THE BUSINESS SYSTEM – Markets, Government and International Trade Saturday, Nov 29 2008 

ECONOMIC SYSTEM:

The system a society uses to provide the goods and services it needs to survive and flourish.

GLOBALIZATION:

The process by which the economic and social systems of nations are connected together so that goods, services, capital, and knowledge move freely between nations.

TRADITION BASED SOCIETIES:

Societies that rely on traditional communal roles and customs to carry out basic economic tasks.

In Locke’s State of Nature:

  • All are free and equal
  • Each person owns his body and labour, and whatever he mixes his labour into
  • People agree to form a government to protect their right to freedom and property

Lockean Rights:

  • The right to life, liberty and property.

Weaknesses of Lockean Rights:

  • Assumption that individuals have neutral rights
  • Conflict between positive and negative rights
  • Conflict between Lockean rights and principles of Justice.
  • Locke’s individualistic assumptions

INVISIBLE HAND : Arguments of Adam Smith

  • According to Adam Smith, the market competition that drives self interested individuals to act in ways that serve society.
  • Market Competition ensures that the pursuit of self interest in markets advances of public’s welfare.
  • Govenment interference in markets does not advance the public’s welfare.

Criticisms of Smith’s Argument:

  • Rests on unrealistic assumptions
  • False assumption that all relevant costs are paid by manufacturer
  • False assumption that human beings are solely motivated by self interested desire for profit.
  • Some degree of economic planning is possible and desirable.
  • Keynes’s claim that government can affect unemployment.

SAY’S LAW:

In an economy all available resources are used and demand always expands to absorb the supply of commodities made from them.

AGGREGATE DEMAND:

According to John Maynard Keynes, the sum of the demand of the 3 sectors of the econonmy; households,businesses and government.

KEYNESIAN ECONOMIES:

The theory of John Maynard Keynes that free markets alone are not necessarily the most efficient means for co-ordinating the use of society’s resources.

SOCIAL DARWINISM:

Belief that economic competition produces human progress.

SURVIVAL OF THE FITTEST:

Charles Darwin’s term for the process of natural selection.

NATURALISTIC FALLACY:

The assumption that whatever happens naturally is always for the best.

ABSOLUTE ADVANTAGE:

A situation where the production costs (costs in terms of the resoueces consumed in producing the good) of making a commodity are lower for one country than for another.

COMPARATIVE ADVANTAGE:

A situation where the opportunity costs (costs in terms of other goods given up) of making a commodity are lower for one country than for another.

FREE TRADE:

  • Advocated by Smith with the idea of Absolut advantage.
  • Advocated by Ricardo with idea of Comparative Advantage.
  • Favours Gloablization.

Difficulties in Applying Ricardo’s Theory Today:

  • Easy movement of capital by companies
  • False assumption that a country’s prodcution costs are constant.
  • Influence of International rule setters.

MEANS OF PRODUCTION:

The buildings, machinery, land and raw materials used in the production of goods and services.

ALIENATION:

In Marx’s view not allowing the lower working classes to develop their productive potential, satisy their real human needs, or form satisfying human relationships.

ECONOMIC SUBSTRUCTURE:

The materials and social controls that society uses to produce its economic goods.

SOCIAL SUPERSTRUCTURE:

A society’s government and its populare ideologies.

FORCES OF PRODUCTION:

The materials- land, labour,natural resources,machinery,energy,technology used in production.

RELATIONS OF PRODUCTION:

The social controls used in producing goods i.e. the social controls by which society organizes and controls its workers.

HISTORICAL MATERIALISM:

The Marxist view of history as determined by changes in the economic methods by which humanity produces the materials on which it must live.

MARX’S PRINCIPLE Claims of Injustice in Capitalism:

  • Exploitation of workers whose “surplus” is taken by owners as “profit”.
  • Alienation of workers from product, work,self and others.
  • Subordination of government to interests of ruling economic class.
  • Immiseration of Workers.

IMMISERATION:

The combined effects of increased concentration, cyclic crises, rising unemployment, decliining relative compensation.

INTELLECTUAL PROPERTY:

Property that consists of an abstract and nonphysical object.

COPYRIGHT:

A grant that indicated that a particular expression of an idea is the private property of an individual or a company.

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ETHICAL PRINCIPLES IN BUSINESS – Various Definitions Saturday, Nov 29 2008 

ETHIC OF CARE:

An ethic that emphasizes cring for the concrete well being of those near to us.

ETHIC OF VIRTUE:

An ethic based on evaluations of the moral character of persons or groups.

UTILITARIANISM:

A general term for any view that holds that actions and policies should be evaluated on the basis of the benefits and costs they will impose on society.

UTILITY:

The inclusive term used to refer to any net benefits produced by an action.

UTILITARIANISM:

  • Advocates maximising utility.
  • Matches well with moral evaluations of public policies
  • Appears intuitive to many people
  • Helps Explain why some actions are generally wrong and others are generally light.
  • Influenced Economics

COST BENEFIT ANALYSIS:

A type of analysis used to determine the desirability of investing in a project by figuring whether its present and future economic benefits outweight its present and future economic costs.

EFFICIENCY:

Operating in such a way that one produces a desired output with the lowest resource input.

NONECONOMIC GOODS:

Goods such as life, love, freedom,equality, health, beauty, whose value is such that no quantity of any economic good is equal in value to the value of the noneconomic good.

INSTRUMENTAL GOODS:

Things that are considered valuable because they lead to other good things.

INTRINSIC GOODS:

Things that are desirable independent of any other benefits they may produce.

JUSTICE:

Distributing benefits and burdens fairly among people.

RIGHTS:

Individual entitlements to freedom of choice and well being.

EVALUATING UTILITARIANISM:

  • Critics say not all values can be measured.
  • Utilitarians respond that monetary and commonsensee mesures can measure everything.
  • Critics say utilitarianism fails with rights and justice.
  • Utilitarians respond that rule – utilitariansim can deal with rights and justice.

LEGAL RIGHT:

An entitlement that derives from a legal system that permits or empowers a person to act in a specified way or that requires others to act in certain ways toward that person.

MORAL RIGHTS:

Rights that human beings of every nationality possess to an equal extent simply virtue of being human beings.

CHARACTERISTICS OF RIGHTS:

  • A right is an individual’s entitlement to something.
  • Rights derieved from legal systems are limited by jurisdiction
  • Moral or human rights are based on moral norms and are not limited by jurisdiction.

SUMMARY OF MORAL RIGHTS:

  • Tigthly correlated with duties.
  • Provide individuals with autonomy and equality in the free pursuit of their interests.
  • Provide a basis for justifying one’s actions and for invoking the protection or aid of thers.

NEGATIVE RIGHTS:

Duties others have to not interfere in certain activities of the person who holds the right.

POSITIVE RIGHTS:

Duties of other agent to provide the holder of the right with whatever he or she needs to freely pursue his or her interests.

KINDS OF MORAL RIGHTS:

  • Negative rights require others leave us alone
  • Positive rights require others help us
  • Contractual or special rights require other to keep agreements.

CATEGORICAL IMPERATIVE:

The requirement that everyone should be treated as a free person equal to everyone else.

MAXIM:

The reason a person in a certain situation has for doing what he or she plans to do. 

UNIVERSALIZABILITY:

The person’s reasons for acting must be reasons that everyone could act on atleast in principle.

REVERSABILITY:

The person’s reasons for acting must be reasons that he or she would be willing to have all others use, even as a basis of how they treat him or her.

KANT’S CATEGORICAL IMPERATIVE FORMULAS:

  • Never do something unless you are willing to have everyone do it.
  • Never use people merely as means, but always respect and develop their ability to choose for themselves.

CRITICISMS OF KANT:

  • Categorical Imperatives are unclear
  • Kant’s rights can conflict
  • Kant’s theory implies some mistaken moral conclusions

LIBERTARIAN PHILOSOPHERS:

  • Believe that freedom from human constraint is necessarily good  and that all constraints imposed by others are necessarily evil except when needed to prevent the imposition of greater human constraints.

TYPES OF JUSTICE:

  • Distributive Justice: Just distribution of benefits and burdens
  • Retributive Justice: Just imposition of punishments and penalities.
  • Compensatory Justice: Just compensation for wrongs or injuries.

DISTRIBUTIVE JUSTICE:

Distributive society’s benefits and burdens fairly.

RETRIBUTIVE JUSTICE:

Blaming or punishing persons fairly for doing wrong.

COMPENSATORY JUSTICE:

Restoring to a person what the person lost when he or she was wronged by someone.

EGALITARIANISM:

Every person should be given exactly equal shares of a society’s or a group’s benefits and burdens.

POLITICAL EQUALITY:

Equal participation in, and treatment by, the political system.

ECONOMIC EQUALITY:

Equality of income, wealth and opportunity.

PURITAN ETHIC:

The view that every individual has a religious obligation to work hard at his calling (the career to which God summons each individual).

WORK ETHIC:

The view that values individual effort and believes that hard work does and should lead to success.

PRODUCTIVITY:

The amount a person produces.

PRINCIPLE OF EQUAL LIBERTY:

The claim that each citizen’s liberties must be protected from invasion by others and must be equal to those of others.

DIFFERENCE PRINCIPLE:

The claim that a productive society will incorporate inequalities, but takes steps to improve the position of the most needy members of society.

PRINCIPLE OF FAIR EQUALITY OF OPPORTUNITY:

The claim that everyone should be given an equal opportunity to qualify for the more privileged positions in society’s institutions.

ORIGINAL POSITION:

An imaginary meeting of rational self interested persons who must choose the principles of justice by which their society will be governed.

VEIL OF IGNORANCE:

The requirement that persons in the original position must not know particulars about themselves which might bias their choices such as their sex,race,religino,income,social status etc.,

PRINCIPLES OF DISTRIBUTIVE JUSTICE:

  • Fundamental: Distributive benefits and burdens equally to equals and unequally to unequals.
  • Egalitarian: Distribute equally to everyone.
  • Capitalist: Distribute by Contribution
  • Socialist: Distribute by need and ability.
  • Libertarian: Distribute by Free Choices
  • Rawls: Distribute by equal liberty, equal opportunity, and needs of disadvantaged.

ETHIC OF CARE:

An ethic that emphasizes caring for the concrete well being of those near to us.

  • Claims ethics need to be impartial.
  • Emphasizes preserving and nurturing concrete valuable relationships.
  • Says we should care for those dependent on and related to us.

COMMUNITARIAN ETHIC:

An ethic that sees concrete communities and communal relationships as having a fundamental value that should be preserved and maintained.

Objection to Care Approach to Ethics:

  • Charge: Ethic of care can degenerate into favoritism.
  • Response: Conflicting moral demands are an inherent characteristic of moral choices.
  • Charge: Ethic of care can lead to “burnout”
  • Response: Adequate understanding of ethic of care will address the need to care for the caregiver.

The Basis of Moral Judgements:

  • Evaluations of social costs and benefits.
  • Respect for individual rights.
  • Just ditribution of benefits and burdens.
  • Caring for those in concrete relationships.

MORAL VIRTUE:

An acquired disposition that is valued as part of th character of morality good human being and that is exhibited in the person’s habitual behaviour.

THEORIES OF MORAL VIRTUE:

  • Aristotle: Habits that enable a person to live according to reason.
  • Aquinas: Habits that enable a person to live responsibly in this world and be united with God in the next life.
  • MacIntyre: Disposition that enables a person to achieve the good at which human”practices” aim.
  • Pincoff: Dispositions we use when choosing between persons or potential future selves.

VIRTUE THEORY:

The theory that the aim of the moral life is to develop those general dispositions called moral virtues, and to exercise and exhibit them in the many situations that human life sets before us.

VIRTUE THEORY CLAIMS:

  • We should exercise, exhibit, and develop the virtues.
  • We should avoid exercising, exhibiting, and developing vices.
  • Institutions should instill virtues not vices.

Business Ethics – Various Definitions and Theories Friday, Nov 28 2008 

Business Ethics:

The principles of conduct governing an individual or a group.

Business Ethics:

Ethics is the study of Morality.

 

Ethics is not the same as morality, it is a study  of various dimensions of Morality.

Ethics is the discipline that examines one’s moral standards or the moral standards of a society.

WHAT IS MORALITY?

The standards that an individual or a group about what is right and wrong or good and evil.

MORAL STANDARDS :

The norms about the  kinds of actions believed to be morally right and wrong as well as the values placed on the kinds of objects believed to be morally good and morally bad.

NON MORAL STANDARDS:

The standards by which we judge what is good or bad and right or wrong in a nonmoral way.

5 Characteristics of Moral Standards:

  1. Involved with serious injuries or benefits.
  2. Not established by Law or Legislature.
  3. Should be preferred to other values including self interest.
  4. Based on impartial considerations
  5. Associated with special emotions and vocabulary

NORMATIVE STUDY:

An investigation that attempts to reach conclusions about what things are good or bad or about what actions are right or wrong.

DESCRIPTIVE STUDY :

An investigation that attempts to describe or exploan the world without reaching any conclusions about whether the world is as it should be.

BUSINESS ETHICS:

A specialized study of moral right and wrong that concentrates on moral standards as they apply to business institutions, organizations and behaviour.

BUSINESS ETHICS STUDIES:

  • Moral Standards
  • How moral standards apply to social systems and organizations that produce and distribute goods and services.

KINDS OF ETHICAL ISSUES:

  • Systemic – Social Systems or institutions within which business operate.
  • Corporate – An Individual Company taken as a whole
  • Individual – A Particular individual or individuals within a company and their behaviours and decisions.

ETHICAL RELATIVISM :

A theory that there are no ethical standards that are absolutely true and that apply or should be applied to the companies and people of all societies.

Objections to Theory of Ethical Relativism:

  • Some moral standards are found in all societies.
  • Moral differences do not logically imply relativism
  • Relativism is incoherent
  • Relativism privileges the current moral standards of a society.

 

Kohlberg’s Three Levels of Moral Development :

  • Preconventional – Punishment and obedience; instrumental and relative.
  • Conventional – Interpersonal concordance; law and order
  • Postconventional – Social contract, universal principles

MORAL REASONING:

The reasoning process by which human behaviours, institutions or policies are judged to be in accordance with or in violation of moral standards.

Objections to Bringing Ethics into Business:

  • In a free market economy,the pursuit of profit will ensure maximum social benefit
  • A manager’s most important obligation is to the company.
  • Business ethichs is limited to obeying the law.

Arguments Supporting Ethics in Business:

  • Ethics applies to all human activities
  • Business cannot survive without ethics
  • Ethics is consistent with profit seeking
  • Prisoner’s dilemma argument
  • Customers and Employees care about Ethics

Elements of Moral Responsibility:

  • Individual must cause or fail to prevent an avoidable injury or wrong.
  • Individual must know what he is doing
  • Individual must act of his own free will.

RECOMMENDED WEBSITES:

http://www.scu.edu/ethics

http://www.ethics.acusd.edu

http://www.web-miner.com/busethics.htm

http://www.essential.org

http://www.sec.gov/edgar.shtml

http://www.betterworldlinks.org/book100.htm

http://www.corpwatch.org

http://www.worldwatch.org

http://www.arq.co.uk/ethicalbusiness

http://www.bsr.org

http://www.mallenbaker.net/csr

http://www.pwblf.org

BUSINESS ETHICS Friday, Nov 28 2008 

Business Ethics is applied ethics in the day to day operations of the business.

It is the on the court application of our understanding or what is good and right to that assortment of institutions, technologies,transactions,activities and pursuits that we call BUSINESS.

Although ethics may be the best policy, the ethical course of aciton is not always clear.

We will try to explore this issue in details through the various series of blog postings in the coming days. The purpose is not to give moral advice but to provide a deeper knowledge of the nature of ethical principles and concepts and an understanding of how these apply to the ethical problems encountered in business.

This kind of knowledge and understanding will help managers in charge to see their way through the various ethical dilemmas that one confronts in our business life.

REFERENCE BOOK:

BUSINESS ETHICS – Concepts and Cases by Manuel G. Velaszquez

Culture & Consumer Behaviour Thursday, Nov 27 2008 

CULTURE :

The study of culture is the study of all aspects of a society. It is the language, knowledge, laws, and customs that give that society its distinctive character and personality. In the context of consumer behaviour, culture is defined as the sum total of learned behaviours, beliefs, values, customs that serve to regulate the consumer behaviour of members of a particular society. 

Beliefs and Values are guiding principles while customs are the usual and accepted norms of behaviour.

The impact of the culture on the society is so natural and so ingrained that its influence on behaviours is rarely noted. It is like fish distinguishing water.

Culture offers orders, direction and guidance to members of society in all phases of human problem solving.

Culture is dynamic and gradually and continually evolves to meet the needs of the society.

Culture is learned as a part of the social experience. Children acquire a set of beliefs, values and customs, which constitutes the culture,from the environment. These beliefs, values and customs are acquired through formal learning, informal learning and technical learning.

Advertising enhances formal learning by reinforcing desired modes of behavior and expectations; it enhances informal learning by providing models for behaviour.

Culture is communicated to members of society through a common language and through commonly shared symbols. Because the human mind has the ability to absorb and to process symbolic communication, marketers can successfully promote both tangible and intangible products and product concepts to consumers through mass media.

All the elements in the marketing mix serve to communicate symbolically with the audience, Products project an image of their own, so does promotion. Price and Retail outlets symbolically convey messages concerning the quality of the product.

The elements of culture are transmitted by 3 pervasive social institutions; the family, the schools and the church. A fourth social institution that plays a major role in the transmission of culture is  the mass media, both through editorial content and through advertising.

A wide range of measurement techniques is used to study culture. The range includes Projective Techniques,attitude measurement methods, field observation,participant observation, content analysis and value measurement  survey techniques.

What are you Consumer Groups? What are their Cultures?  How are you understanding and leveraging that for your business development and client engagement?

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com;  manojonkar@gmail.com; 919375970812

Social Class and Consumer Behaviour Thursday, Nov 27 2008 

SOCIAL CLASSES & CONSUMER BEHAVIOURS:

Social Stratification, the divison of memebrs of a society into a hierarchy of distinct social classes, exists in all societies and cultures.

Social class usually is defined by the amount of status that members of a specific class possess in relation to members of other classes. Social-class membership often serves as a frame of reference for the development of consumer attitudes and behaviour.

The measurement of social class is concerned with classifying individuals into social class groupings. These groupings are of particular value to marketers, who use social classification as an effective means of identifying and segmenting target markets.

There are 3 basic methods for measuring social class:

  1. Subjective Measurement
  2. Reputational Measurement
  3. Objective Measurement

Subjective Measures rely on an individual’s self perception.

Reputational Measures rely on an individual’s perceptions of others and 

Objective Measures use specific socioeconomic mesures, either alone or in combination with others.

Composite variable indexes sucha s the index of status characteristics and the socio economic status score, cominbe a no. of socio economic factors to form one overall measure of social class standing.

Class strucutres range from two class to nine class systems. A frequently used classification system consists of 6 classes: Upper upper, lower Upper, upper middle, lower middle, upper lower, and lower lower classes.

Profiles of these clases are reflected in differences in attitudes, in leisure activities, and in consumption habits. That is why, for the marketers, social class based market segmentation is of high importance.

Geodemographic clustering is a technique that combines geogrpahic and socio economic factors to locate concentrations of consumers with particular characteristics. Particular attention currently is being directed to affluent consumers, who represent the fastest growing segment in our population; however, some marketers are finding it extremely profitable to cater to the needs of non affluent consumers.

Research has revealed social class differences in clothing habits, home decoration, leisure activities, as well as saving, spending and credit habits.

Thus, smart marketeres tailor specific product and promotional strategies to each social-class target segment.

Which Social classes are your customers from? How are their behaviours impacted by these various factors?

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com; manojonkar@gmail.com; 919375970812

Consumer Behaviour Influencers Thursday, Nov 27 2008 

Consumer Behaviour & Purchase Decisions Influenced by Reference Groups and Families

Almost all individuals regularly interact with other people who directly or indirectly influence their purchase decisions. Therefore, the study of groups and their impacts on the individual is of great importance,specially for the marketers who want to influence the consumer behaviours in favour of their products and services.

Consumer Reference Groups are groups that serve as frames of reference for individuals in their purchase decisions. Reference groups include:

  1. Friends
  2. Work Groups
  3. Shopping Groups
  4. Virtual Groups & Communities
  5. Consumer Action Groups.

Normative Reference Groups are those groups that influence general values or behaviour.

Comparative Reference Groups are those that influence Specific Attitudes.

Consumer Reference Groups include groups with which consumers have no direct face to face contact such as film stars, sportspersons, other celebrities and social classes.

The credibility, attractiveness and power of the reference group affect the degree of influence it has. Reference group appeals are used very effectively by some advertisers in promoting their goods and services because they subtly induce the prospective consumer to identify with the pictured user of the product.

The 5 reference group appeals most commonly used in marketing are:

  1. Celebrities
  2. Experts
  3. Common Man
  4. Executive and Employee spokesperson
  5. Trade Spokes Character

Celebrities are used to give testimonials or endorsements as actors or as company spokespersons.

Experts may be recognized experts in the concerned product category or actors playing the part of experts.

The common man approach is designed to show that individuals who are just like the prospective customers are satisfied with the advertised product or service.

Companies are using their top executives as spokespersons because their appearance in company advertisements seems to imply that someone at the top is watching over the customer’s interest.

For many customers, their family is their primary reference group for many attitudes and behaviours.

The family is the primary target for most products and services. As the most basic membership group, families are defined as two or more persons related by blood, marriage or adoption who reside together.

There are 3 types of families: Married Couples, Nuclear Families and Extended Families. 

Socialization is the core function of the family. Other functions being economic and emotional support and the pursuit of a suitable lifestyle for its members.

The members of a family assume specific roles in their everyday functioning: such roles or tasks extend to the realm of consumer purchase decisions. Key consumer related roles of family member include influencers, gatekeepers, deciders, buyers, preparers,users, maintainers and disposers.

A family’s decision making style in influenced by its lifestyle, roles and cultural factors e.g.: husband dominated, wife dominated, joint, autonomic decisions etc.,

Classification of the families by the various stages in the family life cycle (FLC) provides valuable insights into family consumption related behaviour.

The traditional FLC begins with bachelorhood, moves on to marriage, then to an expanding family, to a contracting family and to an end with the death of a spouse.

Various other situations also exists like childless couples, live in couples, single parents or single person households.

Who are the influencers for your Customers? How does this show up in Corporate Purchase decisions?

How are you leveraging the various influencers?

MANAGMENT INNOVATIONS

managementinnovations2020@gmail.com; manojonkar@gmail.com; 919375970812

Marketing Communication and Consumer Behaviour Wednesday, Nov 26 2008 

MARKETING COMMUNICATION:

There are 5 basic components of communication:

  1. Sender
  2. Receiver
  3. Medium
  4. Message
  5. Feedback

 

In the communications process, the sender encodes the message using words,pictures, symbols sends it through a selected medium.

The receiver decodes the message based on his or her personal characteristics and experience, and responds based on such factors as selective exposure, selective perception, comprehension and psychological noise.

There are 2 types of communications:

 

  1. Interpersonal Communications
  2. Mass Communications

 

Interpersonal communications occur on a personal level between tow or more people and may be verbal or non verbal, formal or informal.

Interpersonal communications take place in person,by telephone,by mail,by email,on the web etc., 

In mass communications, there is no direct contact between source and receiver.

Mass communications occur through such impersonal  media as television, radio, newspapers and magazines.

Feedback is an essential component of all types of communications because it provides the sender with some notion as to whether and how well the message has been received.

The credibility of the source, a vital element in message persuasiveness, often is based on the source’s perceived intentions.

Informal sources and neutral or editorial sources are considered to be highly objective and thus highly credible. The credibility of a commercial source is more complex and usually is based on a composite evaluation of its reputation,expertise,and knowledge and that of the medium in which it advertises, the retail channel and company spokespersons.

Media Selection depends on the product,the audience, and the advertising objectives of the campaign.Each medium has advantages and shortcomings that must be weighed in the selection of  media for an advertising campaign.

Following the emergence of new technologies, many advertisers are now developing more customized communications that can reach consumers via media with narrow casting, rather than broadcasting.

The manner in which a message is presented influences its impact. One sided messages are more effective in some situations and with some audiences; two sided messages are more effective with others.

High involvement products are best advertised through the central route to persuasion, which encourages active cognitive effort. 

Marketers can either use objective,factual appeals or emotional appeals. The emotional appeals most frequently used in advertising fear, humour,sexual appeals etc.,

Audience participation is a very effective communications strategy becuase it encourages internalization of the advertising message.

What are the challenges you are facing in designing and delivering your Marketing Communications to your current and potential customers?

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com;  manojonkar@gmail.com; 919375970812

Consumer Attitutde Wednesday, Nov 26 2008 

What is an Attitude?

An attitude is a learned predisposition to behave in a consistently favourable or unfavourable way with respect to a given object whether it is a product, product category, a brand, a service, an advertisement, a website, a store etc., Each property of this definition is critical to understanding why and how attitudes are relevant in consumer behaviours and marketing.

The 4 broad categories of attitude models are:

  1. Tri component attitude model
  2. Multiattribute attitude model
  3. Trying to Consume Model
  4. Attitude toward the ad Model

The tri component model of attitudes consists of 3 parts:

  1. A cognitive Component
  2. An affective Component
  3. A conative component

The cognitive component captures a consumer’s knowledge and perceptions about products and services.

The affective component focuses on a customer’s emotions or feelings with respect to a particular product or service. The affective component determines an individual’s overall assessment of the object in terms of some kind of favourableness scoring.

The Conative component is concerned with the likelihood that a consumer will act in a specific fashion with respect to the attitude object. The Conative component is many times treated as an expression of the customer’s intention to buy.

Multiattribute attitude models like attitude toward object, attitude toward behaviour and the theory of reasoned action models have received much attention from consumer researchers. These models examine consumer beliefs about specific product attributes. The thoery of trying is designed to account for the many cases in which the action or outcome is not certain. The attitude toward the ad models examine the influence of advertisements on the consumer’s attitudes toward the brand.

How attitudes are formed?

Attitudes are learned and the different learning theories provide unique insights as to how attitudes initially may be formed. Attitude formation is facilitated by direct personal experience and influenced by the ideas and experiences of friends and family members and exposure to mass media.

Individual’s personality also plays a role in attitude formation.

Strategies of Attitude Change can be put into 6 distinct categories:

  1. Changing the basic motivational function
  2. Associating the attitude object with a specific function
  3. Relating the attitude object to conflicting attitudes
  4. Altering components of the multiattribute model
  5. Changing beliefs about competititor’s brands, products and Services
  6. The Elaborated Likelihood Model.

Each of these strategies provide the marketer with alternative ways of changing consumer’s existing attitudes.

Cognitive dissonance theory suggests that the conflicting thoughts or information, following a purchase might propel consumers to change their attitudes to make them consonant with their actions.

Attribution theory focuses on how people assign casualty to events and how they form or alter attitudes as an outcome of assessing their own behaviour or the behaviour of the other people OR things.

What are you doing to ensure that your potential customers are creating favourable attitudes towards your company, brand, product and services? How are your competitors doing it? Talk to us for further support.

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com; manojonkar@gmail.com, 919375970812

Consumer Learning Tuesday, Nov 25 2008 

What is Consumer Learning?

Consumer Learning is the process by which individuals acquire the purchase and consumption knowledge and experience they apply to future related behaviour.

Most of the learning is incidental. Some of it is intentional. Basic elements that contribute to an understanding of learning are:

 

  1. Motivation
  2. Cues
  3. Response
  4. Reinforcement

 

There are 2 theories on how Individuals learn:

 

  1. Behavioural Theory
  2. Cognitive Theory

 

Both contribute to an understanding of consumer behaviour.

Behavioural Theorists view learning as observable responses to stimuli, whereas Cognitive Theorists believe that learning is a function of mental processing.

3 Major Behavioural Learning Theories are :

 

  1. Classical Conditioning : Includes Repetition, Stimulus generalization and Stimulus discrimination.                                          
  2. Instrumental Conditioning: Instrumental Learning theorists believe that learning occurs through a trial and error process in which the positive outcomes in the form of results or desired outcomes lead to repeat behaviour like Repeat Purchase or Repeat Positive Word of Mouth.                                        Both positive and negative reinforcement can be used to encourage the desired behaviour. The timing of repetitions influences how long the learned material is retained. Learning usually persists longer with distributed re-inforcement schedule, while mass repetitions produce more initial learnings.                                             
  3. Observational Conditioning or Vicarious Learning:

Cognitive learning theory holds that the kind of learning most characteristics of humans is PROBLEM SOLVING. Cognitive theorists are concerned with how information is processes by the human mind: how it is stored, retained, and retrieved.

Involvement theory proposes that people engage in limited information processing in situations of low relevance to them and people engage in extensive information processing in situations of high relevance.

TV is a low involvement medium for learning and print and interactive media encourage more cognitive information processing.

Measures of consumer learning include recall and recognition tests, cognitive responses to advertising, and attitudinal and behavioural measures of brand loyalty.

A basic issue among researchers is whether to define brand loyalty in terms of consumer’s behaviours or the consumer’s attitude towards the brand. Brand Equity refers to the inherent value a brand name has in the marketplace.

Brand Loyalty consists of both attitudes and actual behaviours toward a brand and both must be measured. For marketers, the major reasons for understanding how consumers learn are to teach them that their brand is best and to develop brand loyalty.

What does your brand mean to your customers? Are they really loyal to your brand? How do you increase their loyalty?

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