Why do people shop?
MCE UNIT 9 UNDERSTANDING CONSUMERS
WHY DO PEOPLE SHOP?
marketer is seeking to address three basic questions:
Why does the customer want to buy a particular product or service?
How will he or she decide which option to purchase?
What factors may influence this decision?
The study of consumer motivation essentially addresses the question: “Why do people shop?”
According to Tauber, there are two main categories of motivation for shopping:
Status & Authority
Pleasure of Bargaining
Motivation: The Psychodynamic Approach
Motivation featured prominently in Freudian theory. Freud himself subscribed to the principle of psychological determinism; the idea that no aspect of human behaviour is ever accidental, even if it appears so to us at times. Key to this deterministic view of behaviour is the dynamic unconscious, hidden drives, desires, fantasies and anxieties directing all behaviour.
the topographical model of the mind. consists of three psychological apparatus; the id, the ego and the super-ego.
The id is the instinctual part of the mind, driving all behaviour toward instant gratification of basic animalistic needs; i.e. hunger, thirst, sexual arousal, etc.
The super-ego, by contrasts, represents the internalised rules of society by which we live; laws, moral codes, social pressures, etc.
According to Freud, the id and the super-ego are often in conflict, our basic needs as animals and opportunities for satisfying them being at odds with the standards by which we live. This conflict creates anxiety and, if left unresolved, is the cause of all mental illness. third mental structure, the ego, which serves as an intermediary between the id and the super-ego, devising ways of behaviour that reduce potential conflict. It is the interplay between these three “structures” that gives psychodynamic theory its name.
To illustrate this structure in operation, imagine you are very hungry and are in a supermarket, surrounded by all your favourite foods.
Freud’s main contribution to motivational research is that he presents us with a model that accommodates the interrelationships between biological factors (id), social influences (super-ego) and human consciousness (ego).
has very little bearing on marketing strategy and, in the main, the Freudian legacy is mainly to be found in personality research. Freud himself only ever directly observed wealthy, largely female individuals in Vienna, many argue that his theory is based upon a very particular culture.
two exceptions to the limitations of psychodynamic theory.
Firstly, Freud believed that many of the individual’s needs and desires are hidden in the unconscious and not readily accessible. Freud developed techniques collectively termed psychoanalysis
second contribution has been in the development of advertising campaigns. For instance, advertisers influenced by psychodynamic theory often develop campaigns utilising sexual themes in an attempt to appeal to the basic desires of the Id.
Freudian theory gives us a unique insight into the potential conflict between internal desires and social demands. It highlights the ways in which basic human needs may direct behaviour, often without conscious recognition.
Motivation: The Humanistic Approach
focusing upon positive aspects of behaviour, such as love, growth and self-development, rather than the traditional preoccupation with abnormal behaviour.
became known as humanistic psychology
Maslow’s Hierarchy of Needs bottom to top:
Biological – basic physiological needs for food, water, sleep, etc.
Safety – needs for shelter, protection, safety, security, etc.
Socialization – affection, friendship, love, acceptance, etc.
Self-Esteem – prestige, accomplishment, success, status, etc.
Self-Actualisation – self-fulfilment, achieving one’s potential, enriching experiences, etc.
The problem here, however, is that the concept of the hierarchical organisation of these needs does not really match empirical evidence. Belk (1988), for example, interviewed a Romanian family who went without food in order to buy a refrigerator, regarded as a status symbol in that particular society at the time. This suggests that esteem needs can sometimes come before basic biological needs.
The Consumer Resource Exchange Model (CREM)
The top line of the model is an adaptation of their previous general model of motivation. According to the general model, human beings have various needs, desires and expectations, known collectively as activators, which surface to create a state of mental disequilibrium. Humans are motivated to reduce that disequilibrium, and so engage in actions and behaviours to achieve this within the time constraints available. The end goal is equilibrium restored, but the individual is only driven to reach this destination by incentives.
To illustrate the general model in action, imagine that a consumer experiences a craving for cigarette, but has none in the house (the activator). She feels anxious and becomes increasingly unable to concentrate (disequilibrium). The consumer has only a few minutes to spare before the children return home from school, so she quickly goes to the corner shop for a packet of cigarettes, even though the supermarket she normally uses further away has lower prices (actions within time constraints). Propelled along by the craving for a cigarette (the incentive), the consumer smokes one and her anxiety subsides (goal achieved).
The point is, human beings often have many simultaneous needs and a key function of any motivational theory must be to describe how they prioritise those needs.
Approaching the problem from the perspective of evolutionary psychology, Bristow and Mowen reasoned that human behaviour has always been motivated by the need to acquire, use and conserve resources. modern society is equally resource-driven
Where conflicting needs arise, we simply prioritise according to the outcome we value the most and the costs associated with achieving it
This is a preview of the whole essay
CREM model classifies needs according to the extent to which the individual is seeking to acquire, conserve or protect them.
CREM diagram suggests that consumer behaviour is driven largely by four main types of need:
we often have to prioritise and spend one to accumulate another.
second key point; individuals differ in the priority they attach to different resource categories.
To summarise, CREM is one of the very few models specifically designed to focus upon consumer motivations. classifies consumer needs in terms of the evolutionary drive to accumulate resources of varying types, recognising that consumers often have to prioritise needs and make trade-offs when potentially conflicting needs surface in parallel. It also accommodates individual differences in the priority.
Historically, the earliest attempts to understand consumer decision-making came from behavioural economics. The emphasis was firmly upon the “rational” nature of consumer behaviour, drawing upon traditional economics concepts such as rationality and utility.
Over the past 50 years, the concept has been extended in the discrete choice models of retail geography, geographers adding into the equation factors such as distance and travel time in respect of each potential retailer.
The fact is, consumers do not have unlimited time and energy to make logical and rational choices.
Cognitive Models of Decision-Making
modal models (or “box-and-arrow” models)
repeat purchases, particular stages (e.g. information search) may be passed through without conscious attention being applied (i.e. may be automatised) because the information required is already available in memory.
decision process doesn’t end with purchase – the extent to which a purchase is deemed successful or unsuccessful will feed back to influence future purchase decisions.
Tversky and Kahneman (1973) coined the term heuristics to describe one particularly important form of processing capacity conservation strategy. Basically, a heuristic is a sort of cognitive “rule-of-thumb”, combining memory and reasoning to reach a quick decision on the basis of prior experience, without having to invest enormous information-processing resources in a decision which, on the whole, is not particularly crucial.
Using the UK National Lottery as an example
Availability Bias: Publicity surrounding major winners and the occasional small personal win make winning seem a more salient outcome than losing.
Randomness Bias: Failure to recognise that the lottery draw is random resulting in the belief that one can “predict” which numbers will be drawn.
Representativeness Bias: Tendency to choose “random” numbers to avoid numbers which seem less random (e.g. consecutive numbers), even though there is no difference in odds. Gambler’s Fallacy: Tendency to over-estimate the chances of numbers being drawn because they haven’t appeared for a while and must therefore be “due”.
Illusory Correlation: Disregarding statistical probabilities and assigning special properties to “lucky” numbers; e.g. birthdays, etc.
Flexible Attribution: Choosing own numbers rather than buying a “lucky dip” in the belief that selecting numbers is a “skill”.
Illusion of Control: Related to the above, occasional successes in “selecting” winning numbers boosts the individual’s belief in his/her own “skills” as a gambler.
Sunk Cost Bias: Continuing to buy tickets every week despite an absence of wins in the mistaken belief that this is somehow an “investment” in the “big win” to come.
Cognition and the Environment
two main problems with information-processing models when it comes to their usefulness to the marketer. Firstly, the “box-and-arrow” approach is rather descriptive. It tells us the decision-making stages the customer negotiates, but tells us very little about how the marketer can actually influence these stages to make his or her product/service the preferred option.
The second weakness of this approach is closely related to the first. Note how the environment is merely “lumped together” to the right of the diagram. The reality, of course, is that consumers are a part of the environment, interacting with environmental factors and influencing each other.
THE ENVIRONMENTAL PSYCHOLOGY OF SHOPPING
The main attraction the EP holds for marketers is that it provides a conceptual framework with which to identify and classify all those environmental factors which may influence the customer – many of which will be under the marketer’s direct control.
Levels of Environment
Take the example of a supermarket. When visiting the supermarket, we probably all behave in pretty much the same way. We enter the store, we select a trolley or basket, we navigate the aisles selecting products, we stand in line at the check-out, we unload the goods, we pay for them, we pack our bags, etc., etc. In other words, as supermarket shoppers, we follow a set behavioural programmes, often with little thought to what we are “supposed to do”.
Retail Shopping Situations
“Consumer A, shopping in Store B, at day and time C, looking for an outfit to wear at person D’s wedding” would constitute a specific shopping situation. Thus, on the one hand, a behaviour setting may contain a great many unrelated situations. To Consumer A, on the other hand, this is a unique act of shopping, or at least a historically and spatially specific one, defined by a particular matrix of situational influences.
Seen from this perspective, then, the situation serves as an interface between the person (e.g. fashion consumer) and the stimulus-object (garment purchased), all those factors defining that interface constituting situational variables.
According to Belk, situational variables are “all those factors particular to a time and place of observation which do not follow from a knowledge of personal (intra-individual) and stimulus (choice alternative) attributes” (Belk, 1974):
Whether an organization is a business or non-business, a ‘bricks-and-mortar’ store or online retail operation, it exists because there are people who "consume" what the organization "produces." Yet, in most cases, the consumers are taken for granted and it is assumed that their attitudes, needs, and behaviour are well understood when they probably aren't. Why do people shop? What makes a consumer choose one product or service over another? Do brand names and advertising really influence buyer behaviour?
304 - Managing in the Competitive Environment
Consumer psychologists study virtually all the psychological and behavioural responses that can occur within the context of a person's role as a consumer. And, consistent with the goals of psychologists from other areas, research carried out by consumer psychologists is designed to describe, predict, explain, and/or influence consumer responses to product and service related information and experiences. Consumer psychologists are becoming very important members of, or consultants to, the marketing team. They provide information to companies and non-profit-making organisations alike on what consumers currently want, need or desire. They help organisations to develop and effectively market products, services and ideas. And, in perhaps a more societal role, they guide the work of public agencies responsible for product safety, identity of brand names, evaluation of advertising claims, and the assessment of ethical marketing practices.
MCE UNIT 10 MARKETING RESEARCH
Size of the Market
Factors Influencing Company Market Share
PROCEDURE FOR RESEARCH
Determine the scope of research (types)
Identify the information required
Collect data (primary / secondary)
SUMMARY Pertinent, up-to-date information is the life-blood of marketing decision-making. The extent to which data collecting and analysis will be useful (cost-effective) will depend upon the nature of the marketing problem and, in particular, the extent to which it improves decision-making.
Unit 11: Introduction to Operations Management
OPERATIONS MANAGEMENT AND OTHER DISCIPLINES
The total technical and human makeup of an operating system is made up of two major sub-areas:
Operations Technology of a firm, we are talking about the hardware which it uses; e.g. in manufacturing: machine-tools or steel mills, in services: computers and office equipment, or in a hospital, medical equipment.
Operations Management is concerned with the 'software' or organisation of work and people, when making use of the Operations Technology. It covers therefore the planning and control of work in its material, human and financial aspects. Some typical Operations Management areas of interest are facilities layout, work measurement, job design, Operations planning, inventory control, and quality control.
Operations Management and OR
Operations Research (American) or Operational Research (British), commonly referred to as OR, is the study of operational problems by mathematical techniques.
Operations Management and Information Technology
The crucial characteristic has been described as the amplification of a man's physical power, i.e. the press of a finger operates a steam hammer. The use of computers and information technology, generally, offers the opportunity to amplify a man's "brain" power, i.e. what can be carried in one man's memory or retrieved in a reasonable time from a filing system is replaced by a data bank which may extend over several countries and which can supply information in seconds.
Operations Management and General Management
What sets Operations Management apart from General Management?
- Operations Manager must be an appropriate, competent and experienced specialist, in a field such as engineering, computing, science or technology.
- must be knowledgeable in the many specialist Operations Management techniques now used in business, such as facilities planning, operations planning, and operations control.
- must be informed about modern management practices in the most general sense. Fourth, of all management in modern organisations, it is the Operations Manager who is most frequently directly involved in all matters concerned with people in the workplace.
CONCEPTS FOR OPERATING SYSTEMS
An operating system is a transformation process, where combinations of inputs of material, labour and information are converted into outputs of either tangible goods or intangible services for a customer.
Inputs and Outputs
The main inputs to industrial and commercial processes are: people (and their know-how), information, raw materials, power etc. and of course cash with which to purchase these inputs. For most systems to operate well it is important to have inputs of the correct specification; time and effort are required to define and maintain these specifications. Outputs can also take the two broad forms of being either tangible such as goods, or intangible such as services, but they will most often be a combination of both.
Systems and Feedback
A system can be defined as a set of sub-units or parts combined in such a way as to create a whole. Examples are a domestic house central heating system, or a city transport system.
There are four main types of transformation process:
The term UTILITY may need some explanation. It refers to the perceived value of some object or situation. Each transformation process takes the object or situation from an initial state to a final state. If we prefer the final state to the initial state, then there has been an increase in utility. The simplest measure of utility is given by the monetary value
As we are concerned with increasing utility, transformation processes such as these are "value adding" processes.
An operating system can be defined as a configuration of resources combined for the creation of goods or the provision of a service. The two key ideas which stem from this definition are:
- A transformation process is taking place, where resources are being converted into either goods or services.
- In a competitive environment the efficiency and effectiveness of this conversion process is of primary concern.
The Characteristics of Transformation Processes
The following key points can be made about the characteristics of the transformation process.
This measure is usually expressed in terms of output per unit of input, e.g. tons per man shift.
Are the outputs which are being produced by the system those which the customer wants?
covers both specification and conformance to specification.
many processes which take a long time because of the time jobs spend waiting in queues, being inspected, being transported etc - lean manufacturing
Can the manufacturing or service system be easily and quickly modified to create different outputs, both in terms of variety and volume.
These characteristics may be condensed into four critical success factors which may be used to define the nature of the Operations contribution to competitive advantage:
The Complexity of the Inter-relationships between the Sub-systems
The system in its totality is often complex and unless the inter-relationship between the sub-systems is understood, there will be a danger of reaching decisions which will optimise a sub-system but at the cost of a lower overall total system performance.
Free and Committed Stock/Capacity
In manufacturing one can either 'make to stock' or 'make to order'. A make to order system produces committed, i.e. spoken for, stock; whereas stock made without customers' orders is made speculatively and is "free".
Examples of free capacity are the emergency services (say the fire service), and "while you wait" services (say shoe repair). Examples of committed capacity are a doctor's appointment system, and the reservation system for aeroplane seats.
DECISION MAKING CONSTRAINTS
The first constraining influence upon the Operations Manager is a result of the link between operating systems structure and operational management decisions, and can be described as one of feasibility constraint. A choice constraint is placed upon the manager as to the actions which are available in the light of the structure of the operating system.
The second constraining influence is that of the objectives given to the Operations Manager, which should have their origins at the highest levels of the organisation and reflect corporate policy.
There are two principal areas for these objectives
- the outputs produced (or customer service)
- the transformation process producing them (or resource utilisation).
For any given system (or subsystem) under an Operations Manager's control, he or she will need to identify both the structure of that system and the objectives behind it. Only then can informed decisions be reached.
MAJOR DIFFERENCES BETWEEN MANUFACTURING AND SERVICES
The presence of the customer
It can be seen from the foregoing that most manufactured products have an intangible service element and some services have a tangible element.
OPERATIONS MANAGEMENT AND BUSINESS STRATEGY
strategy has four components:
Scope - the extent of the organisation's present and planned interactions with its environment. This component will sometimes be referred to as the organisation's domain.
Resource deployments - the level and patterns of the organisation's past and present resource and skill deployments that will help it achieve its goals and objectives. Sometimes this component is referred to as the organisation's distinctive competence.
Competitive advantage - the unique positions an organisation develops viz a viz its competitors through its pattern of resource deployments and/or scope decisions.
Synergy - the joint effects that are sought from the organisation's resource deployments and/or scope decisions.
When we buy a car we assess factors such as: price, specification, reliability, running cost, appearance, image, aftersales service etc. The challenge for the car manufacture is to identify the "package" of attributes which will produce the required sales and then to identify the contributions which the different functions in the organisation need to make to produce the "package" of attributes. In particular the contributions which the Operations functions can make to competitive advantage should be defined in terms of the key characteristics: Cost/Price, Quality, Delivery and Flexibility.
I. THE OPERATIONS INTERFACE WITH OTHER BUSINESS FUNCTIONS
Marketing – 4P’s
The reluctance of the Marketing Department to consider the implications of change might be simply due to ignorance, especially if the Operations Manager has performed similar "miracles" in the past.
emphasis will be on the workforce with pressures i.e. seasonal hiring etc
Cash flow management with the payment (or rather non-payment) of suppliers being the prime example.
Changes to specs
MCE UNIT 12 PRODUCT/SERVICE DESIGN
WHAT INFLUENCES INVESTMENT IN NEW PRODUCTS AND SERVICES
New Product or Service Planning
The introduction of a new product or service may be as a result of a policy of continuous improvement in the company's "offering" or it may be a haphazard, or intermittent, occurrence brought about by unforeseen circumstances such as competitive action or new legislation.
Sources of Ideas
In the design process there are both functional and operational issues to be addressed. (MINIMISING PARTS, PACKAGING, MAINTANANCE)
RESEARCH AND DEVELOPMENT
Hill (1991) defines the objectives of research and development activities as bringing about "technological change and innovation within both the products and services to be sold by an organisation and the process by which these will be produced".
Strategic and Tactical Programmes (long and short term)
PRODUCT AND SERVICE ANALYSIS
Standardisation of both!!
THE SERVICE PRODUCT Nearly all products, be they tangible artifacts or intangible services, comprise a "Core Product" and a "Product Surround".
THE CHARACTERISTICS OF SERVICES
Some of them are:
The Output Cannot be Stored
High Customer Contact
The Exercise of Judgment Services (counselling)
Labour Intensiveness (teachers / class ratio)
There are three main factors that complicate the question of whether services are delivered consistently well:
- service delivery is a mixture of tangible and intangible factors.
- "Who says that this service is good or bad?"
- individual customer may have quite different experiences of the same basic service on separate occasions.
Moments of Truth
refer to any contact between an organisation and its customers or users.
Person to Person (Direct):
Person to Person (Remote):
Person to Person (Indirect):
Person to Technology: using (ATM) at the bank.
Managing the Customer
In many service encounters, the customer performs some aspect(s) of the task. This must be recognised and designed as carefully as any other operational process.
Understand Customer Process Flow
Define and Build Customer Relationships
SERVICE OPERATIONS CLASSIFICATION
The main descriptors of service operations are:
The balance of value adding activity between front office and back room.
The extent of customer contact with the service provider.
The extent of customer involvement in the process of service delivery.
Front Office vs Back Room Service
Customer Contact vs Customer Involvement
MANAGEMENT OF RESOURCES
The central problem for all operations managers is to discover how to improve levels of customer service whilst reducing operating costs. For many service operations the prime variable cost lies with employees, and there is therefore a temptation to overload people, which clearly has a detrimental effect on quality.
Resource Capacity Strategies
There are two basic strategies to manage resource capacity:
The Level Capacity Strategy manages demand, keeping supply constant. This is employed when the resource is relatively scarce and therefore relatively valuable to the customer. As far as the organisation is concerned, this often means that the time required to add another unit of capacity may be significant. This means that it is unlikely that customers will get immediate access at all times to advice. Effectively they will queue, though in this case the queue will be managed through an appointment system. In the "level strategy", demand is managed, either by queuing in which case those customers who feel that the service is worth it will wait, or by some form of pricing policy. In some services demand will be managed by a mixture of premium pricing at peak times and discounts to move demand to off peak periods. Varied service.
With the Chase Capacity Strategy supply is varied to meet demand. The reason for this is that, unlike the "level strategy" situation, in this case the service on offer is not so valuable to the customer that they are prepared to wait for great lengths of time. A good example is a fast food restaurant situated in an area where there are a number of alternatives. Consistent service.
The Coping Zone
chase strategy has become level and they must either wait, suffering reduction in customer service, or leave. We call this the coping zone. The shop staff will find ways to manage this excess demand in some way or other. One approach might be to spend slightly less time with each customer and not to extend the "pleasantries" over payment and farewell. Leads to reduced service.
How to Avoid the Coping Zone
- Better demand forecasting
- Resource flexibility
- Using networks
- Continuous Improvement
THE "MAKE OR BUY" DECISION
For Making In House
- Retention of skills
- Development of new capabilities
- Minimisation of obsolete stock. When components are bought in they are specific to an end product.
For Buying In
Allows concentration of effort on in-house core competences.
Capital investment may be avoided
Off-the-shelf delivery of standard parts may be possible.
An expert supplier may show a better way
May be cheaper
Easier to turn on and off
ORGANISING THE PURCHASING FUNCTION
Different ways to do by product, function, material etc.
Partnership sourcing could be JIT
CHOOSING A SUPPLIER
Cost of lead time
Cost of quality
Cost of inreliable delivery
Vendor rating (overall score scale on various features)
SUPPLY CHAIN MANAGEMENT
Companies have Supply Markets and well as Sales Markets!
Christopher (1992): "The goal of supply chain management is to link the market place, the distribution network, the manufacturing process and the procurement activity in such a way that customers are serviced at the highest levels and the lowest costs”.
Analysing The Supply Chain
5 Forces model!!
Strategies for Improving Supply Chain Management
- not linear systems but are overlapping sets of non-linear dynamic systems. Reduce response times.
- Improve pipeline 'visibility' - status of every parcel is known at all times
- Manage the supply chain as an integrated system.
- Minimise the interference factors (the "background noise"). Systems such as supply chains are
The matching of demand with capacity is a key consideration in the Operations Management of Services, as it is in Manufacturing. It is possible to pursue a Level Capacity Strategy or Chase Capacity Strategy. Sometimes one strategy is applied to one area of a company's operations and the other strategy to other areas. A major challenge for the Operations Manager in Services is managing the situation when "Chase" becomes "Level", i.e. the overload situation called the Coping Zone. Because most service operations involve significant interpersonal contact between provider and customer, and also contain high variety, the Human Resource Management issues are very important.
In this Unit we also have:
- Established the considerable advantages available from outsourcing but also recognised that tomorrow's capabilities are grown from today's activities. If we outsource too much we may deny the opportunity to "learn by doing".
- Recognised that there are four basic types of supplier relationship: - Competitive Leverage - Preferred Suppliers - Partnership Sourcing - Strategic Alliances and that each type may be the best in different circumstances.
- Established the need to carry out a strategic analysis of one's supply market in the same way we would analyse one's sales market. This is particularly true with respect to Power Mapping.
- Recognised that effective Supply Chain Management is largely a question of managing information.