CB, First Canadian Edition Solution Manual

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CHAPTER 1WHAT IS CB, AND WHY SHOULD I CARE?WHAT DO YOU THINK? POLLING QUESTIONIn any business, the customer is truly the most important person.Strongly disagree1234567Strongly agreeHave students access www.icancb.com to answer the polling questions for each chapter ofCB.Ask them to take the online poll to see how their answers compare with those of other studentstaking consumer behaviour courses across the country. Then turn to the last page of the chapterto find the What Others Have Thought box feature. This graph is a snapshot of how otherconsumer behaviour students have answered this polling question thus far.LEARNING OUTCOMESAfter studying this chapter, the student should be able to:LO1Understand marketing ethics and consumer misbehaviour.LO2Understand the meaning ofconsumptionandconsumer behaviour.LO3Describe how consumers get treated differently in various types of exchangeenvironments.LO4Explain the role of consumer behaviour in business and society.LO5Be familiar with basic approaches to studying consumer behaviour.LO6Describe why consumer behaviour is so dynamic and how recent trends affectconsumers.SUGGESTED LECTURE OPENERConsumer behaviour is driven by many things, including the weather. If your sprinkler breaksdown during a dry, hot spell, you are likely to replace it quickly. However, you might have totravel to the back of the store before you get to the product you need, passing by fans, bathingsuits, and air conditioners along the way. Savvy marketers use consumers’ seasonal needs todrive sales and promote other products. Canada’s unseasonably warm winter of 2011/12 even ledto a mini housing boom, driving home sales up 6.7% from the previous year, according toGarryMarr’s article in the March 15, 2012 edition ofThe Financial Post.KEY CONCEPTS WITH POWERPOINT®SLIDESSlide 1Slide 2Slide 3

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What can I do in class?Q:Ask students to explain the link between the recent economic downturn andconsumption.A:Answers will vary but should include discussion of the housing market,appliance and furniture purchases, fewer requests for services, and loss ofjobs.LO1.Understand marketing ethics and consumer misbehaviour.Slide 4Marketing Ethics and Consumer MisbehaviourThere are times when consumers misbehave and act in an unethical manner and there are timeswhen marketers misbehave and act unethically. Scandals, manipulative marketing practices, anddeceptive advertising can upset the value equation associated with a given exchange. Ultimately,consumers may vote with their wallets by changing their own buying behaviour and potentiallythat of family and friends, as well.Slide 5Slide 6

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LO2.Understand the meaning ofconsumptionandconsumer behaviour.Consumption and Consumer BehaviourSlide 7Slide 8Consumer Behaviour as Human BehaviourConsumer behaviouris the set of value-seeking activities that takes place as people go aboutaddressing their needs.Slide 9The Basic CB ProcessThis process is detailed in Exhibit 1.2. In this chapter, the purchase of a BlackBerry Bold isdescribed. In the first step, the consumer determines aneedfor a new cellphone with betteraccess to other people, media, and the Internet. Thewantis to fit into society’s norms; therefore,the consumer visits a cellphone store. Theexchangeoccurs when money is exchanged for thephone. Thecostsinvolve the actual price of the product as well as the time and physical effort tovisit the store. Thebenefitsare the positive results of the purchase, such as better workperformance. Thereactionfollows the purchase when the consumer evaluates the effectivenessof the phone. Ultimately, the process results in a perception ofvalue.ConsumptionConsumptionrepresents the process by which goods, services, or ideas are used and transformedinto value.

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Slide 10Economics and Consumer BehaviourEconomicsis the study of production and consumption.Consumer Behaviour as a Field of StudyThis relatively young field of study (initiated in the 1960s) represents the study of consumers asthey go about the consumption process. Consumer behaviour is also referred to as buyerbehaviour, or the science of studying how consumers seek value in an effort to address realneeds.Slide 11Slide 12LO3.Describe how consumers get treated differently in various types of exchangeenvironments.Slide 13

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The Ways in Which Consumers Are TreatedThe customer is treated differently depending on the place of business and typeof service being performed. Consider the following two questions to understand the importanceto any given organization of providing good service to customers:1.How competitive is the marketing environment?2.How dependent is the marketer on repeat business?Slide 14Slide 15What can I do in class?Q:Ask students to name places where the consumer was not “king,” such asplaces where the wait time was too long or the establishment was not clean.A:Examples used in the book include the passport office, Service Canada, adining establishment, and an apparel retailer.Competition and Consumer OrientationWhat does a consumer do if their wait time at the passport office is too long? If the alternative isnot to travel, the consumer will tend to tolerate poor service.The opposite experience isconsumer (customer) orientation,in which the businessprioritizes the customer. A consumer orientation is a key component of a firm with a market-oriented culture. The organizational culture that embodies the importance of creating value forcustomers among all employees is called amarket orientation.Slide 16

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Relationship Marketing and Consumer BehaviourRelationship marketing is based on the belief that a firm’s performance is enhanced throughrepeat business. Relationship marketing is the recognition that customer desires are recurring andthat a single purchase may be only one touchpoint in an ongoing series of interactions with acustomer. Touchpoints may include any type of correspondence with the consumer (i.e., email,phone call, text message, and face-to-face contact). Each touchpoint represents a way for thebusiness to build value with the customer.What can I do in class?Q:Ask students to provide examples of relationship marketing. Why should acompany take the time to establish a repeat customer?A:Examples could include emails that customers receive on a weekly basis orloyalty cards for movie rentals and groceries. It’s cheaper for a business tobuild customer relationships than to establish new customers.LO4.Explain the role of consumer behaviour in business and society.Consumer Behaviour’s Role in Business and SocietySlide 17Consumer Behaviour and Marketing StrategyConsumer behaviour is not only an interesting subject, but also an important topic to understandfrom multiple perspectives:1.CB provides an input to business/marketing strategy.2.CB provides a force that shapes society.3.CB provides an input to making responsible decisions as a consumer.Businesses have a goal of achieving long-term survival. Companies that achieve that goal do soby obtaining resources from consumers in return for the value they create. This helps to explainresource-advantage theory. Exhibit 1.4 lists several companies, their products, and when theyfirst started doing business.

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Slide 18Slide 19Slide 20What Do People Buy?Theodore Levitt, a famous marketing researcher, noted that consumers don’t really seekproducts. Companies ultimately need to understand why people buy their products in order tounderstand how to keep their business current. Products that are on their way to obsolescenceinclude VHS tapes, tape recorders, and CD players.Slide 21Ways of Doing BusinessVarious ways of doing business are summarized in Exhibit 1.5, including:1.Undifferentiated marketing—Offering the same product to all customers with nocustomization.2.Differentiated marketing—Serving multiple market segments with different productofferings, such as the variety of products found in a Toyota car dealership.3.Niche marketing—Serving one market segment with unique needs. For example, TheRunning Room targets runners to the exclusion of other recreational and competitiveathletes.Slide 22

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Consumer Behaviour and SocietyThe items that people buy and consume are representative of the type of society in which theylive. For example, how does society treat smoking? Today, smoking is frowned upon not only inCanada and the United States, but also in Europe, where many places have embraced a non-smoking policy. However, smoking was commonplace and acceptable 40 years ago. Smoking isa consumption behaviour that is no longer valued by society at large in Canada.Slide 23What can I do in class?Q:Ask students how many of them smoke. When did they start smoking andwhy? How have their consumption patterns changed?A:You will likely see a decline in the number of smokers each year. However,particular regions of Canada as well as colleges or universities might havedifferent numbers.Consumer Behaviour and Personal GrowthThis section is based on life stages. Many university students are acquiring large amounts ofcredit card debt, contributing to the average Canadian debt of $110,000 per household (includingmortgage) in 2009.Several topics can be particularly helpful in enlightening consumers about consumer behaviour,including:1.Consequences associated with poor budget allocation2.The role of emotions in consumer decision making3.Avenues for seeking redress for unsatisfactory purchases4.Social influences on decision making, including peer pressure5.The effect of the environment on consumer behaviourThe Motorola “Brick” phone of the 1980s led to smartphones being widely used today. In bothCanada and the United Kingdom a large population of children age 10–14 have their owncellphones. Restrictions are being put on mobile phone users ranging from safety issues whiledriving to etiquette issues for phone use in public places.

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Slide 24Slide 25What can I do in class?Q:Ask students their opinions of the list on page 16 about mobile phoneetiquette. Should people be restricted on how they use their phone in apublic place?A:Student answers will vary greatly.LO5.Be familiar with basic approaches to studying consumer behaviour.Different Approaches to Studying Consumer BehaviourSlide 26There is no single “best” way to study consumer behaviour. The following research methodsshould be considered.Interpretive ResearchInterpretive research seeks to explain the inner meanings and motivations associated withspecific consumption experiences. Methods include observations and words that consumers useto describe events.Interpretive research generally falls into the category of qualitative research.Qualitativeresearch toolsinclude case analyses, clinical interviews, focus group interviews, and other toolsin which data are gathered in a relatively unstructured way.Interpretive researchers adopt one of several orientations. Two common interpretiveorientations are phenomenology and ethnography.Phenomenologyrepresents the study of

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consumption as a “lived experience.”Ethnographyhas roots in anthropology and often involvesanalyzing the artifacts associated with consumption.Quantitative Consumer ResearchQuantitative research addresses questions about consumer behaviour by using numericalmeasurement and analysis tools. The measurement is usually structured, meaning that theconsumer will simply choose a response from among alternatives supplied by the researcher. Inother words, structured questionnaires typically involve multiple choicetype questions.If consumers have an average attitude score of 50 for Brand A and 75 for Brand B,it can objectively be said that consumers tend to prefer Brand B. Experimental methodologies arealso a key component of quantitative research, and offer the only research method to directlyassess cause-and-effect relationships. Exhibit 1.6 summarizes some key differences betweenquantitative and qualitative research.Slide 27Slide 28Slide 29LO6.Describe why consumer behaviour is so dynamic and how recent trends affectconsumers.Consumer Behaviour Is DynamicSlide 30Today, consumers do not need to wait for a store to open in order to shop. Consumers can visitvirtual stores 24 hours a day/7 days a week. The trends that are shaping the value received byconsumers today are discussed in this section.

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Slide 31What can I do in class?Q:Ask students how they feel about companies like 33Across analyzing theirsocial networking communications to find out about products.A:This statement should spark some debate among students to discuss howthe information they volunteer online through social networking may beused. Companies strive to meet consumer demands, offer increasinglyinnovative products, and grow in response to increased sales. Is it OK thatthey gain the information for these innovative products by tracking usonline?InternationalizationMany store chains have expanded outside their home markets. Consequently, companies mustdeal not only with geographical distances, but with cultural distances as well. The book discussestwo examples—Starbucks and Outback Steakhouse. Each corporation must adapt its productmenu to the country in which it operates. For example, in Seoul, Outback Steakhouse serveskimchi (fermented cabbage) on the menu, which is neither American nor Australian.Slide 32Technological ChangesIn the mid-20th century, television revolutionized consumer behaviour. Not only did TV changeadvertising forever, but true home shopping became a possibility. Although technologycontinues to change, the basic consumer desire for value has not changed. In fact, the dot-com

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failures of the late 1990s illustrated that companies can fail if they do not enhance the value thatconsumers receive when buying online.Changing CommunicationsConsumers’ favourite form of communication used to be face-to-face. Now, many consumerschoose the telephone as their preferred communication method (either by voice or text message).Email and social networks are also used. Marketers are learning quickly how to use these tools tocommunicate with consumers.Changing DemographicsOver the last 25 years, changing demographics mean families include two primary incomeproviders and fewer people make up a family in North America and Europe, resulting in stagnantpopulation growth. This leads marketers around the world to look harder at countries withincreasing populations, like China and India.Changing EconomyMuch of the developed world has faced a recent downturn in the economy, so consumers haveless money to spend. Hearing about other economies around the world that are also in turmoilcauses consumers to be more cautious as well.VIDEO CLIPPowerPoint Clip fromNetflixRun time 1:24 minutesSlide 33Netflix is a subscription service that provides streaming video over the Internet or delivers DVDsvia mail. Netflix changed the way people rent movies and TV shows by cutting out the “shopfront.” For a monthly fee, consumers have increased selections, no late fees, the ability to rent asmany times as they like, and no need to leave their homes. Headquartered in Silicon Valley, CA,Netflix maintains distribution centres all over North America in order to maintain the company’sbusiness model of speedy delivery and catering to consumers’ convenience needs.Ask your students:1. How has Netflix’s business model successfully tapped into consumer behaviour?Answer:By removing the need to drive to a store to rent or return films and by removing latefees, Netflix provides considerably greater consumer convenience than the traditional method offilm rental.

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2. How does Netflix use consumer behaviour and the Internet to avoid becoming obsolete astechnology changes?Answer:Netflix provides a website with film summaries, reviews, a queue for tracking andrating your videos, as well as a service called “Watch Instantly” that allows consumers evenmore convenience by eliminating the need to wait for a DVD to arrive in the mail. This deliverymethod uses current technology to stream video instantly to consumers.

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END OF CHAPTER MATERIALCASE ANSWERS: The Hudson’s Bay Company1.Using the basic consumption process in Exhibit 1.2, discuss how a young Canadian“consumes” clothing.Answer:Consumers develop a need for new clothing in a variety of ways—new clothes forschool or work, the introduction of a new fashion trend, or the desire to fit in with aparticular group. Clothes are necessary to keep consumers warm and protected from theelements, but they are also a fashion item and young consumers like to feel good about theclothes they wear because it brings them self-esteem.These needs drive consumers to want clothing that not only serves the basic functionalneeds, but also looks attractive and makes them feel fashionable and good aboutthemselves. For this reason, they may be attracted to The Bay’s positioning as a store that’sin touch with fashion trends, with many fashion-forward labels in stock.Consumers’ wants may lead them to consider an exchange with The Bay if the clothingstyles in fact do closely match their desires.The decision to participate in an exchange (or to forgo one) has costs and benefits. Clothingcosts money, and trendy labels tend to cost more than less current designs or lower qualityitems. In return, however, consumers may project an improved image, and boost their self-esteem. To the extent that consumers believe they are supporting a Canadian retailinginstitution (regardless of its current ownership), they may gain additional value from theexchange.If consumers indeed achieve the goal of projecting the desired image and feeling goodabout themselves, they will react favourably to their purchase from The Bay. The consumerwill in that case experience positive value. If the product does not achieve those ends, thenno positive value will have been received.2.Do you think it makes sense for The Bay to pursue more fashionable apparel brands toattract younger shoppers?Answer:Answers may vary. The Bay’s strategy of offering more fashionable apparelbrands in order to attract young shoppers is a good business decisionifit addresses a realneed that its target market can afford to satisfy. If successfully implemented, the strategymay allow The Bay to differentiate itself from lower-priced competitors that do not offerhigher-end fashion brands, while offering an alternative to exclusive, high-fashion retailerssuch as Holt-Renfrew.

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3.Is The Bay a consumer-oriented company?Answer:Based on its stated desire to cater to the wants and needs of a specific marketsegment (young consumers), The Bay appears to have adopted a consumer-orientedapproach. Hiring a high-profile CEO from within the fashion industry and aggressivelypursuing the fashion brands most desired by its customers are further proof of a desire tomaximize consumer satisfaction. Its awareness of competitors’ strategies indicates that thisis part of a market-oriented business approach.4.What sort of research will Bonnie Brooks need to drive her strategic decisions for The Bayin the next few years? Interpretive, quantitative, or experimental?Answer:No single type of research is likely to provide answers to all the questions Ms.Brooks is likely to have. Quantitative approaches can analyze consumers’ current buyingpatterns, indicating where specific types of products (such as fashion brands) are beingpurchased, who is buying them, how frequently they buy, and so on. Point-of-saletechnologies provide a wealth of data the researcher can analyze to form a detailed pictureof consumer buying habits. This information may need to be supplemented withinterpretive research, which can help to explain the motivation behind these patterns, suchaswhycertain consumers prefer to do business with certain types of stores. Finally,experimental research may be useful in assessing the effectiveness of specific marketingapproaches. A test market can be a very useful tool in helping a retail chain to develop themost effective way to display, promote, and price its merchandise.5.Almost any business involves some ethical questions. In this case, do you see any problemswith positioning The Bay as Canada’s oldest corporation when it is owned by an Americanprivate equity firm?Answer:Answers will vary. Many brands are associated with a country of origin that nolonger reflects its ownership (or never did so). The quintessentially British Mini Cooperbrand is owned by Germany’s BMW, while Jaguar belongs to India’s Tata. Roots, whichuses Canada and the beaver as part of its brand imagery, was founded by two Americans.Tim Hortons remained a Canadian icon even after its purchase by U.S.-based Wendy’s.Students will have varying opinions on The Bay’s ability to retain its Canadian heritage andthe ethical issues of potential misrepresentation.REVIEW QUESTIONS(*) Indicates material on prep cards.1.[LO1] List two perspectives from which consumer behaviour can be defined.Answer:Consumer behaviour can be defined as (1) a field of study and as (2) humanactivity involving human thoughts and actions.2.[LO1] Define consumer behaviour from both perspectives.

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