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CB, First Canadian Edition Solution Manual

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    CHAPTER 1 WHAT IS CB, AND WHY SHOULD I CARE? WHAT DO YOU THINK? POLLING QUESTION In any business, the customer is truly the most important person. Strongly disagree 1 2 3 4 5 6 7 Strongly agree Have students access www.icancb.com to answer the polling questions for each chapter of CB . Ask them to take the online poll to see how their answers compare with those of other students taking consumer behaviour courses across the country. Then turn to the last page of the chapter to find the What Others Have Thought box feature. This graph is a snapshot of how other consumer behaviour students have answered this polling question thus far. LEARNING OUTCOMES After studying this chapter, the student should be able to: LO1 Understand marketing ethics and consumer misbehaviour. LO2 Understand the meaning of consumption and consumer behaviour. LO3 Describe how consumers get treated differently in various types of exchange environments. LO4 Explain the role of consumer behaviour in business and society. LO5 Be familiar with basic approaches to studying consumer behaviour. LO6 Describe why consumer behaviour is so dynamic and how recent trends affect consumers. SUGGESTED LECTURE OPENER Consumer behaviour is driven by many things, including the weather. If your sprinkler breaks down during a dry, hot spell, you are likely to replace it quickly. However, you might have to travel to the back of the store before you get to the product you need, passing by fans, bathing suits, and air conditioners along the way. Savvy marketers use consumers’ seasonal needs to drive sales and promote other products. Canada’s unseasonably warm winter of 2011/12 even led to a mini housing boom, driving home sales up 6.7% from the previous year, according to Garry Marr’s article in the March 15, 2012 edition of The Financial Post. KEY CONCEPTS WITH POWERPOINT ® SLIDES Slide 1 Slide 2 Slide 3

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    What can I do in class? Q: Ask students to explain the link between the recent economic downturn and consumption. A: Answers will vary but should include discussion of the housing market, appliance and furniture purchases, fewer requests for services, and loss of jobs. LO1. Understand marketing ethics and consumer misbehaviour. Slide 4 Marketing Ethics and Consumer Misbehaviour There are times when consumers misbehave and act in an unethical manner and there are times when marketers misbehave and act unethically. Scandals, manipulative marketing practices, and deceptive 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 potentially that of family and friends, as well. Slide 5 Slide 6

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    LO2. Understand the meaning of consumption and consumer behaviour . Consumption and Consumer Behaviour Slide 7 Slide 8 Consumer Behaviour as Human Behaviour Consumer behaviour is the set of value-seeking activities that takes place as people go about addressing their needs. Slide 9 The Basic CB Process This process is detailed in Exhibit 1.2. In this chapter, the purchase of a BlackBerry Bold is described. In the first step, the consumer determines a need for a new cellphone with better access to other people, media, and the Internet. The want is to fit into society’s norms; therefore, the consumer visits a cellphone store. The exchange occurs when money is exchanged for the phone. The costs involve the actual price of the product as well as the time and physical effort to visit the store. The benefits are the positive results of the purchase, such as better work performance. The reaction follows the purchase when the consumer evaluates the effectiveness of the phone. Ultimately, the process results in a perception of value . Consumption Consumption represents the process by which goods, services, or ideas are used and transformed into value.

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    Slide 10 Economics and Consumer Behaviour Economics is the study of production and consumption. Consumer Behaviour as a Field of Study This relatively young field of study (initiated in the 1960s) represents the study of consumers as they go about the consumption process. Consumer behaviour is also referred to as buyer behaviour, or the science of studying how consumers seek value in an effort to address real needs. Slide 11 Slide 12 LO3. Describe how consumers get treated differently in various types of exchange environments. Slide 13

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    The Ways in Which Consumers Are Treated The customer is treated differently depending on the place of business and type of service being performed. Consider the following two questions to understand the importance to 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 14 Slide 15 What can I do in class? Q: Ask students to name places where the consumer was not “king,” such as places 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, a dining establishment, and an apparel retailer. Competition and Consumer Orientation What does a consumer do if their wait time at the passport office is too long? If the alternative is not to travel, the consumer will tend to tolerate poor service. The opposite experience is consumer (customer) orientation, in which the business prioritizes 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 for customers among all employees is called a market orientation . Slide 16

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    Relationship Marketing and Consumer Behaviour Relationship marketing is based on the belief that a firm’s performance is enhanced through repeat business. Relationship marketing is the recognition that customer desires are recurring and that a single purchase may be only one touchpoint in an ongoing series of interactions with a customer. 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 the business to build value with the customer. What can I do in class? Q: Ask students to provide examples of relationship marketing. Why should a company take the time to establish a repeat customer? A: Examples could include emails that customers receive on a weekly basis or loyalty cards for movie rentals and groceries. It’s cheaper for a business to build 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 Society Slide 17 Consumer Behaviour and Marketing Strategy Consumer behaviour is not only an interesting subject, but also an important topic to understand from 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 so by obtaining resources from consumers in return for the value they create. This helps to explain resource-advantage theory . Exhibit 1.4 lists several companies, their products, and when they first started doing business.

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    Slide 18 Slide 19 Slide 20 What Do People Buy? Theodore Levitt, a famous marketing researcher, noted that consumers don’t really seek products. Companies ultimately need to understand why people buy their products in order to understand how to keep their business current. Products that are on their way to obsolescence include VHS tapes, tape recorders, and CD players. Slide 21 Ways of Doing Business Various ways of doing business are summarized in Exhibit 1.5, including: 1. Undifferentiated marketing —Offering the same product to all customers with no customization. 2. Differentiated marketing —Serving multiple market segments with different product offerings, such as the variety of products found in a Toyota car dealership. 3. Niche marketing —Serving one market segment with unique needs. For example, The Running Room targets runners to the exclusion of other recreational and competitive athletes. Slide 22

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    Consumer Behaviour and Society The items that people buy and consume are representative of the type of society in which they live. For example, how does society treat smoking? Today, smoking is frowned upon not only in Canada 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 is a consumption behaviour that is no longer valued by society at large in Canada. Slide 23 What can I do in class? Q: Ask students how many of them smoke. When did they start smoking and why? 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 have different numbers. Consumer Behaviour and Personal Growth This section is based on life stages. Many university students are acquiring large amounts of credit card debt, contributing to the average Canadian debt of $110,000 per household (including mortgage) in 2009. Several topics can be particularly helpful in enlightening consumers about consumer behaviour, including: 1. Consequences associated with poor budget allocation 2. The role of emotions in consumer decision making 3. Avenues for seeking redress for unsatisfactory purchases 4. Social influences on decision making, including peer pressure 5. The effect of the environment on consumer behaviour The Motorola “Brick” phone of the 1980s led to smartphones being widely used today. In both Canada and the United Kingdom a large population of children age 10–14 have their own cellphones. Restrictions are being put on mobile phone users ranging from safety issues while driving to etiquette issues for phone use in public places.

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

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    consumption as a “lived experience.” Ethnography has roots in anthropology and often involves analyzing the artifacts associated with consumption. Quantitative Consumer Research Quantitative research addresses questions about consumer behaviour by using numerical measurement and analysis tools. The measurement is usually structured, meaning that the consumer will simply choose a response from among alternatives supplied by the researcher. In other 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 are also a key component of quantitative research, and offer the only research method to directly assess cause-and-effect relationships. Exhibit 1.6 summarizes some key differences between quantitative and qualitative research. Slide 27 Slide 28 Slide 29 LO6. Describe why consumer behaviour is so dynamic and how recent trends affect consumers. Consumer Behaviour Is Dynamic Slide 30 Today, consumers do not need to wait for a store to open in order to shop. Consumers can visit virtual stores 24 hours a day/7 days a week. The trends that are shaping the value received by consumers today are discussed in this section.

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    Slide 31 What can I do in class? Q: Ask students how they feel about companies like 33Across analyzing their social networking communications to find out about products. A: This statement should spark some debate among students to discuss how the information they volunteer online through social networking may be used. Companies strive to meet consumer demands, offer increasingly innovative products, and grow in response to increased sales. Is it OK that they gain the information for these innovative products by tracking us online? Internationalization Many store chains have expanded outside their home markets. Consequently, companies must deal not only with geographical distances, but with cultural distances as well. The book discusses two examples—Starbucks and Outback Steakhouse. Each corporation must adapt its product menu to the country in which it operates. For example, in Seoul, Outback Steakhouse serves kimchi (fermented cabbage) on the menu, which is neither American nor Australian. Slide 32 Technological Changes In the mid-20th century, television revolutionized consumer behaviour. Not only did TV change advertising forever, but true home shopping became a possibility. Although technology continues 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 that consumers receive when buying online. Changing Communications Consumers’ favourite form of communication used to be face-to-face. Now, many consumers choose 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 to communicate with consumers. Changing Demographics Over the last 25 years, changing demographics mean families include two primary income providers and fewer people make up a family in North America and Europe, resulting in stagnant population growth. This leads marketers around the world to look harder at countries with increasing populations, like China and India. Changing Economy Much of the developed world has faced a recent downturn in the economy, so consumers have less money to spend. Hearing about other economies around the world that are also in turmoil causes consumers to be more cautious as well. VIDEO CLIP PowerPoint Clip from Netflix Run time 1:24 minutes Slide 33 Netflix is a subscription service that provides streaming video over the Internet or delivers DVDs via mail. Netflix changed the way people rent movies and TV shows by cutting out the “shop front.” For a monthly fee, consumers have increased selections, no late fees, the ability to rent as many 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’s business 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 late fees, Netflix provides considerably greater consumer convenience than the traditional method of film rental.

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

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    END OF CHAPTER MATERIAL CASE ANSWERS: The Hudson’s Bay Company 1. 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 for school or work, the introduction of a new fashion trend, or the desire to fit in with a particular group. Clothes are necessary to keep consumers warm and protected from the elements, but they are also a fashion item and young consumers like to feel good about the clothes they wear because it brings them self-esteem. These needs drive consumers to want clothing that not only serves the basic functional needs, but also looks attractive and makes them feel fashionable and good about themselves. For this reason, they may be attracted to The Bay’s positioning as a store that’s in 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 clothing styles in fact do closely match their desires. The decision to participate in an exchange (or to forgo one) has costs and benefits. Clothing costs money, and trendy labels tend to cost more than less current designs or lower quality items. 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 retailing institution (regardless of its current ownership), they may gain additional value from the exchange. If consumers indeed achieve the goal of projecting the desired image and feeling good about themselves, they will react favourably to their purchase from The Bay. The consumer will in that case experience positive value. If the product does not achieve those ends, then no positive value will have been received. 2. Do you think it makes sense for The Bay to pursue more fashionable apparel brands to attract younger shoppers? Answer: Answers may vary. The Bay’s strategy of offering more fashionable apparel brands in order to attract young shoppers is a good business decision if it addresses a real need that its target market can afford to satisfy. If successfully implemented, the strategy may allow The Bay to differentiate itself from lower-priced competitors that do not offer higher-end fashion brands, while offering an alternative to exclusive, high-fashion retailers such 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 market segment (young consumers), The Bay appears to have adopted a consumer-oriented approach. Hiring a high-profile CEO from within the fashion industry and aggressively pursuing the fashion brands most desired by its customers are further proof of a desire to maximize consumer satisfaction. Its awareness of competitors’ strategies indicates that this is part of a market-oriented business approach. 4. What sort of research will Bonnie Brooks need to drive her strategic decisions for The Bay in 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 buying patterns, indicating where specific types of products (such as fashion brands) are being purchased, who is buying them, how frequently they buy, and so on. Point-of-sale technologies provide a wealth of data the researcher can analyze to form a detailed picture of consumer buying habits. This information may need to be supplemented with interpretive research, which can help to explain the motivation behind these patterns, such as why certain consumers prefer to do business with certain types of stores. Finally, experimental research may be useful in assessing the effectiveness of specific marketing approaches. A test market can be a very useful tool in helping a retail chain to develop the most effective way to display, promote, and price its merchandise. 5. Almost any business involves some ethical questions. In this case, do you see any problems with positioning The Bay as Canada’s oldest corporation when it is owned by an American private equity firm? Answer: Answers will vary. Many brands are associated with a country of origin that no longer reflects its ownership (or never did so). The quintessentially British Mini Cooper brand is owned by Germany’s BMW, while Jaguar belongs to India’s Tata. Roots, which uses 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 and the 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) human activity involving human thoughts and actions. 2. [LO1] Define consumer behaviour from both perspectives.

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