influences on marketing

Question 1

Psychological factors

Answer 1

Influences within an individual that affect their buying behaviour

These operate internally, but can be affected by external sociocultural factors, therefore, it’s important businesses understand these factors

Question 2

Psychological factors: importance for business

Answer 2

Cause: if businesses are aware of the factors that influence customer choice, they can predict trends and customer reactions.

Effect: this allows marketers to create more effective and profitable strategies that appeal directly to the customer’s motives and behaviour

The more marketers understand how their customers are influenced, the more control they have over their choices

Question 3

Psychological factors: perception

Answer 3

The process that people use to filter, organise and attribute meaning to external stimuli

Perception is important for describing how people see a particular product or brand

Importance for business:

• Marketing managers try to create a favourable perception of their product by associating it with positive things
• Advertising can achieve this through the creation of different images for a product

Question 4

Psychological factors: motives

Answer 4

The reasons that individuals make certain decisions or act in specific ways

Comfort, health, safety and approval are all examples of motives that cause customers to choose some products over others

Importance for business:

Advertising can help businesses influence customer choice by attempting to motivate customers to buy products through highlighting relevant motives

Question 5

Psychological factors: attitudes

Answer 5

An individual’s relatively stable and consistent feelings or thoughts towards an object, activity or business

Importance for business

Cause: customer attitudes affect the success of marketing strategies

Effect: negative attitudes toward a business should change its strategy

How is this important: businesses can spread positive word of mouth, creating more trusting customer attitudes

Question 6

Psychological factors: personality and self image

Answer 6

Personality: the behaviours and characteristics that make up a person

Self-image: how a person view themselves, or wants others to view them

Importance for business

Marketers take advantage of people’s desire to express themselves by highlighting the value of their products and aligning them to specific personality traits

Question 7

Psychological factors: learning

Answer 7

Occurs when new information or experiences causes a change in individual behaviour

Importance for business

Cause: Businesses who market products successfully assist customers in learning about them, encouraging brand loyalty

Effect: Brand loyalty exists when consumers show a favourable attitude toward a particular brand, choosing one brand’s products over another’s

Question 8

Sociocultural factors

Answer 8

Sociocultural factors are exerted by other people or groups, but still impact an individual’s purchasing decisions

Question 9

Sociocultural factors: social class

Answer 9

Social class: a person’s relative rank in society

People from a high social class are usually willing to spend more on prestigious products and ‘wants’

People from a low social class may buy ‘cheap’ products and spend more on essential items, or ‘needs’

Effect on business

The type, quality and quantity of products consumers buy can depend on social class

Businesses must align their products and marketing strategies with a target market who will be willing and able to purchase goods and services based on their social class

Question 10

Sociocultural factors: Culture and subculture

Answer 10

Culture: the system of learning values, beliefs, behaviours and traditions of a society

Subculture: a group of individuals with similar qualities that distinguish them from the broader societal culture

They infiltrate everything we do in life, including what we choose to wear, eat or do

Effect on business

Businesses have to adopt to changes in cultural values to appeal to their target markets

Question 11

Sociocultural factors: family and roles

Answer 11

Family and roles: who is responsible for making certain purchasing decisions in the family

Pester power: the influence of children on their parents’ purchasing decisions

Effect on business

This affect how businesses develop their marketing strategies, especially advertising

By being aware of who is responsible for certain purchases, advertisements can be catered to the individual

Question 12

Sociocultural factors: reference groups

Answer 12

Reference groups: any group who a person identifies closely with, and looks to for guidance regarding attitudes, values and beliefs

One member’s buying behaviour may change rest of the group’s beliefs or attitudes

Effect on business

Marketing managers should aim to be able to create trends through reference groups, leading to higher brand awareness and sales

Question 13

Economic influences

Answer 13

A number of economic influences play into whether a business succeeds or fails

Effects on businesses

Economic conditions impact their ability to compete as a number of elements are affected: number of competitors, cost of inputs and sales volume

Effect on customers

The state of the economy influences their willingness, and ability, to spend their money

Question 14

Economic influences: boom

Answer 14

Boom: a period of low unemployment and rising incomes

Characteristics

Expanding economy, increased optimism, increased competition, production and promotion, willing customers and high sales potential

Question 15

Economic influences: bust

Answer 15

Bust/recession: when unemployment is high and incomes fall

Characteristics

Decline in economic activity, increased pessimism, low spending levels, price-conscious customers, new marketing plans and maintain market share

Question 16

Government influences

Answer 16

Governments can influence customer spending habits in two key ways

Economic policy (indirect influence)

Laws and regulations (more direct impact)

Question 17

Government influences: economic policy

Answer 17

Governments can implement policies that allow them to control spending

Depending on the existing economic conditions, policies will expand, or contract, the level of economic activity to try and stabilise the economy

Eg. increasing tax rates, lowering interest rates

Question 18

Government influences: regulation and laws

Answer 18

Regulatory forces include laws, and bodies, who are responsible for enforcing these laws. Not following these regulations can result in financial penalties that will impact profits.

eg law. competition and consumer act 2010 prohibits false advertising

eg regulation. age restrictions for drinking alcohol

Question 19

Purpose of Consumer Laws

Answer 19

Consumer laws protect the rights of consumers and identify the responsibilities of businesses

They restrict how businesses sell products by preventing them from acting dishonestly

Importance for businesses

• Businesses need to know the laws relevant to them, and keep up with any changes to the law
• Staff must be trained to sell their products accurately and understand what customers rights are if the products does not meet expectations
• It is the business’ responsibility to understand all relevant consumer laws and apply them to marketing practices

Question 20

Key consumer laws: ACL (Australian Consumer Law 2011)

Answer 20

Impact for businesses and customers

It is a single, national law, meaning greater clarity and consistency for marketing practices across the country

ACL ensures all customers have the same rights, and all Australian businesses are subject to the same regulations

This act is enforced by the Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investment Commission (ASIC), and any relevant consumer agency

Question 21

Key consumer laws: CCA (Competition and consumer act 2010)

Answer 21

Impact for businesses and customers

The CCA affects marketing, and overall business activities in Australia, including the commercial activities of the government

• It protects consumer against unfair practices (such as misleading customers or purposely lying)
• Ensures businesses do not restrict competition or are unfair (gives consumers choice and stimulates economic growth)

This act is enforced by the Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investment Commission (ASIC), and any relevant consumer agency

Question 22

Breaches

Answer 22

Neglecting to obey the law can result in serious financial or other penalties

Effects on business

Cost, time and effort - if a business breaks consumer law, they have to deal with cost, time and effort of having to refund the customer, or repair and replace their items

Damaged reputation - Large fines, legal fees or imprisonment would not only impact profits in the short-run, but can harm relationships with customers by breaching trust. The business’s reputation could be damaged, which would reduce sales and harm the survival of the business in the long-run.

Question 23

Breaches: ACCC actions

Answer 23

In the event of a breach, the ACCC can take civil or criminal action against those involved:

• Infringement notices - when businesses make false claims about products the ACCC can issue infringement notices
• Public warning notices - the ACCC can issue public warning notices alerting consumers when they suspect illegal activities are taking place
• Court penalties - customers can sue the business for compensation (under the CCA, courts can impose penalties of up to $1.1 million for companies or over $200,000 for individual illegal behaviour)

It’s expensive and inconvenient when businesses breach the law, so it’s best to obey it!

Question 24

Deceptive and misleading advertising

Answer 24

Deceptive advertising creates a false impression of a product and what it can do, so customers are misled

The Competition and Consumer Act 2010 makes deceptive advertising illegal, but some businesses still engage in this unfair practice

Eg. greenwashing, bait and switch, dishonest advertising

Question 25

Price discrimination

Answer 25

Price discrimination is when businesses set different prices for the same product in different markets, unfairly providing favourable treatment for certain customers

Price discrimination is illegal if it reduces competition, or if there is no valid reason for it

Question 26

Price discrimination: when is it legal?

Answer 26

According to the Australian Competition and Consumer Law (2011), price discrimination is legal if:

• There are higher transport or production costs in different markets
• It is an act of good faith to meet a price offered by a competitor

Question 27

Implied conditions

Answer 27

Implied conditions are the terms of a contract that are assumed to exist, even though they may might not be verbally spoken or written down

The Australian Consumer Law (2011) replaced implied conditions with consumer guarantees (sets of rights and remedies for defective products)

Question 28

Implied conditions: acceptable quality

Answer 28

• The product is fit for purpose
• The product is well-made and free from defects
• The product is safe and durable

Acceptable quality considers price, advertising, and normal expectations of the product

Question 29

Warranties

Answer 29

A warranty is a business’s promise to fix any defects in the goods or services they offer

If goods are defective, or services aren’t carried out with due care or skill, the business must compensate customers

All businesses must provide warranties and clearly states its terms and conditions

The Competition and Consumer Act 2010 outlines how making false or misleading statements about the existence, exclusion or conditions of a warranty is illegal

Businesses can use warranties as a marketing tool

• By providing longer warranties or better features than competitors, businesses can gain an advantages
• Warranties mean that customers can enjoy a sense of confidence and trust in the business and its products

Question 30

Warranties: Refund and Exchanges

Answer 30

When a product is defective, the main solutions are either a monetary refund or an exchange for a different product

If a customer changes their mind or damages the product after they bought it, refunds are not an obligation

Businesses are required to provide refunds when products:

• Have faults
• Don’t match their description
• Fail to do their job

Question 31

Ethical behaviour

Answer 31

Behaviour that exceeds legal requirements (harder to define than laws)

Some marketers might engage in behaviour that is legal, but still unethical

This can be just as damaging to a business’ reputation and profits

Question 32

Ethical criticisms of marketing

Answer 32

The marketing function often comes under fire for its practices that are considered unethical

Question 33

Ethical criticisms of marketing: materialism

Answer 33

Marketing can utilise and encourage societal values of materialism to turn a want into a need, even when it isn’t one

Question 34

Ethical criticisms of marketing: stereotypes

Answer 34

Marketing frequently uses stereotypical portrayals of men and women, which can be viewed as offensive or ignorant

Question 35

Ethical criticisms of marketing: invasion of privacy

Answer 35

The internet tracks a person’s activities and uses the data to create targeted ads

Question 36

Marketing Code of Ethics

Answer 36

To combat ethical criticisms and ensure marketers act ethically, a code of ethics was developed

The Australian Association of National Advertisers’ Code of Ethics was implemented in 2012

How it works: breach → complaint → assessment → removal

Self regulation

Much of advertising is governed through self-regulation, with the industry or business controlling its own practices rather than the ASB doing so

It’s important businesses know what practices are deemed unethical so they can avoid them.

Customer benefits: The consumer is not subject to unethical ads

Business benefits: The business doesn’t have to spend time and money creating ads that then have to be removed

Question 37

Marketing code of ethics: self regulation

Answer 37

Much of advertising is governed through self-regulation, with the industry or business controlling its own practices rather than the ASB doing so

It’s important businesses know what practices are deemed unethical so they can avoid them.

Customer benefits: The consumer is not subject to unethical ads

Business benefits: The business doesn’t have to spend time and money creating ads that then have to be removed

Question 38

Importance of ethical behaviour

Answer 38

Acting ethically can create great opportunities for marketing campaigns and businesses

Benefits of acting ethically

• Positive publicity
• Customer loyalty
• High sales/profits
• Strong employee relations
• Attracts investors

All marketers should engage in ethical behaviour to strengthen relationships with key stakeholders, including customers, employees and shareholders

Question 39

Importance of government regulation

Answer 39

Government regulation in marketing:

• Protects consumers and businesses
• Encourages competition and fair trade
• Positive societal impact

Question 40

Truth and accuracy in advertising

Answer 40

If businesses do not create truthful and accurate advertisements, they can be held socially responsible for deceiving consumers.

Marketing managers should be careful to ensure advertisements portray only truthful messages about their products in clear and undeceiving ways.

Some businesses lie to their customers in subtle ways such as concealed facts, vague statements and exaggerated claims

Question 41

Truth and accuracy in advertising: concealed facts

Answer 41

Information purposely excluded from an advert

Question 42

Truth and accuracy in advertising: vague statements

Answer 42

Words or promises that are so unclear that most people won’t know what is being communicated

The customer has to assume what the message is

Question 43

Truth and accuracy in advertising: exaggerated claims

Answer 43

Also known as puffery

Claims that most people wouldn’t perceive as factual, but are still misleading

Question 44

Good taste in advertising

Answer 44

Because of its subjective nature, marketers should ensure advertising is sensitive to the beliefs and values of all people

Eg. one person may find a ad funny while another person may find it offensive

Question 45

Products that may damage health

Answer 45

Social responsibility has led to developments in marketing around areas like: product safety, gambling, alcohol

The marketing of junk food, especially to children is particularly controversial

Question 46

Engaging in fair competition

Answer 46

A competitive environment provides consumers with choice when it comes to the price and quality of goods and services

If competition was restricted, some business might push up their prices and reduce the quality of their products. Therefore, customers will not receive value for money.

To maintain a high level of competition, the Competition and Consumer Act 2010 contains provisions that deter anti-competitive behaviours

Question 47

Engaging in fair competition: anti-competitive conduct examples

Answer 47

Cartel conduct: businesses work together rather than compete against each other

Misusing market power: large corporations take advantage of their position

Predatory pricing: setting extremely low prices to force weaker competitors out of the market

Question 48

Sugging

Answer 48

S = selling, U = under, G = guise of a survey

Sugging is a sales approach disguised as market research. It is unethical, not illegal.

Why is it unethical: it intentionally misrepresents the purpose of an activity to generate sales leads. Additionally, it could be classified as an invasion of privacy, and is deceptive to the consumer.

Effect of sugging: Trust. It significantly reduces the trust customers place in businesses and less people are willing to participate in actual market research.