Part-3: Connecting with Customers

Discussion Questions:

1.      People can emerge with different perceptions of the same object because of three perceptual processes. List and briefly characterize these processes.

DQ No.1) Answer:

Nowadays it is supposed that all consumers are rational, and they go different stages for buying any products. Perception is a process of selecting, analyzing, organizing and interpreting information input to create a meaningful picture of the world.  Perception may not be the same for all people; it depends on individuals’ past experiences, psychological conditions, financial status etc. However, the perception may change and normally go through three different processes. People can emerge with different perception of the same object because of the following three perceptual processes:

1.      Selective attention: Although there are lots of products that are available in the markets, products that remain in the consumer’s head are relatively selective. However, there are some factors that grab attention of the buyer such as:

a)      People are more likely to notice stimuli that relate to a current need. For instance, a person is motivated to buy a car will notice car ads; he or she will be less likely to notice Movie ads.

b)      People are more likely to notice stimuli that they anticipate. For example, a person who is more likely to notice cars than bicycle in a market because he/she doesn’t expect the market to carry bicycles.

c)      People are more likely to notice stimuli whose deviations are large in relation to the normal size of the stimuli. For example, a person is more likely to notice an ad offering $1500 off the price of a car and one offering $ 50 off.

2.      Selective distortion: consumers give focus on the product they are aware of. It is refers to a tendency to interpret information in such a way that will fit our preconceptions. Generally it occurs with brand aware people as they trust in the brand quality. For instance, suppose a person who is more aware about laptop brands such as Hp, Dell, Acer, and Apple but his/her brother has Apple laptop then he/she is generally aware of Apple brand so that he/she give first priority on the Apple Brand.

3.      Selective retention: most of consumers normally forget much information about products which are not needed at the moment. People generally remember those products that they believe on and do not remember for those products which are not use at the same time. For example, an MBA student who is pursuing specialized subject as marketing would retain marketing information in the mind rather than financial information.

In conclusion, perceptions are more important than the reality as it as perceptions that will affect consumers actual behavior. Thus, people can come up with different perceptions of the same objects because of the above mentioned three processes.

References:

-       Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-       (n.d), Retrieved November 18, 2014 from http://www.citeman.com/696-selective-attention-distortion-and-retention.html

2.      What are the five stages of the consumer buying process? Through market research a consumer gathers information about the competing brands of a product and their features. The consumer then advances through four sets with respect to brands before a decision is reached. What are those four sets?

DQ No-2: Answer:

A consumer buying process refers to the buying behavior of customers. All consumers may have to pass through these stages in buying a product. However, it is not necessary that all consumers must pass through all five stages because if you are already familiar with the product then you can buy the products by skipping some stages but if you are going to buy totally new products you must follow all these stages step by step.

1.      Problem Recognition/Identification: The first stage of consumer buying process is to recognize our needs and demands. It means that we have to understand what problems we have at hand and what are we going to solve them. For example, I need a laptop for my study.

2.      Information Search: After recognizing product needs, we have to look for information regarding products’ features and characteristics. It can be done by various ways such as research, surveys and online search on the internet. For example, I need a laptop so I gather various information regarding laptops such as Brands (Dell, HP, Acer, Apple etc) and their features to resolve my educational issues.

3.      Evaluation and selection of alternatives: It is third stage of consumer buying process in which consumers evaluate the various information regarding products’ attributes, its benefits and need fulfillment etc. after analyzing theses information, the best alternative can be made for purchasing decision. For example, I evaluate these features and brands and select (HP) one of the best alternatives which may be reasonable and can solve my problem.

4.      Purchase Decision: To purchase a product, it should be fixed that which brand is to buy? Where it is feasible to buy and when it should be bought. It final decision to buy the products which may or may not satisfy the consumer satisfaction. For satisfying needs, for instance, I buy a HP laptop based on its attributes and value creation to me.

5.      Post-purchase Behavior: After purchasing the product, the customer may or may not be satisfied. Satisfied customers continue to purchase and develop brand loyalty and brand equity. On the other hand, unsatisfied customers stop buying the product and they also dissuade others from buying it. In this case, when performance exceeds the expectations then the customers are delighted. After purchasing a HP laptop, it is the time to determine whether it satisfied me or not. For example, it satisfied me and thus I became a loyal towards HP.

Four sets involved in customer buying decisions:

1.      Total Set: Total set refers to a set of brands available in the market. All buyers may not be familiar with all brands so that buyers have no all information regarding sellers’ brands.

2.      Awareness Set: Awareness set means those familiar brands which the consumer is aware of total set, and knowledge about. Awareness may not be the same for all brands and products.

3.       Consideration Set: It refers to a set of brands that consumers are considering to buy them. These brands have a positive impact on the mind of consumers because they have established trust already for them.

4.      Choice Set: It is a set of final choices that are actually available for buyers to purchase. A consumer has to choose from only two or three brands based on various factors which will enhance to buy the products. At this moment, a consumer is not confused whether to buy which products or not because he/she knows all about products and brands.

In short, Consumer buying process is all about buying activities of the consumers in which they follow 5 stages for new products and for existing products they may skip one or two stages. At the time of consumer buying decisions, basically four sets are involved to make a decision regarding customers’ brand choices. Therefore, all these have to take into account while buying products/services by rational consumers.

References:

-       Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-       (n.d.) Retrieved November 18,2014 from  http://theconsumerfactor.com/en/5-stages-consumer-buying-decision-process/

3.      What mental accounts do you have in your mind about purchasing products and services? Do you have any rules you employ in spending money? Are they different from what other people do? Do you follow Thaler’s four principles in reacting to gains and losses?

DQ No.3) Answer:

Mental accounting refers to a tendency of customers to categorize money or values for their own choices. They use it while handling money for segregating their savings to meet different goals even though there is no mandatory to use these funds to any of the goals.

According to Philip Kotler-“Mental accounting refers to the way consumers code, categorize, and evaluate financial outcomes of choices.”

Literally, most of rational consumers go through the mental accounting processes while purchasing any products or services. I think that I usually use to have mental accounts while spending money. For instance, I separate $3 before going to movie theatre to watch a movie. If I lost that $3 in the way, it doesn’t matter for me because I have already set up spending $3 money in the mind so it is called mental accounts. On the other side, incidentally I have to spend another $3 for watching the movie but in this case I haven’t expected this money so that it doesn’t belong to any mental accounting.

As a rational consumer, I do not use any rules but only use my habit for purchasing routine products such as low priced products( a cup of tea, for example). On the other hand, I use to have some rules regarding spending money for high priced products such as car, computer and house. For example, I usually spend my money when there are more values from the products or services than other products. This means that I make a list of preferences regarding product choices by analyzing product features such as Price, quality, service, warranty, and brand choices etc. yes, it could be different than what other people do because all consumers may not be rational in the countries like Nepal where country is in developing phase and people in this country also have irrational consumers.  Thus, rational consumers’ purchasing habits might be different than irrational consumers because they have no same levels of knowledge; ideas, experiences, and product awareness etc. while spending money for goods and services.

According to Chicago’s Richard Thaler, mental accounting is based on a set of four key principles which I also pursue in reaching to gains and losses. They are as follows:

1.      Segregate Gains: Usually consumers tend to segregate different gains of using product/services separately so that sum of whole benefits is greater than the individual benefits.

2.      Integrate Losses: Consumers tend to integrate small cost of one product with large cost of another product.

3.      Integrate smaller losses with larger gains: Conscious consumers tend to integrate smaller losses with larger gains.

4.      Segregate smaller gains from larger losses: Consumers tend to segregate smaller gains from larger losses in order to identify the smaller gains and larger losses.

Hence, having discussed all these, it is inevitably true that a rational consumer makes a purchase decision in terms of gains and losses according to a value function. Thus, consumers use mental accounting based on Chicago’s Richard thaler’s four key principles.

References:

-       Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-       http://www.investopedia.com/university/behavioral_finance/behavioral5.asp

DQ No.4) Identify the four market segment groups based on brand loyalty status and list what a company can learn from analyzing the degrees of brand loyalty.

DQ No.4) Answer:

Market segment is a small part of whole market based on demographic structures and psychological conditions. Brand loyalty refers to a deeply held commitment of a consumer towards particular products or brands. Brand loyalty enforces the customers to repurchase the products again and again, and it also positively promotes its products through a word of mouth.

Marketers have identified four market segment groups based on brand loyalty status. They are as follows:

1.      Hard-core Loyals: Those customers, who always buy the same branded products, refer to hard-core loyals. They always believe in one brand regardless of other brands available in the markets. They are very important for any companies because they are highly feel comfortable and sense of pride by using that kind of brands. A customer, for example, who always buys Apple’s products only and no other brands at all because he/she is loyal to Apple company.

2.      Split Loyals: Those customers, who like to buy among two or three brands, refer to split loyals. Although there are several brands available in the markets, Split loyals are inclined to compare their benefits and risks, and buy within these two or three brands. For example, a customer who would like to use smart mobile phones either it could be from Apple’s brand, or Samsung’s brand or Nokia’s brand.

3.      Shifting Loyals: Those customers, who move from one brand product to another, refer to shifting loyals. They do not buy specific brands all the time because they believe in demands, consumer preferences, a word of mouth and so forth. A customer, for instance, was loyal to Samsung’s Galaxy S5 but now he/she is shifting his/her brand towards Apple’s I6 mobile.

4.      Switchers: Those customers who have no brand loyalty at all refer to switchers. They like to use those products which are affordable and easily available in the markets. They do not care about brand and they buy whatever they like to use for their own convenience. Customers, for example, who are ready to buy any mobile phones regardless of brand choices, fall in this category.

By analyzing the degree of brand loyalty, a company will be able to do the following things:

Ø  To prioritize their customers according to brand loyalty.

Ø  To segment the markets by analyzing the target markets.

Ø  To understand the changing trend of customers’ needs wants and preferences.

Ø  To improve the brand loyalty by eliminating products defects and customers’ complaints.

Ø  To anticipate the customers’ preferences in the future and prepare accordingly.

It is now concluded that it is essential task for any company to identify the market segment groups based on customer loyalty status because of above mentioned reasons. Also, it will enable a company to analyze the trend and changing nature of customers so that right products can be delivered to the right customers at the right time based on their brands preferences.

References:

-       Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-       (n.d), retrieved November 18, 2014 from http://1praja1.blogspot.com/2013/06/brand-loyalty.html