influences on marketing Flashcards
Psychological factors
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
Psychological factors: importance for business
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
Psychological factors: perception
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
Psychological factors: motives
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
Psychological factors: attitudes
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
Psychological factors: personality and self image
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
Psychological factors: learning
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
Sociocultural factors
Sociocultural factors are exerted by other people or groups, but still impact an individual’s purchasing decisions
Sociocultural factors: social class
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
Sociocultural factors: Culture and subculture
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
Sociocultural factors: family and roles
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
Sociocultural factors: reference groups
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
Economic influences
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
Economic influences: boom
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
Economic influences: bust
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
Government influences
Governments can influence customer spending habits in two key ways
Economic policy (indirect influence)
Laws and regulations (more direct impact)
Government influences: economic policy
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
Government influences: regulation and laws
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
Purpose of Consumer Laws
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
Key consumer laws: ACL (Australian Consumer Law 2011)
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
Key consumer laws: CCA (Competition and consumer act 2010)
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
Breaches
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.
Breaches: ACCC actions
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!
Deceptive and misleading advertising
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
Price discrimination
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
Price discrimination: when is it legal?
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
Implied conditions
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)
Implied conditions: acceptable quality
- 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
Warranties
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
Warranties: Refund and Exchanges
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
Ethical behaviour
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
Ethical criticisms of marketing
The marketing function often comes under fire for its practices that are considered unethical
Ethical criticisms of marketing: materialism
Marketing can utilise and encourage societal values of materialism to turn a want into a need, even when it isn’t one
Ethical criticisms of marketing: stereotypes
Marketing frequently uses stereotypical portrayals of men and women, which can be viewed as offensive or ignorant
Ethical criticisms of marketing: invasion of privacy
The internet tracks a person’s activities and uses the data to create targeted ads
Marketing Code of Ethics
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
Marketing code of ethics: 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
Importance of ethical behaviour
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
Importance of government regulation
Government regulation in marketing:
- Protects consumers and businesses
- Encourages competition and fair trade
- Positive societal impact
Truth and accuracy in advertising
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
Truth and accuracy in advertising: concealed facts
Information purposely excluded from an advert
Truth and accuracy in advertising: vague statements
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
Truth and accuracy in advertising: exaggerated claims
Also known as puffery
Claims that most people wouldn’t perceive as factual, but are still misleading
Good taste in advertising
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
Products that may damage health
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
Engaging in fair competition
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
Engaging in fair competition: anti-competitive conduct examples
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
Sugging
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.
