Influences on Marketing

Marketers must be aware of these factors to be able to successfully influence customer choice. If businesses are aware of the factors that influence customer choice, they can predict customer trends & how they may react to particular marketing strategies. 

To remember this we use the acronym 

PEGS, CLIPDW, E-PEST

There are four main factors that influence consumer and organisational purchasing decisions. 

1. Psychological Influences- Psychological factors are personal characteristics of an individual that affect his or her buying behaviour. They include:

Ø  Perception- is the process through which people select, organise and interpret information to create meaning. Individuals act on perceptions of reality rather than reality itself, thus marketing managers must create a positive perception in the mind of the customer through certain images such as trendy and classy. 

Ø  Motive - motive is an individual’s reason for doing something. The main motives that influence customer choice include comfort, health, safety, ambition, taste, pleasure, fear, amusement, cleanliness and the approval of others.

Ø  Attitudes- An attitude is a person’s overall feeling about an object or activity. It generally influences the success or failure of a business’s marketing strategy. 

Ø  Lifestyle- Different lifestyles attract different types of products and services.

Ø  Personality and self-concept- The way we view ourselves and the way we respond to other people’s perception of us. People that do not care about luxury, will not buy Rolex watches.

2. Sociocultural Influences- are forces exerted by other people and groups that affect an individual’s buying behaviour. 

Ø  Socioeconomic status - Things like education, occupation, and income. Higher income usually purchase luxury brands 

Ø  Culture and Subculture - Culture is all the learned values, beliefs, behaviours and traditions shared by a society. Culture influences buying behaviour because it infiltrates all that we do in our everyday life. e.g. skaters or surfers

Ø  Family and Roles- Everyone occupies different roles in within the family and groups within the wider community. For example: men are more likely to be seen purchasing tools and cars whereas women purchase health care and laundry products. However, roles are changing and marketers are beginning to understand that as well.

Ø  Reference (Peer) Groups- A reference or peer group is a group of people with whom a person closely identifies, adopting their attitudes, values and beliefs. E.g. if a friend tells you that they had a bad experience at a certain store, you will most probably alter your buying behaviour. 

3.  Economic Influences- have an enormous impact on the buying behaviour of businesses and customers. The level of economic activity fluctuates and its four distinct phases influences the marketing environment. 

Ø  The business cycle consists the of the following components. 

Ø  Boom- is a period of low unemployment and high economic growth which lead to higher incomes. This is the phase where businesses and consumers are optimistic about the future. Customers are willing to spend and businesses attempt to increase their market share by promoting heavily. The potential marketing during this phase is usually large with more sales. 

Ø  Expansion -   A period of high economic growth where the economy is expanding. People's incomes are rising and unemployment is reducing.

Ø  Contraction- is a period of high unemployment, slow economic growth and stabilising incomes. Customers and businesses become pessimistic and reduce their spending and investment. Marketing plans during this phase stress the value and usability of the product. 

Ø  Recession- sees unemployment reach high levels and incomes fall dramatically. There is a lack of confidence in the economy and a very small level of spending. Marketing during this time should concentrate on maintaining existing market share. 

4. Government Influences- Policies directly/indirectly influence business activity and customers’ spending habits, and as such, will influence the marketing plan. 

Ø   Interest rates are significant in determining the level of expenditure in the economy and the level of credit that consumers and business will access. It does this through its use of fiscal and monetary policies, microeconomic reform and age restrictions placed on the purchase of specific products 

Ø Legislation  - laws influence how marketers can market their product legally. This will be looked at in more detail in the next section but the relevant legislation includes: 

• • • • Competition & Consumer Act 2010 (CommonWealth) 

      • Sales of goods Act 1923 (NSW)

      • The Fair trading Act 1(987)

In 2011, a single, national consumer law — The Australian Consumer Law (ACL)—  was introduced, which replaced 17 existing national, state and territory consumer laws. This law is enforced by the Act below. 

At the same time, the name of the Trade Practices Act 1974 was changed to the Competition and Consumer Act 2010. 

The Act has two major purposes:

1. To protect consumers against undesirable practices, such as misrepresenting the  contents of products, their place of production, and misleading and deceptive  advertising

2. To regulate certain trade practices that restrict competition. The government also wants to ensure a number of businesses are operating at any one time in the same market to encourage competition.

The Competition and Consumer Act (CCA) applies to virtually all businesses in Australia, including the commercial activities of government. The CCA is enforced and administered by the Australian Competition and Consumer Commission (ACCC), and the Australian Securities and Investments Commission (ASIC) in respect of financial services.

The CCA allows the courts to impose penalties of up to $1.1 million for companies (now up to $50 million) and $2.5 million for individuals for unconscionable conduct and other breaches of the Act. In addition, the consumer can sue the business for compensation. 

The ACCC now has the power to issue an on-the-spot infringement notice to manufacturers making false claims about their products. The changes mean that the ACCC can one a company up to $18 780 (or $187 800 for a listed corporation) and an individual up to $3756 for each infringement of the CCA without having to undertake court action.

The ACCC can also now issue ‘public warning notices’ to warn consumers of suspected illegal activity. 

Sidenote: The ACL is currently being reviewed due to the relatively low penalties that have been imposed on companies for breaches.

Actual examples

• a mobile phone provider signs you up to a contract without telling you that there is no coverage in your region

• a real estate agent misinforms you about the characteristics of a property by advertising 'beachfront lots' that are not on the beach

• a jewellery store advertises that a watch 'was' $200 and is 'now' $100 when the store never sold the watch for $200

• a business predicts the health benefits of a therapeutic device or health product but has no evidence that such benefits can be attained

• a transport company uses a picture of aeroplanes to give you the impression that it takes freight by air, when it actually sends it by road

• a company misrepresents the possible profits of a work-at-home scheme, or other business opportunity.

Ethical and legal aspects of marketing

Ethics in marketing refers to a combination of broad principles that establish standards of behaviour and guidelines for people working across the marketing industry. 

There are 5 ethical criticisms of marketing

• 1. Creation of needs - materialism 

  2. Stereotypical images of males and females

  3. Use of sex to sell products

  4. Product placement

  5. Invasion of privacy 

They are not enforceable through law.

Truth, accuracy and good taste in advertising

• • It is expected that when promotional material is distributed, this material represents information that is truthful, accurate and in good taste. 

  • The Competition and Consumer Act prohibits a corporation from supplying consumer goods that do not comply with prescribed product safety standards. 

  • The Advertising Federation of Australia (AFA) is the peak body representing companies in advertising and  marketing communications. It seeks to promote the best practices in advertising.

  • Using somewhat controversial advertisements to promote social issues, while at that the same time selling its brand name.

 Products that may damage health

Products and services that damage people’s health are regarded as “sin” products, so the government puts restrictions. They include:

o    restrictions on tobacco sponsorship entries into casinos

o    Restricted opening hours for leagues and RSL clubs for gambling

o    Packets contain health warnings for cigarettes

 Engaging in fair competition

The role of the Australian Competition and Consumer Commission is to regulate business behaviour.  

 Unfair competitive behaviour includes:

o    price-fixing between two or more major competitors (illegal)

o     long-term loss leader – pricing strategy by undercutting smaller competitors (illegal)

o    misleading advertising regarding products  (illegal)

 Australian Competition and Consumer Commission

• The ACCC attempts to regulate the level of competition within a range of industries. It aims to promote fair and ethical behaviour by businesses towards their competitors and allows businesses to lodge complaints against competitors regarding behaviour that they deem to be unfair and against the Acts. 

 Sugging 

Selling under the appearance of a survey is a sales technique disguised as market research. This technique is not illegal, however, it does raise several ethical issues including: invasion of privacy and deception. 

2012

Q26  Why are ethical behaviour and government regulation important in marketing? 20 marks

2013

Q11 Sam is asked by a company to participate in a survey on home security. After a few questions,she is asked if she would like to purchase a burglar alarm from the company. What strategy is the company using?

(A) Sugging, which is illegal 

(B) Sugging,which is legal but may be unethical 

(C) Misleading and deceptive advertising,which is illegal 

(D) Misleading and deceptive advertising,which is legal but may be unethical

2014

Q1 Sally shops at a particular store as she has always received excellent service there. What type of factor is influencing her choice of store?

(A) Economic 

(B) Government 

(C) Psychological 

(D) Sociocultural

2017

Q7 Vinh’s friends tell him that a particular brand makes poor quality jeans. He does not buy this brand due to his friends’ opinions.

Which factor is influencing his choice?

(A) Economic

(B) Government

(C) Sociocultural

(D) Psychological

Q8 A customer returns a chainsaw to the place of purchase as it does not cut branches. On what basis must the business refund the cost of the chainsaw? 

(A) Implied conditions 

(B) Ethical considerations

(C) Relationship marketing

(D) Accuracy in advertising

Q22 An Australian company sells educational toys for preschool aged children. 

(a) Why is ethical behaviour important in the marketing of this business?  4 marks

(b) Explain the influence of consumer laws on this company’s promotion strategies. 5 marks

2018

Q14    Recently a business has removed one of its products from sale because it may contain  ingredients that could pose a health risk. 

What is the most likely influence on this marketing decision? 

A.  Competitive fairness 

B.  Product differentiation 

C.  Government legislation 

D.  Economic considerations 

2019

Q7 Which term refers to a sales technique disguised as market research? 

A. Sugging 

B. Telemarketing 

C. Implied conditions 

D. Engaging in fair competition 

21 

A business sells luxury cars. The cars are stylish, high performance and include advanced safety features integrating leading edge technology. 

(a) Describe ONE factor influencing customer choice for this business. 3 marks

(b) Explain the interdependence between marketing and finance for this business. 4 marks

2020

Q4 Australian businesses are required by law to offer a refund if the product or service 

A. does not match the description. 

B. is no longer required by the customer. 

C. is damaged by the customer after purchase. 

D. is available at a competitor’s business for a cheaper price. 

2021

5 A consumer purchases expensive designer clothing as they believe they are getting higher quality and a longer lasting product. Which factor is influencing this consumer’s choice? A. Economic B. Government C. Psychological D. Sociocultural

2022

1 What is an economic factor that could influence customer choice? 

A. Perception 

B. Recession

C. Regulation

D. Subculture 

2023

13 A customer returns a recently purchased 5G mobile phone to the place of purchase as the phone was faulty. Under consumer law, why must the business refund the customer the cost of the mobile phone? 

A. It is ethical to replace defective goods.

B. t is within the implied conditions of the contract. 

C. It is important to meet corporate social responsibility

D. It can be considered deceptive and misleading advertising.