Riphah International University

Faculty of Management Sciences

Riphah School of Leadership
Final Term Examinations, Spring 2020

Subject: Consumer Behavior Teacher Name: Dr. Abdul Qayyum

Marks: 40 Time Allowed: 24 hours
Starting Time: 10 am Date: 10 June 2020
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Instructions:
1. Attempt all questions.
2. All questions carry equal marks.
3. Be relevant and avoid unnecessary details.
5. First understand what is being asked and then answer the question.

Question 1:
1. How would you characterize the service Zipcar provides? With
which companies or services does it compete? What role does it
play in its competitive landscape?

 Service Zipcar provides

 ZipCar is the United States membership car sharing and car club
service offering company providing car reservations to its
members who are billed by the hour or day.
 Members of this car sharing service assumes it as a cheaper and
convenient alternative to traditional car rental and car
ownership.
 The company has more than 400 cars and is providing services
to 21 cities in United States. Members can reserve cars either by
calling or through online.
 ZipCar provides both services to its members.
 Their service is available 24 hours a day and seven days a week.
  The company is providing advance reservations for its valuable
customers which can be made for minutes or up to a year.
 The members were provided with automated access to the cars
through a ZipCard, which works with the car’s technology to
unlock the door, where the keys are already located inside.
 The cars are dropped off at the pickup location after use by the
customers.

Marketing Mix of ZipCar

Product

 Membership based car rental

 Plans for members (Occasional Driving Plan, Extra 50, Extra 75)
 Booking per hour or on a daily, monthly or yearly basis
 Company also provides routine maintenance for the cars and
members who washed their cars were reimbursed up to $15 and
given a free hour of use.

Price
 Daily price charged at about $8.5 hourly rate
 Price of ZipCars varied across cars.
 BMW rented for $12.50 per hour
 Honda Civic for $8.50 per hour
 $125 initial cost with additional membership fee

Place
 Members can book online or through call
 Car parked in specified areas to be picked and dropped off by the
customer
Promotion
Company used online methods for promotion

 Companies or services does it compete? What role does it play in

its competitive landscape?

– Competitors

1. Car Rental Service Providers:

 ZipCar Company competes with all those companies which

are providing car rental services.
 Rental Car Service Providers gives its customers rented cars
for $43 daily hourly rate along with Gas charges,
Insurance/damage charges, parking charges and additional
fee of $10, $21, $8 and $4 respectively which collectively
costs the customer $86.95 per day.
 On the other hand, Zipcar provides cars to its members for
$60 per day without gas, insurance, parking or additional
charges. So the customers has to pay just $60 and in
comparison with rental cars, the customer saves over $26 per
day.

2. Car Ownership Companies:

 It is also a big competition for Automobile companies (Car

ownership companies) because Zipcar is providing cheaper
services so its members prefer ZipCar renting services more
than owning their own car.
  If customer buys a car in US, then he will have to pay $843
per month including charges of gas, insurance, parking etc.
 But if he uses ZipCar services instead of owning a car then
he will have to pay only for what he has used. He will pay
$290 per month if he uses the car more often. So the
customer will save hundreds of dollars while using ZipCar
services.

– Competitive Landscape:

 As ZipCar is providing more cheaper services than other service

providers and automobile companies, and getting enough profit
from their services so they should invest more in technology to
become even more a big competitor in the market place.

Question 2:
What would you say are the critical success factors for Zipcar?

The following are the critical success factors for ZipCar.

a. Automated System of ordering of ZipCar

 The company has made an online system for its members to

get registered without any inconvenience.
 Customers can make an online reservation, then the company
provides them with the car.
 The company also provides their members with a “ZipCard”
through which the customer can easily unlock their car and
use it.
b. Provision of advance payments

 The company provides their customers an ease with an

option to pay in advance for the services being provided to
them.
 Customers can pay on hourly, daily, monthly or yearly
basis. If the customer pays for one year in advance then he
can use the ZipCar at any time without facing any hustle
of money.

c. No Extra Charges (Gas, insurance, parking, additional fee

etc.) being made for renting car:

 This success factor has attracted many customers towards

their services.
 ZipCar only charges daily hourly rate and all the other
charges are already included in initial amount.
 Insurance was included in the usage fees for ZipCars and
members were responsible for filling the gas tanks when
the gauge registered a quarter or less using a declining
balance card kept with the vehicle.

d. Extra incentives (Accident & Maintenance)

 ZipCar provided routine maintenance for the cars and

members who washed their cars were reimbursed upto $15
and they were also given a free hour of use.
 In case of accident and breakdown of the car, the
customers are asked to inform the company as soon as
possible. And they are required to return the car to the
company.
  The company does not charge any penalty for the
breakdown because they already charged the customer
“damage fee” in insurance section which is not charged
separately, this fee is already included in the initial
amount.

e. Cheaper than Rental Car service providers and Car

Ownership Companies:

 This is another success factor. The company is providing

its services cheaper than any other company and any other
service providers.
 The customers of ZipCar can save hundreds of dollars by
using ZipCar’s services.

f. Innovative features:

 ZipCar’s services are also convenient for the customers

because of several incentives and through the usage of
features like “Zip Card” and “Declining Balance Card”.
 ZipCard is used for unlocking the car with an ease and
Declining balance card is used to track the gas in the car’s
tank.

Question 3
What mechanisms does Zipcar have in place to manage
behavior? What, specifically, are these mechanisms intended to
accomplish? What adjustments, if any, would you recommend
that the company make to these mechanisms?
– Mechanisms used by ZipCar:

Few mechanism that ZipCar uses to influence the behavior of its

customers

1. Convenient and flexible Reservation system:

 ZipCar gives its members an option to pay advance payment

either for monthly or yearly. Hourly and daily plans are also
given to customers.
 The customers are free to choose any plan and reserve the car
according to their need. If they have given the payment on
yearly basis then they can use the car anytime without the
hustles of giving payments.
 This makes the consumer more loyal to the company because
of the flexibility. The relationship with customers become
stronger.

2. Deadlines makes the customer more responsible:

 The company has a rule for the customers that they have to
return the car before the deadline ends.
 But if the customer is busy somewhere and is unable to return
the car on time then the company gives an option to the
customer to inform the company immediately and extend
their car reservation time.
 The company does not charge any penalty for this. So this
also makes the customer happier with the company.
 3. Exemption of extra charges:

 If the customer reserves a car, he does not have to pay for the
gas, parking or additional charges.
 Every type of charges are already added in the final amount
which also saves enough money of the consumer.
 So customer feels like the company really cares for them and
this feeling makes them more loyal with the company

– Mechanisms accomplishments:

 These mechanisms are used by the company to facilitate the

consumer so that they can easily take full advantage of the
services being provided by the company.
 These mechanisms, if provided with care, strengthens the
relation of the company with the customers.
 When customers recognizes the efforts put up by the
company for customer’s ease, they become more loyal to the
company and utilizes the company’s services for a long
period of time.

– Recommendations:

The following are some of the recommendations through which the

company can improve their mechanisms;

1. If any customer does not extend their reservation time, then late
fee should be charged to make the customer more responsible to
return the car on time
 2. Company should give incentives to the customers who return the
cars on time for making a good and healthy relationship with the
customer

3. A notification should be sent to the customer an hour before the

reservation expires.

4. There should be a Member rating System on which the members

will be evaluated whether they returned the car on time or not. If
the customer is not returning the car on time consecutively, then
cancel that customer's membership.

5. Regular customers and those who have yearly membership

should be given be given extra incentives for example Dinner
party, extra discounts or free hours to use, so that the company
can built good relations with the customers.

Question 4
Think how organizations have attempted to influence your
behavior. Which types of techniques do you expect to be
more or less effective?

– Consumer behavior is influenced by many different factors. A

marketer should try to understand the factors that influence
consumer behavior. The following are the factors that influence
consumer behavior:

 Psychological factors
 Social factors
  Cultural factors
 Personal factors

A. Psychological Factors
Human psychology is a major determinant of consumer behavior. These
factors are difficult to measure but are powerful enough to influence a
buying decision.
Some of the important psychological factors are:

1. Motivation

 When a person is motivated enough, it influences the buying

behaviour of the person.
 A person has many needs such as the social needs, basic needs,
security needs, esteem needs and self-actualization needs.
 Out of all these needs, the basic needs and security needs take a
position above all other needs. Hence needs have the power to
motivate a consumer to buy products and services.

2. Perception

 It is a major factor that influences consumer behavior.

 Customer perception is a process where a customer collects
information about a product and interprets the information to make
a meaningful image about a particular product.
 When a customer sees advertisements, promotions, customer
reviews, social media feedback, etc. relating to a product, they
develop an impression about the product.
 Hence consumer perception becomes a great influence buying
decision of consumers.
3. Learning

 A consumer’s learning depends on skills and knowledge. While a

skill can be gained through practice, knowledge can be acquired
only through experience.
 In conditional learning the consumer is exposed to a situation
repeatedly, thereby making a consumer to develop a response
towards it.
 Whereas in cognitive learning, the consumer will apply his
knowledge and skills to find satisfaction and a solution from the
product that he buys.

4. Attitudes and Beliefs

 Consumers have certain attitude and beliefs which influence the

buying decisions of a consumer.
 Based on this attitude, the consumer behaves in a particular way
towards a product.
 This attitude plays a significant role in defining the brand image of
a product.
 Hence, the marketers try hard to understand the attitude of a
consumer to design their marketing campaigns

B. Social Factors
Some of the social factors are:

1. Family

 Family plays a significant role in shaping the buying behavior of a

person.
  A person develops preferences from his childhood by watching
family buy products and continues to buy the same products even
when they grow up.

2. Reference Groups

 Reference group is a group of people with whom a person

associates himself.
 Generally, all the people in the reference group have common
buying behavior and influence each other.

3. Roles and status

 A person is influenced by the role that he holds in the society. If a

person is in a high position, his buying behavior will be influenced
largely by his status.

C. Cultural factors
Some of the cultural factors are:

1. Culture

 Cultural Factors have strong influence on consumer buyer

behavior.
 Cultural Factors include the basic values, needs, wants,
preferences, perceptions, and behaviors that are observed and
learned by a consumer from their near family members and other
important people around them.
2. Subculture

 Within a cultural group, there exists many subcultures. These

subcultural groups share the same set of beliefs and values.
 Subcultures can consist of people from different religion, caste,
geographies and nationalities. These subcultures by itself form a
customer segment.

3. Social Class

 Each and every society across the globe has form of social class.
 The social class is determined by the income, occupation, family
background, and education and residence location.
 Social class is important to predict the consumer behavior.

D. Personal Factors
Some of the personal factors are:

1. Age

 Age is a major factor that influences buying behavior.

 The buying choices of youth differ from that of middle-aged
people.
 Elderly people have a totally different buying behavior.
 Teenagers will be more interested in buying colorful clothes and
beauty products.
 Middle-aged are focused on house, property and vehicle for the
family.
2. Income

 Income has the ability to influence the buying behavior of a

person.
 Higher income gives higher purchasing power to consumers.
 When a consumer has higher disposable income, it gives more
opportunity for the consumer to spend on luxurious products.
 Whereas low-income or middle-income group consumers spend
most of their income on basic needs such as groceries and clothes.

3. Occupation

 Occupation of a consumer influences the buying behavior.

 A person tends to buy things that are appropriate to this/her
profession.
 For example, a doctor would buy clothes according to this
profession while a professor will have different buying pattern.

4. Lifestyle

 Lifestyle is an attitude, and a way in which an individual stay in

the society.
 The buying behavior is highly influenced by the lifestyle of a
consumer.
 For example when a consumer leads a healthy lifestyle, then the
products he buys will relate to healthy alternatives to junk food.

Techniques to influence consumer behavior

Advertisers use some specific techniques to influence consumer
behavior and they get attracted towards the product to buy it. The
following are the major techniques used by the advertisers to advertise
their product.
1. Colour Psychology

 Colour has a huge impact on our behaviour and should never be

underestimated in the context of marketing.
 Study found that people make up their minds about a product
within 90 seconds and 62%-90% of that decision is based on color
alone.
 Colour can not only set the company apart from competitors but
also influence mood and feelings.

2. Patriotic Advertisements
 These ads show how one can support their country while he uses
their product or service.
 For example Pepsi products together formed a union and claimed
in their ad that if you buy their products, they will donate 1 rupee
to provide electricity to villages of Pakistan.

3. Celebrity Endorsements
 The advertisers use celebrities to advertise their products.
 The celebrities or star endorse the product by telling their own
experiences with the product.
 For Example, Lux uses big celebrities like Fawad Khan and
Mahira Khan in their ads to inspire customers to buy their
products.
4. Promotional Advertising
 This technique involves giving away samples of the product for
free to the consumers.
 The items are offered in the trade fairs, promotional events, and ad
campaigns in order to gain the attention of the customers.

5. Buy One Get One Free Offer:

 This technique is used to bribe the customers with something extra
if they buy the product using lines like “buy one shirt and get one
free”, or “be the member for the club for two years and get 20%
off on all services.”
 For Example, McDonalds offers its customers “Buy One Get One
Free” on their offerings on special occasions like Eid or
Independence day

6. Collaborative Advertising
 This technique is generally used by the companies which cannot
advertise their products directly.
 The advertisers use indirect advertisements to advertise their
product so that the customers know about the actual product.
 The biggest example of this technique is the collaborative
advertising of Colgate and Shield products. Colgate which gives
Shield tooth brush along with the purchase of Colgate tooth paste