacity to store information about the marketplace in short-term memory. Miller’s (1956) rule of seven plus or minus two) pieces of information as cognitive capacity held for the consumer.

The information in the marketplace was not organized for the ease of the consumer. Unit pricing was fine, but comparing prices across brands and sizes for products was quite a challenge. Only when unit prices were posted on one sheet in a simple linear manner by decreasing prices across all sizes and brands did the consumers shift in their decision making toward lower-priced brands. You can imagine the national brand manufacturer’s enthusiasm toward presentation of this information at point of purchase.

The overriding conclusion of consumer research in the 1970s was that people can only attend to limited information at one point in time. The consumers’ existing skills, habits, reflexes, values, and goals shape the way they search and use information to make their decisions. The 1970s told us that consumers’ skills were limited, but at the same time the number of choices available to the consumer kept increasing. More and more choices became available in the 1980s.

THE COGNITIVE MISER

Today’s consumer uses decision-making skills originally developed in the 1970s, but the 1980s consumer went farther than just recognizing man’s cognitive limitations. Researchers have labelled the low-involvement decision maker (or cognitive miser) as unable or unwilling to engage in extensive decision-making activities in many cases and settle instead for “satisfactory” decisions (Olshavsky and Granbois 1979). There is too much choice and not enough discretionary time to engage in extended cognitive effort for purchases. Instead the consumer develops rules of thumb or heuristics to simplify purchase behavior. An in-store study showed that consumers go through almost no brand price comparison behavior (Hoyer 1984). Rules such as “buy the cheapest,” “buy name brands,” or “buy what my friend bought” give the consumer a satisfactory choice in the marketplace that supplants an optimal choice. This is a very adaptive and rational course for the consumer to have taken in the 1980s, given the cluttered choice environment with little time for decision making and virtually no support in information handling. The cost of thinking was recognized as a limiting factor in processing choices.

The 1980s brought a focus on business and conservatism, and many came to feel that governmental regulation was more of a hindrance than a help. This was expressed in the election of Ronald Reagan. As quickly as Kennedy had made the consumer important, Reagan made him unimportant. With strokes of a pen, the FTC experienced a sharp reduction in its budget and influence. Whole departments set up by the government to service the consumer were abandoned. Consumer programs developed for the 1970s folded.

The 1980s were for business. This focus was a result of several factors. First, the “baby boomer bulge” had a greater number of people for a smaller number of jobs. In the early 1970s a college graduate decided what job to take, or perhaps a trip to Europe, then work. In the early 1980s the concern was for getting any job at all. The economy was slow and competition was stiff. Business looked to the MBA to turn companies around. The student was serious and conservative due to the competitive environment. Business and engineering were in; the humanities were out. The marketplace became more competitive, more diversified. Deregulation prevailed.

Too many goods cluttered too many store shelves for the consumer. For example, the average number of products in supermarkets soared from 13,000 in 1981 to 21,000 in 1987. There are said to he 400 different brands of beer available to the American beer drinker. A new car purchaser might have 300 different types of cars and light trucks, domestic and imported, to choose from.

Along with the “over choice” and market diversity of the 1980s came decreased leisure time for the consumer, not more leisure time as predicted in the 1940s. The number of free hours a person possesses decreased from four to one since the 1970s. The reason for this is that the average time spent at work has increased seven to eight hours a week since 1978 (Stern 1987). More than 50 percent of all women are working, so household duties are done after 6 p.m. or on weekends. Single working mothers have virtually no free time and can’t take care of all they want to do. This scenario has led to a demand for convenience products and convenience shopping. Home catalogs, home TV shopping, home computer shopping, and home shopping parties are part of this easier access to goods that will prevail in the 1990s. The efficiency of in-home shopping, especially through direct marketing, is exemplified by the fact that American Express sold 7 percent of all the luggage bought in the U.S. by sending mailings to affluent cardholders whose charge records showed they spent heavily on travel-related merchandise.

This the cognitive miser of the 1980s is a product of decreased time for shopping decisions and increased choice in the marketplace. It is an adaptive strategy to suit the decision-making environment.

THE COLLECTIVE BUYER OF THE 1990s

The focus on individual decision processes for personal purchase of products and services will be replaced by a more collective decision-making style during the 1990s. This will be caused by the changing cultural patterns of North America combined with the decrease in purchasing power of the individual consumer. The culture of North America is changing due to: (1) the rapid increase in the percent of elderly people who are neither healthy nor wealthy; (2) the aging of the baby boomers, causing a shift in values and needs; and (3) increased immigration from Asian cultures with high birth rates to offset the North American decline in population. All three categories of this cultural shift will have to rely on joint decisions for purchase of goods and services, since goods and services will be shifting to a collective consumption style rather than individual consumption in the North American marketplace.

Individuals will combine households in an increasing rate to make life more affordable. The evidence that this joint living may be a trend for the future is exemplified by the fact that 6.2 percent of all employed people are working two jobs, mainly to meet living expenses. When the economy turns down these extra jobs will not be available, and people will have to decrease their standard of living to meet day-to-day expenses. More unmarried people will share apartments, more single-parent families will couple up, and more children will live at home longer. Thus, more people will be sharing consumer goods just due to living arrangements. Also, through the changing face of North American consumers, the marketplace will continue to change and supply more and more services for these groups. The changing face of the consumer will alter the marketplace and the mode of decision making.

Much has been written about the marketing opportunities for the senior segment. Right now approximately 7.3 percent of the population is over 65. By the year 2000, this group will increase by 20 percent, making it the fastest-growing segment of our population. This is one reason why marketers focus on the elderly. However, this group is not all that wealthy or all that healthy. It is estimated that 80 percent of people over 65 have chronic health problems, and 16 percent have severe physical problems. One in five Americans over the age of 85 resides in a nursing home.

The Baby Boomers

A full one-third of the population is bulging at middle age. In the year 2000 they will be 36 to 54 years old and at the middle of peak earnings. They are important to our view of consumer behavior because they will head 44 percent of all households and still account for a majority of purchasing power. Due to the conflicting structure of the population versus the corporate culture, there will be less moving around among this group, and they will be more stable in their jobs. Hence, their values and attitudes will change dramatically to reflect this stability. The collective decision-making style will be based on their stable environment.

Questions

  1. Discuss as to how the consumer behavior has evolved post 1950?

 

CASE – 3                                                                                                                         

Consumer behaviour: Men still major decision-makers
In India, men continue to dominate.

Even today, only 16 per cent of Indian professionals are women. Therefore, consumer decision-making in all areas — ranging from what cars to buy to what clothes manufacturers to patronize — is dictated by men when it comes to the most upscale market segment in India.

‘Horizon 2003’, a study by BBC World, BBC’s 24-hour international news and information channel, using the latest census as a base, gives some startling insights into the attitudes and activities of India’s leading consumers and decision makers.

The research, conducted by market research agency NFO-MBL across six top metros and profiling 380,000 people, will greatly help media planners, agencies and advertisers to understand this particular horizon professional.

Life insurance was found to be the biggest financial investment for most Indians, followed by the stock markets.

Washing machines were the most desirable consumer durable products, followed by cars and desktop computers.

Forty-two per cent of the respondents owned a mobile phone, of which 52 per cent had a Nokia, and 42 per cent of these subscribed to AirTel cellular service.

For example, more than half of the people surveyed (56 per cent) felt that it was all right to give or take bribes to get their work done. A slightly smaller number (40 per cent) thought it perfectly acceptable ‘to make money through underhand means/deals.’

Who decides

  Self Spouse Joint Family Elders Children
Buying a house 25% 5.8% 20.8% 30.1% 14% 0.4%
Child’s marriage 7.7% 5.9% 21.8% 18.7% 11.5% 4%
Own marriage 20.4% 2.5% 6.2% 22.4% 29.7% 0.9%
Child’s education 15.1% 6.6% 34% 12.5% 5.6% 4.6%
Taking a loan 31.4% 5% 24.3% 18.1% 9.2% 0.6%
Fixing monthly budget 24.2% 10.3% 33.3% 18.5% 11.2% 0.6%
Buying entertainment durables, like TVs 21.4% 8.2% 33.4% 26.7% 7.4% 1.6%
Buying durables like washing machines 19.3% 10.7% 33.3% 26.2% 8.2% 1%
Deciding on holiday destinations 20.6% 6.1% 28.4% 31.8% 4.5% 5.6%

“It is very difficult to survey this group by using traditional methods,” says Jeremy Nye, BBC World’s head of research, in the study. “However, it is important to know the tastes of these professionals who will be shaping India’s destiny.”

Adds Dezma De Melo, research manager, BBC World: “All the individuals in this class are rather alike. They have similar opinions, attitudes and beliefs.”

The study showed the emergence of certain definite trends in the area of just who decides what. For example, the person in question seemed to play a major role in deciding the monthly budget or whether to take a loan, but when it came to deciding whom he should marry, it was still the older people in the family who played a key role.

Both, the husband and the wife jointly decided on issues like the marriage of progeny. In a majority of cases, the whole family got together to decide what kind of house to buy where to go for a holiday.

Alcohol consumption habits indicated that 25 per cent drank alcohol, of which 72 per cent were beer drinkers. Most executives drank at bars and pubs, while self-employed professionals drank at friends’ homes. Businessmen preferred parties to have a drink or two at.

The research has an entire section focusing on travellers as a separate target audience. This is the first time that anyone has studied consumer behaviour in this area in such depth.

The study tries to understand the travelling habits — such as the mode of transport, kind of holidays, choice of place and media consumption while travelling — which will be different from normal household viewership.

The survey sets forth several interesting findings in this area. Sixty per cent people take a holiday in India, while 5 per cent take a holiday abroad. Eighteen per cent travel on business within India, while 8 per cent travel on business abroad at least once in a year.

As for international holidays taken in the last one year, people from Mumbai (30 per cent), Bangalore (35 per cent) and Hyderabad (26 per cent) preferred travelling to the United States, while 35 per cent from Kolkata and 41 per cent from Chennai travelled to Singapore.

A quarter of the respondents from Delhi went to Nepal for a holiday.

Among domestic business travellers, Jet Airways (60 per cent) is the preferred airline, followed by India Airlines (53 per cent) and Sahara Airlines (20 per cent). For domestic leisure travel, Jet Airways and Indian Airlines enjoy an equal share.

Among international leisure destinations, Singapore is the favourite with 23 per cent respondents, followed by 22 per cent opting to visit the US. International business travellers prefer the US (24 per cent) followed by Singapore (23 per cent) and the United Kingdom (13 per cent).

Interestingly, people in the six metros surveyed seemed to show entirely different tastes in watching television. The average number of channels watched was five and an average of 100 minutes of television is watched a day, with 30 minutes devoted to news.

News and Sports are the most preferred programme genres, followed by general entertainment. However, 29 per cent of the respondents in Delhi preferred News channels, while only 14 per cent of those surveyed in Bangalore preferred News. Bangaloreans prefer watching Sports with a high of 34 per cent.

“We look forward to Horizon 2003 being a tool for advertisers and planners to get a better understanding of this upscale, influential audience. We have been able to offer better solutions on the channel to advertisers based on the learning of this upmarket audience,” Seema Mohapatra, head of advertising sales for BBC World, says.

The survey also found that 95 per cent of the professionals were proud to be Indians, while 75 per cent believed risks are worth taking.

Questions

Q1) With reference to case above, define the terms below, and justify how they influence consumer behaviour?

Cultural and Cross-Cultural Influences

Subculture and Social Class

Reference Groups and Family

 

CASE-4                                                                                                                       

After its successful launch of local classifieds, Admanya, India’s leading consumer internet portal today announced the launch of a free classifieds matrimony service for its users .Based on user suggestions and requests, Admanya realized the needs of people in India who are extremely busy yet believe in the traditional way of matchmaking. With its network across 500 cities in India, this new functionality of Admanya will also help people from smaller cities in their search for life partners.
Ranjana, a 26 year old software professional from Bangalore says, “Admanya has always been coming up with surprises. With our busy and hectic schedule this is indeed a welcome surprise for us, seeking a simple platform for matrimonial alliances.”
Mr. Jaydeep Bhattacharjee, the founder and CEO of Admanya says, “People in India have always been rooted in tradition and religious beliefs. They believe in arranged marriages rather then romanticized tying of partners. So, we are indeed honoured to extend this free service to our members to make their search for a life partner fast and easy. With no elaborate profiles required posting a matrimonial ad in Admanya will be simple and hassle-free.”
Admanya is not only an online classifieds service that caters to the growing requirements of communities all over the world but is also a place for product reviews, consumer feedbacks and an emerging social community. You can find a job, recruit people, sell your car or buy one, rent your house and do much more through Admanya classifieds.

Questions 

  1. Matrimonial classified has moved from newspaper to online service, how has the consumer behavior changed, what are the factors which had influenced it?

Consumer Behavior

27 Jun

1. Kellogg launched cornflakes as a breakfast food in Indian market, they were not able to penetrate the Indian market effectively, explain what could be the main reason for not able to penetrate Indian breakfast segment effectively, and they made certain changes in product positioning, what are the changes incorporated by them.

2. One of the European company engaged in the manufacture of highly specialized artificial nose (Electronic Smell Sensor), which has varied application in various industries, however they are planning to find out the market opportunity for their product in the food segment in India. Prepare a detailed questionnaire keeping in mind food Industry in mind (Example – Fast food chains to identify quality of the food etc.).

3. An International company that is very well-known for Perfume brands in both the categories of men and women. The company has their own manufacturing unit and marketing team.

a. Discuss the market entry strategy from the point of Indian culture.

b. Make steps you will consider pre-launch- explain each step logically.