MARKETING: Influences

Question 1

Recall 4 factors influencing customer choice

Answer 1

• Psychological
• Sociocultural
• Economic
• Government

Question 2

What are the 5 main PSYCHOLOGICAL factors?

Answer 2

• Perception
• Motives
• Attitudes
• Personality/ self-image
• Learning

Question 3

Define perception and how it affects customer’s purchasing decision

Answer 3

Perception is how individuals select, organise and interpret information. Marketing aims to make a positive impression of the product and evoke certain images that would be associated with it to stimulate buying behaviour. This is done through advertising. E.g seeing a luxury car is interpreted as a sign of achievement

Question 4

Define motives and how it affects customer’s purchasing decision

Answer 4

Motives are reasons that explain actions. Customers have various motives for buying certain products. E.g seeking a more comfortable mattress for better quality sleep, choosing a certain brand over other because it tastes better

Question 5

Define attitudes and how it affects customer’s purchasing decision

Answer 5

Attitudes are overall feelings about an object or activity. Negative attitudes towards a product will repel customers and the business will be forced to adopt new marketing strategies

Question 6

Define personality/self-image and how it affects customer’s purchasing decision

Answer 6

Personality is individual’s collection of their characteristics and behaviours. Self-image is how someone sees themselves. Both factors affect customer choice in a way that customer express themselves through the products they buy. This is why celebrities are often used to endorse products. If a consumer idolises a certain celebrity who supports a particular brand, they will associate it with success and will buy it.

Question 7

Define learning and how it affects customer’s purchasing decision

Answer 7

Learning are the changes in behaviour due to experiences and information. Positive experiences will lead to repetitive sales that lead to brand loyalty. Negative experiences will repel customers and increase the chances of choosing other competitiors. E.g you try banana blossom, you like it, you go there again to eat

Question 8

Recall the relevant case study for PSYCHOLOGICAL factors that influences customer choice

Answer 8

Coca Cola case study with Christiano Ronaldo. This case study relates to self image as a psychological factor.

Cristiano publicly removed Coca Cola bottles from the screen and declared to drink water. On this day, Coca-Cola’s shares dropped by 1.6%. That caused Coca Cola’s market value to decrease by $4 billion on that particular day.

The drop in market share suggests that people were reluctant to buy coke on that day due to the strong influence of the opinion of the celebrity.

Question 9

Define sociocultural influences

Answer 9

External forces exerted by other people and groups that affect an individuals buying behaviour

Question 10

Briefly outline each sociocultural influence and provide 1 relevant example.

Answer 10

1. Social class: socioeconomic status that is determined by demographical factors.
   Example: people of higher socioeconomic status are more willing to pay higher prices for luxury items, whereas people from lower classes prefer budget friendly alternatives.
2. Culture and subculture: Learned values, beliefs, behaviours, and traditions influencing buying behaviour.
   Example: Choosing to eat healthier alternatives on the basis of family traditions.
3. Family and roles: role-based influences that affect customer choice. Mostly stereotypical.
   Example: females shop more for groceries, laundry and healthcare products.
4. Reference groups: People that share similar attitudes, values and belives including friends and relatives.
   Example: Buying trendy fashion items influenced by friends’ preferences and styles.

Question 11

Identify and describe 2 main features of economic factors.

Answer 11

Economy mainly influences customers in a cyclic manner, that is, through economic cycle that consists of 2 main features - BOOMS and BUSTS.

Booms: when the level of economic activity is at its peak. It is characterised by high levels of employment, increased customer spending, rising incomes.

Busts: when the level of economic activity is at the bottom. It includes high unemployment rates, decreased spending, falling incomes.

Question 12

How does government influence customer choice?

Answer 12

Throught economic policies and regulatory forces. Economic policies have a direct and indirect influence on customer spending, whereas regulatory forces include laws that businesses must abide to. For instance, The Competition and Consumer Act 2010 is a single national law that influences marketing decisions.

Question 13

What are the 4 subtopics that fall under CONSUMER LAWS, INFLUENCES?

Answer 13

• Deceptive and misleading advertising
• Price discrimination
• Implied conditions
• Warranties

Question 14

What is ACL?

Answer 14

Australian Consumer Law is a national law that replaced 17 existing ones in regards to business operations and consumer safety.

Question 15

What is CCA? What is its purpose?

Answer 15

Competition and Consumer Act 2010 formerly known as Trade Practices Act 1974 (Cwlth) is a legislation that affects both consumers and businesses.
Its purpose is to:
1) Protect consumers against unfair practices such as misleading avertising etc.
2) Regulate certain trade practices that restrict competition. Government wants to ensure the number of businesses are operating at any one time in the same market, which encourages competition, keeping prices as low as possible.

Obviously any misconduct, disobedience will result in monetary penalties and imprisonment.

Question 16

List and describe at least 3 examples of deceptive and misleading advertising practices adopted by businesses.

Answer 16

The answer could include 3 of the following:
- Bait and switch advertising: the practice of advertising a few products at cheap attractable prices. When those products run out, the customers are directed to more expensive items.
- Dishonest advertising: when the features of the product advertised do not relfect the reality
- Fine print: Important conditions are written in small size font and therefore difficult to read
- Before and after: worsens “before” and enhances “after” to increase the appeal to the product
- Tests and surveys. Some advertisements make unsubstantiated claims; for example,
stating ‘9 out of 10 people’ prefer a product when no survey has been conducted
- Packaging: The size and shape of the package may give a misleading impression of the contents.

Question 17

Recall the relevant case studies in regards to MISLEADING ADVERTISING, marketing.

Answer 17

1. Nurofen case study
   Nurofen had to pay a $6 million fine for misleading their consumers. Australian Competition and Consumer Commission (ACCC) claimed that the marketing misled their customers about their Specific Pain products. The tablets in all four of their Specific Pain range (back pain, migraine, headache and period pain) were identical and contained the same active ingredient despite claiming on their packaging to treat different kinds of pain. Therefore, the Specific Pain range was not effective at treating the specific types of pain as advertised due to identical chemical composition. As a result, the business faced the monetary penalty and a negative publicity.
2. Coca Cola case study
   in 2008, Coca Cola mentioned in their “myth-busting” marketing campaign the following things:
   Myth. Makes you fat
   Myth. Rots your teeth
   Myth. Packed with caffeine.
   ACCC believed that those claims were deceptive and could trick consumers into thinking that there are no health concerns associated with coke consumptions. As a result, the business was forced to upload corrective advertisements.
   –> no monetary penalty BUT the business wasted its resources such as time and money for the creation of the corrective add

Question 18

Define price discimination

Answer 18

The setting of different prices for a product in separate markets.

Question 19

What is the aim of price discrimination?

Answer 19

The aim of price discrimination is to exploit different willingness to pay and maximise the profit according to different types of customers or conditions.
–> note: it isn’t legal according to ACL UNLESS there is a difference in the cost of getting a product to a different market or there is a difference in the product itself.

Question 20

Recall the relevant case study for PRICE DISCRIMINATION, marketing.

Answer 20

Uber case study.
Uber is engaged in price discrimination based on geographical factors and willingness to pay. This pricing system is hidden from drivers and riders and uses a machine-learning algorithm to predict travellers’ willingness to pay for its ride service and to differentiate fares across routes. For example, a customer could be charged more for travelling to wealthier suburbs or staying in a more expensive hotel.

Despite it being illegal, Uber still uses price discrimination because it is concealed and not explicit. Moreover, other taxi in the industry use similar algoriths to exploit differrent willingess to pay.

Question 21

What are implied conditions?

Answer 21

Unspoken and unwritten terms of contract that are implied. The conditions are assumed to exist whether or not they are specifically mentioned or not.

Question 22

Recall the relevant case study for IMPLIED CONDITIONS, marketing

Answer 22

Was fined $32400 for misleading representation about consumer guarantee rights. The website stated that all sale items were “yours to keep, so no returns and no exchanges”. However, under ACL all it is automatically implied that customers are entitled to receive a refund if the product is faulty.

Question 23

What is a warranty?

Answer 23

A promise made by the business to repair/refund/replace any faulty products.

Question 24

Recall relevant case study for WARRANTIES, marketing

Answer 24

IKEA’s warranties is a marketing tool that attracts customers due to long warranty periods that give the impression of high quality products. It also indicates that the business is certain in the quality of their products because of the high warranty period. IKEA offers the following:
- On the METOD kitchen system, a 25-year guarantee covering defects in material and workmanship.
- On the ENHET kitchen system, a 10-year guarantee covering defects in material and workmanship.
- Ikea bathrooms all have a 10-year guarantee whereas all shower accessories have a 3 year guarantee.
- Ikea beds have a guarantee of 10 years etc.

Question 25

Name the subtopics that are part of ethical influences (there are 4 of them)

Answer 25

• Truth, accuracy and good taste in advertising
• Products that may damage health
• Engaging in fair competition
• Sugging

Question 26

Describe at least 3 ethical concerns in marketing

Answer 26

1. Creation of needs: this is when marketing manipulates individual’s desire to constantly aquire possessions. This is done through sophisticated advertising that encourage customers to purchase whatever the firm sells.
2. Stereotypes: when advertising creates a stereotypical images in the society. E.g power tools are advertised to men, whereas kitchen tools are targeted at women.
3. Use of sex to sell products: Some adds can be oversexualising in order to create an appeal to the product through horny customer base.
4. Product placement: the inclusion of advertising in entertainment. E.g a film could include a scene of a family drinking coke, or a main character wearing apple watch etc.
5. Invasion of privacy: tracking web user’s activity and targeting them with specific advertisements that interest them

Question 27

Comment on truth and accuracy in ads

Answer 27

The truth from ads is very distorted to the point where the actual product information is either sugarcoated, omitted or vaguely stated.

Question 28

What are the three main ethical problems with truth and accuracy in advertising? Describe and provide example for each of them.

Answer 28

1.Untruths due to concealed facts: Crucial facts can be ommitted and not mentioned in the adveritising to make the product more appealling.
E.g “no sugar” cookies conceal the fact that they contain numerous sweeteners that aren’t any healthier to make up for the loss in taste.

2. Exaggerated claims: Expressed in the form of puffery (claims that cannot be proven).
   E.g shampoo is advertised as being better than other brands although there is no way to verify that.
3. Vague statements: The use of ambiguous statements to make consumers assume certain things. This allows marketers to deny any intention to deceive consumers.
   E.g the use of “helps to fight against” on medicine sounds vague and uncertain as if the product doesn’t guarantee the cure.

Question 29

What does a “good taste” in advertising mean? Provide examples.

Answer 29

Good taste in advertising is subjective because different customers might interpret info differently.

E.g sexualisation of kids with increased use of media
E.g Nivea was forced to take down their advertisement on Facebook. They were promoting “invisible antiperspirant” which had the slogan in all caps WHITE IS
PURITY. The company was forced to remove the advertisement the same day aftera number of social media users complained about the post’s racist connotations due to Nivea’s assertion of whiteness being ‘pure.

Question 30

What is the raising concern with products that may damage health?

Answer 30

Nutritionist are arguing that strategies aimed at reducing childhood obesity aren’t working. This is because fast food companies are by passing certain criteria which makes it possible to advertise junk food on tv.

Question 31

What are different ways the business in engage in unfair competition?

Answer 31

Cartel conduct: when businesses agree to act together instead of competing against one another.

Anti-competitive agreements: contracts that lessen competition.

Misuse of market power: when a company that has large market share damages or prevents a business from entering into the market.

Exclusive dealing: when one business trades with another and then imposes restrictions on them.

Question 32

What is the relevant case study for UNFAIR COMPETITION?

Answer 32

Telstra was fined $18.5 million for blocking their competitors from installing broadband equipment at their telephone exchanges, which they are legally required to do under their carrier licence.Telstra told their competitors there wasn’t any room at the exchanges and took unreasonable lengths of time to grant them access, which limited their ability to compete in the broadband market

Question 33

Define sugging. How is it bad?

Answer 33

Refers to the process of selling under the disguise of a survey. Although it isn’t illegal, it worsens the relationship with customers and raises ethical concerns regarding invasion of privacy.