1. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

2. 5-2 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin LEARNING OBJECTIVES Learning Objectives How do firms adjust their product lines to changing market conditions? Why are brands valuable to firms? How do firms implement different branding strategies? How do a product’s packaging and label contribute to a firm’s overall strategy?

3. 5-3 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Prius 09 1,000,000 units sold and demand still growing Introducing 9 new models by 2011

4. 5-4 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Consumer Decision Process

5. 5-5 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Adding Value: H.O.G. Heaven How does Harley Davidson add value? Who is a typical Harley owner? Harley Davidson Website

6. 5-6 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Need Recognition Functional needs Psychological needs

7. 5-7 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin “It’s hard to find your litter box if you can’t smell it”

8. 5-8 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Search for Information Internal Search for Information External Search for Information

9. 5-9 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Factors Affecting Consumers’ Search Process Perceived Benefits Perceived Benefits

10. 5-10 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Locus of Control Internal Locus of Control = more search activities External Locus of Control = Fate, external factors

11. 5-11 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Actual or Perceived Risk Performance risk Financial risk Psychological risk

12. 5-12 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Type of Product or Service Specialty Goods/ Services Convenience Goods/Services Shopping Good/Services

13. 5-13 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Evaluation of Alternatives: Attribute Sets Universal Retrieval Evoked

14. 5-14 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Evaluation of Alternatives: Evaluate Criteria Evaluative CriteriaDeterminant Attributes What are some of the features of a vacation that would be in your evaluative criteria?

15. 5-15 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Evaluation of Alternatives: Consumer Decision Rules Consumer Decision Rules Entertainment Number of Days MealsPrice Importance Weights 0.40.10.30.2 Carnival108688.2 Holland America 89837.1 Celebrity681057.2

16. 5-16 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Evaluation of Alternatives: Decision Heuristics Mental Shortcuts PriceBrand Product presentation

17. 5-17 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Purchase and Consumption Ritual consumption

18. 5-18 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Post-purchase: Customer Satisfaction Build realistic expectations Demonstrate correct product use Provide money back guarantee Encourage feedback Customer contact

19. 5-19 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Post-purchase: Dissonance Firm’s attempt to reduce dissonance by reinforcing the decision Thank you letters, congratulations letters, quality ratings

20. 5-20 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Check Yourself 1. Name the five stages in the consumer decision process. 2. What differences mark the way a highly involved versus a less involved consumer likely looks at the information provided in an advertisement? 3. What is the difference between compensatory and non-compensatory decision rules?

21. 5-21 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Factors Influencing the Consumer Decision Process

22. 5-22 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Psychological Factors: Motives

23. 5-23 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Psychological Factors: AttitudeAttitude BehavioralAttitude CognitiveAffective

24. 5-24 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Psychological Factors: Perception How has society’s perception of people with tattoos changed in recent years?

25. 5-25 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Psychological Factors: Learning and Lifestyle Learning affects both attitudes and perceptions Lifestyle involves decisions in spending time and money

26. 5-26 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Social Factors: Family Decision makers Influencers

27. 5-27 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Social Factors: Reference Groups Groups Family Friends Coworkers Famous people Provide: information rewards self-image

28. 5-28 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Reference Group GEICO Commercial

29. 5-29 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Social Factors: Culture

30. 5-30 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Situational Factors Purchase SituationShopping Situation

31. 5-31 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Check Yourself 1. What are the types of needs suggested by Maslow’s Hierarchy of Needs? 2. Which social factors likely have the most influence on: a. The purchase of a new outfit for going out dancing? b. The choice of a college to attend? 3. List some of the tactics stores can use to influence consumers’ decision processes.

32. 5-32 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin InvolvementInvolvement and Consumer Buying Decisions

33. 5-33 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Types of Buying Decisions Limited Problem Solving Habitual Decision Making Extended Problem Solving Impulse Buying Skittles Commercial

34. 5-34 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Check Yourself 1. How do low versus high involvement consumers process information in an advertisement? 2. What is the difference between extended versus limited problem solving?

35. 5-35 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary An attitude is a person’s enduring evaluation of his or her feelings about and behavioral tendencies toward an object or idea. Return to slide

36. 5-36 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Consumer decision rules are the set of criteria that consumers use consciously or subconsciously to quickly and efficiently select from among several alternatives. Return to slide

37. 5-37 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Determinant attributes are product or service features that are important to the buyer and on which competing brands or stores are perceived to differ. Return to slide

38. 5-38 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Evaluative criteria consist of a set of salient, or important, attributes about a particular product. Return to slide

39. 5-39 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary A consumer’s evoked set comprises the alternative brands or stores that the consumer states he or she would consider when making a purchase decision. Return to slide

40. 5-40 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Extended problem solving occurs during a purchase decision that calls for a lot of effort and time. Return to slide

41. 5-41 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Functional needs pertain to the performance of a product or service. Return to slide

42. 5-42 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Habitual decision making describes a purchase decision process in which consumers engage little conscious effort. Return to slide

43. 5-43 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Impulse buying is a buying decision made by customers on the spot when they see the merchandise. Return to slide

44. 5-44 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Involvement is the consumer’s degree of interest in the product or service. Return to slide

45. 5-45 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Limited problem solving occurs during a purchase decision that calls for, at most, a moderate amount of effort and time. Return to slide

46. 5-46 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Psychological needs pertain to the personal gratification consumers associate with a product and/or service. Return to slide

47. 5-47 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Retrieval sets are the brands or stores that can be readily brought forth from memory. Return to slide

48. 5-48 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Ritual consumption is a pattern of behaviors tied to life events that affect what and how we consume. Return to slide

49. 5-49 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Shopping goods/services are products or services for which consumers will spend time comparing alternatives. Return to slide

50. 5-50 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Situational factors are factors specific to the situation. Return to slide

51. 5-51 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Specialty goods/services are products or services toward which the customer shows a strong preference and for which he or she will expend considerable effort to search for the best suppliers. Return to slide

52. 5-52 © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Glossary Universal sets include all possible choices for a product category. Return to slide