CHAPTER SIX Consumer Perception

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Learning Objectives To Understand Concept of Perception. To Learn About the Three Elements of Perception. Here is an outline of the topics for Chapter Six. Chapter Six Slide Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Outline What is perception What consistutes perception

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Perception The process by which an individual selects, organizes, and interprets stimuli into a meaningful and coherent picture of the world Elements of Perception Sensation Absolute threshold Differential threshold Subliminal perception Perception is how we see the world around us. You and your friend might see the same person, thing, or event yet you will interpret in different ways. This interpretation is highly individualized and depends on each person’s own needs, values, and expectations. These are the four major elements of perception. They will be described in detail on the following slides. Chapter Six Slide Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Sensation Sensation is the immediate and direct response of the sensory organs to stimuli A stimulus is any unit of input to any of the senses. Application in marketing The absolute threshold is the lowest level at which an individual can experience a sensation. Sensation is the response of the sensory organs, including the eyes, ears, nose, mouth, and skin. Most of marketing focuses on sight and sound but much research is being done on smell and touch. The web link on this page connects to a company that uses smell as a marketing tactic. Advertisers must reach the absolute threshold for consumers to be able to experience their advertising tactic. It is interesting that the absolute threshold changes over time. Consumers adapt and get used to a certain ad or message so no longer notice it. This is one of the reasons why advertisers change their ads frequently. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Discussion Most of the marketing communications today appeal to sight and sounds. However, smell and touch also represent considerable opportunities for targeting consumers. Could you find some examples of smell/touch that used to attract target consumers? The importance of smell in communication was strongly supported by two Americans who developed a scientific explanation as to how people associate memories with smells (and won the 2004 Nobel prize in physiology for this work) and other studies demonstrating the impact of fragrance on product and store choices.

Promotional Methods Aimed at Increasing Sensory Input Table 6.2

Differential Threshold (Just Noticeable Difference – j.n.d.) Minimal difference that can be detected between two similar stimuli Weber’s law The j.n.d. between two stimuli is not an absolute amount but an amount relative to the intensity of the first stimulus The stronger the initial stimulus, the greater the additional intensity needed for the second stimulus to be perceived as different. Marketers are very concerned with the differential threshold, which is also called the just noticeable difference. It was a German scientist named Ernst Weber who realized that this difference was not a fixed amount. The best example is when you buy a low-priced product like a cup of coffee from Starbucks. A $1 increase in your tall coffee would be noticed by you. But if you were buying a laptop whose price changed from $455 to $456 you might not even notice. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Marketing Applications of the J.N.D. Marketers need to determine the relevant j.n.d. for their products so that negative changes are not readily discernible to the public so that product improvements are very apparent to consumers Marketers make changes in their products over time. Sometimes they have to make negative changes, perhaps increase price or reduce package size. They want to make this negative change subtle enough that most consumers will not notice. On the other hand, a marketer might want to make positive changes to the product. They would want to determine how small they can make this change so that it is noticeable to the end consumer but does not cost the marketer excessive amounts of money. Marketers also want to be careful that when they change the look of a product or packaging, that consumers still recognize the brand and transfer their positive feelings toward the brand. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Marketing practices of JND Product improvements Example of Goddards’ Price increase Package change Goddard’s, a well known manufactuers of fine polishes, wants to improve it sSilver Care polish sufficiently to claim that it retards tarnish longer than the leading competing brands. In a series of experiments, the company determines that the j.n.d for its present polish is 5 days (which now gives a shine that lasts about 20 days). That means that the shine given by the improved silver polish must last at least 25 days longer if the new polish is to be perceived by the majority of users as improved.

Packaging and the J.N.D Coca-Cola Heinz ketchup Tropicana pure Premium orange juice

Subliminal Perception Stimuli that are too weak or too brief to be consciously seen or heard They may be strong enough to be perceived by one or more receptor cells. Is it effective? Extensive research has shown no evidence that subliminal advertising can cause behavior changes Some evidence that subliminal stimuli may influence affective reactions People have been fascinated by subliminal perception for over 50 years. The question is whether stimuli that are not consciously sensed can still be perceived and are therefore capable of altering behavior. At this point, there is no research that shows that it directly changes attitudes or purchase behavior. No doubt, there will continue to be research on this subject as many feel that there is indeed an effect from subliminal perception. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Aspects of Perception Selection Organization Interpretation The study of perception is largely the study of what we subconsciously add to or subtract from raw sensory inputs to produce our own private picture of the world. This is related to how do we select, organize and interpret stimuli from outside. Consumers are bombarded by stimuli and are therefore very selective as to what messages and information they perceive. As new information comes to their mind, it is organized within their mind. Finally, consumers interpret the stimuli based on their needs, expectations, and experience. Each of these stages will be examined on the following slides. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Perceptual Selection Selection Depends Upon: Includes the product’s physical attributes, package design, brand name, advertising and more… Nature of the stimulus Based on familiarity, previous experience or expectations. Expectations Needs or wants for a product or service. Motives Consumers are exposed to thousands, if not millions, of stimuli every day. The stimuli that they perceive depends on the three factors on this slide – nature of the stimulus, expectations, and motives. Nature of stimuli: Marketing stimuli include an enormous number of variables that affect consumer’s perception including package design Contrast is one of the most attention-compelling attributes of a stimulus. Advertisers often use extreme attention-getting devices to achieve maximum contrast and, thus, penetrate the consumer’s perceptual 'screen.” For example, a number of magazines and newspapers carry ads that readers can unfold to reveal oversized, poster-like advertisement for products ranging from cosmetics to automobiles, because of the “stopping power” of giant ads among more traditional sizes. With respect to packaging, astute markets usually try to differentiate their packages to ensure rapid consumer perception. Since the average package on the supermarket shelf has about 1/10th of a second to make an impression on the consumer, it is important that every aspect of the package provide sufficient sensory stimulation to be noted and remembered. Think of the last time you went to the supermarket – what products did you notice? Why? Perhaps it was the nature of the stimulus, the packaging of the product. You might notice a sale on your favorite brand because you have positive expectations of how that brand performs. Finally, your motive in going to the supermarket might have been to purchase eggs and milk. This might lead you to notice promotions or point-of-purchase displays for these products. 2. Expectation: people usually see what they expect to see. On the other hand, stimuli that conflict sharply with expectations often receive more attention than those that conform to expectations. 3. Motives: Perceive the things that they need or want. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Why Are Consumers Likely to Notice This Ad? Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

The Attention-Getting Nature of a Dramatic Image Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Discussion Questions What marketing stimuli do you remember from your day so far? What makes you notice this? Insert an example of Google ads If you think about it, you might be surprised at what you have seen today. Did you go online to Google? If so, you probably had many contextual search ads appearing on your screen. Also consider outdoor advertisements you may have seen, including billboards, taxi tops, and rail advertising. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Organization Principles People tend to organize perceptions into figure-and-ground relationships. The ground is usually hazy. Marketers usually design so the figure is the noticed stimuli. Figure and ground Grouping Closure Organization refers to how people organize stimuli into groups and perceive them as a whole. This is referred to as Gestalt which means pattern in German. There are three major principles of perceptual organization, including figure and ground, grouping, and closure. The first, figure and ground, has to do with contrast. An advertiser wants just enough contrast so that the figure is noticed but that the background adds a sensory effect. Product placement, when a product appears in a movie or television show, can be considered a figure and ground issue. The advertiser wants the product (figure) to be noticed as it blends in with the ground (character in the show). This web link takes you to a very fun site called sporcle. The quiz that is opened for you refers to the top brands, organized by product category. Is this similar to how you organize these brands? How did you do on the test? Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Organization Principles Figure and ground Grouping Closure People group stimuli to form a unified impression or concept. Grouping helps memory and recall. Grouping is common in perceptual organization. Whether it is numbers (phone numbers) that are grouped in 3 or 4 digits OR images in an ad, consumers will group stimuli together to organize them. This grouping helps memory and recall. Practical example: brand extensions Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Grouping in Practice: Brand Extensions Show some successful examples of brand extensions

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Organization Principles People have a need for closure and organize perceptions to form a complete picture. Will often fill in missing pieces Incomplete messages remembered more than complete Figure and ground Grouping Closure Individuals organize their perceptions to form a complete picture. Our minds have a need for closure and we will work to fill in the missing information when we are presented incomplete stimuli. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

What Element of Perceptual Organization Is Featured in This Ad? Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Closure Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Discussion Question Insert more examples of the three aspects Do you agree you remember more of what you have NOT completed? How might a local bank use this in their advertising? When asked what you have done today, it is sometimes difficult to recall. When asked what you have to do, we often have a stronger memory of this information. A local bank could use this information to help their customers realize they have not yet set up an annual IRA account. They could show a picture of a teller with a blank square in their hand the size of a bank check. The consumer will use closure to fill in the image with a check. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Interpretation People hold meanings related to stimuli Stereotypes Physical Appearances Descriptive Terms First Impressions Halo Effect Stereotypes Physical Appearances Descriptive Terms First Impressions Halo Effect Perceptual interpretation occurs because consumers have unique motives, interests, and experiences. How people interpret often reveals a lot about themselves. For instance, individuals tend to have stereotypes due to physical appearances, descriptive terms, first impressions, and the halo effect. These will be examined in the next couple of slides. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

How would you interpret this ad?

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Interpretation Stereotypes Physical Appearances Descriptive Terms First Impressions Halo Effect Stereotypes Physical Appearances Descriptive Terms First Impressions Halo Effect Positive attributes of people they know to those who resemble them Important for model selection Example We often make decisions based on how people or products appear. A beautiful spokesperson might be perceived as possessing expertise for beauty products. A certain color to a food might make us think it is healthier. The web link is an example of a tool marketers can use on their website to give a “human” touch. There are many attractive hosts to choose from. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Interpretation Stereotypes Physical Appearances Descriptive Terms First Impressions Halo Effect Verbal messages reflect stereotypes The choice of descriptive terms for names and advertisement in services are particularly important due to the intangible nature of services. In this ad, the marketer has stereotyped the person who eats a cheeseburger vs. tofu and applied them in a descriptive sense to their product. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

How Does This Ad Depict Perceptual Interpretation? Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall It Contrasts the Powerful Durango with Less Rugged Referred to in the Ad as the “Land Of Tofu.” Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Interpretation Stereotypes Physical Appearances Descriptive Terms First Impressions Halo Effect Stereotypes Physical Appearances Descriptive Terms First Impressions Halo Effect First impressions are lasting The perceiver is trying to determine which stimuli are relevant, important, or predictive First impressions are lasting so a marketer should be careful how they advertise new products. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Interpretation Stereotypes Physical Appearances Descriptive Terms First Impressions Halo Effect Stereotypes Physical Appearances Descriptive Terms First Impressions Halo Effect Consumers perceive and evaluate multiple objects based on just one dimension Examples: Brand extensions licensing With the halo effect, a person uses just one dimension in evaluating a person, product, or service. For instance, a consumer might consider a clean waiting room as an indication of a good dentist. For this reason, marketers use the halo effect when licensing names of products or choosing spokespeople. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Outline: Marketing Implication of Perception Perceptual map Marketing applications of understand consumers’ perception about: Perceived Price Perceived quality Product quality Service quality Perceived risk

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Product Positioning Establishing a specific image for a brand in the consumer’s mind in relation to competing brands Conveys the product in terms of how it fulfills a need Successful positioning creates a distinctive, positive brand image It is important to realize that good position defines the product in a unique place in the consumer’s mind when compared to competing products. This place is the result of the benefits that are offered by the product and how they are different or better than those of the competitor’s products. Chapter Six Slide Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Product Positioning Importance of product positioning Example Packaging as a positioning element

What does the packaging say about the product? Distinguishing factors Robust and massive in the size Low on resemblance to natural scheme Brand personality features Lower excitement Sophistication Higher ruggedness The perception of scent and the associations made with different aromas vary greatly among individuals. For this reason, it is extremely difficult to convey an “image” of a fragrance. To buyers of perfumes, the only tangible evidence of the product’s nature and quality is the packaging, whose costs often accounts for up to 40 percent of the fragrance’s cost. A recent study identified several holistic designs of ackages, each conveying a distinct, prominent brand impression. For each package type, the study also identified the brand personality features that consumers associate with it. From the paper “holistic package designs and consumer brand impressions”, JM, may 2008, 64-91.

What does the packaging say about the product? Distinguishing factors Muted, sleek and delicate Small in size and weight Brand personality features Higher competence Sophistication Lower ruggedness

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Perceptual Mapping An analytical technique that enables marketers to plot graphically consumers’ perceptions concerning product attributes of specific brands Perceptual mapping helps the marketer visualize how their product is positioned in the consumer’s mind. It is a graph of products within a category based on two major benefits or attributes. It allows them to see gaps in the positioning of all the products and identify areas for new products. Chapter Six Slide Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Perceptual Mapping This map shows slogans used to position new condos in New York City. We can see that they are broadly positioned by whether they are more modern vs. traditional and whether they are more of a home vs. a trophy. This map does not show any large gaps in the marketplace. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Positioning of Services Image is a key factor for services Services often want a differentiated positioning strategy to market several versions of their service to different markets. Positioning of services has extra challenges due to the intangible nature of a service. You cannot hold it in your hand and look at it – you must make your decision based on visual images and tangible cues, such as delivery trucks, storefronts, or other marketing tactics. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Which Elements of This Ad Convey the Restaurant’s Perceptual Position and How? Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall The Steak Knife and the Reference to Vegetarians Convey The Position of the Restaurant as a Well-Established Steakhouse Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Perceived Price Perceived Price: reflect the value that customer receives from the purchase. Perceived price fairness Pricing strategies based on the customer’s perception of the service value Perceived price should reflect the value that the customer receives from their purchase. How a consumer perceives a price-as high, low, or fair-has a strong influence on both purchase intentions and purchase satisfaction It is important for customer satisfaction that the consumer sees their price as fair. To determine fairness, consumers look at other prices that they know. Comparative prices might be ones that the consumer knows (internal) or prices that the marketer uses in their advertising as is the case with an ad that states “compare to $100 at our competitor.” A recent study showed that perceived price fairness strongly impacts customer satisfaction and that sellers should steer clear of exploiting buyers and also anticipate customers’ potential feeling of being exploited. (see the refferred paper notes 22) Chapter Six Slide Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Three Pricing Strategies Focused on Perceived Value - Table 6.4 Pricing Strategy Provides Value By… Implemented As… Satisfaction-based pricing Recognizing and reducing customers’ perceptions of uncertainty, which the intangible nature of services magnifies Service guarantees Benefit-driven pricing Flat-rate pricing Relationship pricing Encouraging long-term relationships with the company that customers view as beneficial Long-term contracts Price bundling Efficiency pricing Sharing with customers the cost savings that the company has achieved by understanding, managing, and reducing the costs of providing the service Cost-leader pricing These are three pricing strategies that one set of researchers proposed. They would be effective when considering services and the customer perception of the value that the service delivers. Leonard L. berry and Yadav S. Manjit “Capture and Communicate Value in the Pricing of Services”, Sloan Management Review (Summer 1996) Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 44 Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Reference Prices Reference prices – used as a basis for comparison in judging another price Internal External Amazon pricing Perceived price should reflect the value that the customer receives from their purchase. It is important for customer satisfaction that the consumer sees their price as fair. To determine fairness, consumers look at other prices that they know. Comparative prices might be ones that the consumer knows (internal) or prices that the marketer uses in their advertising as is the case with an ad that states “compare to $100 at our competitor.” Chapter Six Slide Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Perceived Quality of Products Intrinsic cues Important to make “rational” choice Include color, flavor, aroma, and size. Extrinsic cues Price, brand image, manufacture's image, store image, Country of Origin effect et. Consumers perceive the quality of a product by intrinsic and extrinsic cues. Those that are intrinsic concern the physical characteristics of the product. These include color, flavor, aroma, and size. Cnsumer like to evaluate product quality based on intrinsic cues, because that enables them to justify their product decisions as being “rational” or objective”. Many times a consumer will use extrinsic cues, those that are not really part of the physical product including brand name, reputation, and location within store. If a consumer has no experience with a product, they are more likely to use external cues An example of external cues is country of origin. A chocolate is from Switzerland so it must be good even though you know nothing of the color or taste of the chocolate. A recent study found that the wine region was the most important determinant of consumers’ perceived quality of wines and that Napa Valley and Sonoma had the strongest regional images among american vineyars. Chapter Six Slide Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Discussion Questions When have you used price as an indicator of quality? Were you correct? You have probably done this many times for a service. Was it always better? Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Which of the Ad’s Elements Conveys the Product’s Quality? Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

The Slogan on the Ad’s Bottom Left Reads “Perfection Has Its Price” Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Discussion: Luxury Brands Think about luxury brands that you observe recently. What makes a luxury brand? Discuss both tangible and intangible benefits provided by an luxury brand.

Luxury Brand Measurement Non-personally-oriented perceptions Conspicuousness Uniqueness Quality Personally-oriented perceptions Hedonism Extended self

Measuring Perceptions of Brand Luxury This survey was used in a study to measure perceptions of brand luxury. The benefit of “luxury” would be one that many marketers would use, including hotels, cars, and jewelry. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Perceived Quality of Services Difficult due to characteristics of services Intangible Variable Perishable Services have unique characteristics that make quality a more complex issue. First of all, services are intangible. It is hard for consumers to compare them side by side without having to use external cues. Secondly, they can differ from day to day. We all know that we can get a haircut from a barber or hair stylist on one day that is vastly different from the quality of a previous cut. Services are difficult because they are perishable, they cannot be put on a shelf and left standing from day to day. Finally, the products are consumed and produced at the same time, making quality control hard for the service marketer. The SERVQUAL scale measures the gap between customer expectations of a service before it is provided versus their perceptions after the service is provided. The scale measures five dimensions, including reliability, responsiveness, assurance, empathy, and tangibility Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

SERVQUAL Scale: Measuring Service Performance SERVQUAL scale used to measure gap between customers’ expectation of service and perceptions of actual service Outcome dimension Process dimension Services have unique characteristics that make quality a more complex issue. First of all, services are intangible. It is hard for consumers to compare them side by side without having to use external cues. Secondly, they can differ from day to day. We all know that we can get a haircut from a barber or hair stylist on one day that is vastly different from the quality of a previous cut. Services are difficult because they are perishable, they cannot be put on a shelf and left standing from day to day. Finally, the products are consumed and produced at the same time, making quality control hard for the service marketer. The SERVQUAL scale measures the gap between customer expectations of a service before it is provided versus their perceptions after the service is provided. The scale measures five dimensions, including reliability, responsiveness, assurance, empathy, and tangibility For example: although amazon.com providses the same core service as other online booksellers, it provides a superior process dimension through its advanced database that generates recommendations for customers, shipment tracking system, the ability to preorder books yet to be published months in advance, subscriptions that include unlimited deliveries without shipping fees, and many other. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

SERVQUAL Dimensions Definition Reliability The ability to perform the promised service dependably and accurately Assurance The knowledge and courtesy of employees and their ability to convey trust and confidence Tangibles The appearance of physical facilities, equipment, personnel and communication materials. Empathy The provision of caring, individualized attention to customers Responsiveness The willingness to help customers and provide prompt service

How Can This Ad Affect the Service’s Perceived Quality? Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall It Uses a Process Dimension in Advertising a Newly-Formed Business Class on an Airline Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Perceived Risk The degree of uncertainty perceived by the consumer as to the consequences (outcome) of a specific purchase decision Types Functional Risk Physical Risk Financial Risk Social Risk Psychological Risk Time Risk Consumer purchase decisions are determined by the degree of risk that consumers perceive, and their tolerance for risk. The major types of risk are listed in this slide. The first, functional risk, deals with the risk that the product will not perform as expected. Physical risk is the risk to self and others. Financial risk is that the product will not be worth its cost and social risk is that the choice of the product might lead to social embarrassment. Psychological risk is that a poor product choice will hurt the consumer's ego and time risk is that the time has been wasted in purchasing this product. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

How Consumers Handle Risk Seek Information Stay Brand Loyal Select by Brand Image Rely on Store Image Buy the Most Expensive Model Seek Reassurance How consumers handle risk will differ by their own individual strategy. That being said, there are a handful of strategies that people tend to use when dealing with risk. The first of these is to seek information so that they have more knowledge when they purchase. Consumers can also stay brand loyal, thereby avoiding risk by sticking with a known product. Consumers can select by brand image to reduce their risk because they may already know and trust the brand, perhaps from buying a different product by the same brand or company. Some consumers will rely on store image to help them reduce risk. Some customers buy the most expensive model assuming that the price/quality relationship will safely deliver them the best product. Finally, consumers seek reassurance through money-back guarantees, warranties, seals of approval and free trials. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide

Seek Reassurance

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Six Slide