Consumer Behavior

Chapter 3

CHAPTER THREE DEMOGRAPHICS AND PSYCHOGRAPHICS S ociety comprises of many groups. There are smaller groups like your family and friends which we will discuss in a later chapter. There are larger groups, like the subculture/s you may belong to, which we will discuss in this chapter. These subcultures, taken together, comprise the main U.S. culture which we will discuss in the next chapter. Thus, for instance, the subcultures based on occupation (students, white collar workers, blue collar workers, business owners, retirees, etc.) is ONE way to segment the U. S. culture. We could also do this based on ethnicity, location, religion, age, lifestyle, etc. segment is a group. They should be similar with the group. The other segments should be different from the first but still the same amongst the segment. When you use segments, an advantage is that your advertising budget is used more efficiently. You will get a better idea of your market. If you target to everyone you will not be making anyone's needs One way to segment the market is usage. Example beer. Beer drinkers are segmented into a heavy, medium, and low use. Beer companies usually go after the heavy half (it's not actually half its only 20% but provides 80% of their sales... this is the 20:80 principle) First thing: split into groups and then second: chose one or two to go after... this is risky but without risk there is no reward In practice, marketers combine their knowledge about various subcultures to segment the market into groups and then to target a single group or groups. Typically marketers use more than one subculture (or "segmentation base" from now on) to segment the main market (say, the U.S). So, let's start by looking at the entire U.S. population. A Note on Segmentation (breaking up the market into smaller groups) - a search for similarities and differences! Segmentation in marketing is (A) a search for similarities within groups and (B) a search for differences between groups. For instance, if we are trying to segment the market for beer in the U.S, we are looking for a segmentation "base" (or bases) which will best break the market up into effective segments. Thus, we may choose to use "amount of Usage" as an effective base for beer and segment the market into two groups, say "heavy users", "medium users" and "light users". We would then be saying that heavy users are different from light users (and vice versa) in their requirements for the four Ps - product, pricing, distribution and promotions BUT they all have much the same requirements within their segment. As one example of this, heavy users may require fewer calories, a lower price, intensive distribution and promotions in sports media. On the other hand, light users may not be concerned so much with calories, may be willing to pay a higher price, need distribution in a few outlets and pay more importance to packaging than to promotions in sports media. Can you use the same base (usage) for fast food and tell us if it works? The American Population and the World The population of the U.S. is around 326 million (at the end of 2017). Contrast this to the world's population of 7.4 BILLION! Visit uscensus.gov. for more information on both populations. Here is one segmentation strategy of the whole world in the figure below. We could break up the world into three or more segments, based on population numbers. For instance, into "high pop, medium pop and low pop" segments, just like we do for domestic groups like high, medium and low income groups. Of course, we could use income for the world as well as a demographic segmentation base - high, medium, low per capita income countries for instance. Thus, India with a per capita income of $1600 per year (NY Times 11. 27.2017) would fall into the low per capita income group or segment, perhaps, depending on how we decide to make the cut offs (Note how India may feature differently on other segmentation bases worldwide like the level of industrialization, for instance). Question. What is the per capita income of the U.S.? 58,000 Where would you place the U.S. in the per capita income groups above? Why? Are there any existing classifications of worldwide per capita income groups that you can use to justify your selection? The large population of India brings it down Figure 3.1 World's Most Populous Countries China, India, United States, Indonesia, Brazil, Pakistan, Nigeria, Bangladesh, Russia, and Japan The factors that influence population growth rates in the U.S. and other countries in the world are the same - the birth rate (one birth every 8 seconds in the U.S.), immigration (one international migrant every 32 seconds in the U.S.) and life expectancy (one death every 11 seconds in the U.S.). This amounts to a current growth rate of about .7% every year in the U.S. Compare this to growth rates of 1.3% and more in some countries in Asia. However, birth rates in developing countries are projected to go down because of better access to contraception, more awareness and education on family planning, government policy (China's one-child-only policy) and improved opportunities for women. Young women in countries like India are delaying motherhood as more of them go out and earn a living nowadays. This also allows them to have a different self-concept than just that of a wife and mother and this orientation towards a fruitful individual career may also contribute to lowering the number of pregnancies. Better access to contraption and government policy Question. What difference would this (slow population growth in the U.S. and high growth in other countries) make to the marketing of a diaper in the U.S. as compared to marketing the same brand in Asia? Think of the "target market"! The good news is that there have been increases in life expectancy in recent years through medical improvements (in cancer care, for instance), more awareness in the population on how to take care of themselves (say for diabetics) and more awareness of healthy options in eating choices. Question. How would you increase life expectancies among low income groups who have type 2 diabetics? Do the research and be specific in your answers. There are more millennials than there are baby boomers. 79 mill mills and 75 baby boomers DEMOGRAPHICS This general segmentation base is about the physical characteristics of consumers. These are objectively verifiable and, therefore, amount to "rational" information about consumers in the sense that we can all agree that these are valid indicators of a segment/s. These include gender, age, income, education, occupation, ethnicity, family size, religion, marital status, geographic location, product usage, media usage, etc. We will discuss some of these in this chapter. Demographic Bases " AGE. Segmentation by age would take into account the following groups. " The "greatest generation" (your grandparents) who lived through WW II and made huge sacrifices for our country. In 2010 they were a fifth of the population but a third of the wealthy population (95th percentile). What does this mean for marketing? Are they a good group to target? " Baby Boomers (your parents) born between 1946 and 1964. At 76 million this is the largest segment and, hence, a very profitable segment for marketers. Do you agree? " Generation X, those born between 1964 and 1982. " Millennials born between 1982 and 1997. (Are you here or below?) " New millennials born after 1997. Question. The "graying" of America is the single greatest demographic development for marketers. Which group from above would you target for a chain of pizza restaurants? " INCOME. The median household income in the U.S. is now around $59,000. The mean household income in the U.S. is now around $75,000. 35% of households are above the mean. 5% of households have an income of $200,000 or more. Question. What does the difference between the median and mean above suggest to you about income distribution in the U.S? Hint: see the income distribution numbers in American Fact Finder (find it from the census.gov website) https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_15_5YR_DP03&src=pt Quite obviously, the income of various consumer groups affects marketing. There is a positive correlation between income and purchasing power. The higher the income, the higher ability of households and individuals to buy more and to pay more. Interestingly, high income also appears to increase life expectancy (another positive correlation). In affluent Fairfax County, in W. Virginia, life expectancy for men is 82 and women 85. In adjoining but much less affluent McDowell County, it is 64 and 73. (Source: New York Times 3.16.14). Question. How would you divide the population of U.S. households into low, middle and high income groups? How would you market a brand of household appliances to each of these groups? http://finance.yahoo.com/news/much-earn-considered-middle-class-170000901.html " OCCUPATION. Of the population above 16 years of age (250 million), 145 million are employed. Of those employed 54% are female (2015). The advent of working women is the single most important demographic fact about occupational developments in the U.S. and around the world. Since working women are pressed for time, retailers have made significant changes in store hours etc. to make shopping convenient. Manufacturers have websites allowing women to buy online. Food companies make easy to prepare packages. Question. Focus groups of working women have discovered that they can display guilt in their lives as working wives/mothers. For instance, they feel that they are "short-changing" their families by not cooking dinner like their mothers did. What would you recommend to Campbell Soup to alleviate this guilt and help increase market share? " EDUCATION. Relative to less-educated consumers, better-educated consumers are more likely to have better information on brands' ingredients, benefits, prices, availability, etc. More education (hopefully) provides these consumers with better tools to do comparison shopping. One such tool may be the ability to analyze brand information more accurately. For instance these consumer will be able to use unit pricing to understand brand prices. Some states have laws mandating the use of unit pricing information at retail outlets. As an example, the picture below shows that the retailer has provided the price for one Advil Liqui-Gels next to the price for each size of the brand. " FAMILY SIZE. As the size of the U.S. household becomes smaller, what marketing challenges ensue? As a result of fewer marriages and more divorces the household is becoming smaller. Also, as a result of more unmarried people living together, the household is becoming a less unified entity which, in turn, means that the "goals" within the household may be different. For instance, one partner may want to have children but the other "not so much". Question. What marketing implications can you make from the fact that the family is composed of more singles and childless couples? What would they spend more money on, for instance? " ETHNICITY. We will consider three ethnic groups but there are many more distinct ethnic groups. Also, there many groups within these three ethnic groups. The Hispanic ethnic groups for instance has Cubans, Mexicans, Spanish and other sub-groups. It is wise to keep this in mind. For instance, I am part of the Asian group but if you ask me about my ethnic identification, I will probably say that I am "South Asian" rather than Asian. o Hispanic Americans are the largest ethnic/minority group in the U.S. Their demographics comprise of a size of 50.5 million in 2010 (16% of population) and $ 1.2 trillion purchasing power (2012). Their psychographics consist of traditional and conservative values which are reflected in the respect they give to their elders and a strong commitment to family. o African Americans are the second largest ethnic/minority group in the U.S. Their demographics comprise of a size of 43 million in 2011 (14% of population) and $ 913 billion purchasing power (2011). Their African identity is very important to them and they may be more amenable to ethnic appeals in marketing. o Asian Americans are a much smaller group (17.3 million in 2010 and 5.6% of population) but they are the most highly educated and affluent minority group. 28% of Asian Americans have incomes of 100K+, as compared to 8% in the U.S. population. Accordingly, their $ 718.4 billion purchasing power (2012) is much higher than their size would suggest. As described earlier, this is the most varied subculture with twenty-nine distinct ethnic groups. Question. How would you market a credit card to each of these three ethnic groups? What message appeals would you make to each of the three groups? " SOCIAL CLASS. The notion of social class is based on an index of income, education and occupation. There are different indices but most comprise of six social classes. The usefulness of a social class index instead of considering income, education and occupation alone is that the stratification allows us to understand different values in each social class better. For instance, the "upper middle class" (UMC) considers education to be an extremely important value. PSYCHOGRAPHICS This second general segmentation base is about the mental characteristics of consumers. These are largely subjectively verifiable and, therefore, amount to "emotional" information about consumers. People may not always agree that these are valid indicators of a segment/s. However, they comprise "rich" information about the thoughts and feelings of consumers and are, thus, essential ingredients in the makeup of a segment/s. These include lifestyle indicators, personality indicators, attitudinal indicators, needs and benefit indicators, loyalty status. We will study the first two in this chapter and you will be able to understand the others through our discussions in later chapters. Demographics are simple to use, easy to find and tell us about the physical characteristics of our consumers. Since people can agree on the physical characteristics (age, income etc.) of consumers, demographics are rational indicators of a segment. On the other hand, psychographics tell us how consumers think and feel and are, thus, emotional indicators of a segment. Both are needed to compile a rich description of each segment in the market for our product category. " LIFESTYLES. Lifestyles refer to consumers' activities (A), interests (I), and opinions (O). Thus, they are about how consumers live their lives and how they think and feel. Consequently, they are emotional indicators that describe consumers. We can measure these three elements (AIO inventories) of lifestyles by providing a large group of consumers with a large number of questions about their activities, interests and opinions. Using a statistical technique called factor analysis, we can find "segments" of consumers who have common lifestyles within each segment but which are different between each segment. These segments may be, as an example, outdoorsy consumers, homebodies, health oriented consumers, techies, status seekers, etc. Or, we can ask the VALS program to identify the lifestyles of consumers in the U.S., Japan, etc. The VALS program divides the population into eight different groups based on the level of resources they possess, their ideals, their level of achievement and their self-expression. The eight groups are innovators, thinkers, achievers, experiencers, believers, strivers and makers (see the figure below). Marketers use these groups to identify various segments, select a segment to target, select media to target the chosen segment and, finally, to fashion message appeals to the targeted segment. " PERSONALITY. Any definition of personality depends on which theory of personality you believe in. The only common element in each of the four theories, that we will discuss, is that personality is a set of inferences about a person and determines the person's behavior in a consistent and enduring way. ¢ Trait theory states that personality is composed of a group of traits - such as sociable, detached, passive, aggressive, compulsive, etc. Thus, for marketing purposes, we could segment the market into people with certain traits (say aggressive/less aggressive people for autos and target the more aggressive people for our trucks!). Or, we could segment the market based on more than one psychographic base and add lifestyle (those who are "outdoorsy"), along with other (demographic) factors like income, etc. etc. Typically, we would form an inventory of traits that are relevant to what we are trying to do and ask people to rate themselves on these traits. Just like lifestyle measurement and analysis earlier, we could then use factor analysis to segment people in groups. What traits would you consider when rating job applicants for a starting sales position? ¢ Self-Concept theory states that discrepancies between the actual self (what I am) and the ideal self (what I would like to be), result in personality through emotional outcomes. Consumers have a notion of both of their ideal and actual selves and they are aware of discrepancies between these. If the discrepancy is high there will be negative emotions and this lowers a person's self-concept. The person will then act to improve their self-concept and lower their negative emotions. They will buy products that may reduce the discrepancy by catering to the ideal self thus bridging the gap between the ideal and the actual selves. For instance, they will seek to buy products which reflect societal/family values related to their ideal self. A message strategy for those who are seeking to buy such products would be "Others will think better of you, if you buy .....". If the discrepancy is small, this raises a person's self-concept and they act according to their notion of their actual self, i.e. buy products for who they are (actual self). Thus, a message strategy for those who are seeking to augment their actual self by buying products consistent with their self-concept would be to say that "This product is who you are". Question. You are marketing cosmetics in a Moslem majority country where women cover their faces in public. Will you attempt to sell cosmetics in this country? What would be your message appeal? ¢ Psychoanalytic theory, developed by Freud, states that personality develops during childhood as a result of interactions between three components of personality - a person's libido (ID), ego and super-ego during childhood. The ID is a person's basic needs and urges and it wants to maximize pleasure and minimize pain. We can think of this as the "emotional" component and the superego (see below) as the rational component. The ego manages the ID in a socially acceptable way. The superego is the voice of conventional social mores and it acts as a leash on the id. If it constantly represses the ID, this results in guilt (a negative emotion) and this determines future behavior. An example (derived from Daniel Gilbert) that is often useful in understanding the interactions of these three components of personality is one of a stagecoach driver (the ego) who has to balance the divergent needs of an irate elderly passenger (the superego) who has a destination in mind and the "wild and crazy" horses (the ID) which want to go in a different direction. Thus, the ego is the "manager", much like we are as marketers. When the consumer wants to have ice cream on a hot day and fulfill the impulses of the ID, we know that the voice of "reason" (the superego) will point out that ice cream is not on the consumer's list of "healthy" diet items. How can we as the ego, the balancer or manager, resolve this crossfire between the emotional and the rational? Psychoanalytic theory has led to the field of motivational research in marketing. It is based on psychoanalytic theory - the interaction of three components determine personality during childhood. Thus, the goal here is to determine deep set hidden needs and motives through techniques that delve into the "real" reasons that people do things. Hence, consumers are indirectly probed about their thoughts and feelings instead of being directly asked to provide reasons why they use products. The thinking here is that the real reasons for product use will not be provided in conventional type surveys. If we ask consumers why they use candy, they will say that they use it because it is sweet, provides energy, etc. But on deliberating for two hours on the issue, they may come out with a statement like, "you know, I think that if I didn't buy candy, my family will leave me"! There are two techniques that are used in motivational research. The first of these are depth interviews and there are two forms here - one-on-one interviews and focus groups. Focus groups are composed of ten or so consumers who are encouraged to talk about the product in question in a freewheeling way. The moderator in the group functions to keep the focus on the product but encourages an unstructured conversation about the product. The candy example above is taken from an actual focus group on candy. The one-on-one interview can also take hours to conduct but it is conducted with one consumer at a time. The second type of motivational research uses projective techniques to understand the real reasons why people buy products. Accordingly, people are asked to project their real feelings on to someone or something else. Thus, for example, the father of motivational research, the diabolical Dr. Dichter (as he was called!) once, back in the day, asked typists to imagine that they were a typewriter (the product in question). He saw that a number of them lay down on the floor. From this he surmised that consumers think of typewriters as passive objects. He recommended to his client that their typewriter's keyboard should not stick out but should be streamlined into a concave design thus better integrating the keyboard into the housing. Another, more recent, example is the one in which a bug killing brand hired consultants to find out why women buy bug killers. When asked to draw bugs, the consultants found that women conceived of bugs as "men who had left them". The conclusion was to offer women a bug spray (and not a trap) that would allow them to really blast it to these "bugs". ¢ Note that Freud maintained that personality is set during childhood and it cannot be changed later in life. It can be managed better but personality once set, is set for life. On the other hand, Socio Cultural theories state that, in contrast to Freud, personality is developed by social and cultural features in the environment at any time and not only in childhood. In other words, our personality is evolving all the time and is not set only in childhood, as Freud maintained. Symbolic interactionist theory is one such socio-cultural theory. According to Cooley (1902), our personality is constructed by taking the perspective of others, as through a "looking glass" (p.183). This notion is clarified further by Mead (1934) in his determination of the "generalized other" which is seen as "the attitude of the whole community" with which the individual interacts. Thus, we understand ourselves through our conception (correct or otherwise) of the attitudes of various social groups towards us. It should be noted that Mead's (1934) symbolic interactionist viewpoint is that of a conscious, controlled, rational process and quite contrary to the Freudian, psychoanalytic position, which maintains that personality is primarily a function of the ID or, the innate emotional characteristics and tendencies of the individual. For Freud (1961), while the ego does mediate between the ID and its environment, the ID (innate emotional component of personality) is seen as prior to the social process (balancing the rational components of the ego and superego).

Chapter One

Consumer behavior is the study of what how and why consumers think, feel and behave during consumption. ((Rationalize their decisions)) Consumption, or "consuming behavior", refers to the acquisition (getting the product), use and disposition (getting rid of the product) of products, services and ideas. A "model" or "theory" shows one person's view of "how things work". We all carry around models or theories in our heads. We have to do so in order to survive. For instance, you have a model of how things work whilst driving, cooking, studying, dating, etc. Similarly, I have a model or theory, as in the Figure below, based on the three commonly agreed upon classic influences on human behavior. These are a person's personality, their environment and their genetics. In fact, we could not act at all without making certain assumptions about our world. We have to be careful to make the right assumptions, of course! When we give money to a charity, we assume that the charitable organization will keep a reasonable amount of it for their own expenses but we should check to see if, indeed, this assumption of "a reasonable amount" is correct. Similarly, the model above assumes that human behavior can be attributed to a series of cause and effect reactions. Note that a different paradigm of human behavior may contend that all events are random in nature and cannot be understood in terms of cause and effect; or that events are dictated by fate and cannot be changed ("It is written"). However, the majority of people today ascribe to a reality in which consumers do have free will and marketers cannot make consumers buy products they do not want to. The model, or theory, in the Figure above is based on the three commonly agreed upon classic influences on human behavior. These are a person's personality, their environment and their genetics. Thus, a person who is an alcoholic could attribute their behavior to either (or a combination) of these three variables. Such combinations are called interactions. Question: A smoker says that her addiction is due to (a) her parents used to smoke (b) her friends used to smoke (c) her impulsiveness. Which influences is she referring to? a.) Genetics b.) the environment/external c.) internal/psychographic A judge thinks to herself "I really like the defendant, but I should not let that color my judgment about the facts of the case"... what is she talking about?... she cannot allow her feelings to affect her reason. Emotion and reason dominant people's behavior Interactions are important in understanding consumer behavior. Variables like age, education and income, for instance, often work in combination with each other and the situation. Thus, a certain type of individual (low income) in combination with a certain type of situation (a Christmas gift) may cause a behavior (willing to pay a high price). On the other hand, if high (or low) income consumers always pay a higher price, regardless of the situation, that is called a main effect of the variable income. Most often though, "It depends" is the best explanation for human behavior. Do all high income consumers indulge in conspicuous consumption behavior (main effect of income) or do certain high income consumers who have a certain need for status only exhibit this behavior (an interaction of income and consumer needs)? So, if you are asked, do all high income consumers live it up with luxury goods? You might well say - it depends on their needs as well! Or, perhaps on their needs and also on the kind of advertising (marketing stimuli) they are exposed to. Interaction: a combo of gender and age affect income, or anything else like college education or race "Main effect" gender directly affect income "main effect" and interation doesn't have to be gender Question: A smoker says that his addiction is due to both his friends who smoke and his impulsiveness. Is he referring to an interaction effect or a main effect? Interaction effect between his friends and his own impulsiveness Figure 1.1 shows that a marketing situation (mothers' day or being out of soup or hosting a party, etc.) interacts with any or all of the three influences discussed above (consumers' personality, environment and genetics) to influence consumer behavior VIA arousal, emotion and reason. Thus, once again, the behavior of consumers is the result of a combination of forces as described below: " A certain Marketing Situation containing various Stimuli (people, brands, etc.) " Consumers Internal and External characteristics and their Genetics " Arousal (a basic type of feeling based on physiological changes) " Emotion (a more developed type of feeling like pride, shame, envy, hope, happiness, anger, disgust, surprise, fear, etc. etc. etc.!!!) " Reason, or rational responses on the part of consumers that are thoughtful and usually involve some type of language (English, Math, musical notations, emoji's, etc.) Question: Using the model in Figure 1.1, describe the process by which a commercial, showing a group of friends drinking orange soda, creates behavior. The Situation Situations are opportunities for brands/consumers that occur in the environment at a specific time (temporary) and place. Sales promotions are limited. They may (or may not) involve people ("others") other than the consumer. For instance, the opportunity to take advantage of an offer to buy something online only, for a certain price, by a certain time (today!), causes an interaction with certain individual characteristics (say "impulsiveness") which in turn creates arousal, emotion and a rational appraisal of the situation (this is a good deal!), resulting in behavior. The picture below suggests how you could create a marketing situation for a target market looking to give a gift to their grandparents. The situation in the ad creates emotion by the use of "other" people in the lives of the target market. Question. How would you create an ad using the picture above (the marketing situation)? Do it for any product to be sold as a gift. What would you say in the headline? In the body copy? What media would you place the ad? A Mother's Day ad. Hallmark sale for cards and gift until mother's day. tv Before moving on, look at Figure 1.1 once again and replay your thoughts. You can see that the marketing situation (say, a certain occasion like your birthday or an exam) impacts, first, on consumer's feelings (arousal and emotions) and thoughts directly. Thus, emotion and reason are a direct result of the situation we find ourselves in (the season, the medium, marketing and advertising situations) as well as an indirect result of the situation working on a consumer's characteristics which in turn create feelings and thoughts. Second, the marketing situation also acts on the internal and external characteristics of a person. Subsequently, these characteristics of the consumer also arouse feelings (arousal, emotions) and thoughts (rational responses) creating consumer behavior. Consumer characteristics Internal ("self" oriented) characteristics constitute, among other variables: " The needs of the consumer - including wants (but not feelings and thoughts) " The demographics of the consumer - age, income, occupation, education, gender, race, etc. " The psychographics of the consumer - personality, perceptions, attitudes, etc. External ("others" oriented) environment of the individual constitutes: outside influences that you interact with. External and environmental are the same thing " Culture (social, political and economic), " Subculture " Family and friends " Institutions (including religious, educational and marketing ones) that the individual lives in. The genetics of an individual are the biological codes which are unique to each individual such as DNA etc. and which are passed on to the progeny of the individual. This is our biological inheritance! We shall revisit some of these consumer characteristics in a later chapter. Types of Behaviors Consumption behaviors by consumers are of three types - acquisition behaviors (no commitment yet... like a test drive), use behaviors (how consumers use the product this is after a commitment) and disposition behaviors (no longer in use). First, there are behaviors that relate to consumers' acquisition of products. Thus, these are actions such as searching for information on a product online or in magazines and such, visiting a store to see theassortment of brands in the product category, talking to friends and family about the advantages and disadvantages of the product, etc. In this first step of consumption, consumers have not made a commitment to the product by purchasing it or adopting it into their lives. Note, that if the consumer goes to a dealership and tries a new car, it is acquisition and not usage. There is no commitment to the product here. Second, there are behaviors that relate to consumers' usage of products. Here the consumer is committed tothe product, perhaps also owns the product and is using it. Hence, usage behaviors relate to how consumers use the product, how much they may use of the product, when they use the product, with whom they may use the product and such. Lastly, there are behaviors that consumers must undertake to dispose of the product when they no longer want to use it any more. This may entail going to the recycling center in a town, selling the item to another consumer (C2C context), using the product for an unrelated usage context. Thus, when you cut off an old pair of jeans and make grunge shorts out of it, that's disposition of one product and also acquisition of a new product! In summary, the model in Figure 1.1 shows that stimuli, marketing etc., result in emotional and rational responses to the stimuli in the individual's mind which, in turn, may lead to a particular behavioral response by the individual. The model also shows that the nature of these emotional and rational responses can be further affected by a host of influences under the general categories of the individual's personal characteristics, environment and genetics. Thus, for instance, an advertisement is interpreted according to the culture of the individual and then produces a happy (or unhappy) response in the individual and prompts the individual to buy (or not to buy) the advertised brand. Definitions and Differences between Emotion and Arousal Before we define emotion and arousal, we must first define the notion of perception (the main subject of a later chapter) which leads to arousal and then, perhaps, emotion. Perception occurs when any of our senses (sight, sound, feel, taste and smell) are exposed to a stimulus - say, the color red which causes our pupils to enlarge (a sign, or symptom of arousal). Note that perception is not a feeling. However, arousal is a feeling which arises from a physical reaction (a perception) to a perceived stimulus. Other symptoms of arousal are changes to the viscera (stomach, heart, liver, etc.) such as an increased pulse, sweating, a feeling of "butterflies" in the stomach, etc. Arousal can be viewed as a bridge between physiological (visceral) and psychological (mental) activity (Thayer 1989). As when we perceive something with our senses such as a red color. In which case, we are aroused, our senses are heightened and we feel either happiness or fear (emotional responses) depending on our labelling (rational response) of the context (situation) in which we see the red color - if it is a stop sign at a railway crossing, we feel fearful of the consequences; if it is a rose, we feel happy and, perhaps, ignore the consequences (roses have thorns!). Note that arousal is an automatic reaction/feeling to a stimulus that is much the same for most people while emotion is a feeling which depends on how a certain individual labels their experience of arousal. This is known as the "Schachter-Singer two-factor theory" in which arousal and reason combine to form emotion. I will give one marketing example of this and you must come up with another. A video advertisement (marketing stimulus) that starts with operatic music will produce feelings of arousal in most people. However, how this feeling of arousal is transformed into a feeling of emotion depends on how the target consumer sees the content of the ad. If there is a happy person running in a field of daisies, the emotion may be one of joy, elation, jubilation. If the ad shows a frightened person, looking backwards and forwards as she runs, the emotion that is produced in the audience of the ad is also one of anxiety, fear, tension and suspense. The target consumer will convert the excitement of the music into an emotion depending on what is shown in the ad. When we introduce a brand into the ad, it will be associated with the same emotion that was generated by the content of the ad (we call this classical conditioning in a later chapter). Now ask yourself if the same insurance company could use both of the ad scenarios described above. What would the feelings associated with each version say about the brand? As you can see, emotions are crucial in branding. motional responses by consumers are positive or negative feelings that arise due to the presence of "others" (people, living things (pets/animals/plant) and deities (god), whether physically present or absent (like death). We cannot feel emotion by ourselves without thinking about "others". You need the presence or lack thereof other to actually feel emotion Contrast emotion to arousal, which as defined before, is a feeling which arises from a physical reaction (a perception) to a perceived stimulus. Although it is also a feeling (like an emotion), arousal does not require "others" to be present. Emotion is always accompanied by arousal - which is our sensual, physical reaction to our environment. As said, arousal is a feeling too but it is a state prior to emotion. There can be no emotion without arousal. However, all arousal does not lead to emotion either. As an example, emotions (such as happiness, sadness, surprise, anger, fear, disgust) may be caused by something someone said to you; or, by reflecting on God (love and awe); or, by watching our pets play (amusement). However, finding ourselves in a situation without other people, such as swimming alone in the ocean may create an increase in arousal and a pleasant sensation but no emotion. Or, falling asleep may create a decrease in arousal resulting in a state of relaxation but not emotion. Another difference (emotions are more a descriptive account) between emotion and arousal is that emotions are qualitatively different states (such as happiness, sadness, surprise, anger, fear, disgust) that are much more descriptive about the state of the person who is feeling the emotion. Consider also emotions such as shame, embarrassment, pride, loneliness (?!) and other "social" emotions which are rich descriptions of the state of a person and can only result from the presence/absence of other people. Arousal, however, is a feeling that can only result in good or bad, pleasant or unpleasant states which are much cruder descriptions of the state of a person. So, if we ask someone how they are feeling and they say that they are feeling bad, we do not really know whether they are feeling bad because they are sad, or angry or afraid. Question. As per our definition of emotion, would you say loneliness was an emotion? Can you think of any other emotions that would not fit into our definition of emotion - a feeling in the presence of others? These definitions and differences between emotion and arousal are, obviously, controversial and will not be accepted by everyone. For instance, does our definition of emotion preclude a person from having emotions if they are alone and are not even thinking about "others" (people, living things and deities)? Yes, indeed, it does. That is not emotion but arousal. Unless, the state of arousal causes the person to now reflect on others. Thus, swimming in the ocean produces arousal and not emotion. However, if this state of arousal leads to a reflection on God or parents or other loved ones, or on our memories of past excursions on the beach with "others", then emotions are created. And, the nature of these emerging emotions (joy, fear, etc.) will depend on the internal (past experiences etc.) and external characteristics of the individual. Hence, our definition is clear about what is not emotion. Question: Do you buy into this definition? Can you defend this definition of emotion to someone else? Marketing Implication: These differences are important because as marketing practitioners, we now understand (a) that we can create emotions among our consumers by associating the product with "significant" others like their friends, family, celebrities, etc. (b) that consumers can understand very subtle depictions of social and other emotions, say for a deodorant or other personal use products. As you can see, these social emotions are extremely complex and we need to think through our emotional strategies. Question. What, for instance is the difference between jealousy and envy? Read the play Othello and find the quote below to answer this question! Jealousy: needs three people Envy: between two people The Communication of Emotion in Marketing According to Ross Buck in his book "The Communication of Emotion", we are programmed as humans to understand non-verbal expressions of emotions from other people. For instance, facial expressions and body language are some of the non-verbal elements that result in emotional communication between people which is a big part of marketing today in social media, sales promotions and public relations campaigns. This is NOT to say that verbal communication using some form of language cannot be used for both rational and emotional communication. Thus, if successful communication is the key to marketing results, there are different ways in which this can take place: Bullet points not on exam " Non-verbal communication between the brand and the consumer resulting in arousal and directly to behavior a picture on Instagram, facial expression " Non-verbal communication between the brand and two or more people resulting in emotional responses and then to behavior " Verbal communication between the brand and two or more people resulting in emotional responses and then to behavior " Verbal communication between a brand and a consumer resulting in rational responses (appealing to consumers' self interest in buying the brand) " A combination of verbal and non-verbal communication resulting in both emotional ("do it for others") and rational ("do it for yourself") responses. eason or rational responses by consumers are thoughts. These thoughts are evoked in consideration of consumers' own self-interest. Reason is not a feeling. It's a thought. When you see the words others THAT IS EMOTION Note how different this is from emotion which is aroused by consideration of our needs relative to the interests of others (people, living things, or deity). In branding, such thoughts could be know and understand the bullets " arguments and counter arguments for or against brands working in your own self-interest to see which brand works best for you " attitudes and opinions based on prior knowledge of a brand's attributes " evaluations of costs and benefits of brand choices " knowledge of the attributes and benefits and origins of brands understanding the attributes of coke zero " consideration of which brands are best for certain situations go to a party and take this type of beer, buying beer for myself a different brand " price evaluations versus quality evaluations getting a great deal for Broadway tickets " Thoughts about the corporate intentions (to make money... ripping ME off) of companies and brands, and so forth. Your self-interest and of others This is what Shakespeare said about our ability to reason! Reason is one reason why we are great as human beings. The Interdependence of Emotion and Reason Rational appraisal leads to an understanding of our feelings (labelled as emotion) as a result of other people in the environment. A famous experiment by Schacter and Singer showed that subjects who had been deliberately aroused (they were given epinephrine) understood how to feel by labelling their emotions according tothe actions of others in their environment. Those subjects who were in the company of others who were clowning around said that they felt happy; those subjects who were in the company of others who were angry, labelled their emotion to be anger. So, randomly selected subjects, felt angry or happy depending on the behavior of others in their environment and their rational appraisal of the situation they were in. Thus, our rational appraisal of the situation leads to emotion and the two are interrelated. For instance, when Jill sees a tennis racquet advertised on sale (a situation) price is a rational reaction this causes arousal and this, combined with her individual characteristics (she plays tennis) could lead directly to behavior without much thought or emotion. That's one scenario. Or, another scenario, she sees a racquet advertised by Serena, feels arousal and understands this arousal by a rational appraisal of the situation (I could be as good as her) leading to an emotional response of anticipated success and triumph in her game, and subsequent purchase behavior. Notice how price is usually associated with a rational consideration of the value of a brand but a change in price is a situation that causes arousal and, perhaps directly causes purchase with minimal thinking and emotion! Do consumers sometimes buy stuff simply because it is on sale even when they do not really need it? Yes, they do and the cause of this, from the first scenario above, is that simple arousal can cause behavior. A more complicated scenario is the second one above, in which arousal, reason and emotion combine together to create purchase behavior. Yes, consumer behavior can be complicated! But, if we understand it properly, we can see all our strategic alternatives more clearly. Emotion and reason can and often do clash Comparing Emotion and Reason Both emotional and rational responses work together and both are needed for human survival and self-fulfillment for there is virtue in both selfishness and altruism. Thus we can appeal to consumers' emotions or to their reason or to both. However, according to Chaudhuri (2006) emotional marketing has the following advantages over rational treatments. Emotions are more permanent than brand beliefs. Consumers can be wrong about their beliefs about a product, but they can have no misconception about their emotional response to a product or advertisement. Rational beliefs about products can be changed by competitors providing "new evidence" in the way of taste tests, etc. It will be much harder to change a consumer's overall affective disposition to a brand. Beliefs are amenable to change, feelings are more resistant. Emotional positioning is harder to copy than positioning your brand only on rational attributes. Your brand's competitors can copy your rational product benefits and say that they "do it better". However, if you have created a long-term emotional image for your brand, your competitors would be foolish to copy it. Think about it. If you used cowboys in a cigarette ad or babies in an automobile tires ad, who would consumers think the ad was for? You would actually be spending your ad dollars to promote Marlboro or Michelin! Emotions are fast, catchy, and memorable. Since emotional appeals are often (but not always) non-verbal they are also quicker to communicate. A picture speaks faster than a sentence. Emotions also remain in our memories longer. We may forget the exact facts in a favorite book we read long ago, but we remember the feelings we had while reading the book. So too for emotional ads - we remember we had good, positive feelings about Hallmark ads although we may have forgotten the exact facts about the ad. This helps the brand! One caveat to remember is that "image" without substance is not likely to work in the long-run. Emotional persuasion must be backed up by quality products and services. "You can fool some of the people all the time, and all the people some of the time, but you cannot fool all the people all the time." With most products, you need to satisfy the rational as well as the emotional needs of your consumers. Emotions are global. Darwin's (1872) seminal book on facial expressions established that such expressions are universal and not cultural. Emotional treatments would thus be preferable to rational treatments for "global" advertising. Notice how large companies with worldwide operations are developing logos and advertisements that are largely non-verbal and thus easily translated (emotionally) across cultures. Nike has replaced its name with just a swish. Coke uses ads with non-speaking polar bears whose appeal can be "understood" (again, emotionally) in any culture. This emotional language is the new persuasion strategy in global marketing. 4 differences between emotion and reason: Emotions are global (like emojis or symbols) ... reason is not Emotions are fast, catchy, and memorable Emotional positioning is harder to copy than positioning your brand only on rational attributes... when you make an elephant to sell your product and then later on someone else uses an elephant. People will think of the first brand Emotions are more permanent than brands beliefs... they stick around in the mind. Think about the house in texas, can remember the memories (emotions) but cant remember the layout (rational) reason is different because language is different (your thoughts use a language) Reason is when you make a rational response, while emotion working for others

Chapter 2

ETHICS IN MARKETING The distinctions between emotion and reason are also important to us in our careers as Jesuit marketers. If it "feels" wrong (a negative feeling of doing harm to others), then it probably is the wrong ethical strategy to pursue in our work. Emotions are a way to directly understand the existence of God and morality (the difference between right and wrong) without the intervention of reason. Thus, emotions are evaluative perceptions that lead people to understand the existence of God and right and wrong in their lives. These "evaluations" are all the "reasons" that one needs in faith based behavior including our marketing strategies and tactics. Our feelings about God and our consumers are true and real regardless of "alternative facts" produced by those who may want to alter our perceptions of a strategy. For instance, if someone is selling chemical cocktails to babies as "apple juice", then we know it is wrong because it feels wrong regardless of reasons why it may be acceptable to do ("everybody does it!" etc.). This is not to say that reason does not enter into our considerations of right and wrong. If there are rational reasons ("we will be fined by the FTC!") not to follow an unethical strategy, then that can corroborate and strengthen our resolve to "do the right thing". CONSUMERISM (movement) Emotion and Consumerism There is a vast and vigorous consumer movement, today, to protect the consumer. This movement has come to be known as Consumerism. The agencies and other institutions that are working in this movement are considered to be working on behalf of consumers or "others". Thus, their motivations can also be considered to be altruistic, or "others-oriented", or emotion based. When you work avowedly on behalf of other people, the only benefit to yourself is the satisfaction of seeing how your efforts have helped others to be better off. Since the motivations of profit based businesses and corporations are always, at least somewhat, based on self-interest (or rational outcomes such as greater revenue, lower costs, higher prices), they are not usually considered to be part of the consumer movement. However, a company like Newman's Own which gives 100% of its profits to a cause (Hole-in-the-Wall inner city kids) would rightly be considered to be a part of consumerism.Notice that a company may be consumer-oriented but not a part of the consumer movement per se. Thus, a company like Stew Leonards' says "Rule One: the consumer is always right. Rule Two: re-read Rule One". This certainly makes them very consumer-oriented (good marketing tactic to seem to be "others-oriented"!) but not necessarily a part of the consumer movement known as Consumerism. We do not know if they are committed towards working towards the protection of the consumer and consumers' rights. In general, profit based corporations and businesses are not considered to be a part of the consumer movement. This is because their motives are at best both self-interest and altruistic. They may be working in their own self-interest (seeking profits and other rational outcomes) OR they may be working for the benefit of "others" (seeking altruism and other emotional outcomes) - consumers, society, global communities and so on. CONSUMERISM TODAY There are three sets of institutions which are a part of this movement to protect the consumer (Table 2.1). They are " Consumer advocacy groups Individuals and groups who protect the consumer with their active resistance to corporate and government initiatives which they feel are not in the best interests of consumers comprise this first category. Thus, they lobby for changes in rules, prices, product ingredients, deceitful promotions and so on. They can be individuals like Ralph Nader ("Unsafe at any speed") who fought against the automobile industry and John Muir who advocated on behalf of the great redwood trees. They can also be advocacy groups which work towards protecting consumers by looking out for the environment, the poorer sections of society, animals, and so on. PETA is one such group but there are so many other notable consumer activist groups like Greenpeace, Sierra Club, Audubon Society, etc. TABLE 2.1 THREE GROUPS THAT PROTECT THE CONSUMER You can see how protecting the rights of consumers could easily generate a lot of very strong and varied emotions. For instance, notice how the NRA and gun control groups both work on behalf of the consumer but their motivations are quite different. Each is working to protect their segment of consumers but each is at loggerheads with the other! Each is working to preserve the rights of consumers but in quite different ways! One is working to preserve the right to bear arms and the other to preserve the right to safety. These are both highly emotional causes and their clashes generate a great deal of emotion in our world. Similarly, world leaders avowedly work for their consumers/citizens but their friction generates fear and sadness all around the world. Are they working for others or in their own self-interest? " business sponsored groups Why would businesses set up groups to regulate themselves? Why would they work for others (consumers) and not only in their own self-interest? Hint: if they don't regulate themselves, who could step in and do the job, perhaps in a much more stringent way? So, they are working in their own self-interest when they voluntarily regulate themselves - a rational approach. However, how does this self-regulation help consumers (others)? For instance, how does the Jockey/Fruit of the Loom example below, help to protect consumers? Read on. Here is an example of business groups working in both their own interests and in the interests of consumers. The National Advertising Review Board (NARB) is a branch of the National Advertising Division (NAD) and functions to arbitrate disputes between companies with regard to the claims that competing ads promote. Hence, if Jockey disputes the claims of Fruit of the Loom that the elastic waistbands of their underwear (real example, I kid you not!) are more durable, Jockey can approach NARB to take a decision on the claim made by Fruit of the Loom and all parties, if they agree with the decision, have to abide with the edict. NAD claims that they have a very high percentage of successful arbitrations. Another example. Many industries have trade associations (Brewers Association for beer manufactures, etc.) which require their members to subscribe to a code of ethics. " government agencies State and local authorities are the first recourse of consumers when they feel they have been harmed by unfair business practices. States have consumer protection agencies and they are also proactive in initiating laws, such as unit pricing laws (we will see this in another chapter), recycling and waste disposal laws. Other than state and local authorities, there are federal agencies which monitor the laws that have been passed in the interest of the consumer. FCC. Advertising to children, in charge of all electronic communication (responsible for taking away net neutrality) The Federal Communications Commission has authority over all electronic and broadcast media. Thus, it governs the activities of the internet, television, radio and cable operators. It is also in charge of advertising to children. In this connection, do you think FCC should ban all ads to children during Saturday morning cartoons? The main reasons that have been proposed for this are: a) Children cannot differentiate between hype from reality - they have not developed "selective" perception. b) Children cannot differentiate between programming content and advertising. They do not recognize that there is a profit motive in advertising. c) Children ignore their past experiences with products and respond only to the immediate influence of the ad. They forget that they used the product previously and did not like it. d) Children do not evaluate and interpret the ads. For instance, they do not consider that the ad has a "vested" (secured in the possession of or assignment to a person) self-interest in promoting the product. Admogul.com is used to teach children to understand advertising FDA. Labeling and packaging The Food and Drug Administration sets product standards and requires companies to disclose product ingredients. Thus, it is in charge of the packaging and labelling of all food and drugs. For instance, it has strict laws about the size of the print disclosing the net weight of the contents of a package. Question. What do you think they would require of a maker of potato chips in this regard? FTC. No monopoly. All mergers need to go through the FTC. Competition is the best for society. Working to preserve competition. Prices will be lower... Sometimes mergers are good for better prices, products, options. Bargaining power (volume discount) The Federal Trade Commission was first founded to be in charge of unfair business practices and still has the authority to strike down proposed mergers between companies that, in its view, are not in the best interest of consumers. For instance, if Walgreens and CVS proposed a merger, FTC may not allow it to take place. Question. With regard to consumer prices, what would be the reasons for disallowing such a merger? What would be the reasons for allowing such a merger? Today, FTC also oversees "deceptive" advertising. Consequently, exaggeration by advertisers of the power of their products can be judged to be deceptive and unfair to consumers' interests. There are three ways in which such deception can take place. a) Straightforward lies or fraudulent advertising. Listerine told a straight lie when it said that it could cure colds. Ocean Spray also produced a straightforward lie when they said that cranberries have more vitamins than apple juice. FTC believes that deceptive claims have a "residual effect" on consumers' minds. Thus, FTC told Ocean Spray to "cease and desist" from its advertising. However, FTC told Listerine to spend money on corrective advertising to tell consumers that there was no truth to their statement about the ability of Listerine to cure colds. Obviously, this was a much more punitive sentence. Listerine was told to stop by the FTC while they told Ocean Spray to stop. Listerine was telling lies for 5 years while Ocean Spray was only 1 year. FTC said Listertine's ads are stuck in people's minds while Ocean Spray's can be forgotten naturally. Question. Why do you think FTC made such a call? The claim would be stuck in the consumer's minds if the claim is not reversed The belief has become an attitude. Attitude is very hard to get rid of b) Half-lies or false advertising. This occurs when the claim that is made is only true under certain conditions. Thus, the product's ability to perform its stated function is only true at certain times and not at other times. These are usually lost in the "small" print that is included at the bottom of the printed ad or read out at a frenetic pace at the end of a television ad. If you say that your steak has half the calories but you do not say that your steak is also half the size of other steaks, this is a half-lie. If you "whisper" the other side of the claim that is still a half-lie. My bread is half the calories... the bread is cut smaller Pharmetuical companies commericals c) Misleading advertising. This occurs when ads play on a mistaken notion that some consumers may have about certain aspects of reality. If you mistakenly believe that the color blue in a detergent cleans better and an ad plays on that belief by stressing that the detergent in the ad is blue, that is misleading. If you believe falsely that a car can give you higher status in life and I play on that mistaken belief by suggesting (even subtly) that my car has higher status - that is misleading. Ads often promise things that the product cannot possibly deliver. This is worse when the ad itself creates the false belief and then plays on that same belief. " If I say that my milk is so good, just look at how "shiny" it is and I use white paint instead of milk in making my TV commercial, then that is misleading. Just to make the point very clear, here are some more examples. " Ice cream melts under the heat of the lights during food photography. It is acceptable to substitute mashed potatoes for ice cream in making the commercial but it is not acceptable to, then, say in the ad that your ice cream will not melt as easily as other brands. " Volvo, the car company, once showed that its car was so sturdy that it could take the entire weight of a ten-ton truck. In order to make this claim, the company reinforced the body of the car used in the ad with steel supports. This was clearly misleading to the public and the company was punished for pulling this stunt on consumers. " Campbell soup offers another great example. The heading of the print ad was "CS is good food". The photographer, however, had a problem shooting the chicken noodle soup. When he poured the can of noodle soup into a bowl, all the chicken and noodle went to the bottom of the bowl and could not be seen. Thus, the ingredients could not be photographed as per the client's wishes. She put marbles on the bottom of the soup to get the job done... made consumers believed that got more noodles and chicken in their can of soup " Playing on a mistaken belief " If you believe that cars given you status, my car is status " Use something to enhance the product it is wrong Welches grape juice says it has the same health benefits as wine.... Its misleading because people believe that a glass of wine is good for you (this is a mistaken belief that people carry) Welches is playing on that Question. How did the photographer solve the problem? Do you think it was ethical? Why? Why not? Other Sources of deceptive Marketing include deception in Packaging. Ever wonder why a huge bag of potato chips is only half full when you open it? Can you think of other misleading packaging? How about when they show strawberries in a cereal bowl on the package of Cheerios, yet there are none inside the box? Deception in Pricing is also rampant among manufacturers and retailers of brands. The most famous of these are the bait and switch tactics used by retailers. Advertising is usually the bait that brings the consumer into the store by advertising a low-priced item and the switch occurs in the store by the salespeople who then try to sell the consumer a higher priced item. This is illegal and even big companies have been found to be guilty of it. Sometimes the company is itself not aware that bait and switch is taking place but it is still guilty! The car company Audi had two different promotions going on, possibly by two different brand managers. One promotion was advertising a huge discount on a certain Audi brand (A). Another promotion was offering spiff money to salesmen at Audi dealerships for another brand (B). When the consumer came in to buy brand A, the salespeople naturally tried to sell them brand B, instead. It helps when your left hand knows what your right hand is doing. Hence, the need for IMC or Integrated Marketing Communications! Assuming that the bigger bottle is cheaper, even when it's not There are plenty of other pricing deceptions for you to investigate as a Jesuit Marketer! How about when they always show a brand on sale? Or when they give a "Sale" price but don't tell us what the original price is? Find other or similar irregularities and report back! Are there examples of CONSUMER deception that hurt "other" consumers? What is the net result of all the returns (some of them quite irregular) that retailers take back? What happens to the salesperson who sold me a pair of shoes when I return the shoes to the store after using them at a party last night? Consumer Misbehavior is also prevalent! We blame companies, but we as consumers commit misbehavior. Like returning a product you used. SHORT CASE STUDY YOU ARE WORKING FOR A COMPANY THAT SELLS "APPLE JUICE" TO BABIES. YOU HAVE JUST FOUND OUT THAT YOUR PRODUCT HAS NO APPLE JUICE IN IT. IT IS 100% A CHEMICAL COCKTAIL! WHAT DO YOU DO? GO THROUGH THIS CHAPTER AGAIN AND BE PREPARED WITH YOUR ANSWER. WHAT ARE SOME SOURCES OF REDRESS THAT THE CHAPTER MAY NOT HAVE ADDRESSED? You will empathize with the babies Empathy: the ability to understand and share the feelings of another. Good people can empathize, bad people cannot Promotion: personal seller, advertising, sales promotion, and public relations (publicity

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