Lecture 3

Question 1

Define perception

Answer 1

= process of receiving, selecting and interpreting stimuli from the senses to form a meaningful and coherent picture of the world
- How consumers form their own private view of the world around them

Question 2

Explain the absolute and differential thresholds and the just noticeable difference, and how marketers can overcome these

Answer 2

Absolute Threshold = lowest level at which we can experience a sensation

• The point at which we can detect a difference between something and nothing is the absolute threshold for that stimulus
• As exposure to a sensation increases, we experience adaptation (notice the sensation less), our absolute threshold increases (sensations become increasingly dulled) eg. the longer we drive, the less likely we are to notice billboards/New York times: there are so many billboards with advertising that we can’t process each one individually
• > Advertisers may use periods of silence, loud noises or contrasting colours to try and stand out from the rest (attention-seeking devices)
• > Change advertising campaigns regularly because know that consumers will get so used to their current ads that they will no longer see them (provide enough sensory input to be noted so try and vary the execution of their advertising to maintain impact)

Differential Threshold = minimum difference that can be detected between two stimuli (just noticeable difference)
- Stronger the initial stimulus, greater the additional intensity needed for the second stimulus to be perceived as being different = Weber’s Law
- An additional level of stimulus equivalent to the just noticeable difference must be added for the majority of people to perceive a difference between the resulting stimulus and the initial stimulus (for basically all intensities)
o Eg. petrol goes up by a dollar vs a car price going up by $1 because of the significant percentage increase of the overall cost

• When companies change their own logo, often want to do it minimially so we don’t notice difference as are so used to a brand eg. coca cola
• > Negative changes (reducing packaging size or product quality -> should be minor and fall below jnd
• > Positive changes (larger packaging size or better quality) -> should exceed jnd
• > Use jnd to assess how much improvement to make a product
• > If jnd is exceeded by too much: may increase production costs or reduce repeat purchases
• > If jnd is not exceeded: wasted effort because changes won’t be noticed by consumers
• Marketers endeavour to determine the relevant jnd for their products for two very different reasons:
• > So that negative changes (eg. reductions in product size, increases in product price, or reduced quality) are not readily discernible to the public (below jnd)
• > Product improvements (updated packaging, larger size, lower price) are readily discernible to consumes without being wastefully extravagant (at or above jnd)

Question 3

Define positioning, outline six positioning strategies and why a brand would need to reposition

Answer 3

= the image that a brand has in mind of consumers

• Marketers try to position their brands so they are perceived in particular ways
• > Positioned as providing superior value to alternative brands
• > Positioned as being consistent with self-image of target consumer segments

POSITIONING STRATEGIES

1. Umbrella positioning = creating overall image of a company around which many products can be invidually featured
   - Most appropriate for large firms with diversified product lines
   - >Eg. McDonalds or Coca Cola
2. Positioning against competition -> highlight advantages over competitors risky
   - >Eg. Duracell lasting longer than everready super heavy duty
3. Positioning on specific benefit: highlight brand’s core benefit
   - Need to ensure consumers actually want the benefit
   - >Eg. Melt in your mouth not in your hands is something that people want to avoid but Gilettes ‘for oily hair only’ wasn’t as successful because many people didn’t recognise they had oily hair
4. Finding an ‘unowned’ position
   - fill a market niche that hasn’t been filled by other companies eg. Tesla electric cars
5. Filling several positions = protective strategy where marketers create several distinct offerings, often in the form of different brands, to serve different market niches
   - > Toyota vs Lexus - do not want them to be perceived as at all similar to Toyota, far more luxurious
6. Packaging as a positioning element = using elements of product packaging to convey particular image
   - > Eg. Aesop have very distinct, simple packaging to represent their natural ideal

Repositioning

• New competitors
• Current positioning being too close to competitor position
• Changes in market needs
• Poor implementation of original positioning goals

Question 4

Explain the six types of perceived risk

Answer 4

1. Functional risk
   - Risk the product won’t perform as expected
   - > My phone battery won’t last a full day
2. Financial risk
   - Risk the product isn’t worth the cost
   - > Will a better phone come out in a few months
3. Social risk
   - Risk that a poor product choice will result in social embarrassment
   - > My friends will laugh at my phone
4. Physical Risk
   - Risk to self and others that the product may pose
   - > Is a mobile phone safe, or does it emit harmful radiation
5. Psychological risk
   - Risk that a poor product choice will bruise the consumers ego
   - >Will I be embarrassed when I invite friends to listen to music on my five year old stereo
6. Time risk
   - Risk that the time spent in product search may be wasted if the product does not perform as expected
   - >Will I have to go through the shopping effort all over again

Question 5

Explain some strategies consumers use to reduce risk

Answer 5

= Seeking more information
- Talk with friends, ask questions of salespeople, internet search
= Brand loyal
- Avoid risk by remaining loyal to a brand which they have been already satisfied with
= Select by brand image
- Select a well-known brand (particularly if not much known about the category)
- Well-known brands offer a higher assurance of quality, dependability, performance and service
= Buying most expensive model
- Price-quality relationship (equate price with quality)
= Rely on store image
- If no other information about a product, often trust the judgement of the merchandise buyers of a reputable store and depend on them to have made careful decisions in selecting priducts for resale
- Implication of product testing, assurance of service, returns and adjustment policies in case of dissatisfaction
= Reassurance
- If uncertain, seek reassurance through money-back guarantees, government/lab test results, warranties and pre-purchase trials eg. less likely to buy a new model car without test-driving