Notes

[MUSIC]
So, now we're at the purchase stage.
Many times, this is the stage that people
think,
well this is all that matters, but I hope
you realize now that before the consumer
or the
shopper gets to the purchase stage, a lot
goes on.
They have to discover they have a need,
they
have to search for information, they have
to evaluate the
alternatives, they have to establish their
preferences, and finally they
decide are they going to purchase an item
or not.
Well what's
clearly going to affect their purchase?
First of all, when they go to purchase,
whether it's online
or in a store, the product has to be in
stock.
If the products not in stock, they're not
going to purchase.
So, there's a lot of inventory control,
operations, things like that to
make sure products are on the shelf and
consumers want to purchase it.
But for the time being, lets assume that
the product is on
the shelf, because those other issues
are more operations management and
inventory control.
But from a marketing point of view, let us
assume the product's on the shelf.
At this stage, what will effect whether or
not consumers will make the purchase?
One thing that makes a very big difference
is price.
At this stage, consumers start to
consider, well, I like this product
but do I want to pay this much money for
the product?
The other thing that you want to consider
at the purchase stage is not
only will they buy, but how many will they
buy, and something that influences that
is how much variety a consumer assumes
there is on the shelf.
So, those are the things we'll talk about
in this section.
Pricing strategies and perceived variety
on the shelf.
So, let's talk about pricing.
There was a famous study done by Dixon and
Sawyer which showed that
in supermarkets, consumers are amazingly
mindless about shopping.
They had
doctoral students or graduate students
dress up as clerks and watch
consu-, watch shoppers as they went around
to make their purchases.
They stood by particular product
categories and they timed
how long people stood in front of a
category.
And then they timed, or they've noted how
many different items they inspected.
And once they put an item in the, in the
cart
and they moved the cart away from the
category, the student went
up to the shopper and said, what was the
price of that item.
And what they found, were that shoppers
were amazingly mindless about, what
they were doing, and that they were not
very aware of the price.
First of all, and this was in a grocery
store, they found the
average time between arriving and
departing
from a product category was 12 seconds.
In 85% of the time, only the chosen brand
was handled and 90% of shoppers
inspected only one size, that means they
went to the category and bought just
one thing.
When they move the cart away from the
category, and they ask the shopper what
was the price of the item you just
put into your cart.
21% of the shoppers, could not even give
any price estimate, they had no idea what
the price was.
And of the ones who said they knew the
price, only half of them said it right.
So, they didn't know the absolute price,
but
almost all of them knew the relative
price.
In other words, they knew, I was buying
the most expensive product
in the category, I was buying the cheapest
product in the category.
They might not know exactly how much they
paid, but it wasn't that they had no idea
of that price.
So, what we know about price is not in
all cases, but in many cases, consumers
evaluate price relatively.
They don't evaluate absolutely.
They can't tell you exactly, how much
something is worth.
But they can tell you whether or not they
think its
a fair deal, whether its a good price
compared to other things.
So, what we think about pricing is its
a reference price, they have some
reference price and
they compare the price they see on the
shelf to that reference price.
And there are two kinds of reference
price.
There's an external reference price that
the marketer can
set, or there's an internal reference
price that sits in
the consumer's head as a benchmark and
they compare the
prices that they see, to the benchmark in
their head.
So, let's look at external reference
prices.
Probably the most common one and you've
seen them all
the time, is original price, here's your
discounted price.
Those kind of, that kind of thing really
helps
the consumer decide whether or not it's a
fair price.
You'll see in this store a lot of sale
prices, maybe for
a limited time only, maybe a special deal,
maybe a value price.
But what it does is say to the consumer,
this is a good price.
Here's what it was at one point, and
here's what you have to pay now.
And consumers interpret that as a good
price, and they're
more likely to make a purchase if they
consider it.
There are other ways people use like
rules.
So, for example if you're in the market
for a diamond
ring, the diamond industry tells you two
months salary lasts forever.
Now, how is that a good price for a
diamond?
But it gives you a reference point.
It says, that's approximately, how much
you should spend on a diamond.
And it gives you some way
to evaluate the price.
An other thing we're seeing a lot nowadays
is low price guarantees.
What a low price guarantee does, is
guarantee that if you
found the item somewhere else cheaper,
they'll match that low price.
That gives you piece of mind you feel
okay, I'll make this purchase.
Interestingly many times when people buy
from a low price
guarantee, they don't always compare, they
just feel better knowing
that the, that the price is guaranteed, so
they assume its a low price.
The other type of reference price, that
people use is something that's in their
head.
So, they have a head they have in their
head, a can of soda should cost a dollar.
Whatever it is, their benchmark in their
head is the fair price for the good.
And if the product is higher than their
fair price, their less likely to buy.
If it's lower than their fair price,
they're more likely to buy.
And that's fine, that makes sense, but the
problem with
it is this internal reference price is not
on-, always accurate.
We know consumers are very influenced by
things that happened, that are very vivid.
So, if a brand is frequently promoted,
what happens
is people stop thinking about that as a
sale price.
They think about it as the fair price.
And so as
a result if a brand is very often
promoted, the fair
price of the item goes down as the
internal reference point.
And then people are less likely to buy
that product unless it's on sale.
They won't buy it at the regular price.
So, markets have, marketers have to be
very careful about how they discount
items.
Because it, at one time it seems like it's
a good deal.
But if they discount too often,
they make that seem like the fair price
and then people won't buy it
unless it's on sale, or if it's unless
it's at even a lower price.
You have to be very careful on, how these
internal reference prices work.
The other thing that affects whether or
not
you purchase is how much variety you see.
If you see more variety on the shelf,
you're more likely to buy more than one
item.
And as I mentioned earlier, there are lots
different
ways that con-, that the marketers can
create more variety.
They can use different colors to create
variety, come up with different flavors.
These kinds of things might make it more
likely that you'll buy more than one.
In this store, for example, there are lots
and lots of different types of olives.
And so when you see all that variety of
olives it, it's probably likely
that you'll buy more olives, than if you
only saw one or two different
types of olives.
There was a study that I did, where I did
a study on nail polish, colors and flavors
of soft drinks.
And I found, that if you came up
with interesting product names or flavor
names, or
a color name, consumers were attracted
there was
more fun and they were likely to purchase
more.
[MUSIC]