6 6/ Strategic Marketing

Adapted from Principles of Marketing is adapted from a work produced and distributed under a Creative Commons license (CC BY-NC-SA) in 2010 by a publisher who has requested that they and the original author not receive attribution. This adapted edition is produced by the University of Minnesota Libraries Publishing through the eLearning Support Initiative.

Source: Pixabay .

What is Marketing?

The American Marketing Association defines marketing as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”⁵⁶ If you study the definition, you see that there are four activities, or components, of marketing:

• Creating. Collabourating with suppliers and customers to create offerings that have value.
• Communicating. Broadly, describing those offerings, as well as learning from customers.
• Delivering. Getting those offerings to the consumer in a way that optimizes value.
• Exchanging. Trading value for those offerings.

The traditional way of viewing the components of marketing is via the five Ps:

Product. Goods and services (creating offerings).

Promotion. Communication.

Place. Getting the product to a point at which the customer can purchase it (delivering).

Price. The monetary amount charged for the product (exchanging)

People.⁵⁷ Refers to the staff, salespeople, and those who work for the business. Decisions involving people is rooted in customer service.

Introduced in the early 1950s, the four Ps (the marketing mix), means that a marketing plan is a mix of these four components. If the five Ps are the same as creating, communicating, delivering, and exchanging, you might wonder why there was a change. The answer is that they are not the same. Product, price, place, promotion, and people are nouns. These words cannot capture all the activities of marketing. For example, exchanging requires mechanisms for a transaction, which comprise more than simply a price or place. Exchanging requires transferring ownership. For example, when you buy a car, you sign documents that transfer the car’s title from the seller to you. That is part of the exchange process.

Figure 1. 5 Ps Marketing Mix

The term product, which seems obvious, is limited. Does the product include services that come with your new car purchase (such as free maintenance for a certain period on some models)? Or does the product mean only the car itself?

Consumer Behaviour: How People Make Buying Decisions

You have been a consumer with purchasing power for much longer than you probably realize, since you were asked which cereal or toy you wanted. Over the years, you have developed rules of thumb or mental shortcuts providing a systematic way to choose among alternatives, even if you are not aware of it. Other consumers follow a similar process, but different people, no matter how similar they are, make different purchasing decisions. You might be very interested in purchasing a Smart Car, but your best friend might want to buy a Ford F-150 truck. What factors influenced your decision and what factors influenced your friend’s decision?

As we mentioned earlier in the chapter, many things, including environmental and marketing factors, influence consumer behaviour the situation, personal and psychological factors, family, and culture. Businesses try to figure out trends so they can reach the people most likely to buy their products in the most cost-effective way possible. Businesses often try to influence a consumer’s behaviour with things they can control such as the layout of a store, music, grouping and availability of products, pricing, and advertising. While some influences may be temporary and others are long-lasting, different factors can affect how buyers behave, whether they influence you to make a purchase, buy additional products, or buy nothing at all. Let us now look at some influences on consumer behaviour in more detail.

Situational Factors

Have you ever been in a department story and could not find your way out? No, you are not necessarily directionally challenged. Marketing professionals take physical factors such as a store’s design and layout into account when they are designing their facilities. Presumably, the longer you wander around a facility, the more you will spend. Grocery stores frequently place bread and milk products on the opposite ends of the stores because people often need both types of products. To buy both, they must walk around the store (which is loaded with other items they might see and purchase).

Store locations also influence behaviour. Starbucks has done a good job to locate its stores, you can scarcely drive a few miles down the road without passing a Starbucks. You can also buy cups of Starbucks coffee at many grocery stores and in airports, virtually any place where there is foot traffic.

Physical factors that firms can control, such as the layout of a store, music played at stores, the lighting, temperature, and even the smells you experience are called atmospherics. Perhaps you have visited the office of an apartment complex and noticed how great it looked and even smelled, because managers want you to stay and look at their facilities. Research shows that “strategic fragrancing” results in customers staying in stores longer, buying more, and leaving with better impressions of the quality of stores’ services and products. Mirrors near hotel elevators are another example. Hotel operators have found that when people are busy looking at themselves in the mirrors, they do not feel like they are waiting as long for their elevators (Moore, 2008).

Not all physical factors are under a company’s control, however. Take weather, for example. Rainy weather can be a boon to some companies, like umbrella makers such as Totes, but a problem for others. Beach resorts, outdoor concert venues, and golf courses suffer when it is pouring. Businesses such as automobile dealers also have fewer customers. Who wants to shop for a car in the rain?

Firms often attempt to deal with adverse physical factors such as poor weather by offering specials during unattractive times. For example, many resorts offer consumers discounts to travel to beach locations during hurricane season. Having an online presence is another way to cope with weather-related problems. What could be more comfortable than shopping at home? If it is raining too hard to drive to the GAP, REI, or Abercrombie & Fitch, you can buy products from these companies and many others online. You can shop online for cars, too, and many restaurants take orders online and deliver.

Crowding is another situational factor. Have you ever left a store and not purchased anything because it was just too crowded? Some studies have shown that consumers feel better about retailers who attempt to prevent overcrowding in their stores. Other studies have shown that to a certain extent, crowding can have a positive impact on a person’s buying experience. They often refer the phenomenon to as herd behaviour (Gaumer & Leif, 2005).

If we lined people up to buy something, you want to know why. Should you get in line to buy it too? Herd behaviour helped drive up the price of houses in the mid-2000s before the prices for them fell rapidly. Unfortunately, herd behaviour has also led to the deaths of people. In 2008, a store employee was trampled to death by an early morning crowd rushing into a Walmart to snap up holiday bargains.

Companies like Pampered Chef that sell their products at parties understand that the social situation makes a difference. When you are at a friend’s Pampered Chef party, you do not want to look cheap or disappoint your friend by not buying anything. Certain social situations can also make you less willing to buy products. You might spend more money each month eating at fast food restaurants like McDonald’s and Subway. Where do you take someone for your first date? Some people might take a first date to Subway, but other people might choose a restaurant that is more upscale. If you have turned down a drink or dessert on a date because you were worried about what the person you were with might have thought, your consumption was affected by your social situation (Matilla & Wirtz, 2008).

Video 1. Thin Mints? Dairy Queen

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Time

The time of day, time of year, and how much time consumers feel like they must shop affect what they buy. Researchers have even discovered whether someone is a “morning person” or “evening person” affects shopping patterns. When you are hungry or have cash, you may purchase more than you would at other times. 7-Eleven Japan is a company that is extremely in tune with time and how it affects buyers. The company’s point-of-sale systems at its checkout counters monitor what is selling well and when, and stores are restocked with those items immediately, sometimes via motorcycle deliveries that zip in and out of traffic along Japan’s crowded streets. The goal is to get the products on the shelves when and where consumers want them. 7-Eleven Japan also knows that, like Americans, its customers are “time starved.” Shoppers can pay their utility bills, local taxes, and insurance or pension premiums at 7-Eleven Japan stores, and even make photocopies (Bird, 2002).

Companies worldwide are aware of people’s lack of time and are accommodating them. Some doctors’ offices offer drive-through shots for patients who are in a hurry and for elderly patients who find it difficult to get out of their cars. Tickets.com allows companies to sell tickets by sending them to customers’ mobile phones when they call in. Barcode scanners then read the phones’ displays when the ticket purchasers arrive at the events they are attending. Likewise, if you need customer service from Amazon.com, there is no need to wait on the telephone. If you have an account with Amazon, you just click a button on the company’s Web site and an Amazon representative calls you immediately.

Reason for the Purchase

The reason you are shopping also affects the time you will spend shopping. Are you making an emergency purchase? What if you need something for an important dinner or a project and only have an hour to get everything? Are you shopping for a gift or for a special occasion? Are you buying something to complete a task/project and need it quickly? In recent years, emergency clinics have sprung up in strip malls all over the country. Convenience is one reason. The other is sheer necessity. If you cut yourself and you are bleeding badly, you are probably not going to shop around much to find the best clinic. You will go to the one that is closest to you. The same thing may happen if you need something immediately.

Purchasing a gift might not be an emergency, but you might not want to shop much for it either. Gift certificates have been popular for years. You can purchase gift cards for many merchants at your local grocery store or online. Suppose you need to buy an engagement ring and choose to buy one online, but what if the diamond was fake? What if you had to return the ring? How hard would it be to return (Hornik & Miniero, 2009)?

Mood

Have you ever felt like going on a shopping spree? At other times, wild horses could not drag you to a mall. People’s moods temporarily affect their spending patterns. Some people enjoy shopping. It is entertaining for them. At the extreme are compulsive spenders who get a temporary “high” from spending.

A sour mood can spoil a consumer’s desire to shop. The crash of the U.S. stock market in 2008 left many people feeling poorer, leading to a dramatic downturn in consumer spending. Penny pinching came into vogue, and conspicuous spending was out. Costco and Walmart experienced heightened sales of their low-cost Kirkland Signature and Great Value brands as consumers scrimped¹. Saks Fifth Avenue was not so lucky. Its annual release of spring fashions usually leads to a feeding frenzy among shoppers, but spring 2009 was different. “We’ve definitely seen a drop-off of this idea of shopping for entertainment,” says Kimberly Grabel, Saks Fifth Avenue’s senior vice president of marketing (Rosenbloom, 2009). To get buyers in the shopping mood, companies resorted to different measures. The upscale retailer Neiman Marcus began introducing more mid-priced brands. By studying customer loyalty cards, the French hypermarket Carrefour hoped to get its customers to purchase non-food items that have higher profit margins.

The glum mood was not bad for all businesses. Discounters like Half-Priced books saw their sales surge, as did seed sellers as people began planting their own gardens. Finally, what about those products (Aqua Globes, Snuggies, and Ped Eggs) you see being hawked on television? Their sales were the best. Apparently, consumers too broke to go on vacation or shop at Saks were instead watching television and buying the products (Ward, 2009).

Personal Factors: Personality and Self-Concept

Personality describes a person’s disposition, helps show why people are different, and encompasses a person’s unique traits. The “Big Five” personality traits that psychologists discuss frequently include openness or how open you are to new experiences, conscientiousness or how diligent you are, extraversion or how outgoing or shy you are, agreeableness or how easy you are to get along with, and neuroticism or how prone you are to negative mental states.

Do personality traits predict people’s purchasing behaviour? Can companies successfully target certain products for people based on their personalities? How do you find out what personalities consumers have? Are extraverts wild spenders and introverts penny pinchers?

The link between people’s personalities and their buying behaviour is unclear. Research shows that “sensation seekers,” or people who exhibit top levels of openness, are more likely to respond well to advertising that is violent and graphic. The problem for firms is figuring out “who’s who” in personalities.

Marketers have had better luck linking people’s self-concepts to their buying behaviour. Your self-concept is how you see yourself, be it positive or negative. Your ideal self is how you would like to see yourself, whether it is prettier, more popular, more eco-conscious, or more “goth,” and others’ self-concept, or how you think others see you, also influences your purchase behaviour. Marketing researchers believe people buy products to enhance how they feel about themselves, to get themselves closer to their ideal selves.

The slogan “Be All That You Can Be,” which for years was used by the U.S. Army to recruit soldiers, is an attempt to appeal to the self-concept. Presumably, by joining the U.S. Army, you will become a better version of yourself, which will improve your life. They advertise many beauty products and cosmetic procedures in a way that is supposed to appeal to the ideal “self” people seek. All of us want products that improve our lives.

Social Situation

The social situation you are in can significantly affect your purchase behaviour. Perhaps you have seen Girl Scouts selling cookies outside grocery stores and other retail establishments and purchased nothing from them, but what if your neighbour’s daughter is selling the cookies? Are you going to turn her down or be a friendly neighbour and buy a box (or two)?

Gender, Age, and Stage of Life

While demographic variables such as income, education, and marital status are important, we will look at gender, age, and stage of life and how they influence purchase decisions. Men and women need and buy different products (Ward & Thuhang, 2007). They also shop differently and in general, have different attitudes about shopping. You know the old stereotypes. Men see what they want and buy it, but women “try on everything and shop ‘til they drop.” There is some truth to the stereotypes. That is why you see so many advertisements directed at one sex or the other, beer commercials that air on ESPN and commercials for household products that air on Lifetime. Women influence fully two-thirds of all household product purchases, whereas men buy about three-quarters of all alcoholic beverages (Schmitt, 2008). The shopping differences between men and women seem to change. Younger, well-educated men are less likely to believe grocery shopping is a woman’s job and would be more inclined to bargain shop and use coupons if we properly targeted the coupons at them (Hill & Harmon, 2007). One survey found that approximately 45% of married men like shopping and consider it relaxing.

One study by Resource Interactive, a technology research firm, found that when shopping online, men prefer sites with lots of pictures of products and women prefer to see products online in lifestyle context, say, a lamp in a living room. Women are also twice as likely as men to use viewing tools such as the zoom and rotate buttons and links that allow them to change the colour of products. The video below highlights gender in product advertising.

Video 2. Heineken: What Women vs. Men Want

(Video Link)

Marketing to men is big business. Some advertising agencies specialize in advertisements designed specifically to appeal to male consumers. Many businesses today are taking greater pains to figure out “what men want.” Products such as face toners and body washes for men are growing in popularity (i.e. Brickell, Axe, Weldon Barber, Every Man Jack), which some advertising agencies are focusing exclusively on men’s products. There are products such as kayaks and mountain bikes targeted to women that were not previously. Likewise, conscious brands are making greater appeals to Millennial’s, Generation Z’s and the celebration of diverse populations.

SOURCE: cottonbro.

You have probably noticed that the things you buy have changed as you age. When you were a child, the last thing you probably wanted as a gift was clothing. As you became a teen, however, cool clothes probably became a bigger priority. Do not look now but depending on the stage of life you are currently in, diapers and wrinkle cream might be just around the corner.

If you are single and working after graduation, you probably spend your money differently than a newly married couple. Diapers and day care, orthodontia, tuition, electronics, regardless of the age, children affect the spending patterns of families. Once children graduate from college and parents are empty nesters, spending patterns change again.

Empty nesters and baby boomers are a vast market that companies are trying to tap. Ford and other car companies have created “ageing suits” for junior employees to wear when they are designing automobiles.⁵⁸ The suit simulates the restricted mobility and vision people experience as they get older. Car designers can then figure out how to configure the automobiles to better meet the needs of these consumers.

SOURCE: Pixabay.

Lifestyle

If you have ever watched the television show Wife Swap, you can see that despite people’s similarities (i.e. being middle class Americans who are married with children), their lifestyles can differ radically. To better understand and connect with consumers, companies interview or ask people to complete questionnaires about their lifestyles or their activities, interests, and opinions (often referred to as AIO statements). Consumers are asked about products they like, where they live, and what their gender is but also how they spend their time and what their priorities, values, opinions, and general outlooks on the world are. Where do they go other than work? Who do they like to talk to? What do they talk about? Researchers hired by Procter & Gamble have followed women around for weeks as they shop, run errands, and socialize with one another (Berner, 2006). Other companies have paid people to keep a daily journal of their activities and routines.

Several research organizations examine lifestyle and psychographic characteristics of consumers. Psychographics combines the lifestyle traits of consumers and their personality styles with an analysis of their attitudes, activities, and values to determine groups of consumers with similar characteristics. One of the most widely used systems to classify people based on psychographics is the VALS (Values, Attitudes, and Lifestyles) framework. Using VALS to combine psychographics with demographic information such as marital status, education level, and income provide a better understanding of consumers.

Perception

Perception is how you interpret the world around you and make sense of it in your brain. You do so via stimuli that affect your different senses, sight, hearing, touch, smell, and taste. How you combine these senses also makes a difference. For example, in one study, consumers were blindfolded and asked to drink a new brand of clear beer. Most of them said the product tasted like regular beer. However, when the blindfolds came off, and they drank the beer, many of them described it as “watery” tasting (Ries, 2009).

Consumers are bombarded with messages on television, radio, magazines, the Internet, and even bathroom walls. We expose the average consumer to about 3,000 advertisements per day (Lasn, 1999). Consumers are surfing the Internet, watching television, and checking their cell phones for text messages simultaneously. Some information makes it into our brains. Selecting information, we see or hear (i.e. television shows or magazines) is called selective exposure.

Have you ever read or thought about something and then started noticing ads and information about it popping up everywhere? Many people are more perceptive to advertisements for products they need. Selective attention is filtering out information based on how relevant it is to you. It has been described as a “suit of armour” that helps you filter out information you do not need. At other times, people forget information, even if it is quite relevant to them, which is called selective retention. Often the information contradicts the person’s belief. A long time chain smoker who forgets much of the information communicated during an antismoking commercial is an example. To be sure their advertising messages get through to you and you remember them, companies use repetition. How tired of iPhone commercials were you before they tapered off? How often do you see the same commercial aired during a single television show?

Another potential problem that advertisers (or your friends) may experience is selective distortion or misinterpretation of the intended message. Promotions for weight loss products show models that look slim and trim after using their products, and consumers may believe they will look like the model if they use the product. They misinterpret other factors such as how the model looked before or how long it will take to achieve the results. Similarly, have you ever told someone a story about a friend and that person told another person who told someone else? By the time the story gets back to you, it is completely different. The same thing can happen with many types of messages.

SOURCES: Coverr-Free-Footage; Ezgif.

Using surprising stimuli or shock advertising is also a technique that works. One study found that shocking content increased attention, benefited memory, and positively influenced behaviour among a group of university students (Dahl, et al., 2003).

Subliminal advertising is the opposite of shock advertising and involves exposing consumers to marketing stimuli such as photos, ads, and messages by stealthily embedding them in movies, ads, and other media. Although there is no evidence that subliminal advertising works, years ago the words Drink Coca-Cola were flashed for a millisecond on a movie screen. Consumers were thought to perceive the information subconsciously and to be influenced to buy the products shown. Many people considered the practice to be subversive, and in 1974, the Federal Communications Commission condemned it. Much of the original research on subliminal advertising, conducted by a researcher trying to drum up business for his market research firm was fabricated, although people are still fascinated by subliminal advertising (Crossen, 2007). To create “buzz” about the television show The Mole in 2008, ABC began hyping it by airing short commercials composed of just a few frames. If you blinked, you missed it. Some television stations called ABC to figure out what was going on. One-second ads were later rolled out to movie theatres (Adalian, 2008).

Different consumers perceive information differently. A couple of frames about The Mole might make you want to see the television show. However, your friend might see the ad, find it stupid, and never tune in to watch the show. One man sees Pledge, an outstanding furniture polish, while another sees a can of spray no different from any other furniture polish. One woman sees a luxurious Gucci purse, and the other sees an overpriced bag to hold keys and makeup (Chartrand, 2009).

Learning

Learning refers to the process by which consumers change their behaviour after they gain information or experience. It is the reason you do not buy an inferior product twice. Learning does not just affect what you buy; it affects how you shop. People with limited experience about a product or brand generally seek more information than people who have used a product before.

Companies try to get consumers to learn about their products in different ways. Car dealerships offer test drives. Pharmaceutical reps leave samples and brochures at doctor’s offices. Other companies give consumers free samples. To promote its new line of coffees, McDonald’s offered customers free samples to try. Have you ever eaten the food samples in a grocery store? While sampling is an expensive strategy, it gets consumers to try the product and many customers buy it, especially right after trying in the store.

Another kind of learning is operant or instrumental conditioning, which is what occurs when researchers can get a mouse to run through a maze for a piece of cheese or a dog to salivate just by ringing a bell. Learning occurs through repetitive behaviour that has positive or negative consequences. Companies engage in operant conditioning by rewarding consumers, which cause consumers to want to repeat their purchasing behaviours. Prizes and toys that come in Cracker Jacks and McDonald’s Happy Meals, free tans offered with gym memberships, a free sandwich after a certain number of purchases, and free car washes when you fill up your car with a tank of gas are examples.

Another learning process called classical conditioning occurs by associating a conditioned stimulus with an unconditioned stimulus to get a particular response. The more frequently the conditioned stimulus is linked with the unconditional stimulus, the faster learning occurs, and this is what advertisers and businesses try to do. Think about a meal at a restaurant where the food was good, and you went with someone special. You like the person and want to go out again, which could be classical conditioning. The food produced a good feeling, and you may associate the person with the food, thus producing a good feeling about the person.

Attitude

Attitudes are “mental positions” or emotions, favourable or unfavourable evaluations, and action tendencies people have about products, services, companies, ideas, issues, or institutions.⁵⁹ Attitudes tend to be enduring, and because they are based on people’s values and beliefs, they are hard to change. Companies want people to have positive feelings about their offerings. A few years ago, KFC began running ads to the effect that fried chicken was healthy, until the U.S. Federal Trade Commission told the company to stop. Wendy’s slogan that its products are “way better than fast food” is another example. Fast food has a negative connotation, so Wendy’s is trying to get consumers to think about its offerings as being better.

An example of a shift in consumers’ attitudes occurred when the taxpayer-paid government bailouts of big banks that began in 2008 provoked the wrath of Americans, creating an opportunity for small banks not involved in the credit bailout and subprime mortgage mess. The Worthington National Bank, a small bank in Fort Worth, Texas, ran billboards reading: “Did Your Bank Take a Bailout? We didn’t.” Another read: “Just Say NO to Bailout Banks. Bank Responsibly!” The Worthington Bank received tens of millions in new deposits soon after running these campaigns (Mantone, 2009).

Societal Factors

Situational factors, personal factors, and psychological factors influence what you buy, but only temporarily. Societal factors are different as they are more outward and have broad influences on your beliefs and the way you do things. They depend on the world around you and how it works.

Culture

Culture refers to the shared beliefs, customs, behaviours, and attitudes that characterize a society, and can influence on a consumer’s behaviour. Your culture prescribes how you should live and has a huge effect on the things you purchase. For example, in Beirut, Lebanon, women can often be seen wearing miniskirts. If you are a woman in Afghanistan wearing a miniskirt, however, you could face bodily harm or death. In Afghanistan women generally wear burqas, which cover them completely from head to toe. Similarly, in Saudi Arabia, women must wear what is called an abaya, or long black garment. Interestingly, abayas have become big business in recent years. They come in many styles, cuts, and fabrics and some are encrusted with jewels and cost thousands of dollars. To read about the fashion’s women in Muslim countries wear, check out the following article: time.com.

Even cultures that share many of the same values as the United States can be quite different. Following the meltdown of the financial markets in 2008, countries around the world were pressed by the United States to engage in deficit spending to stimulate the worldwide economy. The plan was a hard sell both to German politicians and to the German people in general. Most Germans do not own credit cards and running up a lot of debt is something people in that culture rarely do. Credit card companies such as Visa, American Express, and MasterCard must understand cultural perceptions about credit.

Subcultures

A subculture is a group of people within a culture who differ from the dominant culture but have something in common with one another such as common interests, vocations or jobs, religions, ethnic backgrounds, and geographic locations. The fastest growing subculture in the United States comprises people of Hispanic origin, followed by Asian Americans, and African Americans. The purchasing power of U.S. Hispanics continues to grow, exceeding $1 trillion in 2010.⁶⁰ Home Depot has launched a Spanish version of its Web site. Walmart is converting some of its Neighbourhood Markets into stores designed to appeal to Hispanics. The Supermarcado de Walmart stores are in Hispanic neighbourhoods and feature elements such as cafés serving Latino pastries and coffee and full meat and fish counters (Birchall, 2009). Marketing products based on the ethnicity of consumers is useful but may become harder to do in the future because the boundaries between ethnic groups are blurring.

Subcultures, such as college students, can develop in response to people’s interests, similarities, and behaviours that allow marketing professionals to design specific products for them. You have probably heard of the hip-hop subculture, people who in engage in extreme types of sports such as helicopter skiing or people who play the fantasy game Dungeons and Dragons.

Social Class

A social class is a group of people who have the same social, economic, or educational status in society.⁶¹ While income helps define social class, the primary variable determining social class is occupation. To some degree, consumers in the same social class exhibit similar purchasing behaviour. In many countries, people are expected to marry within their own social class. When asked, people tend to say they are middle class, which is not always correct. Have you ever been surprised to find out that someone you knew who was wealthy drove a beat-up old car or wore old clothes and shoes or that someone who isn’t wealthy owns a Mercedes or other upscale vehicle? While some products may appeal to people in a social class, you cannot assume a person is in a certain social class because they either have or don’t have certain products or brands.

Figure 2. Example of American Social Classifications in the Auto Industry

SOURCES: Pexels.com.

The figure above shows an example of social classifications according to automobile purchasing in America. Keep in mind that the U.S. market is just a fraction of the world market. The rise of the middle class in India and China is creating opportunities for many companies to sustain their products. For example, China has overtaken the United States as the world’s largest auto market.⁶²

In a recession when luxury buyers are harder to come by, the makers of upscale brands may want their customer bases to be as large as possible. However, companies do not want to risk “cheapening” their brands. That is why, for example, Smart Cars, which are made by BMW, do not have the BMW label on them. For a time, Tiffany’s sold a cheaper line of silver jewellery to a lot of customers. However, the company later worried that its reputation was being tarnished by the line. Keep in mind that a product’s price is to some extent determined by supply and demand. Luxury brands therefore try to keep the supply of their products in check, so their prices remain high.

SOURCE: KRiemer.

The whiskey brand Johnnie Walker has expanded its market share without cheapening the brand by producing a few lower-priced versions of the whiskey and putting them in bottles with different labels.

Some companies, such as Johnnie Walker, have captured market share by introducing “lower echelon” brands without damageing their luxury brands. The company’s whiskeys come in bottles with red, green, blue, black, and gold labels. The Blue Label is the company’s “best” product, with a serial number and sold in a silk-lined box, accompanied by a certificate of authenticity.⁶³

Reference Groups and Opinion Leaders

Reference groups are groups (social groups, work groups, family, or close friends) a consumer identifies with and may want to join. They influence consumers’ attitudes and behaviour. If you have ever dreamed of being a professional player of basketball or another sport, you have an aspirational reference group. That is why, for example, Nike hires celebrities such as Michael Jordan to pitch the company’s products. There may also be dissociative groups or groups where a consumer does not want to be associated.

Opinion leaders are people with expertise in certain areas. Consumers respect these people and often ask their opinions before they buy goods and services. An information technology (IT) specialist with a great deal of knowledge about computer brands is an example. These people’s purchases often lie at the forefront of leading trends. The IT specialist is probably a person who has the latest and greatest tech products, and his opinion of them is likely to carry more weight with you than any sort of advertisement.

Today’s companies are using different techniques to reach opinion leaders. Network analysis using special software is one way of doing so. Orgnet.com has developed software for this purpose. Orgnet’s software does not mine sites like Facebook and LinkedIn, though. Instead, it is based on sophisticated techniques that unearthed the links between Al Qaeda terrorists. Explains Valdis Krebs, the company’s founder:

“Pharmaceutical firms want to identify who the key opinion leaders are. They do not want to sell a new drug to everyone. They want to sell to the 60 key oncologists” (Campbell, 2004).

Family

Most market researchers consider a person’s family to be one of the most important influences on their buying behaviour. Like it or not, you are more like your parents than you think, at least in terms of your consumption patterns. Many of the things you buy and do not buy result from what your parents bought when you were growing up. Products such as the brand of soap and toothpaste your parents bought and used, and even the “brand” of politics they leaned toward (Democratic or Republican) are examples of the products you may favour as an adult.

Companies are interested in which family members have the most influence over certain purchases. Children have a great deal of influence over many household purchases. For example, in 2003 nearly half (47%) of 9- to 17-year-olds were asked by parents to go online to find out about products or services, compared to 37% in 2001. IKEA used this knowledge to design their showrooms. The children’s bedrooms feature fun beds with appealing comforters to prompt children to identify and ask for what they want.⁶⁴

Marketing to children has come under increasing scrutiny. Some critics accuse companies of deliberately manipulating children to nag their parents for products. For example, even though tickets for Hannah Montana concerts ranged from hundreds to thousands of dollars, the concerts often still sold out. As one writer put it, exploiting “pester power” is not always ultimately in the long-term interests of advertisers if it alienates kids’ parents (Waddell, 2009).

SOURCE: Poswiecie.

Footnotes