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Consumer Behaviour
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Total Marks: 80
CASE – 1 (15 Marks)
Tony the Tiger goes Global
Kellogg Company has distribution in more than 150 countries and yet is still “unknown to half the world’s
population.” according to Arnold Langbo, Kellogg’s CEO. Langbo plans to change that.
Kellogg recently built a company—owned cereal plant in Latvia and currently has sales in Poland, Hungary
and Czechoslovakia. It has also started construction on a plant in India and is entering China. However
international expansion and the development of global brands will not be easy.
To become more international, the firm recently reorganized into four divisions :North America,Latin
America, Europe and Australasia. According to Langbo:
The way we used to be organized, we were a US-based Multinational-a company with a big domestic business
and, by the way,some international business. That was the way we were thinking; that’s the way the
organization was structured.
Today, if you talk to customers in the UK, Canada, or Australia, they think of Kellogg’s as being based in the
U.K or Canada or Australia. We’re global in organizational structure and business but also multidomestic.
We now have a number of truly global brands (Frosted Flakes and Corn Flakes, with Froot Loopa and Rice
Krispies close, and Frosted Mini-Wheats and Honey Nut loops moving rapidly).There used to be slight
variations in our food around the world, but now you’ll recognize the product wherever you go.
Expanding into many markets will involve more than trying to gain share from other cereal marketers. It
will require altering long—held traditions:
In Eastern Europe it’s going to he pretty slow because we’re going to have to go in there and literally create
the habit—much as we did in Germany 25 years ago or France 20 years ago. Cereal is a whole new breakfast
concept for these people. However, they do eat breakfast in those countries, and they eat fairly substantial
breakfasts.
In Asia, consumers are used to eating something warm, soft, and savory for breakfast—and we’re going to sell
them something that’s cold, crisp, and sweet or bran tasting. That’s quite a difference.
The challenge is made greater by the presence of aggressive competition in many developed or develop-ing
markets. Competition is particularly intense in Europe where Nestle and General Mills formed a joint venture
called Cereal Partners Worldwide. Langbo characterizes the new competitor this way:
They are a very formidable competitor with Nestle’s distribution strength and knowledge of the European
market and General Mills’ technology and cereal marketing expertise.
The result of the entry of the new competitor, which spent an estimated $35 to $50 million in advertising in the
top six European markets, and the response of existing firms such as Kellogg was an increase in the growth
rate of total cereal sales as well as share erosion among the weaker brands.
Competition is strong even in some countries where consumption is low. For example, in Japan, with
consumption at four bowls per year per person, compared to 10 pounds in the United States, there are more
than 100 products fighting for shelf space.
According to Langbo, a global brand requires a core position strategy or product benefit that will work in
multiple countries and local execution of that idea to reflect local attitudes. The key ideas for three of
Kellogg’s global or near-global brands are described by Langbo in the following paragraphs.
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Frosted Flakes
Frosted Flakes is based on the concept of vitality. This idea originated in the United States but is a universal
idea that both translates and travels well. Because the product has a special appeal to children, the cultural
differences are not so pronounced. Tony the Tiger illustrates the vitality theme in a universally understandable
manner. Tony is loved throughout the world symborizing appeals that are truly global. We use Tony and he
vitality message everywhere from the United States to Taiwan in Argentina.
Corn Flakes
The basic positioning concept for Corn Flakes is simple, unadulterated food that tastes surprisingly good. This
concept also has universal appeal. It is typically the first product we introduce in a new market, It is the
foundation of our line, and it is the world’s most popular cereal.
All-Bran
The value proposition for All-Bran is the health benefits of fiber in the diet. This proposition does not have
universal appeal without development. The concept of the value of fiber in the diet is new to many countries
and is often resisted.
In 1984, we began a massive campaign to countries where the benefits of fiber were not widely accepted.
campaign varied across countries due to differences in the attitudes of local medical and nutritional
professionals, specific diseases that were most on the minds of the local population, and local restrictions on
health claims. However, the basic approach was to educate and support the medical and nutritional community
in each country. We would sponsor symposia on dietary fiber. As a country’s experts became convinced of the
value of fiber, they told their story in their academic press, the general press, and in public service
announcements. Today, despite competition from many other high-fiber cereals., All-Bran is one of the top 15
cereals worldwide.
Questions
1. What type of innovation would cold cereal be to a country not accustomed to this type of food?
2. Conduct an innovation analysis based for cold cereal in China.
3. What values are involved in the consumption of product such as breakfast cereal?
4. What values would support and what values would harm the chances of Kellogg succeeding the cold cereal
in
the following countries? What other factors would be important?
a. China
b. Mexico
c. Japan
d. France
5. What nonverbal communications factors would be important in developing an advertising campaign for a
cold cereal?
6. Develop a marketing program to market one of Kellogg’s cold cereals in the following countries.
a. China
b. Mexico
c. Japan
d. France
7. Why does Tony the Tiger “travel” so well’?
8. Evaluate the communications process Kellogg used to gain acceptance for All-Bran. Could a version of this
work for gaining acceptance of cold cereals in China?
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Case – 2 (20 Marks)
Boots with six – inch heels are the latest fashion rage among young Japanese women. Several teens
have died after tripping over their shoes and fracturing their skulls. However, followers of the style
claim they are willing to risk twisted ankles, broken bones, bruised faces, and other dangers
associated with the platform shoes. One teenager said, “ I’ve fallen and twisted my ankle many
times, but they are so cute that I won’t give them up until they go out of fashion.” Many consumers
around the world seem to be willing to suffer for the sake of fashion. Others argue that we are merely
pawns in the hands of designers, who conspire to force unwieldy fashions down our throats.
Questions
1.)What do you think ?
2.) What is and what should be the role of fashion in our society ?
3.) How important is it for people to be in style ?
4.) What are the pros and cons of keeping up with the latest fashions ? Do you believe that we are at
the mercy of designers.
CASE – 3 (6 Marks)
You are the Business Development Manager of an Engineering company that has developed a highly advanced
machine for packaging of pharmaceutical products. The machine saves a lot of time and cost involved in the
packaging as it is faster compared to other machines, it consumes lesser electricity and requires lesser
manpower. One of your clients, N.K. Pharma is a 1200 crores pharmaceutical company having its head office
in Mumbai. The company has six manufacturing units, one in Tarapur, two at Vapi, one in Nagpur, one in
Chennai and the newest one at Baddi in Haryana. Each unit is led by a Factory Manager, who reports to the
GM – Production who sits at the head office. The GM – Production, GM – R & D, GM – Marketing, and G.M.
HRM report to the COO. The Accounts and Finance functions report directly to the COO. The COO is a 36
year old enthusiastic leader who enjoys immense trust of the MD (who is also the founder of the organization).
The company sells through a network of 400 Medical Representatives spread all over India.
Questions
1 Analyze the buying behaviour of this organization with respect to your product.
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Case -4 (10 Marks)
THE ECONOMIC PARADIGM
The 1940s view of the consumer in the marketplace was rooted in economic theory. Most scholars of
economics probably still hold to the theory of Economic Man. In this paradigm, purchasing decisions
are the result of largely "rational" and conscious economic calculations. The individual buyer seeks to
spend his income on those goods that will deliver the most utility (satisfaction) according to his tastes
and relative prices. This is a normative rather than a descriptive model of behavior, because logical
norms are provided for buyers who want to be "rational."
The model suggests useful behavioral hypotheses, such as: (a) the lower the price of the product, the
higher the sales; (b) the lower the price of substitute products, the lower their sales; (c) the lower the
price of complementary products, the higher their sales, provided they are not "inferior" goods; and
(d) the higher the promotional expenditures the higher the sales. In striving to meet these hypotheses,
consumers are not only assumed to be aware of all available alternatives in the marketplace; they are
also assumed to be able to rationally rank order the available alternatives by preferences. This is the
case of perfect information in the marketplace and unlimited ability of tile consumer.
In applying these assumptions to actual consumption, several problems became apparent. First of all,
consumers do not have perfect information in the marketplace. Second, they do not all have the same
information about the existing alternatives or attributes of known alternatives. instead, each consumer
has fragmented knowledge of his or her own set of known alternatives; as a result, consumers can not
always rank a set of alternatives available to them. In addition, preferences often violate utility
theory, because different people prefer different styles, have different tastes, and hence make choices
built on preferences rather than objective information such as price.
Problems arise with applying economic theories to gifts. Increasing the price of goods may actually
make them more desirable, defying basic economic theory. Hence, inverted demand curves reflect
products where increasing prices stimulate increasing sales. Perfume is a perfect example of this type
of good. Most perfume or cologne is bought as a gift, and the connotations of bringing home a $2
bottle of cologne or a $50 bottle for a loved one are implicit. A relationship may not last upon receipt
of the cheaper good. Hence the economic model ignores the fundamental question of how product
and brand preferences are formed.
THE IRRATIONAL CONSUMER
After becoming aware that goods have "hidden meaning," scholars of consumer behavior in the
1950s took to the notion of the consumer as an irrational, impulsive decision maker. Consumers were
seen as passive, open, and vulnerable to external influences. This position was an obvious reaction to
the "economic man" and also represented a time when business schools were developing. Earlier,
faculty trained in economics were the first to be hired, but in the 1950s psychologists were added to
the payroll. Their insights from Freud to Maslow, from personality to motivation theory, seemed ever
so relevant to our study of the consumer.
The two major psychological theories underlying this era were the Pavlovian learning model and the
Freudian psychoanalytic model. The Pavlovian model is based on four central concepts-those of
drive, cue, response, and reinforcement. Drive or motives can be primary, such as hunger and sex, or
secondary, such as fear. A drive is very general and impels a particular response only in relation to a
particular configuration of cues. The Pavlovian model emphasizes the desirability of repetition in
advertising. Repetition fights the tendency for learned responses to weaken in the absence of practice
and provides reinforcement.
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The model also provides guidelines for copy strategy. To be effective as a cue, an advertisement must
arouse strong drives in the person. For candy bars, it may be hunger; for safety belts, fear; for hair
tonics, sex; for automobiles, status.
In the Freudian psychoanalytic model, the guilt or shame man feels toward his sexual urges causes
him to repress them from his consciousness. Through rationalization and sublimation, these urges are
denied or become transmuted into socially approved expressions. These urges are never eliminated or
under perfect control and they emerge in dreams, in slips of the tongue, or in neurotic or obsessive
behavior.
Because of these urges, the consumer's motivations for behavior are not obvious or deeply
understood. As a result, Freudian psychology gave consumer behavior the tool of in-depth
interviewing to get at the motives and symbols behind a purchase. If a consumer is asked why lie
purchased an expensive foreign sports car, he may reply that he likes its maneuverability and its
looks. At a deeper level he may have purchased the car to impress others, or to feel young again. At a
still deeper level, lie may be purchasing the sports car to achieve substitute gratification for
unsatisfied sexual strivings.
Other Freudian consumer research findings included men wanting their cigars to be odoriferous to
prove they were masculine, and women being very serious when baking cakes because unconsciously
they were going through the symbolic act of birth. These theories were certainly more interesting
reading than the graphs and curves of economics.
One major study of this era (Haire 1950) found that when a shopping list included instant coffee
rather than drip grind, the owner of the list was perceived to be a very different person. The owner of
the list with instant coffee was lazy, a poor planner, a spendthrift, and a bad wife. Meanwhile, the
owner of the list with drip coffee was perceived to be thrifty and a good wife. Fortunately a
replication of this study was done in 1970 and housewives were no longer judged by their coffee
(Wilkie 1986). However, Haire's study provided good insight to the fact that products have meaning
and significance that go far beyond the physical attributes of the products themselves. Furthermore,
these hidden values were thought to be a major influence on consumer decisions. To tap into the
consumers' hidden motives for purchase, more indirect methods of data gathering were necessary.
Toward the end of the 1950s an empirical article started to throw doubt on the heavy reliance on
psychological perspectives. A study by Evans (1959) sought to determine the personality
characteristics of Ford versus Chevrolet owners. In the 1950s these were the major automobile
manufacturers. Wider choice and Japanese imports did not exist. If the differences between the cars
were not major, the train of thought was that the personality of the owner must be significantly
different and motivate the consumer to buy one brand or the other. A carefully controlled survey of
personality characteristics of 1,600 owners of Fords and Chevrolets showed no major significant
differences in personality characteristics of the car owners. The importance of this line of behavioral
research to consumer products was questioned. By this time, in the early and mid-1960s, business
schools were producing their own scholars and faculty. Researchers were trained by business schools
rather than only economics and psychology departments. Researchers of consumer behavior gained
from this marriage of economics and psychology and began to develop their own theories of the
consumer.
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THE PROBLEM SOLVER
In the 1960s John Kennedy became president of the United States and gave the consumer elevated
status. In his message to Congress on March 15, 1962, he put forth the Consumer Bill of Rights
(1963) as a social contract between business and society. Government was tile ultimate guarantor of
these rights, which included the right to safety, the right to be informed, the right to choose, and the
right to be heard (redress). The government took Kennedy seriously and began an activist role
The marketplace was becoming more diversified. The concept of market segmentation became even
more important. Goods that the consumer ted were now being produced, rather than just the goods
the manufacturer wanted to make. Choice prevailed for the consumer, and the consumer was
recognized by the highest official in the country. Consumers had the right to he informed and
protected.
The government poured millions of dollars into departments whose goal was to make sure the
consumer had access to information. The Federal Trade Commission flourished. Labels were put on
products listing all ingredients. Advertising was regulated and measured; if it was misleading, then
corrective advertising was necessary. Information was in great supply to the consumer. Ralph Nader,
with his book Unsafe At Any Speed, emerged as the hero of the 1970s, taking on corporate giants in
the name of the little man. Consumerism was everywhere.
As a result of this environment, consumer behavior researchers started to see the consumer as a
"cognitive man." The irrational psychotic purchaser of the 1950s and early 1960s was left behind.
The consumer was now a problem solver. He or she was receptive to products or services that
consciously met his or her needs. Consumers were thought to actively search for information about
the products and services they bought. Consumer Reports was born. Consumers were seen as striving
to make the best decisions possible given their limitations.
However, consumer researchers told us that even though consumers are given information, they often
fail to use it to make decisions. In an initial experiment (Jacoby, Speller, and Kohn 1974) and a
follow-up (Scammon 1975), consumers were given objective product information concerning several
brands available in the marketplace. The results of the first study showed that consumers felt better
about their brand selections with more information, but actually made poorer choices. The study by
Scammon corrected for weaknesses in the original study but still found that recall of product
attributes decreased with increasing information. Consumers were still limited by the extent of their
knowledge about the marketplace and their capacity to store information about the marketplace in
short-term memory. Miller's (1956) rule of seven plus or minus two) pieces of information as
cognitive capacity held for the consumer.
The information in the marketplace was not organized for the ease of the consumer. Unit pricing was
fine, but comparing prices across brands and sizes for products was quite a challenge. Only when unit
prices were posted on one sheet in a simple linear manner by decreasing prices across all sizes and
brands did the consumers shift in their decision making toward lower-priced brands. You can imagine
the national brand manufacturer's enthusiasm toward presentation of this information at point of
purchase.
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The overriding conclusion of consumer research in the 1970s was that people can only attend to
limited information at one point in time. The consumers' existing skills, habits, reflexes, values, and
goals shape the way they search and use information to make their decisions. The 1970s told us that
consumers' skills were limited, but at the same time the number of choices available to the consumer
kept increasing. More and more choices became available in the 1980s.
THE COGNITIVE MISER
Today's consumer uses decision-making skills originally developed in the 1970s, but the 1980s
consumer went farther than just recognizing man's cognitive limitations. Researchers have labelled
the low-involvement decision maker (or cognitive miser) as unable or unwilling to engage in
extensive decision-making activities in many cases and settle instead for "satisfactory" decisions
(Olshavsky and Granbois 1979). There is too much choice and not enough discretionary time to
engage in extended cognitive effort for purchases. Instead the consumer develops rules of thumb or
heuristics to simplify purchase behavior. An in-store study showed that consumers go through almost
no brand price comparison behavior (Hoyer 1984). Rules such as "buy the cheapest," "buy name
brands," or "buy what my friend bought" give the consumer a satisfactory choice in the marketplace
that supplants an optimal choice. This is a very adaptive and rational course for the consumer to have
taken in the 1980s, given the cluttered choice environment with little time for decision making and
virtually no support in information handling. The cost of thinking was recognized as a limiting factor
in processing choices.
The 1980s brought a focus on business and conservatism, and many came to feel that governmental
regulation was more of a hindrance than a help. This was expressed in the election of Ronald Reagan.
As quickly as Kennedy had made the consumer important, Reagan made him unimportant. With
strokes of a pen, the FTC experienced a sharp reduction in its budget and influence. Whole
departments set up by the government to service the consumer were abandoned. Consumer programs
developed for the 1970s folded.
The 1980s were for business. This focus was a result of several factors. First, the "baby boomer
bulge" had a greater number of people for a smaller number of jobs. In the early 1970s a college
graduate decided what job to take, or perhaps a trip to Europe, then work. In the early 1980s the
concern was for getting any job at all. The economy was slow and competition was stiff. Business
looked to the MBA to turn companies around. The student was serious and conservative due to the
competitive environment. Business and engineering were in; the humanities were out. The
marketplace became more competitive, more diversified. Deregulation prevailed.
Too many goods cluttered too many store shelves for the consumer. For example, the average number
of products in supermarkets soared from 13,000 in 1981 to 21,000 in 1987. There are said to he 400
different brands of beer available to the American beer drinker. A new car purchaser might have 300
different types of cars and light trucks, domestic and imported, to choose from.
Along with the "over choice" and market diversity of the 1980s came decreased leisure time for the
consumer, not more leisure time as predicted in the 1940s. The number of free hours a person
possesses decreased from four to one since the 1970s. The reason for this is that the average time
spent at work has increased seven to eight hours a week since 1978 (Stern 1987). More than 50
percent of all women are working, so household duties are done after 6 p.m. or on weekends. Single
working mothers have virtually no free time and can't take care of all they want to do. This scenario
has led to a demand for convenience products and convenience shopping. Home catalogs, home TV
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shopping, home computer shopping, and home shopping parties are part of this easier access to goods
that will prevail in the 1990s. The efficiency of in-home shopping, especially through direct
marketing, is exemplified by the fact that American Express sold 7 percent of all the luggage bought
in the U.S. by sending mailings to affluent cardholders whose charge records showed they spent
heavily on travel-related merchandise.
This the cognitive miser of the 1980s is a product of decreased time for shopping decisions and
increased choice in the marketplace. It is an adaptive strategy to suit the decision-making
environment.
THE COLLECTIVE BUYER OF THE 1990s
The focus on individual decision processes for personal purchase of products and services will be
replaced by a more collective decision-making style during the 1990s. This will be caused by the
changing cultural patterns of North America combined with the decrease in purchasing power of the
individual consumer. The culture of North America is changing due to: (1) the rapid increase in the
percent of elderly people who are neither healthy nor wealthy; (2) the aging of the baby boomers,
causing a shift in values and needs; and (3) increased immigration from Asian cultures with high
birth rates to offset the North American decline in population. All three categories of this cultural
shift will have to rely on joint decisions for purchase of goods and services, since goods and services
will be shifting to a collective consumption style rather than individual consumption in the North
American marketplace.
Individuals will combine households in an increasing rate to make life more affordable. The evidence
that this joint living may be a trend for the future is exemplified by the fact that 6.2 percent of all
employed people are working two jobs, mainly to meet living expenses. When the economy turns
down these extra jobs will not be available, and people will have to decrease their standard of living
to meet day-to-day expenses. More unmarried people will share apartments, more single-parent
families will couple up, and more children will live at home longer. Thus, more people will be
sharing consumer goods just due to living arrangements. Also, through the changing face of North
American consumers, the marketplace will continue to change and supply more and more services for
these groups. The changing face of the consumer will alter the marketplace and the mode of decision
making.
Much has been written about the marketing opportunities for the senior segment. Right now
approximately 7.3 percent of the population is over 65. By the year 2000, this group will increase by
20 percent, making it the fastest-growing segment of our population. This is one reason why
marketers focus on the elderly. However, this group is not all that wealthy or all that healthy. It is
estimated that 80 percent of people over 65 have chronic health problems, and 16 percent have severe
physical problems. One in five Americans over the age of 85 resides in a nursing home.
The Baby Boomers
A full one-third of the population is bulging at middle age. In the year 2000 they will be 36 to 54
years old and at the middle of peak earnings. They are important to our view of consumer behavior
because they will head 44 percent of all households and still account for a majority of purchasing
power. Due to the conflicting structure of the population versus the corporate culture, there will be
less moving around among this group, and they will be more stable in their jobs. Hence, their values
and attitudes will change dramatically to reflect this stability. The collective decision-making style
will be based on their stable environment.
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Questions
Discuss as to how the consumer behavior has evolved post 1950?
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Total Marks: 80
CASE – 1 (15 Marks)
Tony the Tiger goes Global
Kellogg Company has distribution in more than 150 countries and yet is still “unknown to half the world’s
population.” according to Arnold Langbo, Kellogg’s CEO. Langbo plans to change that.
Kellogg recently built a company—owned cereal plant in Latvia and currently has sales in Poland, Hungary
and Czechoslovakia. It has also started construction on a plant in India and is entering China. However
international expansion and the development of global brands will not be easy.
To become more international, the firm recently reorganized into four divisions :North America,Latin
America, Europe and Australasia. According to Langbo:
The way we used to be organized, we were a US-based Multinational-a company with a big domestic business
and, by the way,some international business. That was the way we were thinking; that’s the way the
organization was structured.
Today, if you talk to customers in the UK, Canada, or Australia, they think of Kellogg’s as being based in the
U.K or Canada or Australia. We’re global in organizational structure and business but also multidomestic.
We now have a number of truly global brands (Frosted Flakes and Corn Flakes, with Froot Loopa and Rice
Krispies close, and Frosted Mini-Wheats and Honey Nut loops moving rapidly).There used to be slight
variations in our food around the world, but now you’ll recognize the product wherever you go.
Expanding into many markets will involve more than trying to gain share from other cereal marketers. It
will require altering long—held traditions:
In Eastern Europe it’s going to he pretty slow because we’re going to have to go in there and literally create
the habit—much as we did in Germany 25 years ago or France 20 years ago. Cereal is a whole new breakfast
concept for these people. However, they do eat breakfast in those countries, and they eat fairly substantial
breakfasts.
In Asia, consumers are used to eating something warm, soft, and savory for breakfast—and we’re going to sell
them something that’s cold, crisp, and sweet or bran tasting. That’s quite a difference.
The challenge is made greater by the presence of aggressive competition in many developed or develop-ing
markets. Competition is particularly intense in Europe where Nestle and General Mills formed a joint venture
called Cereal Partners Worldwide. Langbo characterizes the new competitor this way:
They are a very formidable competitor with Nestle’s distribution strength and knowledge of the European
market and General Mills’ technology and cereal marketing expertise.
The result of the entry of the new competitor, which spent an estimated $35 to $50 million in advertising in the
top six European markets, and the response of existing firms such as Kellogg was an increase in the growth
rate of total cereal sales as well as share erosion among the weaker brands.
Competition is strong even in some countries where consumption is low. For example, in Japan, with
consumption at four bowls per year per person, compared to 10 pounds in the United States, there are more
than 100 products fighting for shelf space.
According to Langbo, a global brand requires a core position strategy or product benefit that will work in
multiple countries and local execution of that idea to reflect local attitudes. The key ideas for three of
Kellogg’s global or near-global brands are described by Langbo in the following paragraphs.
Page 1 Out of 1
Frosted Flakes
Frosted Flakes is based on the concept of vitality. This idea originated in the United States but is a universal
idea that both translates and travels well. Because the product has a special appeal to children, the cultural
differences are not so pronounced. Tony the Tiger illustrates the vitality theme in a universally understandable
manner. Tony is loved throughout the world symborizing appeals that are truly global. We use Tony and he
vitality message everywhere from the United States to Taiwan in Argentina.
Corn Flakes
The basic positioning concept for Corn Flakes is simple, unadulterated food that tastes surprisingly good. This
concept also has universal appeal. It is typically the first product we introduce in a new market, It is the
foundation of our line, and it is the world’s most popular cereal.
All-Bran
The value proposition for All-Bran is the health benefits of fiber in the diet. This proposition does not have
universal appeal without development. The concept of the value of fiber in the diet is new to many countries
and is often resisted.
In 1984, we began a massive campaign to countries where the benefits of fiber were not widely accepted.
campaign varied across countries due to differences in the attitudes of local medical and nutritional
professionals, specific diseases that were most on the minds of the local population, and local restrictions on
health claims. However, the basic approach was to educate and support the medical and nutritional community
in each country. We would sponsor symposia on dietary fiber. As a country’s experts became convinced of the
value of fiber, they told their story in their academic press, the general press, and in public service
announcements. Today, despite competition from many other high-fiber cereals., All-Bran is one of the top 15
cereals worldwide.
Questions
1. What type of innovation would cold cereal be to a country not accustomed to this type of food?
2. Conduct an innovation analysis based for cold cereal in China.
3. What values are involved in the consumption of product such as breakfast cereal?
4. What values would support and what values would harm the chances of Kellogg succeeding the cold cereal
in
the following countries? What other factors would be important?
a. China
b. Mexico
c. Japan
d. France
5. What nonverbal communications factors would be important in developing an advertising campaign for a
cold cereal?
6. Develop a marketing program to market one of Kellogg’s cold cereals in the following countries.
a. China
b. Mexico
c. Japan
d. France
7. Why does Tony the Tiger “travel” so well’?
8. Evaluate the communications process Kellogg used to gain acceptance for All-Bran. Could a version of this
work for gaining acceptance of cold cereals in China?
Page 1 Out of 1
Case – 2 (20 Marks)
Boots with six – inch heels are the latest fashion rage among young Japanese women. Several teens
have died after tripping over their shoes and fracturing their skulls. However, followers of the style
claim they are willing to risk twisted ankles, broken bones, bruised faces, and other dangers
associated with the platform shoes. One teenager said, “ I’ve fallen and twisted my ankle many
times, but they are so cute that I won’t give them up until they go out of fashion.” Many consumers
around the world seem to be willing to suffer for the sake of fashion. Others argue that we are merely
pawns in the hands of designers, who conspire to force unwieldy fashions down our throats.
Questions
1.)What do you think ?
2.) What is and what should be the role of fashion in our society ?
3.) How important is it for people to be in style ?
4.) What are the pros and cons of keeping up with the latest fashions ? Do you believe that we are at
the mercy of designers.
CASE – 3 (6 Marks)
You are the Business Development Manager of an Engineering company that has developed a highly advanced
machine for packaging of pharmaceutical products. The machine saves a lot of time and cost involved in the
packaging as it is faster compared to other machines, it consumes lesser electricity and requires lesser
manpower. One of your clients, N.K. Pharma is a 1200 crores pharmaceutical company having its head office
in Mumbai. The company has six manufacturing units, one in Tarapur, two at Vapi, one in Nagpur, one in
Chennai and the newest one at Baddi in Haryana. Each unit is led by a Factory Manager, who reports to the
GM – Production who sits at the head office. The GM – Production, GM – R & D, GM – Marketing, and G.M.
HRM report to the COO. The Accounts and Finance functions report directly to the COO. The COO is a 36
year old enthusiastic leader who enjoys immense trust of the MD (who is also the founder of the organization).
The company sells through a network of 400 Medical Representatives spread all over India.
Questions
1 Analyze the buying behaviour of this organization with respect to your product.
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Case -4 (10 Marks)
THE ECONOMIC PARADIGM
The 1940s view of the consumer in the marketplace was rooted in economic theory. Most scholars of
economics probably still hold to the theory of Economic Man. In this paradigm, purchasing decisions
are the result of largely "rational" and conscious economic calculations. The individual buyer seeks to
spend his income on those goods that will deliver the most utility (satisfaction) according to his tastes
and relative prices. This is a normative rather than a descriptive model of behavior, because logical
norms are provided for buyers who want to be "rational."
The model suggests useful behavioral hypotheses, such as: (a) the lower the price of the product, the
higher the sales; (b) the lower the price of substitute products, the lower their sales; (c) the lower the
price of complementary products, the higher their sales, provided they are not "inferior" goods; and
(d) the higher the promotional expenditures the higher the sales. In striving to meet these hypotheses,
consumers are not only assumed to be aware of all available alternatives in the marketplace; they are
also assumed to be able to rationally rank order the available alternatives by preferences. This is the
case of perfect information in the marketplace and unlimited ability of tile consumer.
In applying these assumptions to actual consumption, several problems became apparent. First of all,
consumers do not have perfect information in the marketplace. Second, they do not all have the same
information about the existing alternatives or attributes of known alternatives. instead, each consumer
has fragmented knowledge of his or her own set of known alternatives; as a result, consumers can not
always rank a set of alternatives available to them. In addition, preferences often violate utility
theory, because different people prefer different styles, have different tastes, and hence make choices
built on preferences rather than objective information such as price.
Problems arise with applying economic theories to gifts. Increasing the price of goods may actually
make them more desirable, defying basic economic theory. Hence, inverted demand curves reflect
products where increasing prices stimulate increasing sales. Perfume is a perfect example of this type
of good. Most perfume or cologne is bought as a gift, and the connotations of bringing home a $2
bottle of cologne or a $50 bottle for a loved one are implicit. A relationship may not last upon receipt
of the cheaper good. Hence the economic model ignores the fundamental question of how product
and brand preferences are formed.
THE IRRATIONAL CONSUMER
After becoming aware that goods have "hidden meaning," scholars of consumer behavior in the
1950s took to the notion of the consumer as an irrational, impulsive decision maker. Consumers were
seen as passive, open, and vulnerable to external influences. This position was an obvious reaction to
the "economic man" and also represented a time when business schools were developing. Earlier,
faculty trained in economics were the first to be hired, but in the 1950s psychologists were added to
the payroll. Their insights from Freud to Maslow, from personality to motivation theory, seemed ever
so relevant to our study of the consumer.
The two major psychological theories underlying this era were the Pavlovian learning model and the
Freudian psychoanalytic model. The Pavlovian model is based on four central concepts-those of
drive, cue, response, and reinforcement. Drive or motives can be primary, such as hunger and sex, or
secondary, such as fear. A drive is very general and impels a particular response only in relation to a
particular configuration of cues. The Pavlovian model emphasizes the desirability of repetition in
advertising. Repetition fights the tendency for learned responses to weaken in the absence of practice
and provides reinforcement.
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The model also provides guidelines for copy strategy. To be effective as a cue, an advertisement must
arouse strong drives in the person. For candy bars, it may be hunger; for safety belts, fear; for hair
tonics, sex; for automobiles, status.
In the Freudian psychoanalytic model, the guilt or shame man feels toward his sexual urges causes
him to repress them from his consciousness. Through rationalization and sublimation, these urges are
denied or become transmuted into socially approved expressions. These urges are never eliminated or
under perfect control and they emerge in dreams, in slips of the tongue, or in neurotic or obsessive
behavior.
Because of these urges, the consumer's motivations for behavior are not obvious or deeply
understood. As a result, Freudian psychology gave consumer behavior the tool of in-depth
interviewing to get at the motives and symbols behind a purchase. If a consumer is asked why lie
purchased an expensive foreign sports car, he may reply that he likes its maneuverability and its
looks. At a deeper level he may have purchased the car to impress others, or to feel young again. At a
still deeper level, lie may be purchasing the sports car to achieve substitute gratification for
unsatisfied sexual strivings.
Other Freudian consumer research findings included men wanting their cigars to be odoriferous to
prove they were masculine, and women being very serious when baking cakes because unconsciously
they were going through the symbolic act of birth. These theories were certainly more interesting
reading than the graphs and curves of economics.
One major study of this era (Haire 1950) found that when a shopping list included instant coffee
rather than drip grind, the owner of the list was perceived to be a very different person. The owner of
the list with instant coffee was lazy, a poor planner, a spendthrift, and a bad wife. Meanwhile, the
owner of the list with drip coffee was perceived to be thrifty and a good wife. Fortunately a
replication of this study was done in 1970 and housewives were no longer judged by their coffee
(Wilkie 1986). However, Haire's study provided good insight to the fact that products have meaning
and significance that go far beyond the physical attributes of the products themselves. Furthermore,
these hidden values were thought to be a major influence on consumer decisions. To tap into the
consumers' hidden motives for purchase, more indirect methods of data gathering were necessary.
Toward the end of the 1950s an empirical article started to throw doubt on the heavy reliance on
psychological perspectives. A study by Evans (1959) sought to determine the personality
characteristics of Ford versus Chevrolet owners. In the 1950s these were the major automobile
manufacturers. Wider choice and Japanese imports did not exist. If the differences between the cars
were not major, the train of thought was that the personality of the owner must be significantly
different and motivate the consumer to buy one brand or the other. A carefully controlled survey of
personality characteristics of 1,600 owners of Fords and Chevrolets showed no major significant
differences in personality characteristics of the car owners. The importance of this line of behavioral
research to consumer products was questioned. By this time, in the early and mid-1960s, business
schools were producing their own scholars and faculty. Researchers were trained by business schools
rather than only economics and psychology departments. Researchers of consumer behavior gained
from this marriage of economics and psychology and began to develop their own theories of the
consumer.
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THE PROBLEM SOLVER
In the 1960s John Kennedy became president of the United States and gave the consumer elevated
status. In his message to Congress on March 15, 1962, he put forth the Consumer Bill of Rights
(1963) as a social contract between business and society. Government was tile ultimate guarantor of
these rights, which included the right to safety, the right to be informed, the right to choose, and the
right to be heard (redress). The government took Kennedy seriously and began an activist role
The marketplace was becoming more diversified. The concept of market segmentation became even
more important. Goods that the consumer ted were now being produced, rather than just the goods
the manufacturer wanted to make. Choice prevailed for the consumer, and the consumer was
recognized by the highest official in the country. Consumers had the right to he informed and
protected.
The government poured millions of dollars into departments whose goal was to make sure the
consumer had access to information. The Federal Trade Commission flourished. Labels were put on
products listing all ingredients. Advertising was regulated and measured; if it was misleading, then
corrective advertising was necessary. Information was in great supply to the consumer. Ralph Nader,
with his book Unsafe At Any Speed, emerged as the hero of the 1970s, taking on corporate giants in
the name of the little man. Consumerism was everywhere.
As a result of this environment, consumer behavior researchers started to see the consumer as a
"cognitive man." The irrational psychotic purchaser of the 1950s and early 1960s was left behind.
The consumer was now a problem solver. He or she was receptive to products or services that
consciously met his or her needs. Consumers were thought to actively search for information about
the products and services they bought. Consumer Reports was born. Consumers were seen as striving
to make the best decisions possible given their limitations.
However, consumer researchers told us that even though consumers are given information, they often
fail to use it to make decisions. In an initial experiment (Jacoby, Speller, and Kohn 1974) and a
follow-up (Scammon 1975), consumers were given objective product information concerning several
brands available in the marketplace. The results of the first study showed that consumers felt better
about their brand selections with more information, but actually made poorer choices. The study by
Scammon corrected for weaknesses in the original study but still found that recall of product
attributes decreased with increasing information. Consumers were still limited by the extent of their
knowledge about the marketplace and their capacity to store information about the marketplace in
short-term memory. Miller's (1956) rule of seven plus or minus two) pieces of information as
cognitive capacity held for the consumer.
The information in the marketplace was not organized for the ease of the consumer. Unit pricing was
fine, but comparing prices across brands and sizes for products was quite a challenge. Only when unit
prices were posted on one sheet in a simple linear manner by decreasing prices across all sizes and
brands did the consumers shift in their decision making toward lower-priced brands. You can imagine
the national brand manufacturer's enthusiasm toward presentation of this information at point of
purchase.
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The overriding conclusion of consumer research in the 1970s was that people can only attend to
limited information at one point in time. The consumers' existing skills, habits, reflexes, values, and
goals shape the way they search and use information to make their decisions. The 1970s told us that
consumers' skills were limited, but at the same time the number of choices available to the consumer
kept increasing. More and more choices became available in the 1980s.
THE COGNITIVE MISER
Today's consumer uses decision-making skills originally developed in the 1970s, but the 1980s
consumer went farther than just recognizing man's cognitive limitations. Researchers have labelled
the low-involvement decision maker (or cognitive miser) as unable or unwilling to engage in
extensive decision-making activities in many cases and settle instead for "satisfactory" decisions
(Olshavsky and Granbois 1979). There is too much choice and not enough discretionary time to
engage in extended cognitive effort for purchases. Instead the consumer develops rules of thumb or
heuristics to simplify purchase behavior. An in-store study showed that consumers go through almost
no brand price comparison behavior (Hoyer 1984). Rules such as "buy the cheapest," "buy name
brands," or "buy what my friend bought" give the consumer a satisfactory choice in the marketplace
that supplants an optimal choice. This is a very adaptive and rational course for the consumer to have
taken in the 1980s, given the cluttered choice environment with little time for decision making and
virtually no support in information handling. The cost of thinking was recognized as a limiting factor
in processing choices.
The 1980s brought a focus on business and conservatism, and many came to feel that governmental
regulation was more of a hindrance than a help. This was expressed in the election of Ronald Reagan.
As quickly as Kennedy had made the consumer important, Reagan made him unimportant. With
strokes of a pen, the FTC experienced a sharp reduction in its budget and influence. Whole
departments set up by the government to service the consumer were abandoned. Consumer programs
developed for the 1970s folded.
The 1980s were for business. This focus was a result of several factors. First, the "baby boomer
bulge" had a greater number of people for a smaller number of jobs. In the early 1970s a college
graduate decided what job to take, or perhaps a trip to Europe, then work. In the early 1980s the
concern was for getting any job at all. The economy was slow and competition was stiff. Business
looked to the MBA to turn companies around. The student was serious and conservative due to the
competitive environment. Business and engineering were in; the humanities were out. The
marketplace became more competitive, more diversified. Deregulation prevailed.
Too many goods cluttered too many store shelves for the consumer. For example, the average number
of products in supermarkets soared from 13,000 in 1981 to 21,000 in 1987. There are said to he 400
different brands of beer available to the American beer drinker. A new car purchaser might have 300
different types of cars and light trucks, domestic and imported, to choose from.
Along with the "over choice" and market diversity of the 1980s came decreased leisure time for the
consumer, not more leisure time as predicted in the 1940s. The number of free hours a person
possesses decreased from four to one since the 1970s. The reason for this is that the average time
spent at work has increased seven to eight hours a week since 1978 (Stern 1987). More than 50
percent of all women are working, so household duties are done after 6 p.m. or on weekends. Single
working mothers have virtually no free time and can't take care of all they want to do. This scenario
has led to a demand for convenience products and convenience shopping. Home catalogs, home TV
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shopping, home computer shopping, and home shopping parties are part of this easier access to goods
that will prevail in the 1990s. The efficiency of in-home shopping, especially through direct
marketing, is exemplified by the fact that American Express sold 7 percent of all the luggage bought
in the U.S. by sending mailings to affluent cardholders whose charge records showed they spent
heavily on travel-related merchandise.
This the cognitive miser of the 1980s is a product of decreased time for shopping decisions and
increased choice in the marketplace. It is an adaptive strategy to suit the decision-making
environment.
THE COLLECTIVE BUYER OF THE 1990s
The focus on individual decision processes for personal purchase of products and services will be
replaced by a more collective decision-making style during the 1990s. This will be caused by the
changing cultural patterns of North America combined with the decrease in purchasing power of the
individual consumer. The culture of North America is changing due to: (1) the rapid increase in the
percent of elderly people who are neither healthy nor wealthy; (2) the aging of the baby boomers,
causing a shift in values and needs; and (3) increased immigration from Asian cultures with high
birth rates to offset the North American decline in population. All three categories of this cultural
shift will have to rely on joint decisions for purchase of goods and services, since goods and services
will be shifting to a collective consumption style rather than individual consumption in the North
American marketplace.
Individuals will combine households in an increasing rate to make life more affordable. The evidence
that this joint living may be a trend for the future is exemplified by the fact that 6.2 percent of all
employed people are working two jobs, mainly to meet living expenses. When the economy turns
down these extra jobs will not be available, and people will have to decrease their standard of living
to meet day-to-day expenses. More unmarried people will share apartments, more single-parent
families will couple up, and more children will live at home longer. Thus, more people will be
sharing consumer goods just due to living arrangements. Also, through the changing face of North
American consumers, the marketplace will continue to change and supply more and more services for
these groups. The changing face of the consumer will alter the marketplace and the mode of decision
making.
Much has been written about the marketing opportunities for the senior segment. Right now
approximately 7.3 percent of the population is over 65. By the year 2000, this group will increase by
20 percent, making it the fastest-growing segment of our population. This is one reason why
marketers focus on the elderly. However, this group is not all that wealthy or all that healthy. It is
estimated that 80 percent of people over 65 have chronic health problems, and 16 percent have severe
physical problems. One in five Americans over the age of 85 resides in a nursing home.
The Baby Boomers
A full one-third of the population is bulging at middle age. In the year 2000 they will be 36 to 54
years old and at the middle of peak earnings. They are important to our view of consumer behavior
because they will head 44 percent of all households and still account for a majority of purchasing
power. Due to the conflicting structure of the population versus the corporate culture, there will be
less moving around among this group, and they will be more stable in their jobs. Hence, their values
and attitudes will change dramatically to reflect this stability. The collective decision-making style
will be based on their stable environment.
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Questions
Discuss as to how the consumer behavior has evolved post 1950?
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