Know all the major legislations and agencies.
- Sherman Act: 1890 Against monopolies, trusts and conspiracies that can restrict competition in the marketplace.
- Clayton Act: 1914 Builds on Sherman Act. Prohibits price discrimination and pricing contracts.
- Federal Trade Commission Act: 1914 Wheeler-Lea Amendments to FTC Act, 1938 Created the Federal Trade Commission. Broadens FTC’s powers; prohibits false/deceptive advertising.
- Lanham Act: 1946 Establishes trademark protections.
- Foreign Corrupt Practices Act: 1977 Prohibits bribing foreign officials for business purposes.
- Economic Espionage Act: 1996 Foreign entities stealing trade secrets is a federal crime.
- Controlling the Assault of Non- Solicited Pornography and Marketing Act: 2004 Regulates how firms collect and use information from online data sources.
- Consumer Product Safety Act: 2008 Regulates products designed for children (12 years and younger).
What are the four types of competition that can exist in a marketplace?
- Pure competition: Many sellers with homogenous products
- Pure monopoly: One firm sells one product
- Monopolistic competition : Many sellers with similar products
- Oligopoly: Few firms control the industry
Know the four major agreements that exemplify economic integration
- European union: • 28 member states; largest economy in the world. • Free trade zone; allows goods, capital, services and people to move freely within the market. • Greater uniformity in product and packaging standards. • Removal of most tariffs that affected pricing
- North American Free Trade Agreement (NAFTA): • 3 member states. • Opened Mexican and Canadian markets to US companies. • Cheaper imports for US. • Significant impact on jobs (gains and losses) in all countries.
- WTO: 161 member states in the WTO Trade agreement covers services, intellectual property rights, and trade-related investment measures. Provides a plan for building and maintaining international trade agreements.
- Trans-Pacific Partnership: Signed on 4 February, 2016. Not quite in effect yet. 12 countries (800 million people 2x EU market) Strengthen economic relationships, reduce tariffs, and foster trade.
What are the main demographic changes happening in the US?
- Population is becoming getting older
- Population is becoming more diverse
- Household structure is changing; fewer married couples
What are the major generational cohorts?
- Greatest generation: Before 1928 Community-minded, rule-minded, respect for authority, strong loyalty
- Depression cohort, Silent Generation: 1928 - 1945 Hardworking, financially conservative, respect for authority and hard work
- Baby Boomers: 1946 - 1964 Life defined by work, question everything, willing to change brands and try new things, have the largest net worth
- Generation X: 1965 - 1980 Independent, resilient, better-educated than previous generations, skeptical
- Generation Y, Millennials: 1980 - 2000 Biggest segment, highly tolerant, more trusting of institutions, more demanding/entitled, want personal and memorable experiences
- Generation Z: digital natives After 2000 Most tech-savvy, most diverse, independent, curious, global outlook, need to express themselves
What are the main core values in the US?
- Upward Mobility
- Work Ethic
What are the three main global market entry strategies?
Exporting: Producing in one country and selling in another. Common strategy for small to medium sized firms. Indirect exporting good when limited/no resources in foreign country. Direct exporting good when no need for intermediary.
Joint venture: Foreign company + local company invest together Shared ownership, control and profits May be required by foreign government Potential for conflict
Direct investment: Involves investment/ownership of foreign asset Often occurs at a later stage
Stages of the decision making process:
- PROBLEM RECOGNITION: Recognizing that there is a discrepancy between a desired state and an actual state that is sufficient to arouse and activate the decision process.
- Internal Search: Two types of search: Internal search External search Ongoing search: external information search even when there is no problem because it might be useful later on and it’s enjoyable. Two routes to information acquisition Active Passive
- Alternative Evaluation Stage: Evaluative criteria: objective and subjective attributes used to compare alternatives. Consideration set: the acceptable alternatives from among all the alternatives of which the consumer is aware. Evoked set: the alternatives that will be considered for purchase
- Purchase Decision: Desired alternative has been selected. Now two decisions: Where to buy? When to buy? Purchases can be: Planned Impulse Factors that can decrease the conversion rate: Attitudes of others Unexpected situational factors
- POST-DECISION REGRET: Occurs when selected option is perceived to be worse than an alternative. Can exist even if you have no concrete information about alternatives and only a fear of inferiority. Can influence future purchase intentions.
- POST-DECISION DISSONANCE: Uncertainty about whether you’ve made the right choice Most likely to occur when more than one alternative The decision is difficult to reverse The decision is important The decision involves considerable risk Creates anxiety that needs to be reduced Often leads to information search that confirms decision and reduces dissonance.
- DISSATISFACTION: Consumer dissatisfaction: a mild, negative emotional state resulting from an unfavorable appraisal of a consumption experience. Dissatisfied customers stop purchasing, complain, spread negative word-of-mouth 95% of complainers will do business with you if complaint is resolved quickly Average business does not hear from 96% of its unhappy customers SATISFACTION:Consumer satisfaction: a mild, positive emotional state resulting from a favorable appraisal of a consumption experience. Satisfied customers are profitable customers: Consumer in supermarket spends $50,000+ in lifetime Satisfied customer can provide $150,000 of business to car dealer over lifetime
What are the types of perceived risk?
- Monetary/financial: Losing money due to the purchase
- Functional/performance: Purchase won’t solve the problem
- Physical: Purchase may lead to injury
- Social: Purchase may lead to embarrassment
- Psychological: Purchase may lead to internal conflict
- Time/effort: Loss of time/effort due to the purchase
What is involvement? How does it influence consumer decision making?
- High involvement: • High cost • High perceived risk
- Low involvement: • Low cost • Low perceived risk
- Routine: Short time, Low cost, Internal info search, one alternative
- Limited: Short to moderate time, low to moderate cost, mostly internal info search, few alternatives
- Extensive: long time, high cost, internal and external info search, many alternatives
- High previous experience, low involvement
- high interest, high involvement
- high risk, high involvement
- high visibility, high involvement
What are the main consumer behavior patterns of the different racial/ethnic groups?
What is social class?
Social class: Relatively permanent and ordered divisions in a society whose members share similar values, interests, and behaviors Determined by a number of factors Consumers of the same social class tend to behavior similarly.
What are the temporary situational influences on consumer behavior?
- Purchase task: What are you buying and why
- Social surroundings: Who is around when you are buying? Who will be around when you’ll be using?
- Physical surroundings: Where are you buying? Where will you be using?
- Temporal effects: What time of the day are you buying/using
- Antecedent states: What’s going on right before you buy?
What are the components of perception?
- Selective exposure: Consumers are very selective about what they are willing to be exposed to.
- Selective comprehension: Interpreting information so that it is consistent with your attitudes and beliefs.
- Selective retention: Consumers remember only a small portion of all the information they’re exposed to.
What is learning?
- A process that produces a relatively enduring change in behavior or knowledge as a result of an individual’s experience. Happens over time. Should influence behavior for a while. Can occur as a result of one’s own experiences or someone else’s. Types of learning Associative Reasoning/analogy
- LEARNING ASSOCIATIONS: Learning the association between a stimulus and a response. Marketing implications: Stimulus generalization: Stimulus generalization is the tendency to respond to stimuli that are similar to the original conditioned stimuli. Stimulus discrimination
- LEARNING BY REASONING: Observing how others solve a problem and applying that information to one’s own problems. Using one’s own thinking and reasoning abilities.
What are attitudes? How are attitudes formed and changed?
- Beliefs: consumer’s subjective thoughts about how a product or brand performs on different attributes. Can be evaluative (benefits) or non-evaluative (features)
- Attitude: learned predisposition to respond to an object or class of objects in a consistently favorable or unfavorable way.
- Change beliefs
- Change importance of attributes
- Add/remove attributes
What are the main types of individuals/groups that can influence consumer behavior?
- Opinion leaders
- Reference groups: Associative Brand community Aspirational Dissociative
- Word of mouth
What are the 2 main types of motivation?
- Utilitarian: motivations that drive us toward behavior that solves problems and accomplishes a task.
- Hedonic: motivations that drive us toward behavior that is personally gratifying.
What are the motives in Maslow’s hierarchy?
• placement of legal restrictions on international trade, includes tariffs, quotes, subsidies and other bureaucratic barriers
- agreements between countries in a
- geographic region to reduce tariff and non tariff barriers to the free
- flow of goods, services, and factors of production between each other
Purchasing power parity
- purchasing power parity (PPP) is the relative ability of two countries'
- currencies to buy the same "basket" of goods in those two countries. Thus, although the law of
- one price holds for single products, PPP is meaningful only when applied
- to a basket of goods. In the context of exchange rates, the principle
- of purchasing power parity can be interpreted as the exchange rate
- between two nations' currencies that is equal to the ratio of their
- price levels. In other words, PPP tells us that a consumer in Thailand
- needs 21.67 units (not 41.45) of Thai currency to buy the same amount of
- products as a consumer in the United States can buy with one dollar.
Gross vs. disposable vs. discretionary income
- Gross Income: Total income before taxes
- Disposable Income: Income after taxes
- Discretionary Income: Income after taxes and necessities
Price, Product, Place, Promotion
- a country's communications,
- transportation, financial, and distribution system Is critical in
- determining whether to try to market to a country's consumers and
Exporting versus joint venture versus direct investment
- Joint Venture: when a domestic firm buys a part of a foreign company to create a new entity
- direct investment: A global market-entry strategy that entails a domestic firm actually investing in and owning a
- foreign subsidiary or division
export, licensing, contract manufacturing, joint venture, direct investment (from least risky and lowest reward to highest)
- when foreign buyers are charged
- lower prices than domestic buyers for an identical product, after
- allowing for transportation costs and tariff duties
- A grey market or gray market also known as parallel market is the trade
- of a commodity through distribution channels which, while legal, are
- unofficial, unauthorized, or unintended by the original manufacturer.
You are involved when the product:
- is important to your self-image,
- is of continual interest to you (e.g. fashion or computers), entails
- significant risks, has emotional appeal and is identified with group
A low involvement purchase is one in which consumers do not consider the product important to their belief system and
do not strongly identify with it
Low involvement vs High involvement
- Low 1) brand beliefs formed by
- passive learning 2)a purchase decision is made 3)brand may or may not be
- evaluated afterwards. High 1)brand beliefs are formed first by active
- learning 2)brands are evaluated 3)a purcahse decision is made
represent both the objective attributes of a brand and the subjective ones you use to compare different products and brands.
- the group of brands that a
- consumer would consider acceptable from among all the brands in the
- product class of which he or she is aware.
Evoked set: alternative brands or stores considered when purchasing
Conversion rate= number of buyers/number of visitors
features vs. benefits
- Features are facts
- Benefits are opinions