This document summarizes a chapter on perception. It defines perception as the process of selecting, organizing, and interpreting stimuli. It discusses absolute and differential thresholds, including Weber's law stating that a just noticeable difference is relative to the initial stimulus intensity. The document also covers topics like sensory adaptation, subliminal perception, and how marketers apply concepts like the just noticeable difference in product design and advertising.

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2. Perception
Learning Objectives:
Upon completion of this chapter the student will be able to
undeerstand :
Define perception
Absolute thresh hold and relative
thresh hold
Marketing implication of j.n.d
Dynamics of perception
Consumer imagery
Perceptual risk
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Definition of Perception
Perception can be described as “how we see
the world around us.”
Two individuals may be subject to the same stimuli
under the same apparent conditions, but how each
person recognizes them, selects them,
organizes them, and interprets them is a highly
individuals process based on each person’s
won needs, values, and expectations.
 The influence that each of these variables has on
the perceptual process, and its relevance to
marketing, will be explored in some detail.

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Perception is defined as the process by which
an individual selects, organizes, and interprets
stimuli into a meaningful and coherent picture of the
world.
A stimulus is any unit of input to any of the
senses. Examples of stimuli (i.e., sensory input)
include products, packages, brand names,
advertisements, and commercials.
Sensory receptors are the human organs (i.e.,
the eyes, nose, mouth, and skin) that receive
sensory inputs.
 Their sensory functions are to see hear, smell, taste,
and feel.
 All of these junctions are called into play either singly or
in combination in the evaluation and use of most
consumer products.

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SENSATION
Sensation is the immediate and direct
response of the sensory organs to simple
stimuli (an advertisement, a package, a brand
name).
Human sensitivity refers to the experience of
sensation.
Sensitivity to stimuli varies with the quality of
an individual’s sensory receptors (e.g.,
Eyesight or hearing) and the amount or intensity
of the stimuli to which he or she is exposed.

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Fore example, a blind person may have a more
highly developed sense of hearing than the
average sighted person ad may be able to hear
sounds that the average person cannot. Smell is
the sense most closely tied to memory.
Sensation itself depends on energy
change (i.e. differentiation of input).
A perfectly bland or unchanging environment
– regardless of the strength of the sensory
input provides little or no sensation at all.

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Thus, a person who lives on a busy street in
midtown Addis Ababa would probably receive
little or no sensation from inputs of such noisy
stimuli as horns honking, tires screeching, and
fire engines clanging, because such sounds are
so common place .
One honking horn more or less would never be
noticed.
In situations in which there is a great deal of
sensory input, the senses do not detect small
intensities or differences in input.

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 As sensory input decreases, however, our ability to detect
changes in input or intensity increases, to the point that we
attain maximum sensitivity under conditions of minimal
stimulation.
This accounts for the statement, “It was so
quiet I could hear a pin drop.”
 It also accounts for the increased attention given to a
commercial that appears alone during a program break, or to a
black-and –white advertisement in a magazine full of four-
color advertisements.
 This ability of the human organism to accommodate itself to
varying levels of sensitivity as external conditions vary not
only provides more sensitivity when it is needed, but also
serves to protect us from damaging, disruptive, or
irrelevant bombardment when the input level is high.

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The Absolute Threshold
The lowest level at which an individual can
experience a sensation is called the absolute
threshold.
 The point to which a person can detect a difference
between “something” and “nothing” is that person’s
absolute threshold for that stimulus.
To illustrate, the distance at which a driver can note
a specific billboard on a highway is that individual’s
absolute threshold.
Two people riding together may first spot the
billboard at different times (i.e., at different
distance); thus, they appear to have different
absolute thresholds.

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Under conditions of constant stimulation, such
as driving through a “Corridor” of billboards,
the absolute threshold increases (that is, the
senses tend to become increasingly dulled).
 After an hour of driving through billboards, it is doubtful
that any one billboard will make an impression.
 Hence, we often speak of “getting used to” a hot bath, a
cold shower, the bright sun, or even the odor in a college
locker room.
 In the field of perception, the term adaptation refers
specifically to ‘getting used to” certain sensations, becoming
accommodated to a certain level of stimulation.

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Sensory adaptation is a problem
that concerns many TV advertisers.
This is why they try to change
their advertising campaigns
regularly.
They are concerned that consumers will
get so used to their current print ads and
TV commercials that they will no longer
“see” them; that is, the ads will no longer
provide sufficient sensory input to be
noted.

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In an effort to cut through the advertising “clutter”
and ensure that consumers note their ads, some
marketers try to increase sensory input.
For example, Apple Computer once bought all the
advertising space in an issue of Newsweek
Magazine to ensure that readers would note its ads.
Other advertisers try to attract attention by
decreasing sensory input.
 Recent studies suggest that some advertisers use
silence (the absence of music or other audio
effects) to generate attention.

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MAGAZINE INSERTS
 Perfume manufacturers; use scent strips in magazines send direct mail to bring the
smell of their perfumes directly to the consumer.
 Detergent manufacturers use a “Scratch-and –Sniff” sticker in ads for one of its
detergents to evoke the perception of sun-dried cloths.
 Others offer eye shadow and blusher samples bond into fashion magazine
POINT –OF-PURCHASE DISPLAYS
 Interactive computes are programmed to give cosmetic product advice to
consumers who input information about their eye, hair, and skin coloring.
 Package popcorn in packets designed to resemble videocassette and distributes
them through video rental stores
 Store customers are invited to press buttons that activate minirecorders that play a
stream of product message.
Advertisers Attempt to Increase Sensory Input

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The Differential Threshold
The minimal difference that can be detected between
tow similar stimuli is called the differential threshold, or
the j.n.d. (For just noticeable difference).
A 19th century German scientist named Ernest Weber
discovered that the just noticeable difference between
two stimuli was not an absolute amount, but an amount
relative to the intensity of the first stimulus.
Weber’s law, as it has come to be known, states that
the stronger the initial stimulus, the greater the
additional intensity needed for the second stimulus
to be perceived as different.

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For example, if the price of an automobile were
increased by $100, it would probably not be
noticed (i.e. the increment would fall below the
j.n.d.).
It may take an increase of $200 or more before a
differential in price is noticed.
 However, a one-dollar increase in the price of Gasoline
would be noticed very quickly by consumers, because it
is a significant percentage of the initial (i.e. base) cost of
the gasoline.

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According to Weber’s law, an additional level of
stimulus equivalent to the j.n.d. must be added
for the majority of people to perceive a
difference between the resulting stimulus and
the initial stimulus.
Weber’s law holds for all the sense and for
almost all intensities.
Let us say that a manufacturer of silver polish
wants to improve the product sufficiently to
claim that it retards tarnish longer than the
leading competitive brand.

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In a series of experiments, the company has
determined that the j.n.d for its present polish
(which now gives a shine that lasts about 20 days) is
5 days, or one-fourth longer.
 That means that the shine given by the improved
silver polish must last at least one-fourth longer
than that of the present polish if it is to be perceived
by the majority of users as, in fact, improved.
By finding this j.n.d. Of 5 days, the company has
isolated the minimum amount of time necessary to
make its claim of “lasts longer” believable to the
majority of consumers.

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If the company has decided to make the
silver polish effective for 40 days, it would
have sacrificed a good deal of repeat
purchase frequently.
If it had decided to make the polish
effective for 23 days (just 3 extra days of
product life), its claim of “lasts longer”
would not perceived as true by most
consumers.

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The j.n.d has other uses as well.
For example, retailers have long made use of a
general rule of thumb that markdowns of
merchandise must amount to at least twenty percent
of the old price, since a smaller amount often goes
unnoticed.
They recognize that the just
noticeable difference is not an absolute
amount, but rather a relative amount
contingent upon the level of the initial price.

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Marketing Applications of the J.N.D.
Weber’s law has important applications in
marketing.
Manufacturers and marketers endeavor to
determine the relevant J.N.D for their
products for two very different reasons:
i)So that negative changes (e.g.,
reductions in product size, increases
in product price, or reduced quality)
are not readily discernible to the
public.

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ii)So that product improvements (Such as
improved or updated packaging, larger size,
lower price) are very apparent to consumers
with out being wastefully extravagant.
 For example, because of rising costs, many
manufacturers are faced with the choice of
increasing prices or reducing the quantity of the
product offered at the existing price/ some
companies have done both, keeping the increased
cost or the reduced size just under the j.n.d to avoid
negative consumer reaction.

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Manufacturers who choose to reduce the quality
of their products also try to ensure that product
changes remain just under the point of just
noticeable difference.
For example, when the price of coffee beans
goes up, coffee processors often
downgrade quality by adding inferior beans
to the mix, up to but not including the j.n.d.
(the point at which the consumer will notice
a difference in taste.

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A number of well-known food companies have
been “down sizing” their packaging – that is,
decreasing the package size but decreasing the
contents.
By charging the same price, they are in fact
achieving a price increase that is “invisible” to the
consumer.
To illustrate, Starkist Tuna traditionally put 6½
ounces of tuna in to its regular –sized can.
When it decreased this quantity to 61/8 ounces
while maintaining the same price, it actually
realized a 5.8 percent price increase.

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 Marketers often want to update existing packaging
without losing the ready recognition by consumers who
have been exposed to year’s cumulative advertising
impact.
 In such cases, they usually make a number of small changes, each
carefully designed to fall below the j.n.d. So that consumers will not
perceive any difference.
 Lexmark International inc., which bought the office supplies and
equipment line from the international Business Machine
Corporation in March 1991, agreed to relinquish the IBM name
by 1996.
 Recognizing the need to build a brand image for Lexmark
while they moved away from the well-known IBM
name, Lexmark officials conducted a four-stage campaign for
phasing the Lexmark name on products.

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Stage 1
stage Stage 2
Stage 2
Stage 3
stage 4
Laser Printer 4029
By LEXMARK
IBM Lser Priner 4029 by
Lexmark
Lexmark
Laser Printer 4029
Figure: Gradual Change in Brand Name Below the j.n.d

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When it comes to product improvement,
marketers very much want to meet or exceed
the consumer’s differential threshold; that is,
they want consumers to readily perceive any
improvements made in the original product.
Marketers can use the j.n.d. to determine the
amount of improvement they should make in
their products.
Less than the j.n.d. is wasted effort because
the improvement will not be perceived; more
than the j.n.d may be wasteful by reducing
the level of repeat sales.

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Subliminal Perception
People are also stimulated below their level of
conscious awareness; that is, they can perceive
stimuli with out being consciously aware that
they are doing so.
The threshold for conscious awareness or
conscious recognition appears to be higher
than the absolute threshold for effective
perception.

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Stimuli that are too weak or too brief to be
consciously seen or heard may nevertheless be
strong enough to be perceived by one or more
receptor cells.
This process is called subliminal perception
because the stimulus is beneath the threshold,
or “limens,” of awareness, though obviously not
beneath the absolute threshold of the receptors
involved.
(Perception of stimuli that are above the level of
conscious awareness is called supraliminal
perception.)

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In general, there are three types of subliminal
perception:
 Briefly presented visual stimuli,
 Accelerated speech in low-volume auditory messages, and
 Embedded or hidden imagery or words (often of a sexual
nature) in print ads or on product labels. Embeds are
defined as disguised stimuli not readily recognized by
readers that are “planted” in print advertisements to
persuade consumers to buy their products.
 Research Studies of Subliminal Persuasion and
evaluating the effectiveness of subliminal persuasion
is beyond of the scope of this course.

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Dynamics of Perception
 The preceding section explained how the individuals receive
sensation form stimuli tin the outside environment and how
the human organism adapts to the level and intensity of
sensory input.
We now come to one of the major principles of
perception: Raw sensory input by itself does not
produce or explain the coherent picture of the
world that most adults possess.
 Human beings are constantly bombarded with stimuli during
every minute and every hour of every day.
The sensory world is made up of an almost infinite
number of discrete sensations that are constantly
and subtly changing.

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 According to the principles of sensation, intensive stimulation
“turns off” most individuals, who subconsciously block the
receipt of a heavy bombardment of stimuli.
 Individuals are very selective as to which stimuli they
“recognize”; they subconsciously organize the stimuli
they do recognize according to widely held psychological
principles, and they interpret such stimuli subjectively in
accordance with their needs, expectations, and
experiences.
Let us examine in some detail each of these
aspects of perception: the Selection,
organization, and interpretation of
stimuli.

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Perceptual Selection
Consumers subconsciously exercise a great
deal of selectivity to which aspects of the
environment – which stimuli – they perceive.
An individual may look at some things, ignore
others, and turn away form still others.
In actuality, people receive – or perceive-only a
small fraction of the stimuli to which they are
exposed.
Consider,for example, a woman in a supermarket.

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 She may be exposed to over 20,000 products of different
colors, sizes, and shapes; to perhaps 100 people (looking,
walking, searching, talking); to smells (from fruit, form meat,
from disinfectant, form people); to sounds with in the store
(Cash registers ringing, shopping carts rolling, air conditioners
humming, and clerks sweeping, mopping aisles, stocking
shelves); and to sounds from out side the store (Planes
passing, cars honking, tires screeching, children shouting, car
doors slamming).
Yet she manages on a regular basis to visit her local
supermarket, select the items she needs, pay for them,
and leave all with in a relatively brief time, without losing
her sanity or her personal orientation to the world around
her.
This is because she exercises selectivity in perception.

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Which stimuli get selected depends on following major
factors:
Nature of the Stimulus:
 Marketing stimuli include an enormous number of variables that
affect the consumer’s perception, such as the nature of the
product, its physical attributes, the package design, the brand
name, the advertisements and commercials (including copy
claims, choice and sex of model, positioning of model, size of ad,
and typography), the position of a print ad or the time of a
commercial, and the editorial environment.
 In general, Contrast is one of the most attention-compelling
attributes of a stimulus.
 Advertisers often use extreme attention-getting devices to achieve
maximum contrast and thus penetrate the consumer’s perceptual
“Screen”.
 For example, a growing number of magazines and newspapers
are carrying ads that readers can unfold to reveal oversized,
poster-like advertisements for products ranging room cosmetics to
automobiles, because of the “stopping power” of giant ads
among more traditional sizes.

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Expectations
 people usually see what they expect to see, and what they
expect to see is usually based on familiarity, previous
experience, or preconditioned set.
 In a marketing context, people tend to perceive products
and product attributes according to their own
expectations.
 A man who has been told by his friends that a new brand
of Scotch has a bitter taste will probably perceive the
taste of bitter; a teenager who attends a horror movie has
been billed, as terrifying will probably find it so.
 On the other hand, stimuli that conflict sharply with
expectations often receive more attention than those that
conform to expectations.

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Motives
People tend to perceive things they need or want;
stronger the need, the greater the tendency to ignore
unrelated stimuli in the environment.
 A women interested in a portable computer is more likely to notice and
to read carefully ads for computer laptops than her neighbor who does
not use a computer.
 In general, there is a heightened awareness of stimuli that are relevant
to one’s needs and interests, and a decreased awareness of stimuli that
are irrelevant to those needs.
 An individual’s perceptual process simply attunes itself more closely to
those elements in the environment that are important to that person.
 Some one who is hungry is more likely to spot a restaurant sign; a
sexually repressed person may perceive sexual symbolism where none
exists.

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Important Selective Perception Concepts
 The consumer’s “selection” of stimuli from the environment is
based on the interaction of expectations and motives with the
stimulus itself.
These factors give rise to a number of important
concepts concerning perception.

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Selective Exposure:
 Consumers actively seek out messages that they find
pleasant or with which they are sympathetic, and they
actively avoid painful or threatening ones.
Thus, heavy smokers avoid articles that link
cigarette smoking to cancer.
 Instead, they note (and even quote) the
relatively few articles that deny the relationship.
Consumers also selectively expose themselves
to advertisements that reassure them of the
wisdom of their purchase decisions.

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Selective Attention
 Consumers tend to have a heightened awareness of
stimuli that meet their needs or interests and minimal
awareness of stimuli irrelevant to their needs.
 Thus, they are likely to note ads for products that would
satisfy their needs and for stores in which they shop, and
disregard those in which they have no interest.
 People also vary in terms of the kind of information in
which they are interested and the form of message and
type of medium they prefer.
 Some people are more interested in price, some in
appearance, and some in social acceptability.
 Some people like complex, sophisticated messages;
others like simple graphics.
 Clearly, consumer exercises a great deal of selectivity in
terms of the attention they give to commercial stimuli.

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Perceptual Defense
 Consumers subconsciously screen out stimuli that they would
find psychologically threatening, even though exposure has
already taken place.
Thus, threatening or otherwise damaging
stimuli are less likely to be consciously
perceived than are neutral stimuli at the same
level of exposure.
 Furthermore, individuals unconsciously may
distort information that is not consistent with
their needs, values, and beliefs.

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Perceptual Blocking
Consumers protect themselves form being
bombarded with stimuli by simply “tuning
out” – blocking such stimuli form conscious
awareness.
Research shows that enormous amounts of
advertising are screened out by consumers;
they mentally tune out because of the visually
over stimulating nature of the world in which we
live.
This perceptual blocking –out is similar to
consumers “Zapping” commercials using
remote controls.

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Perceptual Organization
The specific principles underlying
perceptual organization are often
referred to by the name given the
school of psychology that first
developed it: Gestalt psychology.
(Gestalt, in German, means pattern
or configuration.)
The three of the most basic
principles of perceptual
organization are figure and ground,
grouping, and closure.

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I) Figure and Ground:
 As was noted earlier, stimuli that contrast with their
environment are more likely to be noticed.
 A sound must be louder or softer, a color brighter or
paler.
 The simplest visual illustration consists of a figure on
a ground (i.e., background).
 The figure is usually perceived clearly because, in
contrast to its ground, it appears to be well defined,
solid, and in the forefront.
 The ground however is usually perceived as indefinite,
hazy, and continuous.

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 The common line that separates the figure
and the ground is perceived as belonging to
the figure, rather than to the ground, which
helps give the figure grater definition.
Consider the stimulus of music:
 People can either “bathe” in music or listen to
music.
 In the first case, music is simply ground to other
activities; in the second, it is figure.
 Figure is more clearly perceived because it
appears to be dominant; in contrast, ground
appears to be subordinate and, therefore, less
important.

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 Advertisers have to plan their advertisements carefully to
make sure that the stimulus they want noted is seen as figure
and not as ground.
The musical background must not overwhelm the
jingle; the background of an advertisement must not
detract form the product.
 Print advertisers often silhouette their products
against a white background to make sure that the features
they want noted are clearly perceived.
 Others use reverse lettering (White letters on a black
background) to achieve contrast; however, in such cases
they are flirting with the problem of figure – ground
reversal.

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II) Grouping
Individuals tend to group stimuli so that
they form a unified picture or impression.
The perception of stimuli as groups or
chunks of information, rather than as
discrete bits of information, facilitates
their memory and recall.
Grouping can be used advantageously
by marketers to imply certain desired
meanings in connection with their
products.

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For example, an advertisement for tea
may show a young man and woman
sipping tea in a beautifully appointed
room before a blazing hearth.
The overall mood implied by the
grouping of stimuli leads the consumer
to associate the drinking of tea with
romance, fine living, and winter warmth.

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III) Closure
 Individuals have a need for closure.
They express this need by organizing their perceptions
so that they form a complete picture.
If the pattern of stimuli to which they are exposed is
incomplete, they tend to perceive it, nevertheless, as
complete; that is, they consciously or subconsciously
fill in the missing pieces.
Thus, a circle with a selection of its periphery
missing is invariably perceived as a circle, not as
an arc.

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The need for closure is also seen in the tension
an individual experiences what a task is
incomplete, and the satisfaction and relief that
come with its completion.
The tension created by an incomplete message
leads to improvement in memory for that part of
the message that has already been heard.
The need for closure has some interesting
implications for marketers.
The presentation of an incomplete advertising
message "begs" for completion by consumers,
and the very act of completion serves to involve
them more deeply in the mess itself.

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Perceptual Interpretation
People exercise selectivity as to which stimuli
they perceive, and they organize these stimuli
on the basis of certain psychological
principles.
The interpretation of stimuli is also uniquely
individual, because it is based on what
individuals expect to see in light of their
previous experience, on the number of plausible
explanations they can envision, and on their
motives and interests at the time of perception.

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Stimuli are often highly ambiguous.
Some stimuli are weak because of such factors
as poor visibility, brief exposure, high noise
level, or constant fluctuation.
Even stimuli that are strong tend to fluctuate dramatically
because of such factors different angles of viewing,
varying distances, and changing levels of illumination.

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Consumers usually attribute the sensory input they
receive to sources they consider most likely to have
caused the specific pattern of stimuli.
Past experiences and social interactions help to
form certain expectations that provide categories (or
alternative explanations) that individuals use in
interpreting stimuli.

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The narrower the individual's experience, the more
limited the access to alternative categories.
How close a person's interpretation are to reality,
and then depends on the clarity of the stimulus, the
past experiences of the perceiver, and his or her
motives and interests at the time of perception.

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Distorting Influences
Individuals are subject to a
number of influences that tend
to distort their perceptions;
some of these are discussed
below.

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i)Physical Appearances
 People tend to attribute the qualities they associate with
certain people to others who may resemble them, whether of
not they consciously recognize the similarity.
For this reason, the selection of models for
advertisements and for television commercials can
be a key element in their ultimate persuasiveness.
 Studies on physical appearance have found that
attractive models are more persuasive and have a more
positive influence on consumer attitudes and behavior
than average-looking models; attractive men are
perceived as more successful businessmen than
average-looking men; more attractive women are
perceived as less able in business; and women wearing
severely tailored clothing are more likely to be hired.

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ii)Stereotypes
Individuals tend to carry "pictures" in their
minds of the meanings of various kinds of
stimuli.
These stereotypes serve as
expectations of what specific situations,
people, or events will be like, and they are
important determinants of how such stimuli
are subsequently perceived.

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iii) Irrelevant Cues
When required to form a difficult
perceptual judgment, consumers often
respond to irrelevant stimuli.
For example, many high-priced automobiles
are purchased because of their color or because
of luxury options like retractable headlights or
leather upholstery, rather than on the basis of
mechanical or technical superiority.

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iv)First Impressions
First impressions tend to be lasting; yet, in forming
such impressions, the perceiver does not yet know
which stimuli are relevant, imported, or predictive of
later behavior.
A shampoo commercial effectively used the line
"You'll never have a second chance to make a first
impression."
Since first impressions are often lasting, introducing
a new product before it has been perfected may
prove fatal to its ultimate success, because
subsequent information about its advantages, even
if true, will often be negated by memory of this early
failure.

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v) Jumping To Conclusions
Many people tend to jump to conclusions before examining
all the relevant evidence.
For example, the consumer may hear just the
beginning of a commercial message and
draw conclusions regarding product or service
being advertised on the basis of such limited
information.
For this reason, some copywriters are careful
not to save their most persuasive arguments for
last.

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vi)Hello Effect
 Historically, the halo effect has been used to describe
situations in which the evaluation of a single object or
person on a multitude of dimensions is based on the
evaluation of just one or a few dimensions (e.g., a man is
trustworthy, fine, and noble because he looks you in the
eye when he speaks).
Consumer behaviorists broaden the notion of the
halo effect to include the evaluation of multiple
objects (e.g., a product line) on the basis of the
evaluation of just one dimension (a brand name or a
spokesperson).

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Using this broader definition, marketers take
advantage of the halo effect when they extend a
brand name associated with one line of
products to another.
For example, Consumers bought the new BIC
razor on the basis of their favorable evaluation
of the BIC pen.
The mushrooming field of licensing
also is based on the halo effect.

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Consumer Imagery
Consumers have a number of enduring perceptions, or
images, that are particularly relevant to the study of
consumer behavior.
 Products and brands have symbolic value for individuals, who
evaluate them on the basis of their consistency (i.e., congruence)
with their personal pictures of themselves.
 Some products seem to match an individual's self-images by
buying products that they believe are congruent with their self-
images, and by avoiding products that are not.
 Consumers also tend to shop in stores that have images
consistent with their own self-image for their stores.

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Product and Service Images
The image that a product or service has in the mind
of the consumer--that is, its positioning--is probably
more important to its ultimate success than are its
actual characteristics.
 Marketers try to position their brands so that they are
perceived by the consumer as fitting into a distinctive niche
in the marketplace--a niche occupied by of other product.
They try to differentiate their products by stressing
attributes that they claim will fulfill the consumer's
needs better than competing brands.

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Positioning Strategy Positioning strategy is the
essence of the marketing mix; it complements the
company's segmentation strategy and selection of
target markets.
 Positioning conveys the concept, or meaning, of the product or
service in terms of how it fulfills a consumer need.
 Different consumer meanings (i.e., product images) are
sometimes assigned to the same product or service.
 Thus, a product (or service) can be positioned differently to
different market segments, or can be repositioned to the
same audience, without actually being physically changed.

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Positioning of Services
Compared with manufacturing firms, service
marketers face several unique problems in
positioning and promoting their offerings.
Because services are intangible,
image becomes a key factor in
differentiating a service from its
competition.
Thus, the marketing objective is to
enable the consumer to link a specific
image with a specific brand name.

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The Service Environment
 The design of the service environment is an important aspect
of service positioning strategy and sharply influences
consumer impressions and consumer and employee
behavior.
 The physical environment is particularly important in
creating a favorable impression of such services as banks,
retail stores, and professional offices, because there are so
few objective criteria by which consumers can judge the
quality of the services they receive.
The service environment conveys the image of the
service provider with whom the service is so
closely linked.

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One study of service environments identified the environments variables
most important to bank customer:
a) Privacy (both visually and verbally, such as enclosed of faces, transaction
privacy, etc.);
b) Efficiency/convenience (transaction areas that are easy to find, directional
signs, etc.);
c) Ambient background conditions (temperature, lighting, noise, music);
d) Social conditions (the appearance of other people in the bank
environment, such as bank customers and bank personnel); and
e) Aesthetics (e.g., color, style, use of materials, artworks). Clearly, a
favorable service environment creates the perception among consumers
that the service itself better satisfies their needs.

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Repositioning Strategies regardless or how well
positioned a product appears to be, the
marketer may be forced to reposition it in
response to market events, such as a
competitor cutting into the brands market share.
For example, rather than trying to meet the lower
prices of high-quality private label competition,
some premium band marketers have repositioned
their brands to justify their higher prices, playing up
brand attributes that had previously been ignored.

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Perceived Price
How a consumer perceives a price--as high,
as low, as fair--has a strong influence on
both purchase intentions and purchase
satisfaction.
Products advertised as "on sale" tend to create
enhanced customer perceptions of savings and value.
 Different formats used in sales advertisements have
differing impacts, based on consumer reference prices.

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 A reference price is any price that a consumer uses as
a basis for comparison in judging another price.
 Reference price can be external or internal.
An advertiser generally uses a higher external
reference price (sold elsewhere at . . .) in an ad in
which a lower sale price is being offered, to persuade
the consumer that product advertised is a really good
buy.
Internal reference prices are those prices (or price
ranges) retrieved by the consumer from memory.
Internal reference points are thought to play a major
role in consumers' evaluations and perceptions of value
of an advertised price deal, as well as in the believability
of any advertised reference price.

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Several recent studies have investigated the effects on
consumer price perceptions of three types of advertised
reference prices:
Plausible low,
 plausible high, and
 implausible high.
Plausible low prices are well within the range of
acceptable market prices;
Plausible high are near the outer limits of the range but
not beyond the realm of believability,
Implausible high are well above the consumer's
perceived range of acceptable market prices.

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As long as an advertised reference price is within
a given consumer's acceptable price range, the
external reference price is considered plausible
and is assimilated.
If the advertised reference point is outside the
range of acceptable prices (i.e., implausible), it
will be contrasted and thus will not be perceived
as a valid reference point.

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Tensile and Objective Price Claims
The semantic cues (i.e., specific wording) of the
phrase used to communicate the price-related
information may affect consumer's price
perceptions.
Tensile price claims (e.g., "save 10 to 40%," "save
up to 60%" "save 20% or more") are used to
promote a range of price discounts for a product
line, an entire department, or sometimes an entire
store

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In contrast with tensile cues, objective price claims
provide a single discount level tensile and objective
price discount, they potentially have a greater effect
on consumer shopping and on store traffic than a
reference Price advertisement that promotes a
single product.
 Consumer evaluations and shopping intentions are least
favorable for advertisements stating the minimum discount
level (save 10% or more).
 Aids that state a maximum discount level (save up to
40%) either equal or exceed the effectiveness of ads
stating a discount range (save 10 to 40%).

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Perceived Quality
 Consumers often judge the quality of a product or service on
the basis of variety of informational cues tat they associate
with the product.
 Some of these cues are intrinsic to formational cues that
they associate with the product.
i)Perceived Quality of Products
Cues that are intrinsic concern physical characteristics
of the product itself, such as size, color, and flavor, or
aroma.
 In some case, consumers use physical characteristics to
judge product quality.
 Many consumers use country –of-origin stereotypes to evaluate
product (e.g., “German engineering is excellent,” “Japanese
cars are reliable.”)

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ii) Perceived Quality of Services
It is more difficult for consumers to evaluate
the quality of services than the quality of
products.
This is true because of certain distinctive
characteristics of services: they are intangible they
are variable, they are perishable, and they are
simultaneously produced and consumed.
The downside of service standardization,
unfortunately, is the loss of customized
services, which May consumers’ value.

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While a defective product is likely to be detected
by factory quality control inspectors before it
ever reaches the consumer, a “defective”
service is consumed as it is being produced;
thus there is little opportunity to correct it.
For example, a defective haircut is difficult to
correct, just as the negative impression caused
by an argument between two service employees
in the presence of a customer is difficult to
correct.

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a) The SERVQUAL
Scale was designed to measure the gap between customers 'expectations of service
and their perceptions of the actual service delivered, based upon the following five
dimensions:
 Tangibles,
 Reliability,
 Responsiveness,
 Assurance, and
 Empathy.
 Since its development, the servqual scale has been used in
numerous studies, though not all of its empirical findings
correspond precisely to the five dimensions that the scale is
designed to measure.
 Furthermore, some researchers believe that there are
problems in conceptualizing service quality as a “difference”
store.

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b)Another scale that measures service quality, called
SERVPERF,is based on the consumers’ perception of service
performance.
The SERVPERF scale results in a summated overall
service quality score that can be plotted relative to time
and specific consumer subgroups (e.g., demographic
segments.)
Recent research divides the dimensions along with
consumers evaluate service quality into two groups: the
outcome dimension (which focuses on the reliable
delivery of the core service) and the process dimension
(which focuses on how the core service is delivered).
The process dimension offers the service provider a
significant opportunity to exceed customer
expectations.

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DIMENSION DESCRIPTION
 Tangibles
 Reliability
 Responsiveness
 Assurance
 Empathy
Appearance of physical facilities, equipment, personnel, and
communication materials.
Ability to perform the promised service dependently and accurately.
Willingness to help customers and provide prompt service.
Knowledge and courtesy of employee and their ability to convey trust
and confidence.
Caring, individualized attention the firm provides its customers.
SERVQUAL Dimensions for Measuring Service
Quality

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 Researchers have tried to integrate the
concepts of product quality and service
quality into an overall transaction satisfaction
index, on the basis that all product (i.e., tangible)
purchases contain some element of
service.

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Evaluation of
Service Quality
(SQ)
Evaluation of
Product Quality
(PQ)
Evaluation of
Price (P)
Transaction
Satisfaction (TSAT)
A conceptual model of the components of Transaction
Satisfaction

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A comprehensive review of the literature confirms the
existence of a positive price /quality relationship.
However, when other cues are available (e.g.,
brand name, store image), they are sometimes
more influential than price in determining
perceived quality.
A study that investigated the effects of the extrinsic
cues of price, brand, ad store information on
consumers’ perceptions of product quality found that
price had a positive effect on perceived quality but a
negative effect on perceived value and respondents’
willingness to buy.

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Brand and store information also had a positive
effect on perceived value and willingness to
buy.
The following figure presents a
conceptual model of he effects of
price, brand name, and store name
on perceived product quality.

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Perceived
Quality
Perceived
Sacrifice
Objective
Price
Perception
of Price
Perceived
Value
Willingness
to Buy
A. Conceptual Relationship of Prince Effect
Brand
Name
Store Name
Objective
Price
Perception of
Brand
Perception
of Price
Perception
of Store
Perceived
Quality
Perceived
Sacrifice
Perceived
Value Willingness
to buy
B. Extended conceptualization to include Brand Name and Store Name

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Conceptual Model of the Effects of Price, Brand Name, and Store Name
on Perceived Value
Retail Store Image
 Retail stores have images of their own that serve to influence
the perceived quality of products they carry and the decisions
of consumers as to where to shop.
 In order to create a distinctive identity, many retailers put their
own labels on the clothes of popular designers.
 Such private-label clothing has been successful because
consumers perceive high quality and value in clothing that
bears a well-known retail name.
 Because of this trend, private label fashions in many cases are
squeezing well-known designer clothing off the racks.

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Manufacturer’s Image
Consumer imaginary extends beyond perceived
price and store image to the producers themselves.
Manufacturers who enjoy a favorable image generally
find that their new products are accepted more readily
than those of manufacturers who have a less favorable
or even a “neutral” image.
Researchers have fond that consumers generally
have favorable perceptions of pioneer brands (the
firms in a product category), even after follower
brands become available.

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Brand Image
Brand image is defined as the set of associations’
linked to the brand that consumers hold in memory.
Positive brand image is associated with consumer
loyalty, consumer beliefs about positive brand value, and a
willingness to search for the brand.
A positive brand image helps the consumer to
be favorably inclined toward future brand
promotions and to resist competitors’ marketing
activities.

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Perceived Risk
 Consumers must constantly make decisions regarding what
products or services to buy and where to buy them because
he outcomes (or consequences of such decisions are
often uncertain, the consumer perceive some
degree of “risk” in making a purchase decision.
Perceived risk is defined as the uncertainty that
consumer face when they cannot foresee the
consequences of their purchase decisions. This
definition highlights two relevant dimensions of
perceived risk; uncertainty and consequences.

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The degree of risk that consumers perceive and
their own tolerance for risk taking are
factors that influence their purchase
strategies.
It should be stressed that consumer are
influenced by risk that they perceive,
whether or not such risk actually exists.

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Types of Perceived Risk
The major types or risks that consumers perceive when
making product decisions include functional risk, physical
risk, financial risk, social risk, psychological risk, and
time risk.
Functional Risk: is the risk that the product will
not perform as expected. (“Will the new electric car
operate a full day with out needing to be recharged?”)
 Physical Risk: is the risk to self and others that the
product may pose. (“Is a cellular Phone really safe, or
does it emit harmful radiation?”)
 Financial Risk: is the risk that the product will not be
worth its cost. (“Will art school really help me become
an artist?”)

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Social Risk: is the risk that a poor product choice
may result in social embarrassment. (“Will that new
deodorant really eliminate perspiration odor?”)
Psychological Risk: is the risk that a poor product
choice will bruise the consumer’s ego. (“Will I really
be proud to invite friends to this house?”)
Time Risk: is the risk that the time spent in product
search may be wasted if the product does not
perform as expected. (“Will I have to go through the
shopping effort all over again?”).

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Consumer perception of risk varies, depending on:
a) The Person
 The amount of risk perceived depends on the specific consumer. Some
consumers tend to perceive high degrees of risk in various consumption
situations; others tend to perceive little risk.
 For example, studies of risk perception among adolescents have found that
adolescents who engage in high-risk consumption activities (e.g., drug use)
differ significantly from those who do not engage in frequent high-risk
activities.
 High-risk Perceivers are often described as narrow categorizers
because they limit their choices (e.g., alternatives than chance a poor
selection.
 Low – Risk Perceivers have been described as broad categorizers
because they tend to make their choices form a much wider range of
alternatives.
 They wild rather risk a poor selection than limit the number of alternatives
form which they can choose.

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b) The Product/Product Category:
For example, consumers are likely to perceive a
higher degree of risk in the purchase of large screen
television set (e.g., functional risk, financial risk,
time risk) than in the purchase of a cordless specific
perceived risk.
A recent study showed that consumers
perceive service decisions to be riskier that
product decisions, particularly in terms of social
risk, physical risk, and psychological risk.

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C) The Shopping Situation
The degree of risk perceived by a consumer is also
affected by the shopping situation (e.g., a traditional
retailer, by mail or telephone, form catalogs or direct-mail
solicitations, or form door – to- door salespeople.)
The sharp increase in mail-order catalog sales in
recent years suggests that on the basis or positive
experiences and word of mouth, consumers now
tend to perceive less risk in mail-order shopping
than they once did, despite their inability to
physically inspect he merchandise before ordering.

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d)Culture
Not all people around the world
exhibit the same level of risk
perception.
For this reason, marketers who do business
in several countries cannot generalize the
results of consumer behavior studies
conducted in one country to other countries
with out additional research

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Discussion Questions
1. How sensory adaptation does affect advertising
effectiveness? How can marketers overcome
sensory adaptation?
2. Describe how manufacturers of chocolate bars
can apply their knowledge of differential threshold
to packages and prices during periods of :
1. Rising ingredients costs
2. Increasing competition, and
3. Consumer nutrition concerns

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3. How do advertisers use contrast to make sure that their ads
are noticed/ would the lack of contrast between the ad and the
medium in which it appears help or hinder the effectiveness of
the ad? What are the ethical considerations in employing such
strategies?
4. Martha is a 29-years old, single investment banker who lives
in an apartment in a large city. After a particularly difficult,
long workday, she relaxed in her apartment by reading several
magazines. When questioned by a researcher the next day ,
she could clearly recall seeing two vacation ads and vaguely
remembered one ad for a personal computer from among the
nearly 100 ads she had seen in the three magazines. However,
she could repeat the articles which she read in detail and
even recalled the titles of articles which she did not read.
How can you explain this?
5. Discuss the difference between the absolute threshold and
differential threshold?

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Thank You !!!