Chapter 4

Consumer Perception and Positioning

Complete Study Notes — Consumer Behavior

1. What is Perception?
Perception is the process by which people select, organize, and interpret stimuli (inputs from the
world) to create a meaningful picture of their surroundings — basically, "how we see the world
around us."

Key idea: Consumers act based on their perceptions, not on objective reality. What they THINK
is true matters more to marketers than what IS true.

📌 Example: Two people see the same advertisement. One person finds it appealing, the
other finds it annoying. Same ad — different perception — because each person has
different needs, values, and past experiences.

Two inputs shape perception:

• Physical stimuli from the outside world (e.g., colours, sounds, smells)
• Internal factors: a person's expectations, motives, and past experiences

Because everyone has unique experiences and needs, no two people see the world in exactly
the same way.

1.1 The Three Steps of Perception

Step What it means Example
Selection We only notice a small fraction of In a supermarket with 30,000
stimuli around us products, you only pay attention to a
few
Organisation We group stimuli into patterns that Seeing a logo and brand name
make sense together as one brand identity
Interpretation We give meaning to what we Seeing a red sale tag and
perceive based on personal immediately assuming a good deal
experience and needs
2. Sensory Information
Sensation is the immediate response of our sensory organs (eyes, ears, nose, mouth, skin) to
stimuli. A stimulus is any input to any sense — this includes products, packaging, brand names,
ads, and commercials.

Important: Sensation depends on change in the environment. If everything around us stays the
same, we stop noticing it.

📌 Example: A person living on a busy street in New York City stops noticing the noise of
honking horns because it never changes. One more honk makes no difference. But in a quiet
library, even a whisper is noticeable.

2.1 The Five Types of Sensory Input

Sight (Vision)
Visual cues — colours, shapes, layouts, designs — directly influence what we choose and buy.
Transparent packaging makes food seem fresher and more natural.

📌 Example: Fruit pieces in transparent yogurt containers need to be large and intact to
signal quality. Tortilla chips must stay whole inside clear bags, otherwise consumers
perceive the product as low quality.

Scent (Smell)
Smell triggers memories and emotions. Stores use scent strategically to make shopping more
enjoyable and to make time seem shorter.

📌 Example: Cinnabon places its ovens near the front entrance so the smell of fresh
cinnamon rolls drifts out and pulls customers in. Panera Bread moved baking staff from night
to day shifts so customers smell fresh bread during store hours.

Some companies have even trademarked their product's scent (e.g., a US ukulele company
trademarked a pina colada aroma).

Touch
Touching a product increases the likelihood of purchase. However, being touched by a
salesperson has mixed effects depending on culture and personal preference.
• Touching a product → more likely to buy it
• Being touched by a salesperson → can increase or decrease sales depending on culture
 • Being touched from behind → almost always decreases sales (especially for women)

📌 Example: Apple stores let customers freely handle all displayed products. The experience
of touching and using the devices in-store leads to more purchases.

Sound
The right sounds — or even silence — create powerful consumer perceptions. Background
music in stores affects mood, time spent shopping, and spending.
• Music triggers dopamine release, making shoppers more generous
• Retailers match music to their target customers' demographics and lifestyles
• Hotels use different playlists for different spaces and times of day
• On social media, most users scroll with sound off — so advertisers must capture
attention visually within 3 seconds

Product Sound Perception

Snapple The 'pop' sound signals that the product is safe and fresh. The right
sound eliminated the need for a plastic seal.
VW Jetta The 'thump' of the car door closing signals quality — the company
featured it in ads.
Mascara The 'click' when removing the cover indicates quality.
Tampons (P&G) Women disliked opening packages that made noise. P&G carefully
balanced the plastic crinkle and used silent adhesive strips.
Spray Bottle A quieter nozzle signals higher quality to consumers.
(Method)

Taste
There are 5 fundamental tastes: salty, sweet, sour, bitter, and umami (the savory, full-bodied
taste of broths, meats, cooked tomatoes).
What we see and hear changes how food tastes to us.

📌 Example: When Australia introduced graphic health warning images (cancerous lungs,
mouth ulcers) on cigarette packs, smokers reported that their cigarettes tasted different —
even though the product was identical. Ugly packaging triggered a psychological perception
of a bad taste.

📌 Example: Shoppers who heard French music while buying wine chose more French wine.
When German music played, German wines sold better. The music literally changed what
consumers perceived as better-tasting wine.
Sensory Input and Culture
Sensory perception is shaped by culture. People in different cultures interpret the same senses
in different ways.
• English speakers easily identify the colour in milk and jasmine flowers ('white') but find it
harder to identify common scents
• Speakers of Persian, Turkish, and Zapotec describe musical pitch as 'thin or thick' rather
than 'high or low'
• Marketers must understand cultural differences to serve consumers effectively

3. The Absolute and Differential Thresholds

3.1 Absolute Threshold
The absolute threshold is the minimum level of stimulation that a person can detect. Below this
level, the stimulus goes completely unnoticed.

📌 Example: Two people driving together may spot a billboard at different distances — they
have different absolute thresholds. With constant exposure to many billboards, the threshold
rises (senses adapt) and none of the boards stand out anymore.

Sensory adaptation: When we are exposed to a stimulus repeatedly, we stop noticing it. This
is a major problem for advertisers, which is why they regularly change their campaigns. If an ad
stays the same for too long, people stop seeing it.

3.2 Differential Threshold (JND — Just Noticeable Difference)

The differential threshold is the smallest difference between two stimuli that a person can
detect. This is also called the Just Noticeable Difference (JND).

Weber's Law: The stronger the original stimulus, the larger the change must be for the
difference to be noticed. In other words, a small change to a big stimulus goes undetected.

Marketer wants to HIDE a change (stay Marketer wants to SHOW a change

below JND) (exceed JND)
Slightly reducing product size, quietly raising Improving packaging design, adding new
price, or making a small cost-cutting change features, lowering price — so consumers
to ingredients clearly notice the improvement

📌 Example: A pasta brand increases its price from Rs.399 to Rs.425 — consumers notice.
Instead, it keeps the price the same but reduces the bag from 16 oz to 13.25 oz — most
consumers don't notice because the size change is below the JND.
 📌 Example: Apple: When Apple introduced minor display improvements, consumers were
disappointed because the change was below the JND. But when Apple introduced Retina
Displays, the change was clearly above the JND — it felt like a revolution.

JND and Logo/Packaging Updates

When updating logos or packaging, marketers make small changes over time (staying below the
JND) so loyal consumers don't feel alienated.
• Heinz Ketchup: Updated its label gradually — well within the JND. Consumers
recognized the bottle immediately.
• Betty Crocker: Updated her portrait 8 times since 1936, but each update was minimal —
consumers barely noticed the changes.
• Xerox: Updated its logo multiple times across 100+ years, always staying close to the
previous version.

Mistakes happen when brands exceed the JND:

• The Gap: Introduced a completely new logo — customers reacted negatively and the
company reversed it within days
• Tropicana: Changed its orange juice packaging dramatically — consumers could not find
it in stores and complained the new pack looked like a cheap store brand
• Coca-Cola: Used white holiday cans that were too similar to Diet Coke — caused
confusion and were quickly discontinued

4. Subliminal Perception
Subliminal perception refers to stimuli that are too weak or too brief to be consciously seen or
heard, yet strong enough to register in the sensory receptors.

Does subliminal advertising work? Research says: NOT convincingly.

• A famous 1957 test at a movie theater reportedly showed that flashing 'Eat Popcorn' and
'Drink Coca-Cola' on screen increased sales — but these results were later admitted to
be fabricated
• Studies show subliminal messages may trigger associations or arouse mild feelings (like
thirst) but do NOT change actual buying behaviour
• The most honest conclusion: people see what they want to see — a vivid imagination
can find hidden messages anywhere

📌 Example: In a lab experiment, people subliminally exposed to the Apple logo (too fast to
see consciously) scored higher on a creativity test than those shown the IBM logo. This
shows subliminal cues may trigger associations — but NOT purchasing decisions.
5. Perceptual Selection
Consumers are surrounded by thousands of stimuli every day, but they consciously process
only a tiny fraction. The stimuli a person selects are influenced by:
• Previous experience and expectations — what they are 'set' to see
• Current motives and needs — what they are looking for right now

5.1 Stimuli Features

Stimuli that stand out from the environment get noticed. Key factors that attract attention:
• Contrast: A bright product on a dark background, an unusual image, silence at the start
of a commercial
• Shocking or unrealistic images: Something unexpected automatically grabs attention
• Size and placement of ads: Bigger ads in unexpected places get noticed more

📌 Example: The Gatorade website uses brightly coloured bottles against a dark background
— maximum contrast makes the product stand out.

5.2 Personal Expectations

People usually see what they expect to see, based on past experience and pre-formed beliefs.

📌 Example: A student who is told a professor is 'amazing and engaging' will likely perceive
the class as interesting even before it begins. Expectations shape perception.

📌 Example: A study found that people who believed they had cooked the food they ate rated
it almost twice as high in quality compared to others who ate the same food but didn't
prepare it. 'I made it' boosted their perception of taste.

Marketers of DIY (do-it-yourself) products should always emphasize self-preparation in

promotions because it enhances customer satisfaction.

5.3 Consumer Motivation

People notice what they need or want. The stronger the need, the sharper the attention to
relevant stimuli.

📌 Example: A person looking to switch their mobile phone plan will notice every mobile
carrier ad they pass. Their roommate, happy with their current plan, won't notice any of them
 — same ads, different attention.

5.4 Perceptual Selectivity — Three Concepts

Concept Explanation
Selective Exposure Consumers tune into messages they find pleasant and actively
avoid unpleasant or irrelevant ones. They seek out ads that confirm
their buying choices were smart.
Selective Attention Consumers pay heightened attention to things that match their
needs and barely notice things that don't. A dieter notices every
weight-loss advertisement.
Perceptual Defense Consumers subconsciously block out messages they find
threatening or uncomfortable — even after being exposed. Smokers
who 'don't see' health warnings on cigarette packs are exercising
perceptual defense.

6. Perceptual Organisation
Humans don't experience stimuli as isolated fragments. We automatically group them into
organised wholes. This is known as Gestalt psychology (German for 'pattern or configuration').

Three key principles:

6.1 Figure and Ground

Every perceived scene has a 'figure' (the main focus) and a 'ground' (the background). The
figure appears solid and clear; the ground appears hazy and less important.

📌 Example: In a music store, if background music is playing softly while a shopper browses,
the music is the 'ground' and the products are the 'figure'. But if someone sits and
intentionally listens, the music becomes the 'figure'.

In advertising, the product must be the figure, not the background. Poor figure-ground design
confuses the viewer.

Product Placement is a clever use of figure-ground: the advertised product (figure) is embedded
into a TV show or movie (ground), so consumers see it without consciously realizing it's an ad.

📌 Example: Stranger Things on Netflix prominently featured Eggo Waffles and Coca-Cola.
The products are the figure placed within the entertainment ground.
6.2 Grouping
People naturally group stimuli together to form a unified impression. Grouping helps memory
and creates associations.

📌 Example: A tea advertisement shows a young couple sipping tea by a fireplace in a cozy
room. The consumer groups these stimuli and associates tea with romance, warmth, and
fine living.

📌 Example: Coca-Cola places its products near related foods in supermarkets — bottled
water near salad bars, large Coke bottles near takeout counters. Grouping creates a mental
connection: 'Coke goes with this meal'.

6.3 Closure
People have an instinct to complete incomplete pictures or messages. When a stimulus is
incomplete, our mind fills in the gaps — this is called closure. Ads that require the consumer to
'fill in' something are more engaging because active participation means deeper processing.

📌 Example: A radio commercial uses the same soundtrack as a well-known TV ad.

Listeners who know the TV ad automatically visualize the visuals in their heads — their mind
seeks closure. The radio ad becomes far more effective because of this mental completion.

Examples of ads that use closure:

• Asking consumers to unscramble words
• Showing incomplete images for the viewer to complete in their mind
• Sentences with blanks to fill in

7. Interpretation: Cues
Consumers interpret products using two types of cues:

7.1 Intrinsic Cues (Integral Indicators)

Physical characteristics of the product itself — size, colour, flavour, aroma, texture. Consumers
believe these are objective, 'rational' reasons for their choices.

📌 Example: Hillshire Farm redesigned its sliced meat packaging to include a transparent
window showing the product. Consumers also preferred a shallower tub with neatly fanned-
out meat — they perceived it as higher quality.
7.2 Extrinsic Cues (External Indicators)
Characteristics not physically part of the product — price, brand name, packaging, store image,
country of origin. These are used far more often than people realize.

📌 Example: Haagen-Dazs is an American ice cream brand with a made-up Scandinavian-

sounding name. Its foreign-sounding name created a perception of European luxury and
quality — even though it's made in the US.

📌 Example: Smirnoff vodka is made in Connecticut but its Russian-sounding name gave it
an aura of authenticity. When Russia's image became negative, Smirnoff began distancing
itself from that origin to protect its brand.

7.3 Stereotypes
Stereotypes are pre-formed biased images that people carry in their minds about what certain
stimuli mean. They act as mental shortcuts that speed up interpretation — but can also distort
reality.

Triggers of stereotyping:
• Physical appearance: Attractive models are seen as more expert in
beauty/enhancement products but NOT in problem-solving products (like anti-dandruff
shampoo)
• Descriptive terms: 'Succulent Italian Seafood Filet' tastes better than 'Seafood Filet' to
the same people eating the same dish
• First impressions: Launching an imperfect product early creates a lasting negative
impression that is very hard to overcome
• Halo Effect: If you love one product from a brand, you're more likely to trust all its
products. Porsche sells sunglasses at premium prices because people who admire
Porsche cars assume the accessories are equally premium.

📌 Example: KFC changed its name from 'Kentucky Fried Chicken' to 'KFC' to reduce the
association with fried food (perceived as unhealthy). The halo of 'fried' was hurting their
brand.

8. Consumer Imagery
Consumer imagery refers to consumers' overall perceptions of a product's, service's, or brand's
components — including its visual identity, packaging, price signals, and quality cues.
8.1 Perceived Value
Perceived value = what you get vs. what you give up (price + effort). Consumers compare what
they pay to what they think is fair.
• Price fairness affects purchase decisions AND post-purchase satisfaction
• Differential pricing (different people paying different prices) feels unfair to consumers

Reference prices: A reference price is any price a consumer uses as a baseline to judge
another price.
• External reference price: 'Sold elsewhere at Rs.999, our price: Rs.599'
• Internal reference price: What the consumer already believes is a 'normal' price for that
product

📌 Example: Flat-screen TVs were once perceived as luxury items costing thousands. As
prices dropped across the market, consumers' internal reference price fell too — now flat-
screen TVs are considered everyday items.

8.2 Price-Quality Relationship

Many consumers automatically assume that more expensive = better quality. Marketers
sometimes leverage this by intentionally keeping prices high to signal quality.

📌 Example: In a study, subjects took identical placebo pain pills. Half were told the pill cost
$2.50 per dose, the other half were told 10 cents. 85% of the '$2.50 group' reported
significant pain relief vs. only 61% in the '10 cents group'. The perceived price changed the
perception of effectiveness.

8.3 Brand Image

A brand's image — its unique identity in the consumer's mind — is often MORE important than
the product's actual physical features. A distinct brand image creates brand loyalty.
• Most new products fail because consumers see them as 'me-too' products with no
unique benefit
• Brand images occasionally need freshening up to avoid looking old or boring

📌 Example: BlackBerry was the first major smartphone. But consumers began to perceive it
as 'only for business people' — boring and not personal. By 2016, BlackBerry's market share
dropped to 0%. Failing to update its brand image led to total collapse.

8.4 Package Perceptions / Image

Packaging conveys the brand's personality and quality. The design, shape, colour, and feel of
packaging all create strong perceptions.
 📌 Example: Tide's stain-removal version comes in a heavy-feeling orange container with a
large handle — suggesting strength. The 'Total Care' version comes in a slimmer, brighter
container — suggesting sophistication. Same brand, different packaging, completely different
perceived promises.

8.5 Service Quality

Services are harder to evaluate than products because they are: intangible (can't be touched),
variable (quality differs), perishable (can't be stored), and produced/consumed simultaneously
(a bad haircut can't be recalled).

Consumers rely on extrinsic cues (surrogate cues) to judge service quality:

📌 Example: When evaluating a doctor's service, people look at the neatness of the office,
the number and source of framed degrees on the wall, how friendly the receptionist is, and
how professional the nurse seems — all before the doctor even enters the room.

SERVQUAL Scale: A framework that measures service quality by comparing customer

expectations vs. actual experience across two dimensions:
• Outcomes: Was the core service delivered reliably? (Did the flight arrive on time?)
• Processes: HOW was the service delivered? (Were staff polite when there was a delay?)

📌 Example: Amazon's advantage over competitors is not just selling products (outcome). It's
the processes — instant e-book delivery, personalised recommendations, shipment tracking,
pre-ordering months in advance, unlimited deliveries with no shipping fees.

8.6 Retail Store Image

Stores have their own image that affects how consumers perceive the products they sell.
• Carrying a premium brand in a discount store = brand image damaged, store image
improved
• Frequent large sales = store perceived as 'discount' and less prestigious
📌 Example: Lord & Taylor in New York was once seen as upscale. Over time, it advertised
sales so frequently and packed its aisles with bargain signs that its prestigious image was
destroyed and its target customer changed.

8.7 Company Image

A company's overall image affects how new products are received. Favorable company image =
easier acceptance of new products.
Institutional advertising: Advertising designed to promote a company's overall image without
mentioning specific products.

📌 Example: Siemens ran ads featuring its wind energy technology with the slogan 'The
world of tomorrow needs answers that last'. No specific product was mentioned — the aim
was to build a brand identity as innovative and responsible.

9. Risk Perception
Perceived risk is the uncertainty consumers feel when they cannot predict the consequences of
a purchase. Even if a product is safe and good, if the consumer PERCEIVES it as risky, they
won't buy it.

9.1 Types of Perceived Risk

Type Definition Example
Functional Risk Product may not perform as Will this laptop battery last all day?
expected
Physical Risk Product could cause harm to self Is this organic unpasteurised milk
or others safe to drink?
Financial Risk Product may not be worth its cost Will a newer, cheaper model of this
phone come out next month?
Psychological / A poor choice might hurt self- Will my friends laugh at me if I buy
Social Risk image or social standing a non-smartphone?
Time Risk Time spent searching may be If this internet plan is bad, I'll have
wasted if the product disappoints to research all over again.

9.2 Risk Tolerance Differences

• Narrow categorizers: High-risk perceivers — they limit choices to a few safe options
• Broad categorizers: Low-risk perceivers — they consider many options and are willing to
risk a poor choice

9.3 How Consumers Reduce Perceived Risk

• Seek information: Read reviews, ask friends, consult experts, spend more time
researching
• Brand loyalty: Stick to brands that have worked before — less uncertainty
• Store image: Trust reputable stores to have vetted their products carefully
 • Price-quality relationship: Buy the most expensive model assuming it's the best

Marketers can reduce perceived risk through: well-known brand name, distribution through
reputable stores, informative advertising, free samples, money-back guarantees, and
independent test results.

10. Positioning and Repositioning

Positioning is the process by which a company creates a distinct image and identity for its
product, service, or brand in consumers' minds. A unique position is what differentiates a brand
from competitors.

Key idea: Positioning exists in the consumer's mind, not in the product itself. A 'position' is how
consumers PERCEIVE a brand, not what the brand physically is.

10.1 Steps in Developing a Positioning Strategy

1. Define the market — who are the buyers and who are the competitors?
2. Identify key product attributes and research how consumers perceive them
3. Research how competing brands are perceived (use perceptual maps)
4. Determine what combination of attributes consumers prefer
5. Develop a distinctive, value-based positioning concept
6. Create a position statement and communicate it to the target audience

10.2 Positioning Strategies

Umbrella Positioning
A general slogan that covers the entire company's offering without mentioning specific products.

📌 Example: Campbell's — 'Soup is Good Food'. Nike — 'Just Do It'. McDonald's — 'I'm
Lovin' It'. DeBeers — 'A Diamond is Forever'.

Premier Position
Focuses on exclusivity and high-end status. Implies the brand is the best, the most prestigious,
or the costliest.

📌 Example: Joy perfume: 'The costliest perfume in the world'. L'Oreal: 'Because I'm Worth It'
(later changed to 'Because We're Worth It' to sound more inclusive and modern).
Positioning Against Competition
Directly or indirectly acknowledges a competitor to define your brand in contrast.

📌 Example: Avis car rentals: 'We're No. 2. We Try Harder' — clearly acknowledging Hertz's
dominance while positioning Avis as more motivated. 7Up: 'The Un-Cola' — positioned
against Coke.

Key Attribute Positioning

Focuses on one key product benefit or feature that is important to consumers.

📌 Example: Bounty paper towels: 'The Quicker Picker Upper' — a single superior functional
attribute (speed of absorption).

The Un-Owned Position

Identifying a gap in consumer perception — a benefit that no competitor currently owns in the
consumer's mind — and claiming it.

📌 Example: Fage Greek Yogurt positioned itself as 'ridiculously thick' — no other yogurt
brand had claimed thickness as their core benefit. They occupied an un-owned perceptual
space.

📌 Example: Visine eye drops originally only relieved redness. By adding product lines for
allergy, tired eyes, and multi-symptom relief, they filled multiple un-owned positions and
made it almost impossible for new competitors to enter the market.

10.3 Repositioning
Repositioning is deliberately changing the existing perception consumers have of a brand.
Companies reposition when:
• The original positioning becomes dull or outdated
• Too many competitors are claiming the same benefit
• The brand needs to appeal to a new market segment

📌 Example: Chevrolet shifted from its American-nostalgia slogans like 'Heartbeat of

America' to 'Find New Roads' to create a single global brand perception that works across all
countries and can be translated into any language.

📌 Example: Barclaycard, popular with baby boomers, repositioned to target millennials with
the message that the card lets you buy things you love. They partnered with Buzzfeed for a
music quiz and ran ads on Snapchat.
10.4 Perceptual Mapping
A perceptual map is a visual diagram that plots how consumers perceive competing brands
along two key dimensions. Marketers use these maps to:
• See where their brand stands in the consumer's mind relative to competition
• Identify un-owned positions that represent market opportunities
• Plan repositioning strategies to move their brand in the desired direction

📌 Example: A perceptual map of retail stores plots them on two axes: 'Innovative vs.
Traditional' and 'Luxurious vs. Thrifty'. Barneys occupies the innovative-luxurious corner
alone. If Macy's appears close to Old Navy (thrifty, traditional), that signals a positioning
problem — Macy's needs to reposition to separate itself from low-end associations.

11. Key Terms Glossary

Perception The process of selecting, organizing, and interpreting stimuli into a

coherent picture of the world
Sensation Immediate response of sensory organs to a stimulus
Stimulus Any input to any of the senses (product, ad, sound, smell, etc.)
Sensory Adaptation Getting so used to a stimulus that you stop noticing it
Absolute Threshold The minimum level of a stimulus that can be perceived
Differential The smallest detectable difference between two stimuli
Threshold (JND)
Weber's Law The stronger the initial stimulus, the larger the change needed to be
noticed
Subliminal Perceiving stimuli below conscious awareness
Perception
Selective Exposure Choosing to engage with pleasant stimuli and avoid unpleasant
ones
Selective Attention Heightened awareness of stimuli relevant to current needs
Perceptual Defense Subconsciously blocking psychologically threatening stimuli
Gestalt Psychology Principle that people organize stimuli into unified wholes
Figure and Ground Distinction between the focal stimulus (figure) and its context
(ground)
Grouping Natural tendency to cluster stimuli into unified impressions
Closure Instinct to complete incomplete stimuli or messages
Product Placement Embedding a product (figure) into entertainment content (ground)
Intrinsic Cues Physical product characteristics used to judge quality (size, colour,
flavour)
Extrinsic Cues Non-physical cues used to judge quality (price, brand, country of
origin)
Stereotypes Biased mental images that distort perception of stimuli
Halo Effect Overall evaluation of an object based on one or a few positive
dimensions
Consumer Imagery Consumers' total perception of a brand's components and quality
Reference Price A price used as baseline to judge another price
Price-Quality Belief that higher price = higher quality
Relationship
SERVQUAL Scale Measures gap between service expectations and actual service
received
Perceived Risk Uncertainty about the consequences of a purchase decision
Narrow Categorizer High-risk perceiver who limits choices to safe options
Broad Categorizer Low-risk perceiver who considers many alternatives
Positioning Creating a distinct image and identity for a brand in consumers'
minds
Repositioning Intentionally changing the existing brand image in consumers'
minds
Perceptual Mapping A diagram showing how consumers perceive competing brands on
key attributes
Institutional Advertising that promotes company image, not specific products
Advertising

End of Chapter 4 Notes — Consumer Perception and Positioning