Important Concepts

 Marketing basics (customer retention, customer value etc.,)

The four drivers of successful relationships between marketers and customers are customer
value, customer satisfaction, customer trust and customer retention.
1) Providing customer value can be viewed as the ratio between the customer’s perceived benefits (economic, functional and
psychological) and perceived cost (monetary, time, effort and psychological).
2) Customer satisfaction is the consumer’s perception of the performance of the product/service in relation to expectation. The
consumer is satisfied if the expectations are either met or exceeded or dissatisfied when performance is below expectations.
3) Customer retention is to make it in the best interest of customers to stay with the company rather than switch to
competitors. It is more expensive and difficult to win new customers than to keep existing ones. Studies have shown that
loyal customers buy more products and they are easier and cheaper to serve, less price-sensitive and pay less attention to
competitors’ advertising. Also, loyal customers spread positive word-of-mouth and refer other customers. So, many
companies have been using loyalty programs to encourage their customers to continuously buying their products for a long
period of time.

Customer-driven marketing strategy: segmentation, targeting and positioning. (STP)

 Perceptual Mapping
Segmentation, targeting and positioning enable companies to avoid head-on competition in the market by differentiating their
offerings on pricing, styling, packaging, promotional appeal, method of distribution and level of service.

Segmentation is the process of dividing the total potential markets into smaller, distinct subsets of consumers with common
needs or characteristics, which they are able to design specific marketing strategies, such as products, pricing, distribution and
promotion. The bases for segmentation include geographic (based on location), demographic (the identifiable and measurable
statistics of a population such as age and income), psychological (the inner or psychological characteristics of consumers),
psychographic (consumer personality and attitude), sociocultural (consumer’s culture, values and social class), user-related (the
frequency and level of usage), user-situation (based on the situation), benefit (based on the benefit sought), and hybrid
(combining several segmentation variables) segmentations.

Targeting. After segmentation, the company needs to determine how many segments to enter and which segments offer the
most potential. To be an effective target, a market segment should be identifiable, sizeable, stable or growing, accessible and
congruent with the marketer’s objectives and resources. There are three market coverage alternatives: undifferentiated,
differentiated and concentrated marketing.
- Undifferentiated marketing ignores segment differences and offers just one product or service to the entire market. For
example, Coca-Cola used to offer only one type of cola to the entire market. While standardisation certainly saves the
company’s costs, it does not allow the company to offer different versions of the product that will address and satisfy the
different needs and preference in the market.
- Differentiated marketing involves marketing in a number of segments, developing separate marketing strategies for each. In
such, products and their advertising appeals may be developed for various segments with different needs and wants. For
example, Coca-Cola has extended its range to attract the health-conscious consumers by introducing Diet Coke and Coke
Zero.
- Concentrated marketing is used when the company selects one particular segment and attempts to capture a large share of
this market. For example, Feifan English training is an Australian company that is targeting only Chinese people who need to
past English requirement for their visa applications.

Positioning. Positioning relates to the image of the product and/or brand in the consumers’ mind, relative to competing
products/brands. The position of the product/brand is the key factor in communicating the benefits it offers and differentiating it
from the competitors. Positioning strategies include positioning by product attributes, price/quality, use, product class, users and
competitor.
- Positioning by product attributes and benefits: on the basis of the specific characteristics or benefits or salient attributes
offered. For example, Singapore Airlines is positioned by one product benefit which is its outstanding service.
- Positioning by price/quality: emphasise on building an image of a high-quality brand where cost is secondary but also
relevant to the quality benefits derived from using the brand. For example, Huawei has been offering smartphones with great
quality and value at a very competitive price.
- Positioning by use or application: to associate the brand with a specific use or application which is also an effective way to
expand the usage of a product. For example,
- Positioning by product class: to address the competition among product classes instead of a specific product. For example,
there are campaigns promoting Australian meat such as pork and beef, fruits like banana and avocado.
- Positioning by product user: associating a product with a particular group of users, such as xxx
- Positioning by competitor: the competition within the same product category which is the most common positioning
strategy. For example, Apple and Samsung competing with each other in the high-end smartphone market.
- Positioning by cultural symbols: where cultural symbols are used to differentiate brands. For example,
- Repositioning: involves altering or changing a product’s or brand’s position due to declining sales or emerging new
opportunities. For example,

 Consumer Decision-making Process

Stages in the consumer decision-making process include problem recognition, information search, alternative evaluation,
purchase decision, and postpurchase evaluation.
Problem Information Alternative Postpurchase
Purchase decision
recognition search evaluation evaluation

(1) Problem recognition occurs when the consumer perceives a need, caused by a difference between the consumer’s ideal
state and actual state, and becomes motivate to satisfy it. The sources of problem recognition include out of stock or
dissatisfaction with the current product or service being used, new needs or wants, related products, new products, and
marketer-induced needs.
(2) Information search. Consumers begin to search for information needed to make a purchase decision once they perceive the
problem or need can be satisfied by purchasing a product or service. The information search begins with internal search
which is to recall past experiences or knowledge regarding various purchase alternatives. The consumer will seek external
 search if the internal search does not provide enough information. External sources of information include personal sources
such as friends and co-workers, commercial sources such as advertising and point-of-sales staff, public sources such as
websites and magazines, and personal experience such as trail or testing the product. Factors that influence the degree and
sources of external information include the importance of the purchase decision, the effort needed to acquire information,
the amount of relevant past experience, the degree of perceived risk associate and the time available.
(3) Alternative evaluation is the stage that the consumer compares the various brands, products, or services (referred as the
consumer’s evoked set) they have identified as being capable of solving the consumption problem and satisfying the
needs/motives that initiated the decision process. The goal of most IMC strategies is to increase the likelihood that a brand
will be included in the consumer’s evoked set and considered during alternative evaluation.
(4) Purchase decision is where a consumer chooses which brand/product/service to buy. During this stage, additional decisions
may be needed such as when and where to buy, how much money to spend and how to pay. Often, there is a time delay
between the intentional purchase and the actual purchase, and the length of delay depends on the degree of involvement
and complexity of the purchase.
(5) Postpurchase evaluation is where the consumer compares the level of performance with expectation of the product/service
after using it and decide either it is satisfied or dissatisfied. The consumer is satisfied if the expectations are either met or
exceeded or dissatisfied when performance is below expectations. This is important as it will influence the likelihood of
future purchases.

 Levels of Consumer Decision-making

Link to high- / low-involvement decisions.
1. Extensive problem solving is where consumers need a great deal of information to establish a set of criteria on how to judge
the purchasing alternatives. high-involvement, e.g. luxury products
2. Limited problem solving is where consumers have already established the basic criteria for evaluating the alternatives but
still need more information. medium-involvement, e.g. clothing, white goods
3. Routinised-response behaviour is where consumers already have the established criteria and some experience with the
alternatives that little of no additional information is needed. low-involvement, e.g. grocery

 Four Views on Decision-making

1. Economic model sees the consumers as rational decision-makers who would have to be aware of all available product
alternatives, correctly ranking each alternative in terms of its benefits and disadvantages and able to identify the best one.
However, people are limited by their existing skills, knowledge, values and goals.
2. Passive model is the opposite to the economic view which depicts the consumers as submissive to the self-serving interests
and marketers’ promotional efforts. However, this model fails to recognise that consumers can play an equal, if not
dominant, role in many buying situations.
3. Cognitive model sees the consumers as thinking problem solvers that are actively seeking products and services that fulfil
their needs and enrich their lives.
4. Emotional model recognises human feelings or emotions are likely to be highly involved in consumers’ buying behaviour. So,
many advertisements have used emotional appeal to draw viewers’ attention.

 Maslow’s Hierarchy of Needs

Maslow’s hierarchy of needs theory consists of five basic human needs ranking from the lowest to the highest level: physiological,
safety and security, social, ego and selfactualisation. The theory suggests that people’s behaviour is motivated by the
dissatisfaction, instead of satisfaction, and the unfulfilled lower-level needs must be satisfied first before the next higher-level
needs emerge.
1. Physiological needs are the primary human needs for biological survival, such as food, water, air, shelter, clothing and sex.
2. Safety and security needs. After the physiological needs are satisfied, the physical safety and security needs emerge. They
include order, stability, routine, familiarity, control over our life and environment, and a sense of certainty – the
knowledge, for example, that we will eat dinner not only today and tomorrow but also every day far into the future.
3. Social needs include love, affection, belonging and acceptance.
4. Ego needs. Inwardly directed ego needs reflect our need for self-acceptance, self-esteem, success, independence and
personal satisfaction with a job well done. Outwardly directed ego needs include the need for prestige, reputation, status
and recognition from others.
5. Need for self-actualisation is the desire to reach one’s full potential – to become everything we are capable of becoming. For
instance, challenging work and a sense of accomplishment appeal to esteem and self-actualisation needs respectively.

(2017) What determines the ranking of needs in Maslow’s hierarchy? Discuss your views with suitable examples.
 Trio of Needs
Trio of needs refers to the needs for power, affiliation and achievement, and they can be included in the Maslow’s hierarchy of
needs. Firstly, the power need is closely related to the ego and safety needs, since it reflects the individual’s desire to control over
the surrounding environment and people. Secondly, the need for affiliation is basically the same as Maslow’s social need as they
both describe the need for belonging, acceptance and social connection. Lastly, the need for achievement is clearly linked to the
ego and selfactualisation needs as they all concern about personal accomplishment.

 Freud, Neo-Freud and Trait theories

 Big Five Personality Model

The ‘Big Five’ model of the trait theory consists of five major personality types including neuroticism, extroversion, openness to
experience, agreeableness and conscientiousness. Each person will have several or all these traits, but the strength level of each
trait is different from person to person.
1. Neuroticism is the tendency to experience negative effects such as fear, sadness, embarrassment, anger, guilt and disgust.
A low score on this dimension indicates emotional stability characterized by calmness, and an even-tempered, relaxed
nature. The facets of neuroticism are anxiety, anger, hostility, depression, self-consciousness, impulsiveness and
vulnerability.
2. Extroversion is the tendency to interact with the world. Individuals tending towards extroversion enjoy excitement and
stimulation; they are upbeat, energetic and optimistic; they like people and prefer large groups and gatherings. A low score
on this dimension indicates introversion. Introverts tend to be reserved and independent and prefer to spend time alone.
The facets of extroversion are warmth, gregariousness, assertiveness, activity, excitement-seeking and positive emotions.
3. Openness to experience is the tendency to seek a variety of experiences, to entertain novel ideas and unconventional values,
and to experience both positive and negative emotions more keenly. A high score on this dimension is associated with an
active imagination, preference for variety, intellectual curiosity and an independence of judgment. A low score on this
dimension indicates a conservative outlook and a desire for the familiar and the conventional. The facets of openness to
experience are fantasy, aesthetics, feelings, actions, ideas and values.
4. Agreeableness is the tendency to move towards people and act kindly towards them. A high score on this dimension is
associated with altruism, an eagerness to help people, cooperativeness and a belief that others will be equally helpful in
return. A low score indicates the tendency to be antagonistic, egocentric, competitive and sceptical of others’ intentions.
The facets of agreeableness are trust, straightforwardness, altruism, compliance, modesty and tender-mindedness.
5. Conscientiousness is the tendency to control impulses and pursue goals. A high score on this dimension is associated with
an individual who is purposeful, strong-willed, punctual, reliable and determined. A low score on this dimension indicates a
tendency to be lackadaisical in working towards goals. The facets of conscientiousness are competence, order, dutifulness,
achievement-striving, self-discipline and deliberation.

 Elements of Perception
Elements of perception include selective perception, perceptual organisation and perceptual interpretation.
1. Selective perception: consumer select the information to process on a daily basis. There are four important selective
perception concepts: selective exposure, selective attention, perceptual defence, and perceptual blocking.
1) Selective exposure and selective attention.
Consumers are inundated with millions of different stimuli each day. As it will require a tremendous amount of energy
and effort to process them all, which is highly unnecessary, consumers tend to select and seek stimuli that interest or
matter to them while ignoring the others. Also, consumers are likely to pay more attention to the stimuli that are either
related to satisfying their needs or are more familiar to them. Furthermore, consumers’ focus on the selected stimuli
varies from person to person. For example, a student might be interested in what study materials and assistance that a
tutor can provide, while another student is more focused on the tutoring cost.
2) Perceptual defence and blocking.
The perceptual defence concept refers to the subconscious avoidance of the important stimuli or information, which is
quite common among consumers like smokers. For example, smokers will intentionally ignore the horrific images on the
cigarette packing. Altering and increasing the amount of sensory input is helpful for combating perceptual defence.
However, marketers need to be careful not to overwhelm its prospective customers as consumers are likely to block out
the excessive stimuli.
2. Perceptual organisation: how we organise the selected information. People try to simplify their lives consciously or
unconsciously by organising the stimuli and information they selected into groups and perceive them as integrated wholes.
Figure and ground, grouping, and closure are the three basic principles of perceptual organisation.
1) A figure that is contrasting to its background (ground) is more likely to be noticed. So, marketers need to design their
 promotional stimuli in a way that they can be easily spotted by the target audience.
2) After selecting the stimuli, consumers tend to group the related information together for an overall impression. Thus, an
integrated marketing communication strategy is important for Feifan to convey the desired message to its target market.
3) As people are more driven by their unsatisfied need, an incomplete perception tends to be lingering around and
motivates the consumer to act on it, such as search for more information. Some online free courses are effective
because they gave just enough stimuli to the prospective customers to draw their attention and let them act on their
own desire for more information.
3. Perceptual interpretation: how we draw meaningful conclusion from the organised information. Many factors are
influencing a consumer’s interpretation of a perception, including their personality, experience, expectation, motives and
interests. Also, there are some factors seem to be able to distort the consumer’s objective interpretation, such as first
impressions, halo effects and appearance.

 Learning Theories (Behavioural & Cognitive)

Consumer learning is the process of consumers to acquire consumption knowledge and experience that they can apply to future
similar activities. There are two main learning theories: behavioural, that learning as observable responses to stimuli, and
cognitive, that learning is based on mental activity.
1. Behavioural learning theories are stressing the importance of repetition or the association of rewards with a specific
response to the external stimuli signal.
1) Classical conditioning focuses on repetition, stimulus generalisation and stimulus discrimination. Firstly, repetition is
useful for retention. Secondly, stimulus generalization refers to the consumer’s ability to generalise which is useful for
product extensions. Lastly, stimulus discrimination is being selective among similar stimuli. A successful positioning
strategy will be resulted in being selected by the target consumers among the competitive stimuli.
2) Instrumental conditioning learning refers to the learnt repeat behaviour that is resulted from a trial-and-error process
with positive or negative reinforcement. Feifan has displayed all the high-scored test transcripts of its former students –
on their wall, website and social media – as a positive reinforcement to attract and motivate the students.
2. Cognitive learning theory sees human activity as problem solving and emphasises the role of motivation and mental
processes in producing a desired response. That is, people are not submissive to the marketers’ efforts and are capable of
making their own judgement. Cognitive learning concerns with how information is processed by the human mind: how it is
stored, retained and retrieved. A simple model of the structure and operation of memory suggests that existence of three
separate storage units: a sensory store, a short-term store and a long-term store. The processes of memory include
rehearsal, encoding, storage and retrieval.

 Information Processing
Cognitive learning concerns with how information is processed by the human mind: how it is stored, retained and retrieved. A
simple model of the structure and operation of memory suggests that existence of three separate storage units: a sensory store,
a short-term store and a long-term store. The processes of memory include rehearsal, encoding, storage and retrieval.

 Tricomponent Attitude Model

According to the tricomponent attitude model, attitudes consist of three major components: cognitive, affective and conative.
1. The cognitive component: the thinking element. Cognitions are the knowledge and perceptions that are acquired by a
combination of direct experience with the attitude object and related information from various sources. This knowledge and
the resulting perceptions commonly take the form of beliefs; that is, the consumer believes that the attitude object
possesses various attributes and that specific behaviour will lead to specific outcomes.
2. The affective component refers to the emotions or feelings a consumer has about a particular product or brand constitute
the affective component of an attitude. These emotions and feelings are the individual’s direct or global assessment of the
attitude object, such as favourable or unfavourable, good or bad.
3. The conative component: Conation is concerned with an individual’s likelihood to undertake a specific action or behave in a
particular way regarding to the attitude object, such as buying intention or actually buying something.

Three stages of the response process: cognitive, affective, and behavioural stages.
(1) The cognitive stage represents what the receiver knows or perceives about the particular product or brand. It includes
awareness that the brand exists and knowledge, information or comprehension about its attributes, characteristics or
benefits.
(2) The affective stage refers to the receiver’s feelings or affect level (like or dislike) or the particular brand. This stage also
includes stronger levels of affect such as desire, preference or conviction.
(3) The conative or behavioural stage refers to the consumer’s action towards the brand: trial, purchase, adoption or rejection.
All four models assume a similar ordering of thee three stages. Cognitive development precedes affective reactions, which
precede behaviour.
 Multi-attribute Attitude Models
Multi-attribute attitude models portray consumers’ attitudes with regard to an attitude object (e.g. a product, a service, a direct-
mail catalogue, or a cause or an issue) as a function of consumers’ perception and assessment of the key attributes or beliefs held
with regard to the particular attitude object.
1) The attitude-towards-object model: especially suitable for measuring attitudes towards a product (or service) category or
specific brands. Consumers generally have favourable attitudes towards those brands that they believe have an adequate
level of attributes that they evaluate as positive, or they will have unfavourable attitudes otherwise.
2) The attitude-towards-behaviour model is designed to capture the individual’s attitude towards behaviour or action to an
object. It seems to correspond somewhat more closely to actual behaviour other than just a belief.
3) The theory-of-reasoned-action model represents an integration of attitude components into a structure that is designed to
lead to a better explanation and predictions of behaviour. It incorporates the cognitive, affective and conative components.
4) The theory of planned behaviour: Consumers’ behaviour was (also) affected by their perceived behavioural control, such as
their skills or resources, to achieve their desired outcome. It helps understand consumer willingness to engage in a broad
range of activities, such as broadband adoption, blood donation and road safety.

 Elaboration Likelihood Model (ELM)

ELM views that consumer attitudes are changed by two distinctly different ‘routes to persuasion’: a central route and a peripheral
route. The central route refers to attitude change occurs when the consumer actively seeks out information relevant to the
attitude object itself, which is more likely in a high-involvement condition. In contrast, the peripheral route refers to learning and
attitude change occurs without consumer’s attention on it, which is more likely in a low-involvement condition. Although both
central and peripheral routes are possible to be initially in low-involvement conditions, the central inducement is more persistent
over time.
 The Diffusion Process
How well the new product/service penetrate into the market and how well the consumers adopt it.
The diffusion process is concerned with how innovations (new product/service/idea/practice) is spread by communication (mass
media/sales people/informal conversations) to members of a social system (target market) over a period of time. There are five
categories of adopter: innovators, early adopters, early majority, late majority, and laggards.
Adopter categories:
1) Innovators. 2.5% of all adopters. Venturesome—very eager to try new ideas; acceptable if risk is daring; more
cosmopolitan social relationships; communicate with other innovators.
2) Early adopters. 13.5%. Respectable—more integrated into the local social systems; the people to check with before
adopting a new idea; category contains greatest number of opinion leaders; are role models.
3) Early majority. 34%. Deliberate—adopt new ideas just prior to the average time; seldom hold leadership positions;
deliberate for some time before adopting.
4) Late majority. 34%. Sceptical—adopt new ideas just after the average time; adopting may be both an economic
necessity and a reaction to peer pressures; innovations approached cautiously
5) Laggards. 16%. Traditional—the last people to adopt an innovation; most ‘localite’ in outlook; oriented to the past;
suspicious of the new

 The Adoption Process

5 stages, very similar to consumer-decision making process,
Innovation adoption process/model represents the stages a consumer passes through in the adoption process for an innovation
such as a new product. The series of steps includes awareness, interest, evaluation, trial and adoption or rejection.
1. Awareness. During the first stage of the adoption process, consumers are exposed to the product innovation. This exposure
is somewhat neutral, for they are not yet sufficiently interested to search for additional product information.
2. Interest. When consumers develop an interest in the product or product category, they search for information about how
the innovation can benefit them.
3. Evaluation. Based on their information, consumers draw conclusions about the innovation or determine whether further
information is necessary. The evaluation stage represents a kind of ‘mental trial’ of the product innovation. If the evaluation
is satisfactory, the consumer will actually try the product innovation; if the mental trial is unsatisfactory, the product will be
rejected.
4. Trial. At this stage, consumers use the product on a limited basis. Their experience with the product provides them with the
critical information that they need to adopt or reject.
5. Adoption (rejection). Based on their trials and/or favourable evaluation, consumers decide to use the product on a full rather
 than limited basis, or they decide to reject it.

Disadvantages:
It does not adequately acknowledge that there is quite often a need- or problem-recognition stage that consumers face before
acquiring an awareness of potential options or solutions (a need recognition preceding the awareness stage). Moreover, the
adoption process does not adequately provide for the possibility of evaluation and rejection of a new product or service after
each stage, especially after trial (i.e. a consumer may reject the product after trial or never use the product on a continuous
basis). Finally, it does not explicitly include post-adoption or post-purchase evaluation, which can lead to a strengthened
commitment or to a decision to discontinue use.