What is the Consumer Interest? Notes | CSM 401, Study notes of Marketing

Download What is the Consumer Interest? Notes | CSM 401 and more Study notes Marketing in PDF only on Docsity! Notes Chapter 1 – What is the Consumer Interest? Does the consumer decide what is going to be produced, set prices or decide how much of a product will be available? Is the consumer KING, in other words, and does he make all the decisions? If it is true that he does make all the decisions, how does he? He's not the manufacturer, so how would he make those decisions? DEMAND. The consumer decides what he WILL buy, what he WON'T buy, how much he will pay, and how much he won’t pay. Producers can't sell it if consumers won't buy it. Is this how it works? Do consumers have all the power OR, do producers decide what they're going to make, how much of it, and what price they'll get for it? For instance, who drives the desire for changes in the way cars look every few years? Do WE want the look of our Ford to change every couple of years? Or, does the car-maker tell us that we need a new car because the new models make our old ones look out-dated? Who's in control? Consumer sovereignty is the market situation where consumers have the power to ultimately decide which products and services society will produce and consume. Producer sovereignty is an alternative view that consumers are more or less at the mercy of producers’ marketing plans and are manipulated into consuming whatever is produced. Note that there is a difference between consumer choice and consumer sovereignty. EX: Drivers are required to carry auto insurance and we can choose which company to use, but not whether to buy. We have a choice and yet are not sovereign. The American economy is probably somewhere in the middle. Producers do extensive market research to determine what consumers want or think they want. Consumers then determine what goods remain on the market by purchasing the good. Consumers DO have power --(dollar votes)-- but do they hold all the power? No. How much power a consumer wields is directly related to how much he knows:  About the products he buys  About producers, their methods and tactics  About the choices or alternatives he has. This is what our book refers to as "Consumer Sophistication". To have that kind of knowledge, the consumer has to educate himself (that is, research products, producers, and alternative choices). To educate himself, a consumer has to have time. Unfortunately, a lot, if not most, consumers don't have or don't take the time to educate themselves. The result is a lack of power for consumers and more power for producers. That's part of the goal of this course -- to show you the importance of educating yourself, so that you'll have power as a consumer. It's in the best interest of all consumers for us to seek fairness for ourselves. The equity component of the consumer interest means ensuring access to acceptable goods and services (fairness). Sometimes, in order to achieve this concept of equity, government gets involved and adopts a "paternalistic" position. What does "paternalistic" mean? Fatherly, parental. As in, "It's for 3) Forming solutions to problems that allow consumers as much choice as possible -- like, rather than banning tobacco sales, opting instead to put warning labels on tobacco products. 4) Letting businesses use self-regulation to solve problems as much as possible rather than government mandates. Sometimes, though, in all of this, government officials do yield to special interest groups that can offer the most money to re-election campaigns. However, what they should do --and hopefully do most of the time--is represent the public interest--even over the consumer interest where there is a conflict. What are some ways the consumer interest might conflict with the public interest? The example that our text gives: Our interest as consumers might be a $.10 loaf of bread, but in order for government to insure a $.10 price for us, it would have to control supply and demand and subsidize bread prices (i.e., pay the difference in cost to the bakeries.). That's not in the public's best interest. Sometimes the consumer interest conflicts with itself. Like when, as consumers of automobiles, we would benefit from the safety of airbags and yet we don't want the cost of airbags to increase the prices we have to pay for cars. (Some areas where public interest decisions have helped consumers are things like nutritional labeling and "lemon laws" for cars. Can you think of others?) HOW TO PURSUE THE CONSUMER INTEREST Because consumers have specific interests that differ from the interests of other groups, it is important that consumers SPEAK UP for what they need and actively pursue their objectives. To do that we as consumers need to BAND TOGETHER as a group to be heard louder and clearer. It is difficult for us to get much done alone and that's why we take advantage of what our text calls "participatory democracy." That's one way we pursue our consumer interest. Another is how we cast our "Dollar Votes". We buy things that meet our needs and expectations and refuse to buy things that fail in quality, price, and service. Have any of you ever consciously refused to buy, in order to cast a "no" vote? What were the circumstances? EX: Several upscale pet stores have sports drinks for dogs. Are we such a wealthy nation that we will spend our money on Doggie Gatorade? I, for one, refuse to purchase these beverages and would rather donate a few dollars to the Humane Society. Whatever the item is, what we’re doing when we consciously cast those "no" votes is "BOYCOTTING". If you do that alone it is a "personal boycott" and those do add up to have an effect. Sometimes groups band together to encourage others to boycott a product or a seller. Why do sellers respond to boycotts? Lost sales. Another is a fear of what effect controversy and negative publicity will have on the company. In order to be effective consumers and cast the right "dollar votes," we need to be INFORMED. Only a small fraction of consumers are well-informed. Those who are informed and actively pursue getting their money's worth are called aggressive assertive consumers. In addition to private citizens seeking the consumer interest, there are also professional consumer advocates who make a career of it. They are people who work for non-profit organizations that monitor legislatures, congress, and regulatory agencies to influence public policy on behalf of consumers. Ralph Nader is the most famous consumer advocate. There are several Consumer Rights that have evolved into acceptance over the years - mostly promoted by different presidents as part of their agendas. We'll review these in more detail in Chapter 3, but at this point I want to introduce you to what they are: Choice, Info, Safety, Voice (right to be heard), Redress (right to remedy), Environmental health (that is, to be protected from damage to the environment), Service (courtesy, responsiveness), and Consumer education. These are all rights that have been pretty much universally accepted - not as legal rights, but as moral rights. Reflect on how you benefit from these. Our text identifies 4 problems that consumers face when the consumer interest comes into conflict with business interest. Business wants to sell goods and services at the highest price regardless of quality. 1) Producers' inability OR unwillingness to satisfy a consumer's needs. For instance, perhaps a producer's inability to incorporate safety features in a product because of the added cost to production. OR, maybe an unwillingness to live up to a warranty promise. OR, frauds in the marketplace. 2) Lack of consumer information. Not only is it difficult for consumers to find the time to educate themselves, but sometimes the information is simply not available. EX: When I went to purchase my first printer I had a difficult time. I went in one of those technology stores where there were probably 100 different kinds. Did I have time to read on every box? No, it was a nightmare. Information overload! 3) Failure of the marketplace to resolve consumer grievances easily, or effectively. When we have a problem, sometimes it is very difficult to get it resolved. OR, the process we have to go through can be difficult and even intimidating. EX: 1-800-wait an-hour to speak to a customer service representative. 4) Consumer interest underrepresented in government so that an imbalance is created among special interests to the consumer's disadvantage.