978-0132539302 Chapter 5 Lecture Note Part 2

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A. “Consumer Concerns”

The focus is on several major new issues in studies and strategies related to consumer

marketing. After considering the privacy issue related to the consumer’s right to privacy, the

discussion flows to the different types of consumers and the implications for marketers in the

future.

Teaching Objectives

To stimulate students to think about the privacy issue, pro and con, for a firm when it

attempts to achieve a better understanding of its customers.

To communicate the role of various types of information that help the firm achieve a

clearer understanding of its customers and the consumer behavior environment of the

present and future.

Discussion

INTRODUCTION

Americans today feel more protective of their privacy than they did during most of the 1990s.

That is the fundamental conclusion of two surveys on privacy issues. Polls by Yankelovich and

Louis Harris & Associates indicate continued high levels of concern over the way business

obtains, uses, and disperses consumer information.

The more alarming figures arise from the Yankelovich survey, in which nine out of ten

respondents favored legislation to regulate business uses of consumer information. Forty-five

percent of those polled strongly feel the need for privacy legislation, up from 23 percent in

1990. According to a Yankelovich partner: “Very seldom do we get 90 percent agreement on

anything. That really attests to the fact that this is an enormously important issue to people.”

The Harris study is more reassuring, providing a less negative message. Although 82 percent of

the respondents say they are “somewhat” or “very concerned” about threats to their personal

privacy, their uneasiness is more focused on the government than business. The majority of

respondents (57 percent) think businesses that handle personal information “are paying more

attention to privacy issues these days.” An interesting aspect of this poll is, however, that 72

percent of the respondents agreed that “if companies and industry associations adopt good

voluntary privacy policies, that would be better than enacting government regulations.”

There are some very consistent messages that have gotten clearer in recent years. They are:

People regard their transaction information as something they feel they have lost

control over, and that concerns them.

People are different. Some don’t want any direct marketing, some want

everything you can give them, and in between there are people who want some

say in what gets to them and what doesn’t.

People in the last group (those who want a say in what comes to them) comprise the largest

segment of the total (55 percent). This group recognizes the benefits of using personal

information for business uses. However, they have to be convinced that the data being sought

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are relevant and subject to fair information practices. For these people, notice and the ability to

opt out are very important. This group “favors voluntary standards,”” but they will back

legislation when they think not enough is being done by voluntary means. As it is, over half the

respondents (54 percent) do not believe current laws or business practices adequately protect

their privacy.

At the same time, the Direct Marketing Association (DMA) reports that consumers purchased

over $700 billion through direct marketing channels in 1998. This is not the contradiction it

might seem. A 1994 survey regarding interactive services revealed that the respondents who

were most interested in subscribing were also the most likely to have made purchases through

direct marketing. They were also the most concerned about privacy, and their willingness to

release personal information for interactive marketing purposes was contingent on the presence

of policies that protected their privacy.

According to various surveys, the best customers for direct marketing are many of the same

people who are looking for proper safeguards in the relationship between the marketer, the

service provider, and the consumer. The apparent message here is that it would be a mistake for

direct marketers to assume that their customers are not interested in privacy. Clearly, they are

the people concerned about privacy.

Respondents to one of the surveys actually expressed a desire for better relationships with

marketers. The survey indicated the people are tired of having to be vigilant about everything

they do, and they would like to be able to trust a little bit again, but still they are looking for

protection. The theme seems to be that it will take more than individual effort. A company

could be doing everything right, but 10 other companies are doing everything wrong, so in the

consumer’s mind all marketers stink. The point is that businesses have to make much more of a

marketing passed and pending in various state legislatures is clear evidence of this point.

Legislators are showing that this is an issue that people care about.

BEHAVIORAL ANALYSIS

There is a substantial question about how well the American consumer is faring in this era of

passive.

To support this perspective Langer Associates, Inc., conducts an annual survey of American

consumers. Langer specializes in qualitative studies of consumer marketing issues. The firm

conducted focus groups with thousands of people across the United States and discovered that

the following attributes and concerns are widely shared:

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they do have: jobs, family, community, possessions—a change reflected in

economics and politics.

Localization. A new protectiveness following 9/11 has translated into increased

interest in issues like school budgets and neighborhood crime. Advertisers can

oConnection with others

oAvoiding intrusive interaction

The message is that stores, restaurants, and clubs similarly can satisfy both

needs by building zones of “alone-togetherness” into their layout.

Topsy-Turvy Retail. Focus group members often give higher marks for customer

beginning to tire of superstores, business remains brisk. Smaller stores will have

to maintain excellent personal service, find niches to fill, and do more direct

marketing to stay afloat.

“Woo-Me” Marketing. Customers today will not seek out products or services;

reason for buying (even if it is the reason) are likely to appeal to this crowd.

Clothing Cutbacks. Until a new style of dressing renders their current wardrobes

obsolete, most consumers feel they already have all the clothing they need. The

trend toward more casual dress for work and socializing has added to their

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closet is being spent instead on homes, travel, and investments despite national

and global economic and political issues.

High-Tech Polarization. Attitudes toward technology are polarized, with many

people still concerned about the impact of computers on employment, the

touch.”

Data Glut. Complaints about being overwhelmed by information are up sharply,

indicating a potential market for those who can help simplify it and screen out

extraneous communications.

Changed Office Structures. Downsizing means more executives doing clerical

materials.

Working at Relaxing. Nothing is easy; professional/managerial types put a lot of

effort into their down time, scheduling massages, gardening, and redecorating

their city apartments. Ads can talk about people deserving to relax, and depict

the humor inherent in striving for serenity.

technology advances, and those who do not embrace these new methods will be at a

disadvantage as consumers will gravitate to those organizations that do.

Teaching Objectives

To demonstrate how the Internet and wireless environment has enabled the consumer to

Discussion

Organizations, in their efforts to reduce cost, increase their competitivenss, and enhance

communication to consumers have greatly enhanced their Web pages with most of the

information necessary for consumers to research and purchase their products and services.

Additionally, new business entities such as bizrate.com have evolved to provide product and

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keywords for search engines when a consumer is searching for information by category and not

brand. Consumers who are armed with information acquired on the Web change the sales

process. For example, consumers are coming into car dealerships with all relative information

on a particular car’s options and what price they are wiling to pay for the car. In some cases the

method of efficiently informing the consumer with their relative product and service

information. Technology is changing quickly and the rate of change adoption varies by

consumer as well as by organization. Therefore, organizations must keep pace with both the

technology and consumer technology adoption synamics to remain competitive.

Background Article

Report, May 14, 2002.

In the five-and-a-half decades since they first began arriving on the scene, the baby boomers

have transformed every American institution with which they’ve come in contact, from popular

music to parenthood. Now that the older boomers are in their late 40s and 50s, they’re making

their mark on grandparenting.

it’s wise for retailers and other businesses to pay attention to what they are buying and how

they view their grandparenting role.

Researchers believe that baby boomers want to be more of a presence in their grandchildren’s

everyday lives than grandparents of earlier generations. This attitude stems partly from the fact

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their own relations with their parents, boomers see helping with grandchildren as one way to

keep communication going between them and their own children.

As the ranks of boomer grandparents grow, you will see more taking responsibility for

child-care. Grandparents will become more involved in day-to-day purchases of what cereals to

chauffeur duties easier.

The travel industry will be one of the biggest beneficiaries as boomer grandparents shell out

big bucks to vacation with their grandkids, particularly on trips that can broaden their

grandchildren’s minds. Eco-friendly cruise packages, river rafting, and other adventure tours

will be major attractions. Grandkids will have a major say in how the family’s travel money is

or instant messaging.

Then there’s the entertainment market. Having grown up on rock and roll, boomers will be far

more likely than their senior parents to share their grandchildren’s musical interests. That

means not only that they’ll spend more on compact discs for their grandkids, but also that

they’ll be joining them in the stands at rock concerts. Similarly, they’ll be more likely to take

will go about it with an eye toward keeping themselves informed. If an educational game is

something that grandparents can play with their grandkids, so much the better. Kathy

Whitehouse, a senior consultant with SRI Consulting Business Intelligence, says that boomer

grandparents will be more likely than their own parents to pay attention to sources such as

safety and durability.

Probably the best way to appeal to boomer grandparents is to emphasize two things: education

and shared experience. For big-ticket items, a major hook is the desire to give grandkids a

wider range of experiences, particularly to things the boomers wish they could have

experienced as kids but that their parents couldn’t afford. Adventure travel certainly fits that

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IV. Case:

“TiVo”

HBS Case: 501-038 TN: 5-501-057

Teaching Perspectives

complex electronics product that is intended radically to change consumer habits. Moreover,

with an ambiguous future impact on the television and advertising industries, TiVo needs to

demonstrate that it can play a constructive role in the future media landscape.

Fourteen months into the launch, sales are very disappointing. The VP of Marketing and Sales,

of big player Microsoft.

This case can be used to discuss classical areas of marketing strategy:

Launch strategy for a truly new product.

Preemptive positioning/first mover advantage.

The role of branding in relation to these issues.

Integrated communications strategy.

Habit formation/disruption.

Finally, the case can he used to discuss contemporary issues related to marketing in the

information age:

Empowering consumers with more control over their consumption experiences,

in order to enhance targeted marketing.

Consumer privacy.

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plan?), allowing the other topics (consumer behavior and marketing issues in the information

age) to surface as the discussion progresses. This approach has pluses and minuses. On the

minus side, the analyses of these specific topics might remain relatively superficial. On the

action plan.

Questions

2. Now adopt the standpoint of the networks, the advertisers, and the cable/satellite

companies: What do they want TiVo to be? Thinking about the competition: What are

Microsoft’s potential strengths and weaknesses in this market?

3. How would you describe and characterize TiVo’s action plan as given at the end of the

analysis suggest an alternative plan?

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