Professional advice for entrepreneurs and business managers in the context of Europe's recovery from the financial crises. Marketing notes, stories and videos.

Influences – how other people make decisions for you



External influences are the key factors that influence people’s behaviour. The control of those factors, predominantly in the process of consumer decision making, is crucial for the achievement of any possible commercial objectives. The marketers can use the tools available to them to influence the Social Environment (all the behavioural inputs received from other people). Marketers should also understand the culture of their target markets.

Culture is a set of shared beliefs, attitudes and behaviours associated with large and distinct groups of people and this includes: religion, language, food and customs. According to Geert Hofstede culture can be defined and its strength measured by the analysis of the following factors:

  • Individuals vs. Collectivism
  • Level of Uncertainty Avoidance
  • Level of Power Distance
  • Masculinity vs. Femininity

In High Context Cultures where there is usually little room for personal expression or change and societies are more collectivist, conservative and sometimes even totalitarian, special marketing strategies are necessary. Inversely, Low Context Cultures are more individualistic and behaviours or consumption of products outside of well established standards is more likely to be socially accepted. Consumer Societies in Low Context Cultures are encouraged to be competitive rather than cooperative and are more likely to take risks to succeed (due to their general greed the next economic or social crises is likely originate from these cultures – exactly the same as in 2007). Consumer Culture is a creation of capitalism and members of the consumer culture are defined by what they consume rather than in what they believe. Subcultures are the best example of distinctive groups of people that share common cultural meanings and behaviours (UK’s baby boomers).

Using Social Class as a targeting tool is probably the most misleading and confusing technique in marketing (social class and personal wealth should not be confused here). Over the last few decades many people stepped up on the social class ladder without really increasing their personal wealth. Targeting low priced products at lower social classes is a common marketing error. Some marketers assume the lower social classes consider the price of a product as the only purchase decision making factor. The Trickle-Down Theory implies that lower social classes often imitate upper classes by consuming products marketed as products targeted at higher market segments.

UK’s social classes are subdivided into five categories.

  • A – Upper-middle class
  • B – Middle class
  • C – Lower-middle class
  • D – Working class
  • E – Lowest level of subsistence

Peer and Reference Groups – humans are social animals. A reference group is a person or group of people that significantly influence an individual’s behaviour. People often buy products or services not because these are necessary for their existence but as a means of communication to their peers. The choice of product will depend on at which group the intended message is targeted at? Most common reference groups are:

  • Primary Groups are usually friends and family and can be characterised by face-to-face interaction on a regular basis.
  • Secondary groups are people who we see occasionally and with whom we share interest but this group in comparison to family is usually less influential.
  • Aspirational Group are the groups an individual wants to join. Very powerful in influencing behaviour.
  • Dis-associative groups – groups the individual does not want to be associated with.
  • Automatic Group – gender, age etc

The process of learning which behaviours are acceptable within a particular group is called socialisation. As a result of contact between an individual and a group the relationship may either turn into:

  • Conformity – change of beliefs or actions based on group pressures.
  • Compliance – individual goes along with the group without accepting its beliefs.
  • Acceptance – individual accepts behaviours and shares group’s beliefs.
  • Normative Compliance – the pressure on an individual to conform and comply. The source of normative compliance lies in operant conditioning (very powerful).
  • Homophilious Influences – transmission between those of similar age, education, social class etc.

As far as the entire life of an individual is concerned family is the most powerful reference group. Family and individual have face-to-face contact, share consumption, subordinate their individual needs, select family purchasing agents and usually nominate one as a dominant member of the family.

First born babies on average generate more economic impact on families. This is because the first born babies require parents to buy all the necessary care products for the first time. Parents often learn how to care for their children through a system of trial and error by buying and using care products for their first child and use this knowledge to save money when caring for their second child. Children, on the other hand, use their Pester Power to exert pressure on their parents to buy something for them. Young teens in high income economies in particular have more influence on family because they watch more TV. Often they accompany the purchasing agent shopping and their purchase decision making process is heavily influenced by TV and Internet marketing.

Parents can be characterised as:

  • Authoritarian – cold and restrictive
  • Authoritative – warm and restrictive
  • Permissive – warm and non-restrictive
  • Strict Dependent – fosters dependence
  • Indulgent Dependence – giving everything the child wants

Rituals are the occasions when people spend money for irrational reasons, sometimes even more money than for any other reason. Examples of ritual purchasing are:

  • Exchange Ritual – gift giving
  • Possession Ritual – photographs of beautiful cars
  • Grooming Ritual – preparing oneself for public
  • Divestment Ritual – cleaning, redecorating
References
  • Maciejovsky, B., 2012. External Influences, Consumer Behaviour. Imperial College London, unpublished.

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Classical Conditioning Examples – what can customers learn from you?



One has learned something if, as a result of an experience or more information being made known to them, their behaviour changes. Learning is a process of behavioural changes that occur over time relative to an external stimulus condition.

The definition of Pavlov’s Classical Conditioning is: “Unconditioned stimulus leads to unconditional response”. What it means in practice is that certain kinds of acts lead us to conduct another act as a rule e.g. smoking cigarettes may tempt the smoker to drink a cup of coffee. In marketing, classical conditioning is often used with sounds to accompany advertisements. Consumers, by hearing the sound, are reminded of the message they saw in the advertisement. Additionally, liking the sound extends to liking the product subject to advertisement. The repetition of sound (unconditioned stimulus) is key in order for classical conditioning to be effective. The number of repetitions required depends on the strength of stimulus and the motivation of the individual. Classical conditioning is involuntary. Individuals are not required to actively participate in learning.

Generalisation – stimulus that is close to an existing/known one evokes the same/similar response.

Cognitive learning – is learning through conscious analyses of purchase. The emphasis is on what is learned, not how it is learned. Cognitive learning consists of:

Cognitive effort – Cognitive structure – Analysis – Elaboration – Memory

Memory – is the mechanism by which learned information is stored.

Sensory memory – (Attention) – Short Term Memory – (Elaboration) – Long Term Memory

Operant Conditioning by B. F. Skinner – takes place when the learner conducts trial and error behaviour to obtain reward and avoid punishment. The learner has a choice of outcome of their behaviour and the process of trial and error involves cognitive dimension (thinking). In marketing, Operant Conditioning is an idea that is highly relevant to industries that rely on repeat purchase, particularity for FMCG (fast moving consumer goods). If the first time a purchase is made has had a positive effect on a consumer then they are positively reinforced. For example: if a consumer buys an ice cream and is satisfied with its taste and quality (reward), the same consumer is likely to buy the same ice cream in the future in order avoid disappointment from buying an ice cream of unsatisfactory quality (punishment). The main difference between Classical Conditioning and Operant Conditioning is that the former is based on voluntary behaviour, and the latter is based on reflex.

Knowledge – the more one knows about the product the lower the perceived risk is.

  • Consumer knowledge consists of:
  • Self Knowledge
  • Knowledge of brands
  • Consumption Knowledge
  • Persuasion Knowledge
Reference
  • Maciejovsky, B., 2012. Learning, Consumer Behaviour. Imperial College London, unpublished.

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Maslow Hierarchy of Needs for Marketing



Maslow’s Hierarchy of Needs does not require long introduction. It is in my opinion one of the most important marketing concepts ever invented. In this article I update Maslow’s theory slightly to make it more relevant realities of modern European. Entrepreneurs and investors, before investing their time and money into new ventures, should test their ideas against this and how well their new business would measure up when assessed using Maslow’s Hierarchy of Needs.

Survival Needs – used to be about covering one’s body to protect it against cold and having access to food to survive. Today, survival needs are more to do with fashion, healthy living and conspicuous consumption. As marketers we should think of human’s survival needs as an opportunity to deliver demanded and differentiated clothing and food products to the market by the means of mass customisation and co-creation.

Security Needs – The most obvious examples of products and services which directly appeal to a human’s security needs are insurance, saving plans, burglar alarms, car breakdown memberships and computer anti-virus software. The less obvious are the things like dating sites. In uncertain economic times in particular, some dating websites site may choose to position themselves as sites which help their users to develop true and long lasting relationships. By doing so they purport to increase the social security of both members of this newly developed relationship.

Belonging Needs – Products and services designed to appeal to the need to belong are probably the most profitable ones. The motives behind their purchase are mainly irrational. People are willing to pay dearly for fashion products in high-value categories, luxury goods and club memberships not only to benefit from receiving the service it provides but to belong to a group of people of similar socioeconomic characteristics. Europe, with its demographic imbalance between senior and junior citizens, presents a great opportunity for marketers capable of addressing the need to belong in the form of offering vintage products to those born just after WWII. By owning a product such as a classic car people can reach back to the time of their youth and meet and chat to other people of the same generation and interests.

Esteem Needs – Are often confused with the need to belong. The two are actually quite opposite. The need for self-esteem is often fulfilled by the ownership of rare and unique products such as an expensive house, jewellery or car and nearly everything which implies one’s social status. The uniqueness, rarity and individualism that are presented throughout the process of fulfilling one’s esteem needs, will unfortunately often prevent an individual from belonging to a certain desired group of people. Rolls Royce is a good example for this. The products addressing esteem needs require smart marketing and are very fragile in the hands of greedy marketers. Overdoing marketing in this product category might remove the brand from the category suitable for the self esteem appeal.

Cognitive Needs – Splitting cognitive needs into aesthetic and information needs is appropriate for its marketing application. Works of art, designer products and jewellery are the best examples of products that address peoples’ aesthetic needs. Travel agencies offer holidays to places considered as beautiful to appeal to the aesthetic needs. The need for information on the other hand motivates us to buy information products such as newspapers, subscribe to a website or pay for a university course. Using the socio-economic classification of people, such as the one currently in use in the UK, can help the marketers to more accurately target consumers with products or services designed to attract people with an elevated high need for information.

Self-actualisation – Is the need to become more and more of what one is and to achieve everything one is capable to achieve. Targeting products which address the self-actualisation needs is difficult and expensive as it requires a thorough and detailed understanding of consumers’ personality and motives. Marketers can use projective research techniques to stablish the self-actualisation needs of an individual. People self-actualise in various different ways so finding a typical example of a product in this category is difficult. Some people climb Mount Everest while others grow their own food to self-actualise.

Reference

  • Maciejovsky, B., 2012. Maslow’s Hierarchy of Needs, Consumer Behaviour. Imperial College London, unpublished.

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Motivation


Motive is a reason for carrying out a particular behaviour. Motives are not instincts (pre-programmed, inborn responses). Needs are the basis of all motivation.

Motives can be subdivided into 6 motivational categories:

Primary motives – Replacement of a used product for a new one e.g. the purchase of a new car to replace an old broken one. The primary motive is a utilitarian one. A consumer purchases a new product because the one they already own no longer does what is intended to.

Secondary motives – Here the motive is more than just a utilitarian one. Unlike the primary, the secondary motives lead the consumer to buy into a specific brand. A product from a specific brand usually carries intangible benefits such as social image in addition to the service it performs.

Rational motives – Are based on reasoning or logical assessment. Rational motives are tradeoffs between the price the consumer has to pay for the product or service and the value it represents to this consumer.

Emotional motives – Having to do with feelings about the brand. Emotional motives are irrational. Consumers are motivated to but a product not by its utilitarian features or its market value but how they feel about it. Emotionally motivated purchases can usually be characterised as products or services of high cost to profit ratio (Good business for companies).

Conscious motives – Are the motives we are aware of and these can be both primary and secondary. People might or might not know what motivates them to buy a specific brand. Buying a luxury suit motivated by the need to look like peers at the workplace is very conscious choice of product.

Dormant motives – Operate below the conscious level. Buying a luxury suit can also be motivated by dormant motives such as appearing to the public as someone who you are not. Here the motive is derived from the discrepancy between the purchaser’s self-image and how others perceive this person. The purchaser is aware of the fashion standards of a social class they aspire to belong to but are not aware that they don’t belong to this social class. Companies, luxury brands in particular, base their marketing strategies on dormant motives by creating imaginary high social class role models for their customers to follow.

Reference

  • Maciejovsky, B., 2012. Motivation, Consumer Behaviour. Imperial College London, unpublished.

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Perception in Marketing


Perception – is the process of converting sensory input into understanding of how the world works. The sensory input occurs through the senses of touch, taste, smell, sight and hearing.

 process of perception

Stimuli → Sensory Receptors → Attention → Interpretation → Response → Perception

Selective Attention filters all the sensory input we as humans are exposed to in our everyday lives. Only the relevant sensory input (information that reaches us in the form of touch, taste, smell, sight and hearing) is let through to our consciousness. All irrelevant sensory input (the noise) is cut out by our selective attention.

Subjectivity – is the effect of past life experiences, including cultural influences, on an individual’s perception of the world. Due to subjectivity, the world appears in a unique way to each separate person.

Categorisation – is the process of pigeon-holing of chunks of information. People prejudge the quality and other characteristics of products and services even before consumption thanks to this form of perception.

Expectations – an expectation is created when an individual uses a certain product or experience and receives a certain outcome. They are then conditioned to expecting this same outcome again when they use the same product or service, in that same way.

Weber’s Law – is a rule in marketing which says that the size of the least detectable change depends on the size of the stimulus. Very intense stimulus requires bigger change to be perceived by the consumer. For example:

If the price of product A is £0.06 a change to this price by £0.03 will be easily detectable by the purchaser.
If the price of product B is £10.06 a change to this price by £0.03 is less likely to be noticed. In this case the price change to be noticed requires a much larger amount.
 
Weber’s Law is also applicable to the changes of product size, quality and all the other product characteristics.
 

Subliminal Perception – Perception is not necessarily a conscious process. Much of what happens in the mind is below the conscious level. There was a time when subliminal techniques were used to advertise products in TV programmes. An image of a product or a brand mark used to be displayed for a fraction of a second (below the subliminal threshold of our attention) during the broadcast. The objective was to trigger the need for consumption of a product subject to subliminal advertising at below the consumer’s consciousness level.

Many marketers doubt the effectiveness of subliminal advertising but I believe that this technique might be effective if used in a less technological way. Subliminal advertising is not only about images of brands fitted into a film for a short period of time so no one can be conscious of noticing it. An experiment I took part in at Imperial College was about making people thirsty using subliminal technique.

There where two separate groups of people participating in the experiment. One group had to listen to a story told about London. We later were told that this story contained repetitions of the word “water” and its synonyms. The other group listened to another story about London but with no repetitions of “water”. We were then asked to choose from a list of food products, including a bottle of mineral water, for immediate consumption. The sample of those who listened to the story about London with repetitions of a word “water” showed, in comparison to the other group, greater preference of water as a product for immediate consumption. Subliminal marketing in its most simple forms is not permitted in many countries.

Colours – Are used to attract attention but they also convey emotions and meanings. The meaning of colours in marketing is particularly important in the context of international marketing. The best example for it is the association people have with the colour white across the world. In Europe, white is a colour of cleanness and innocence whereas in the Middle East the same colour is associated with misfortune.

Gestalt Interpretation – an image can be perceived differently by two people and the way each person perceives this image will depend on their subjectivity and expectations. Gestalt Interpretation is based on the notion of ‘closure’. Certain kind of images, especially those illustrating shapes that can be associated with more than one object, are identified by people in the unconscious, cognitive process of filling the missing gaps. The information used to fill those gaps originates from past life experiences.

 Different past experiences – different information used to fill the missing gaps in the image – different image perceived.

 Reference
  • Maciejovsky, B., 2012. Perception, Consumer Behaviour. Imperial College London, unpublished.

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Marketing Research Process


The process of research for marketing (hereafter called marketing research) usually consists of five underlying parts which are:

  • Problem Definition
  • Research Plan
  • Data Collection
  • Data Analysis
  • Report Presentation

There are many kinds of marketing research techniques and deciding on which one is right for you depends on what is to be achieved from the research you are conducting.

Exploratory Research is probably the simplest and most often used, not only in marketing but for nearly all research needs. This method is used to explore a problem and provide insights and is particularly useful when there is no initial understanding of the problem.

Descriptive Research is most often used to describe something, usually market characteristics or functions. It is conclusive and used to describe characteristics of groups such as consumers and sales people. It is also used to estimate the percentage of a specified population exhibiting certain behaviours. Descriptive research can be completed as:

  • Cross-sectional design – where collection of information from a given sample takes place only once.
  •  Longitudinal design – is where fixed sample is measured repeatedly. Unlike cross-sectioned research here the same sample of people are studied over time.

Descriptive research, regardless of whether it’s cross-sectional or longitudinal, is completed using questionnaires and/or structured interviews and the data is processed quantitatively.

Causal Research – is used to obtain evidence of cause and effect. Marketing managers like using the data derived from causal research to justify their decisions. Causal research is used to point out which variables cause a known and identified marketing phenomenon. It is also used to determine the nature of the relationship between causal variables and to test hypotheses.

Simple example:

Causal research established that the reduction in price of a product will boost demand for it.
 

In-depth Interviews are unstructured, delivered on a one to one basis and can last from 30 to 60 minutes. Professional interviewers prepare their questions in advance and structure them according to possible interview scenarios. In marketing the in-depth interviews are used to collect information from groups as diverse as industry experts for an informed view of the subject, or general members of the public, including children, to get a layman’s (or potential customer’s) view. The nature of this type of research means it is exploratory where there will be unknown responses to questions. It is therefore important for the interviewers to remain flexible in the structure of their interview and to give the interviewee enough leeway to allow for unexpected findings.

Projective Technique is an unstructured questioning style of research. In marketing it is used to establish the underlying motivations, beliefs, attitudes and feelings of the respondent towards a product or service. The respondent is asked to respond to scenarios by:

  • Associating scenarios with words
  • Completing sentences
  • Completing stories

The purpose of research is not clear to the respondents. Projective techniques are used when required information cannot be obtained by direct methods.

Focus Groups – Conducted by professional moderators and is unstructured and natural. The value of this technique lies in unexpected findings. The focus groups are used for new product development and production of advertising.

Ethnographic Research – The researcher observes social phenomena in their natural setting.

Reference
  • Malhotra, K. N. and Birks, F.D., 2000. Marketing Research. An applied approach. European Edition. London: Pearson

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Why On-line Reputation Management may be a good investment?



On 20th March 2012 Michael delivered his presentation about On-line Reputation Management to the teaching staff and other post graduate students at Imperial College Business School and persuaded four talented students to join his team in realising this idea and the potential it had to offer. More information about this project is available from the prototype website developed for the Dignatio project.

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Is Amazon Kindle Fire capable of taking Apple’s leading position in the Tablet PC market?



The Amazon Kindle Fire has entered the tablet PC market with promising prospects. It is based upon the highly successful Kindle e-book reader. Amazon seeks to differentiate itself from competitors in the tablet PC market but is this enough to displace the current market leader, Apple? [Read more…]