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Friday, February 27, 2015
Economic XI HSEB All Notes
Tuesday, February 24, 2015
EFFECT OF CELEBRITY ENDORSEMENT ON CONSUMER BEHAVIOUR
The buying process which any consumer goes through before making a purchase can be broadly classified into two categories- thought situations and feel situations. Whereas in the first case, consumers process information and arrive at outcomes using facts and logic, in the second case, he tends to reach a decision based on his subjective likes or dislikes. As per the Elaboration Likelihood model, for the first scenario, marketers follow the central route to persuasion and the buying process is said to be a high involvement one. For the second scenario, peripheral routes of persuasion are used and the process is characterized as a low involvement one.
Figure 1
According to the FCB Grid developed by Richard Vaughn in 1980, for high involvement purchases, a consumer typically feels/ learns about the product first and then buys it. While for low involvement items, the ‘do’ portion precedes the learning/ feeling.
Figure 2
Motivation for the study
The variation in the hierarchies of effects for these two categories has a lot of relevance for a marketer since it gives him direction on how to best portray his offering to the consumer so that he purchases it. Using an endorser to promote the product has been a tried and tested formula for many companies. Through a number of studies it has been established that endorsers in an advertisement influence the buying behaviour of a consumer. (Biswas, Biswas and Das, 2006) Many studies have also been conducted to demonstrate the influence of endorsers on various marketing variables such as attitude towards product, purchase intention etc. (Petty, Cacioppo, & Schumann, 1983; Block & Atkin, 1983)
The aim of this paper would be to analyze and compare the effect of celebrity and expert endorsers on high and low involvement products to see whether it is different for the two product classes.
Experimental Methodology
For a high involvement purchase, a mobile phone was taken as the experimental product, while a biscuit packet was taken as a low involvement purchase. For each of these two products, two print ads of a fictional brand was designed, one endorsed by a celebrity and the other by an expert, were shown to two sets of 30 respondents each. Care was taken to ensure that the two groups were heterogeneous within but homogeneous across. Both the ads had the same celebrity endorsing the product, mobile in one, biscuit in the other. The 120 respondents rated the ads on the parameter of Claim Believability, the scale for which was adapted from Beltramini and Evans (1985). It is a 10 item 7 point Likert scale. The scale item is listed below.
Figure 3
The parameters in red were reverse coded to ensure that respondents do not blindly mark all the questions.
Initial Hypothesis
Obermiller and Spangenberg (2005) examined the relationship between ad skepticism and informational versus emotional appeal. Their studies showed that high skeptics are less responsive to emotional appeals. This result was consistent with Friestad and Wright (1994) who proposed that emotional appeals are developed by marketers specifically to circumvent consumers’ skeptical resistance to informational arguments. In a related study, Lord and Putrevu (2009) concluded that for products appealing to informational motivations, (high involvement) credibility was influenced by the expertise of the endorser while for products appealing to transformational motivations, attractiveness of the endorser has maximum impact on credibility.
Based on these studies, the following hypothesis was developed.
H1: Celebrity endorsement has a more positive effect on Claim believability of a low involvement product compared to a high involvement one.
H2: Expert endorsement has a more positive effect on Claim believability of a high involvement product compared to a low involvement one.
The posters of the four advertisements shown to the students are given below. The 1st one was for a High Involvement product- Smart Phone while the other was for a Low involvement one- glucose biscuit. Both ads had the exact same layout and colour scheme, with only the content differing in each. The celebrity chosen was also same for both the sets. This was done to remove any bias created due to the quality of the ad. For the brands, fictional names were chosen so as to eliminate pre-conceived notions in the minds of the respondents.
Figure 4
Expected Outcome
Since it is theorized that celebrities appeal more to the emotional senses, it is expected that the claim believability of consumers will be more for the low involvement product. For a high involvement product, a consumer is typically expected to gather further information before deciding to buy.
Experiment Results
The responses to the questionnaire were tabulated.. The mean scores for each of the parameters were calculated to arrive at the final rating given by the respondents to the ad. Refer to the excel sheet attached for further details.
It was observed that the mean score for the High Involvement product, mobile phone was 5.64 while that for the low involvement (biscuit) was 3.53. This showed that contrary to our initial hypothesis, claim believability of consumers was more for the mobile than the biscuit.
Statistical Analysis
H1: Celebrity endorsement has a more positive effect on Claim believability of a low involvement product compared to a high involvement one.
The ANOVA test for the dependent variable ‘Endorser’ with respect to the independent variable ‘Claim Believability’ for Celebrities showed the following result.
Figure 5
Given that the mean of claim believability for the consumers who were shown the print ad of the high involvement product, mobile, is considerably higher, and the difference in means is statistically significant, celebrity endorsement considerably increase the believability for the high involvement product
H2: Expert endorsement has a more positive effect on Claim believability of a high involvement product compared to a low involvement one.
The ANOVA test for the dependent variable ‘Endorser’ with respect to the independent variable ‘Claim Believability’ for Experts showed the following result.
Figure 6
Conclusion
This research experiment showed that experts have the highest influence in brand promotions of low involvement products. As the consumers have not invested their time to research about the product, expert opinion reinforces the consumer belief in the product and brand leading to higher claim believability.
However in case of high involvement products, celebrity endorsers are highly valued. Their impact on the brand promotions is more because consumers have invested sufficient time and have taken opinion from experts already. Celebrity endorsers help them achieve the aspirational value of owning that product. Thus the claim believability is more.
References
1.Ahmed, Azmat, & Farooq. (2012). Effect of celebrity endorsement on customer's buying behavior; A perspective from Pakistan. Interdisciplinary Journal of Contemporary Research in Business, 4(5), 584-592.
2.Biswas, Biswas, & Das. (2006). The differential effects of celebrity and expert endorsements on consumer risk perceptions. Journal of Adveritsing, 35(2), 17-31.
3.Block, & Atkin. (1983). Effectiveness of Celebrity Endorsers. Journal of Advertising Research, 23(1), 57-61
4.Petty, Cacioppo, & Schumann. (1983). Central and Peripheral Routes to Advertising Effectiveness: The Moderating Role of Involvement. Journal of Consumer Research, 10(2), 135-146.
5. Pooja Punjabi (2014) ,IIM Kozhikode, MBASkool.com
E-COMMERCE - THREAT TO TRADITIONAL RETAIL?
E-COMMERCE - THREAT TO TRADITIONAL RETAIL?
E-retail with its innovative business model is radically changing the way people traditionally shop. The demise of companies like Tower Records, Borders can be attributed to growing acceptance of e-retail. The extremely high growth rates are a cause of concern for traditional retail. However, despite glaring advantages, e-retail is only 5% of total retail sales. Traditional stores have inherent advantages in terms of experiential products and a huge supporting ecosystem. But, the market dynamics are changing and traditional stores can’t rely on the momentum barrier to keep out e-retail. The future lies in innovation and the ability to integrate channels to satisfy evolving customer needs.
Emergence of e-retail: How real is the threat for traditional retailers?
Ever since the launch of Amazon and eBay in 1995, E-Commerce has been periodically touted as the next big disruption with the power to drive traditional retail stores to extinction. Tower Records, a retail music chain went bankrupt in 2006. Musicland was sold in 2006. Borders, a bookstore went bankrupt in 2011. The common thread through all these failures is innovation pioneered through e-retailing by companies like Amazon, the Apple Store and Napster. A look at the growth rates in the past 5 years will indicate that we may possibly be headed in that direction. The growth in traditional retail has been 3.3% year on year compared to e-retail’s growth of 17.7% in the same time period.
A look at the overall market statistics, however, reveals a different story. E-retail, although it has been around for more than 2 decades, accounts for a mere 4.59% of total retail sales in the world. This inconsistency between the hype about e-retail and the actual adoption warrants a deeper understanding of the two channels which can also serve as a pointer to the future prospects of traditional and e-retail stores.
The effect of product category on consumer’s choice of retail channel
The consumer acceptance of e-retailing depends on product category, value addition by the seller and engagement required in the buying process. For high value purchases in categories like consumer electronics and consumer appliances, e-retailing has captured approximately 13% and 10%, respectively, of the total sales. The customers often resort to “showrooming” for these categories; experiencing the product in offline stores and then buying it online at lower prices. For experiential products like beauty and healthcare, a majority of the consumers still prefer offline stores but are turning online for repeat purchases for better prices.
Media products like music, movies and books where the physical store adds little value derive a sizeable portion of their overall sales from the online channel.
Online sales of apparel and footwear, primarily experiential purchases, has grown at a much faster rate than offline sales and accounts for approximately 7% of the total sales. One of the major reasons for this is free shipping and returns in e-retailing allowing customers to check fits and sizes.
What “clicks” for e-retail?
Traditionally, the distance between the customers and the retailers was an important determinant on the selection of the retailer and travelling entailed significant costs. With e-retail, physical distance has become almost irrelevant, except to the extent of shipping charges which are mostly waived off. It has also eliminated the problem of information asymmetry between the sellers and buyers with elaborate product information including price comparison across all available sellers, user reviews and opinion blogs.
The product range is a significant competitive advantage for the online stores as the physical stores have limitations on the product range that they can carry due to expensive retail space. The online stores, on the other hand, carry inventory in warehouses or function as intermediaries between buyers and sellers (marketplace model).
The asset light model of the online stores brings significant cost advantages which are passed to the consumers in the form of discounts and special deals. This has attracted price sensitive buyers. For many people, shopping is a necessary evil and the convenience provided by e-retail in terms of time, fuel and effort savings is alluring.
The experience of traditional retail
On the other hand, for many buyers, shopping is a rejuvenating and fulfilling experience which provides instant gratification. One of the major shortfalls of e-retail and strengths of traditional retail is the personal touch or interactive experience. Customer service or in-store assistance is still valued by these customers who are willing to pay a little extra for their purchases.
For most people, the ability to touch feel, try and test the products also contributes to the superior experience of traditional stores. This is one of the major sustainable advantages in favour of traditional retailers which can’t be mimicked by the online retailers without significant increase in costs which would blunt their competitive edge in terms of pricing.
Due to the lag between order and delivery for online purchases, traditional retail stores have a service advantage with respect to the immediate, necessary and emergency requirements of the customer.
Barriers to e-retailing:
One of the most significant barriers facing e-retailers today is the momentum barrier. 95% of total retail sales are still offline and it is going to take a substantial amount of time before e-retail is widely adopted.
One of the other major barriers to e-retail is the ecosystem barrier. With 60% of the population without internet and out of reach of the e-retailers, there is a long time before e-retail can be a realistic threat to the traditional retailers.
For e-retail to grow beyond customer segments who value price, convenience and product information, it has to recreate the experience of the offline stores with a high level of customer service, speedy delivery. Replicating the experience and reducing delivery time through try and buy, free returns, more number of facilities will entail significant costs which will erode the price advantage of e-retail. This business model barrier will need to be tackled for further growth.
What does the future hold?
It will be difficult to sustain customers with singular strategies in the future. Offline customers may gradually experience dissatisfaction due to higher prices. Online customers may gradually detest the disengaged shopping experience. Omnichannel retailing or integration of offline and online channels to provide customers the convenience of e-retail and personal touch of offline stores at competitive prices through economies of scale and wider reach with lesser investment would be an answer to customer needs of price, experience and information. Tesco is a successful example of omnichannel retailing. It installed digital screens in Seoul subway stations for ordering groceries and staples. Customers ordered through those screens and picked up their order through stores. This enabled Tesco to increase its online sales by 130%.
Currently, e-retail occupies a small proportion of total retail and must overcome significant barriers before it can become a real threat to traditional retail. However, it is definitely altering the stakes of the game, ensuring that pureplay strategies either in e-retail or traditional retail stores will have limited success potential.
References:
5.The Rapid Rise of Digital Music (n.d). Retrieved from http://mashable.com/2014/03/19/digital-music-chart/
6. Devam Sardana(2014) , IIM Ahmedabad MBASkool.com,
What is Product Concept?
Definition: Product Concept
Before marketing any product marketers study the product concept to give the best product to the customer. It says that consumers will prefer a product which is high on quality, performance and features against a normal product.
Innovation helps to get new product concepts
Example: - Apple is one company which works highly on product concept to get the best products to their consumers.
What is selling concept?
The selling concept essentially mirrors the thought that consumers will not purchase enough of the company’s products unless large-scale promotional and selling efforts are carried out by it.
This concept is used for goods which customers don’t buy normally, unsought goods like insurance etc. These goods are aggressively sold by tracking down the target segment and sold on the virtue of the product benefits.
The focus here is more on selling the products of the company to consumers without comprehending the market needs and increasing sales transactions rather than building and enhancing relationships with customers.
This concept works under poor assumptions that if customers are coaxed into buying a product then they will necessarily like it. Even if they don’t like it, they’ll forget their dissatisfaction over a period of time and buy the product again later.
Monday, February 23, 2015
HSEB Class XI BUSINESS STUDIES ALL Download
Business Studies Notes
Notes of Business Studies HSEB Class Xl
1. Introduction of Business
2. Evolution of Business
3. Forms of Business
a) Sole Trading Concern
b) Partnership
c) Joint Stock company
d) Multinational Company
e) Public Enterprise
f) National Business Development Boards
4) Office Management
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