1)

A. Attempting to explain and predict the behaviors of consumers.

B. Marketers have a solid understanding of their target consumers and their behavior in the market place.

1)

A. Process Oriented: The behavior is not just an act but a process. (ex. purchasing vitamin water at a vending machine).

B. Identify the influential factors: things that influence consumer behavior (time, peers, media).

C. Flexible & Adaptable: recognize that the process is dynamic & ever-changing, so the model needs to change & adapt too.

D. Useful: Practical, able to be used by marketers.

1)

A. Problem Recognition

B. Search

C. Alternative Evaluation

D. Choice

E. Outcomes

1)

A. Prompted by the difference between consumer's actual & ideal states.

B. External: (ads, other people, signs, news, etc).

Internal: (motives)(suppose to come before external)

Ex. Subliminal advertising does not work unless the target audience has an underlying motivation before the exposed to the stimulus.

1)

A. Consumers search for information and solutions to problems.

B. External: (ads, other people, signs, news, sales people, etc).

Internal: Memory- the result of consumers information processing.

1)

A. Exposure: Being in physical proximity to the information to the information stimulus.

B. Attention:  allocating mental capacityin order to focus on the stimulus.

C. Comprehension: Trying to take meaning from (understood) what the stimulus is attempting to communicate.

D. Yielding Acceptance (Persuasion): Accepting or rejecting information.

E. Storage Retention: Placing pieces of our interpretation of the information into long-term memory.

F. Retrieval: Bringing pieces of stored memory (regarding info) back to consiousness.

1) Alternative Evaluations

2) Steps

1) Choosing among various alternatives

2)

A. Evaluate Criteria: Characteristics of products/ services. LEADS TO

B. Form beliefs about brands. LEADS TO

C. Form Attitudes about brands based on aforementioned. LEADS TO

D. Form Purchase intentions about a brand.

Ex. Automobiles

A. Reliability is critical (Evaluation Criteria)

B. Honda=Reliable. Ford=Not Reliable. (Belief)

C. Honda=Favorable. Ford=Not favorable. (Attitude)

D. I want to buy a honda. (Purchase Intention)

1) Choosing a particular brand or product.

1) Post Purchase Evaluations

A. Satisfaction

B. Dissatisfaction

C. Dissonance (uncertainty)

1)

A. Initiator

B. Influencer

C. Decision Maker

D. Purchaser

E. User

1)

Keep it simple stupid

1)

A. Introduces need to solve a problem.

B. Initiates the buying process.

1)

A. Exerts influence and is persuasive during the process (may also be an opinion leader).

1)

A. Ultimately holds authority when it comes to making buying decisions.

1)

A. The person who buys the product at point of purchase.

1)

A. The individual who consumes and/or uses the product.

1) Involvement

2) Steps

1) Personal, social and economic significance of the purchase or product to the consumer (identity).

2)

A. Problem Solving

B. Attitude

C. Perception

D. Situational Influences

1) Problem Solving

2) In relation to the Problem Solving Model what level of involvment do marketers want consumers to have?

1)

A. 5 traditional steps previously mentioned.

B.

Routine               Limited            Extended

Low Involvment           High Involvment

(Internal Search)                               

2)

A.Depends on current brand-related behavior.

Current consumers= low involvement.

1) Attitude

2) Strategies

1)

A. Learned predisposition to respond favorably or unfavorably towards something.

B. Formed by beliefs about brands and the evaluative criteria they use to assess existing products.

2)

A. Alter Existing Beliefs (beliefs link a brand to attributes/ characteristics of the product): example, potatoes are thought to be fattening. So advertisers tell us they aren't.

B. Alter Existing Evaluative Criteria: evaluative criteria are the standards individuals use to judge/rate a product (ex. cough syrup that taste like shit but actually works!)

C. Add new evaluative criteria: to the current list (ex. Listerine is good for your whole body!)

1)

A. The process by which an individual selects, organizes and interprets information to create a meaningful picture of the world. "Perception is reality."

B. Using scientific or technical jargon to promote brands (ex. Chevron with Techron).

C. Selective Processing: Thinking one way.

D. External Influences.

1)

A. Purchase Task (e.g. are you purchasing a product for yourself or someone else?)

B. Social Surroundings (e.g. are other people present when your purchase is made?)

C. Time or Temporal effects: (e.g. what time is it? how much time do you have?)

D. Physical Surroundings (e.g. the stores decor, music, sents.

i.) Carpeting gives the belief of expensive products.

1)

A. Developing new products

B. Modifying existing products

C. Branding decisions

D. Packaging/Labeling Decisions

E. The augmented product (warranties, additional services, etc.)

1)

A. To Companies: Competative advantage (something a brand has that others don't). Loyalty (consumer insistance of our brand; repeat business).

B. To Consumers: Increased efficiency (speed in shopping), effectiveness (satisfaction, consistency, etc.), a brand is a "storehouse of trust." A great brand balances the delivery of functional benefits with emotional ones (creating an emotional link with it's audience.

1)

A. Use the manufacturer's brandname for a variety of products. (Family Brand) Ex. Nike

B. Individual Brandnames

C. Make the product for a retailer, put the retailer-associated brandname on it.

i. Dealer brand

ii. Store brand (ex. Costco's Kirkland)

iii. Private label brand

D. Put a name owned by another company on the product (licensed brand- a fee is payed to the owner of the brand). 

E. Make the product and put no company name on it.

F. Make the product and put two names on it. Your name and another well-known name (co-branding). Ex. Trix are for kids Yoplait yogurt.

1) Branding Dilemma Positives & Negatives

A. Family Brand

B. Individual Brands

1)

A. Positives: "Halo" good associations. Less expensive to introduce.

 Negatives: Could dilute brand image/ strength of family name. Target Marketing/segmenting is different.

B. Positives: Target Marketing/ segmenting is easier.Establish own identity, may not effect company's other brands

Negatives: More costly to introduce. Does not get the "halo" effect (pre-determined brand value).

1)

A. Private label brand on the rise.

i. cheaper for the consumer

B. Brand/line extensions

i. Extending family brand

ex. Hershey's

C. Licensing

i. Payment of a fee/royalty to the brand owner for use of the brand.

ii. Anything with potential value can be licensed.

1) Packaging Decisions

A. V.I.E.W

1)

A. Visibility

Information

Emotionality

Workability

1) Functional benefits of the package.

a. protect contents (primary & secondary packaging)

b. easy/convenient to use

c. sizes.

d. retailer's needs, easy to stack and store, shop lifting deterrence.

1)

a. Idea generation

b. Product concept development

c. Marketing strategy development

d. Business analysis

e. Technical development

f. Test marketing

g. Commercialization

1)

A. Results form the test market may not be representative of the national market.

B. Cost (often exceeds $1 million).

C. May reveal your plans to the competition.

D. Competitor's actions during the test market may invalidate results (making it difficult to predict the new product's future success or failure.

1)

A. Reduce, eliminate cost of introducing nationally if the product would be a "flop." (Drop the product at an early stage before it proceeds any further)

B. Allows a company to fine-tune it's marketing mix.

1.)

A. Psychological Pricing

B. Demand Backward Pricing (Target Setting)

1.)

A. Odd/Even Pricing: $4.99 is seen as closer to $4 than $5. Ex. When Muehlings wife goes shopping. 

B. Prestige (High Price Image), translateds to quality.

C. Price Lining ($25-$50-$75): or reference point.

i. Lattitudes of acceptance or rejection.

Rejection       Accept        Reject

Low Price      Acceptable   High Price

ii. Lattitudes can be moved by changing the consumer's reference point.

1.)

A. The consumer's knowledge about what the price should be in relation to certain products.

B. Marketing tactics may help consumers establish a "reference point," i.e in store display, shelf tags, advertising.

C. Marketers do not set prices markets do.

1.)

A. Package Downsizing.

B. It is the consumer who ultimately sets the price by choosing or not choosing to buy a product at a certain price .

1.)

A. Price is set by first determining what consumers are willing to pay (or what competitors are charging) then determining whether you can profitably make the product at that price.

1.)

A. Consumer's sensitivity to price change.

B. If elasticity is E<1 the demand is inelastic and higher the price will cause total revenues to increase.

C. If elasticity is E>1 the demand is elastic and lower the price will cause total revenues to increase.

1.) Equation to determine Elasticity

2.) Equation for percent change in quantity.

3.) Equation for percent change in price.

4.) Equation to determine total revenue.

1.)

% change in quantity/ % change in price= Elasticity

2.) % change in quantity= [(Q1-Q2)]/Q1

Q1=original quantity

3.) % change in price= [(P1-P2)]/P1

P1=Original Price

4.) Total Revenue (TR)= Quantity x Price

1.)

A. Focuses more on price changes, rather than setting original price.

B. Elasticity may vary at different price  ranges (i.e along various points on the demand curve).

1.)

A. Cost based pricing methods.

B. Adjustments

C. Demand

D. New Product Priding

E. Legal Issues

F. Characteristics of the product

1.)

A. Start with cost to produce and market the item, then add a markup (for profit).

B. Break Even Point (BEP)= Total Fixed cost/ Unit Price-Unit variable price

1.)
A. Deductions, Discounts, Allowances

i. Quantity discount

ii. Seasonal Discount

- Marketer's dilemma: When & How much to discount?

-Discount too early and you lose profit

Discount too late and your left with excess inventory.

iii. Cash Discount (for wholesalers and retailers), 2/10, net 30

- 2% discount if invoice is paid in 10 days, total of 30 days to pay off invoice.

IV. Funcional Discount

-Discounts given to "middlemen"(retailers, wholesalers) for performing channel functions.

      Product costs $2              Product costs $4        Product cost $8

- Manufacturer------ Wholesaler------ Retailer-----consumer

Product costs $16

1.)

A. Skimming: Set a high price initially (ex. Introduction of the Calculator- $149)

i. Only effective when:

-Consumers are willing to pay the price thinking it relates to quality.

- Lowering the price has limited effect on increasing volume sales (i.e inelastic demand).

B. Penetrating: Set a low price initially

i. Penetrating is effective when:

- A low price discourages competitors from entering the market (demand backward principle).

- If you sell more and make more the price to make the unit lowers.

1.)

A. Horizontal Price Fixing: Retailers group together to determine the market for product. (Illegal)

Manufacturer

Whole Saler

Retailer Retailer Retailer

B. Vertical Price Fixing: Manufacturer coerses with one or more of the lower level distributors to determine prices etc. (Illegal)

C. Manufacturer's suggested retail price: not a legal obligation but a suggestion to keep market value. To make sure the price is align with the manufacturer's four P's (product, place, promotion, price)

D. Baitn n' Switch: Consumer's are baited with ads touting low prices. but are persuaded in the store to buy higher priced goods. (illegal)

Ex. Furniture store

E. Price Comparisons: A company makes reference to a original, former, normally, was/now, price.

i. According to the state of Washington that "original" price has to have been set for 60% of that year and account for 20% of that product's sales.

ii. Marketers do this to Help to establish consumer's internal refernce point.

1.)

A. Captive Products: Popcorn & Soft Drinks, in a movie theater. (part of the experience)

B. Complimentary Products: A free razor... to get you to buy razor blades. Cell phone... to sign up for the service... etc.