Masaryk Universi ty

Faculty of Economics and Administration

MASTER THESIS

Brno 2014 Anida Krajina

Masaryk Universi ty

Faculty of Economics and Administration

Field of Study: Business Management

NEUROMARKETING IN PRACTICE

Master thesis

Thesis Supervisor: Author:

Ing. Alena Klapalová, Ph.D. Anida Krajina, 417710

Brno, 2014

Masaryk University

Faculty of Economics and Administration

Department of Corporate Economy

Academic year 2012/2013

ASSIGNMENT OF DIPLOMA THESIS

For: Anida Krajina

Field: Business Management

Title: Neuromarketing in practice

P r i n c i p l e s o f t h e s i s w r i t i n g:

Objective of the thesis:

The main objective of the thesis is to enrich current knowledge of neuromarketing in the

practice of companies on the ground of the analysis of chosen problem within the topic of

neuromarketing. Outcomes of analysis should result into proposals concerning the

application of neuromarketing.

Approach and methods used:

1. Literature search on all relevant topics concerning various issues of neuromarketing,

2. analysis of current situation of neuromarketing utilization in the frame of chosen

problem,

3. conclusions and proposals.

Methods:

All relevant methods of market and marketing analysis and market research.

The extent of graphical works: according to the supervisor's guidelines,

the assumption is about 10 charts and graphs

The thesis length without appendices: 60 – 70 pages

List of specialist literature:

DOOLEY, R. Brainfluence: 100 Ways to Persuade and Convince Consumers with

Neuromarketing [Hardcover]. 1st ed. New York: Wiley, 2011. 304 pp. ISBN 1-118-

11336-5.

PRADEEP, A. The Buying Brain: Secrets of Selling to the Subconscious Mind. 1st ed.

Hoboken: Wiley, 2010. 252 pp. ISBN 0-470-60177-9.

RENVOISE, P. and CH. MORIN. Neuromarketing: Understanding the Buy Buttons in

Your Customer's Brain. 2nd

ed. Nashville: Thomas Nelson, 2007. 256 pp. ISBN 0-

7852-2680-X.

ZALTMAN, G. How Customers Think: Essential Insights into the Mind of the

Markets. 1st ed. Boston: Harvard Business School Press, 2003. 323 pp. ISBN 978-1-

57851-826-5.

ZURAWICKI, L. Neuromarketing: Exploring the Brain of the Consumer. 1st ed.

Berlin: Springer, 2010. 293 pp. ISBN 3-540-77828-4.

Diploma thesis supervisor: Ing. Alena Klapalová, Ph.D.

Date of diploma thesis assignment: 15/4/2013

Submission deadline for Diploma thesis and its entry in the IS MU is provided in the

valid Academic Calendar.

Department Head Dean

In Brno on 15/4/2013

i

Abstract

The aim of this thesis is to apply research in neuromarketing and evaluate its potential

contribution in enhancing merchandising performance, in this particular case, of dm stores in

Sarajevo, Bosnia and Herzegovina. The thesis consists of theoretical part, which overlaps the

basic roots and principles of neuromarketing, as still one of the most tempting and the least

known field in marketing research. The theory is upgraded by overview of consumer

behaviour, because the consumers were in the focus for the research provided. Further on, the

glance to merchandising theoretical background is provided. The second part of the thesis is

the empirical part, explaining the scope of the research provided within dm stores in Sarajevo

in the form of observation supplemented with short interviewing, focus group conducted and

the interview with dm employee. Overall result of data gathered and processed showed that

neuromarketing tools and techniques can in many areas enhance the merchandising

performance of retail store in general and consumers’ satisfaction. Particularly for dm in

Bosnia and Herzegovina this introduction is still questionable, if the market situation is taken

into consideration. However, dm on one side, and its customers on the other have shown the

potential to start from the small steps in benefiting from neuromarketing findings, practices

and tools.

Key words

Neuromarketing, merchandising, consumer behaviour, cognitive process, consciousness and

unconsciousness, pricing, purchase decision making, brain science, dm drogerie markt,

Bosnia and Herzegovina

ii

Statement of Authorship

I hereby declare that the Master thesis “Neuromarketing in practice” and relevant research in

its background is entirely my own work, supervised by Ing. Alena Klapalová, Ph.D., and has

not been taken out of the work from others. The used literary resources and other specialist

resources have been cited and acknowledged within the text of the thesis and listed in the

References according to the relevant legislation and regulation.

In Brno____________ ________________

Anida Krajina

iii

Acknowledgments

At this place, I would like to express my appreciation and deepest gratitude to professor Ing.

Alena Klapalova, Ph.D., for believing in me from the very beginning, her valuable comments,

priceless advice and support she was giving through the whole path this work went. You have

been a tremendous mentor for me. Additionally, I would like to thank Faculty of Economics

and Administration for recognizing the potential of this thesis and awarding me with the

scholarship program. I could not be more than honoured.

Special thanks to the professor Nick Lee, Ph.D., who inspired me and encouraged to take this

challenge and glance into the world of neuromarketing without “fancy equipment.”

Furthermore, sincere gratitude goes to dm drogerie markt d.o.o. in Bosnia and Herzegovina,

for giving me the chance to make this vision a reality, especially to Mrs Alida Čović- Mezet. I

would also like to acknowledge with much appreciation the crucial role of the dm stores staff,

for letting me be “one of them” during two weeks. In addition, many thanks to ladies who

participated in focus group and gave the important contribution to this story.

Last, but not the least, thank you to my family and friends. Words cannot express how

grateful I am to my parents and brother, for all of the sacrifices they have made on my behalf

during the entire study. Without their love and support, this would not be possible. Special

thanks to my friends, here in Brno, and those in Sarajevo, who have supported me throughout

entire process, both in keeping me harmonious and helping me putting pieces together.

And thank you to all others who contributed in any respect.

iv

Table of Content

INTRODUCTION ................................................................................................................................ 1

Preface .......................................................................................................................................... 1

Problem definition and goals........................................................................................................ 2

Research questions ....................................................................................................................... 4

Methodology ................................................................................................................................ 4

Phase I ....................................................................................................................................... 5

Phase II ...................................................................................................................................... 6

Phase III ..................................................................................................................................... 7

Brief description of dm drogerie markt and its scope .................................................................. 9

THEORETICAL BACKGROUND ......................................................................................................... 12

Neuromarketing- A Perfect Blending of Science and Marketing................................................ 13

Evolution of human kind and the brain .................................................................................. 13

Study of the brain ................................................................................................................... 16

Emotions, Feelings and the Reason ........................................................................................ 20

Secret World of Neuromarketing ........................................................................................... 22

Short Overview of Consumer Behaviour .................................................................................... 28

Consumer behaviour .............................................................................................................. 28

Theoretical Overview on Merchandising .................................................................................... 33

Merchandising at glance ......................................................................................................... 33

Pricing ..................................................................................................................................... 37

FINDINGS ........................................................................................................................................ 38

Predictability of Human Brain .................................................................................................... 38

Tapping Into the Consumers’ Minds .......................................................................................... 40

Categories of behaviour- R1 ................................................................................................... 40

Price effect- R5 and R8 ........................................................................................................... 44

Buying process in dm and purchase decision making- R3, R4, R6 and R7 .............................. 47

Painting the “black box” of buying process and purchase decision making- R9 .................... 49

Seductiveness of neuroscientific findings- R10 .......................................................................... 51

Roots of consumer behaviour come from the “buying brain” ............................................... 51

Neuromarketing and Merchandising collided- R11 ............................................................... 61

Persuasion Models.................................................................................................................. 61

Alternative neuromarketing contributions to merchandising ............................................... 64

How dm merchandising can benefit from neuromarketing? ................................................. 67

v

CONCLUSION .................................................................................................................................. 71

Summary .................................................................................................................................... 71

Contributions of the Thesis ........................................................................................................ 71

Limitations and Recommendations ........................................................................................... 72

Heading to the Future ................................................................................................................ 73

Neuromarketing is here to stay ............................................................................................ 73

REFERENCES ................................................................................................................................... 76

APPENDICES ................................................................................................................................... 82

Appendix A: In-Store Short Interview Questions ....................................................................... 83

Appendix B: Deep Interview Questions ..................................................................................... 85

Appendix C: Previous Neuromarketing Studies ......................................................................... 87

vi

List of Tables

Table 1: Schedule for the observation process in branches 7.

Table 2: Demographic data for the focus group members 8.

Table 3: Neuromarketing technology comparison 18.

Table 4: Power of colours 26.

Table 5: The results of the experiments 38.

Table 6: R4 frequencies of questions 8 and 9 in survey 45.

Table 7: Neural and Psychological Machinery behind Consumer Behaviour

in dm 52.

Table 8: Time of response inside the store for different brain regions 59.

vii

List of Figures

Figure 1: Three phases of research process 5.

Figure 2.1: Number of stores in Germany (Njemačka), connected

countries without B&H (dm Povezane Zemlje bez dm BiH)

and dm Bosnia and Herzegovina (dm BiH) 10.

Figure 2.2: dm Bosnia and Herzegovina turnover 10.

Figure 3: Diagram of the human brain parts 14.

Figure 4.1: The photo of fMRI device 17.

Figure 4.2: The activated brain areas with additional blood while being

happy and sad 19.

Figure 5: Major components of merchandising 33.

Figure 6.1: Question 8 answers’ distributions in in- store survey 44.

Figure 6.2: Question 9 answers’ distributions in in- store survey 45.

Figure 7: Emotion- Cognition measure framework by EmSense 60.

Figure 8.1: Traditional Persuasion Model 62.

Figure 8.2: Revealed Consumer Preferences Persuasion Model 63.

Figure 8.3: Collective Neuromarketing Consumer Persuasion Model 63.

Figure 8.4: Individual Neuromarketing Consumer Persuasion Model 64.

Figure 9: The influence of retail atmospheric 66.

viii

Intentionally left blank.

1

INTRODUCTION

Preface Talking about marketing today is a great challenge. It is much more than philosophy,

technique, tool or discipline. For decades, marketing scholars and experts have been trying to

reach the audience in the best manner possible and to tap into the mind of the consumers

worldwide. The first channel for reaching customers is advertising, as one of the fundamental

part of marketing.

Advertising itself came on the scene in 20th

century. The father of propaganda and originator

of modern advertising, Edward Louis Barneys declared that constantly a small number of

people have been applying a vast quantity of effort to capture people minds and interest for

idea, policy or commodity (Barneys 1928:11). The term “capturing minds” was present even

in 1928 and was related to the advertising practice. The power of advertising is gigantic and

the manipulation of media is happening on a daily basis. Therefore, advertising is important

because it creates interest at the first sight. Today, in some cases advertisers can predict the

behaviour and according to that pay attention to what should they say and how should they

say it.

One of the examples of successful ad comes straight from the reality and is recent ad

campaign made by a hygienic products producer in Bosnia and Herzegovina. Currently, very

popular advertisement is the one in which babies are filmed. Baby-talk and kids-language is

aped and they are talking about the benefits of the product. During the focus group that I have

provided for the purpose of the research presented in this thesis, all women agreed that they

would buy that product immediately after they have seen TV ad. From daily conversation it is

possible to hear positive reactions to this ad as well. The phenomenon of reactions to kids-

language is particular and scientifically justified. Noam Chomsky, currently one of the most

influential intellectuals worldwide explained that when you speak to adults in kids- language,

their critical consciousness is repressed, meaning that the messages affects people more

effectively (De Simone 2010). In the De Simone’s article (2010), several more interesting

concepts by Chomsky were mentioned, such as using emotions, emphasizing average and

misuse of knowledge were used to manipulate people and mostly used in advertising.

Furthermore, advertising leads to stressing out the promotion, which keeps customers

interested. Sales promotion in the store is the tool which satisfies customers in tangible level,

meaning that they actually can have at least material benefit. It influences their emotions in

higher level.

Influencing emotions is important component of communication and promotion tools.

Consequently, the roots could be found in psychology. Even in the 20th

century Barneys

(1938:48) indicated that propaganda was not science like chemistry, but definitely has got

some new frameworks after mass psychology (psychology of the human masses) had been

introduced. Barney’s work was one of the first time the term “science” was introduced when

talking about propaganda, advertisement and influence on consumers’ purchase decisions.

2

Even though the promotion and communication tools have been used and effective for

decades, there has been still a “black box” in customers’ heads and scholars and marketers

needed to tap in. More and more marketers had realized that traditional marketing methods

faced tremendous issues in measuring subconscious, emotional aspects and intuition in

communication with consumers (Ohme et al. 2009:22). Vertigo of 21st century and modern

approaches have brought some new perspectives on the scene. The focus is on human brain.

Dr. Eric Kandel, neuroscientist and winner of the Nobel Prize for Psychology or Medicine

said that understanding it, generally, in biological terms, has become a number one challenge

of science in 21st(Pradeep 2010:1).Brain science informs our daily lives in different manners.

Thus, this story is coming to the neuromarketing.

It has been more than 10 years already passed since the term “neuromarketing” hit the

boardroom, a perfect blending of marketing and neuroscience. However, with the blossom of

technology, it has got the new meaning and way of treatment that point out amazing

opportunities and discoveries. Certainly, it helps and supports older disciplines within

marketing and gives important contribution to their findings. It can be said that it gives the

new angle to the discoveries. To blend the previous terms, advertising, promotion and other

communication tools are important for the whole picture customers get from the companies

and brands and their reaction in the terms of sales. In retail industry, contribution to sales is

given through practice of merchandising. Within merchandising itself, which is better

explained in the theoretical part of this thesis, interest and purchase frequencies of customers

are stimulated by communication and promotion tools. Moreover, discoveries of processes in

human brain while making purchase decision can be interesting for opening new paths and

alternatives within merchandising. Thus neuromarketing can play important role in improving

merchandising practices.

In this thesis, among others, the merchandising and neuromarketing are the two main terms

that shall be overlapped and discussed based on conducted research in the background. These

pages should be the journey through the new marketing approaches, consumer behaviour and

human brain. The journey has been based upon the case study of dm stores in the Bosnia and

Herzegovina capital Sarajevo. It is the Bosnian branch of one of the biggest and most popular

chain of cosmetic retail stores in Europe and one of the rare that explores new approaches and

marketing strategies. In the empirical part of this thesis more about the dm will be told.

Research and study have the final aim of introducing quasi- rational behaviours, interesting

and extraordinary situations and processes in human brain and give the overall suggestions of

potential improvements in merchandising. Shortly said, it should connect neuromarketing

knowledge and merchandising practice. According to that, the rest is- bon voyage!

Problem definition and goals Since always, companies have needed to follow the trends in order to provide the optimal

offer for the end consumers and keep them satisfied. From the first mentioning of advertising

in Barney’s work, the world has got to the point where in the story of marketing is much more

than advertising. Even consumers are aware that it is much more than just the TV, newspaper

and web ads that they can see every day. Marketing in 21st century has got new perspectives.

3

Customers’ overall experience is put in the centre of retailers’ interest and the starting point is

improving merchandising techniques.

Merchandising in retail companies is very important, and the attention should be paid to it,

since it plays significant role in customers’ experience inside the store. Within merchandising,

the prices are quantitative measure of quality and preferences (Steinmetz 2005). On the other

side, it affects shoppers psychologically. Neuromarketing plays its role there. The potential

lays in combination of these two, i.e. how first can benefit from the letter. Moreover, the

consumers should be the focus. Their behaviour, preferences, attention, perceptions and habits

need to be analysed. All those are result of certain processes in the brain which are explained

by the neuromarketing. If there are some processes under the obvious surface that provoke

emotions and consequently behaviours, merchants can use those information to establish the

new level of retailer- customer relationship. If the customers’ brains are explored, shocking

discoveries are possible. Retailers might be wrong all the time.

In the attempt to show if dm, as retailer was among those that were wrong, the research for

the purpose of this thesis was conducted in their stores. dm is the company that has been

serving its customers in Bosnia and Herzegovina for a while now. Even though they are

creating trend in marketing at the market, they have not used any neuromarketing approaches.

This study strives towards it and the main questions are if it is possible to introduce these

practices, how customers react, will there be some new findings and can dm merchandising

benefit from neuromarketing attainments.

Creating research questions was the process based on the following aspects:

1. The research focuses on Sarajevo, the capital of Bosnia and Herzegovina, as the most

appropriate representative of the country;

2. The objective was to develop proposals to dm for improvements, in other words, if

and how they are able to use neuromarketing knowledge and practices in

merchandising and relations to customers;

3. The focus was on dm customers, more precisely on B2C;

4. Due to the time frame, and lack of funds, the behavioural study was implemented on

approachable sample, without neuromarketing equipment, but more relying on

observing behaviour and finding roots in previous neuromarketing studies.

Moreover, the exact goals should be stated in order to keep the track of the research itself. The

goals/aims are basis for the research questions. In other words, the research questions are

developed and transformed goals. Their transformation is more precise and directed at

particular situations that could appear during the application of research methods. The aims

in the background of this thesis and are as follows:

1. Observe and define the behaviour categories of dm customers;

2. Define the pillars based on which dm customers make purchase decision;

3. Determine the influence of prices on purchase decisions;

4. Analyse the effectiveness of merchandising in observed dm stores;

5. Explain the brain reactions in process of buying and purchase decision;

4

6. Find the roots of the consumer behaviour in the brain processes;

7. Determine the benefit that merchandising can have from neuromarketing;

8. Make proposals for dm in their merchandising and further directions of customer

research processes.

Research questions When starting any research process and study, based on the goals, there have to be defined

research questions which serve as the guidance and lead to the accomplishment of the goals.

In other words, those are research objectives with question mark at the end. According to

aforementioned aspects and goals, ten crucial research questions have been defined in order to

serve the purpose of this research and answer the main issues.

R1: Which types of behaviour categories is possible to notice among dm customers?

R2: Is human brain predictable to certain extent and how?

R3: Which one is more often occurring, impulse purchase or planned purchase? Does loyalty

play significant role for dm customers?

R4: Do customers in dm shop consciously or unconsciously?

R5: Is decision making process affected by price changes/ discounts?

R6: Inside the dm store, do customers notice emphasized shelves/ POS shelves with products

sold by special price?

R7: During the purchase, which are the external factors/ distractions and how they can affect

purchase decision and buying process?

R8: How neuromarketing can be used as a benefit in price creation process?

R9: What happens in human brain during the process of buying and making the purchase

decision?

R10: Is it possible to find roots of observed and noticed consumer behaviour patterns in

processes of human brain?

R11: Can neuromarketing findings help merchandising in dm and how?

These questions should lead me to make the first and small, but ambitious impact in applying

neuromarketing knowledge and background to explanations of consumer behaviour of the

sample in the market of Bosnia and Herzegovina and show the potential it might has in

improving merchandising and establishing tight relations with consumers.

Methodology Methodology used for the purpose of this research was both quantitative and qualitative.

Quantitative research requires work “on-field”, gaining as much relevant data as possible in

order to process them and interpret for various purposes (Mladenović 2014:12). Additionally,

both primary and secondary data analysis is important, since they are supporting one another.

5

On the other hand, qualitative research gives fruitful and direct insight in human behaviour

and it is productive and personal (Ahmić 2014:35). Therefore, it is widely used in behavioural

studies. As Blythe (2005:102) pointed out, the purpose of any research is to turn the data into

usable and valuable information. Thus it has standardized steps to certain extent, but it is

applicable to different situations, types of the problems and needs to be adjusted to them.

Methods used in marketing research processes are very important part of any research of this

kind. In the future, they can serve as a good basis to start the new research or develop

different practices when approaching particular problem.

For the purpose of this study, there were several stages of research process, supported by

different methodological tools. It has to be enhanced that secondary and primary sources were

used and qualitative research was implemented. The following Figure 1 shows the exact steps,

which will be further explained more briefly.

Figure 1: Three phases of research process (By Anida Krajina)

Phase I

The very first stage includes three important steps. Those steps are the basis for any further

research development and building.

Any marketing research needs to have purpose. The purpose answers the question: Why? This

is something that any researcher has to start from. In this particular step, opportunities were

considered, the core of the research was defined and the value stated (Crossman 2014).

Additionally, it somehow gives the depth to the analysis in particular and the whole research

in general.

Preliminary

•Defining purpose

•Defining objectives/ research questions

•Finding validation based on previous research conducted (secondary data)

Research planning and design

•Choosing the approaches and tools

•Forming questions, focus group and observation plan

•Contacting potential participants (retailers) in the research

Implementation of research techniques

•Interview conducting

•Observation

•Focus group

•Analysis ,interpretation of the collected data and reporting

6

The next step is establishing research objectives. Those are the aims and final points that the

research needs to reach (Smith and Albaum 2012:7). It answers the question: What? More

precisely, the question is what to accomplish and find out by this research. Research

objectives are basically research question of this thesis.

Secondary data analysis is in this part as important as primary data analysis. Previous

academic research, papers and theories are serving as the back up to the research that is

provided (Smith and Albaum 2012). Secondary data is used in supporting the main ideas of

this paper and provide in some way tangible evidence of the importance of the topics that are

covered.

Phase II

Since the neuromarketing is the matter very hard to research without expensive equipment

and high financial funds, it was challenging to choose the techniques and tools that would

bring closer the point of neuromarketing. However, during preparation phase and choosing of

these approaches, I contacted Professor Nick Lee, director of the Research Degrees Program

at Aston Business School and one of the top neuromarketing experts at the moment via the e-

mail. He elaborated that the neuroscience does not have to be about the expensive equipment

and that things can be done simply by behavioural studies1. In addition, he said that the key is

in explanation, meaning to try to find if there are some brain- related explanations for certain

behaviours. Many companies as well did not use imaging, but relied on various technologies

or no technologies at all (Fisher et al. 2010:232). That was the guide for the research at the

very beginning. Based on what Mr Lee said, and some materials he proposed, several

techniques were chosen for the research process itself.

To be more precise, three techniques were chosen: observation, focus group and interview. As

it can be noticed, all three are qualitative research methods. The reason for the decision like

this lays in the fact that this study is about how consumers feel, react to certain product,

company, or merchandising. It took more time to be conducted and sample size was much

smaller than it could be in quantitative. As Blythe (2005:106) enhanced, qualitative research

often shows why people behave the way they do, which exactly was necessary for this thesis.

I wanted to place my research in my country of origin, Bosnia and Herzegovina, for several

reasons. First of all, it is developing market and I wanted to see if it has potential for the

future to be introduced to new marketing techniques. It is close and familiar to me, and there

are no any language and communication barriers. Additionally, I was curious about how

people behave and how price changes affect them. The last, but not the least is the deepest

purpose, related to future insights. This research should be the one of the foundations for the

deeper and more extensive studies in the future. Contacting potential participants for the

research was the most time- consuming part of this phase, since most of them did not reply on

e-mails and were not convinced and able to give the contribution. This process lasted for a

month, basically the whole October of 2013. In the end, dm drogerie markt in Sarajevo

accepted to take part in the research as a subject and planning process with them took place in

1 Nick Lee, e-mail message to author, September 16, 2013

7

the first half of November. Finally, the research started in the middle of the November in

Sarajevo.

Phase III

The third and final stage of the research process was the implementation phase of above

mentioned techniques. In this part, they all will be explained more in detail.

Observation is qualitative technique that includes observing behaviour of consumers and

taking notes about them (Blythe 2005:106). It had shown as the best way to track the

reactions, movements and purchase of the dm consumers within the store. The observation

lasted for two weeks. In agreement with dm, the behaviour was observed in relation to the

three products: Palmolive shampoo, Nivea In-Shower lotion and Nivea Harmony shower gel.

The reason for focusing just on these products was that they were going to be sold by special

prices beginning from the middle of the week (Wednesday). Therefore, there was price

change and their emphasis on special promotion shelves. Exactly that was necessary in order

to see the potential reactions. In addition, it is hard to observe the general behaviour of the

consumers towards all products and prices in this short time and scope of the research. The

observation was conducted at three locations in different parts of the city and during different

hours. Following Table 1 shows the schedule.

Table 1: Schedule for the observation process in branches

Observation was supported by the notes taken at the place and short interviews conducted

with consumers who bought some of the products mentioned above, after the price was

discounted. The questions for the in- store interviews are added in Appendix A. The notes,

also called the field note descriptions, are not only copying down the fact what happened, but

interpretation and sense- making processes and writing down “significant” things (Emerson et

al. 1995:8).

On 26th

November 2013, interview with Mrs Alida Čović- Mezet was conducted. She is

assortment manager at dm drogerie markt of Bosnia and Herzegovina. If one wants to

describe how certain process works, develop holistic description, or integrate multiple

perspectives, the interviews are used (Weiss 1994:9). The interview lasted for half an hour

8

and was obtained in three parts based on different groups of questions. The first group of

questions contained general information about the informant’s position within company and

company itself. The second part overlapped questions from the field of merchandising and the

third included questions from neuromarketing. The aim of the interview was to find out more

about the company point of view, dm’s perspectives, so some proposals can be made for them

afterwards. In addition, it was useful to get the feedback from the marketing expert working

in Bosnia and Herzegovina market about situations and conditions. The interview questions

can be found in Appendix B.

The focus group is the method that produces wide range of opinions, triggering between

members, group pressure and deep discussion (Blythe 2005:105). For this research, the focus

group was conducted on 28th

November 2014. The main purpose of the focus group was to

understand better the reaction and behaviour of dm consumers by listening to their opinions

and reactions. It was needed to serve as a backup to the behaviour in the store and to find

linkage between observed behaviour and the focus group explanations of feelings and

reactions. Additionally, focus group in this research was aimed to give a frame and sense to

observation and survey results. There were seven female participants plus moderator. The

descriptive data of the focus group are in the following Table 2.

Table 2: Demographic data for the focus group members

The focus group flow schedule consisted of five parts:

1. Introduction. Moderator explained the purpose of the focus group, plan, activities and

expectations from them.

2. Experiment Coca Cola and Pepsi. Participants were given to taste drink from two

white glasses, in one was Coca Cola and in other was Pepsi, but they were not told

which drink was in which glass. They had to choose the one they liked more. The

second part of this experiment was the same, but this time, participants were told that

Coca Cola was in red glass and Pepsi in the blue glass. Again, they had to choose the

drink they liked more. It is important to mention that this experiment was modelled on

Participant initials Age Occupation

M.P. 32political

scientist

S.S. 22 student

S.K. 45 housewife

Z.G. 60 retired

R.S. 50 entrepreneur

J.B. 53economist-

accountant

E.B. 23 student

9

the example from 1975, when the Pepsi- Cola Company rolled out the same heavily

publicized experiment called Pepsi Challenge (Lindstrom 2008:25). The way the

experiment was conducted was almost the same like in the purpose of this research.

Back then, it showed that Coke’s success was not matching the taste of customers,

because they had preferred Pepsi.

3. Short questionnaire. The same questions like in the questionnaires provided for

shoppers in the dm stores (until the question number 12 from the questionnaire in

Appendix A). Participants were asked to fill the questionnaires in. This questionnaire

was actually a form of pre- screening questionnaire which assembled the information

about the gender, age, occupation, city and general attitudes about the promotional

activities and shopping habits. The overall purpose of pre- screening questionnaire is

to learn more about the subjects prior to the interview, focus group or other form of

research method (Sullivan 2004).

4. Experiment with prices. In the first part of the experiment, participants were given two

prices: 6 euros and 9 euros, from which they had to choose one that they would pay

for product X. The product was not important, because the story behind is that they are

in the imaginary shop where they can choose the price by themselves. The second part

of the experiment has the same story behind just there are three prices now: 7.5 euros,

9 euros and 6 euros. Again, the participants were asked to choose one price. Hereby,

the choice experiments were applied. These types of experiments attempt to identify

the utility that individuals derive from the attributed of chosen commodity and focus

groups are good in determining which attributes are important for these choice sets,

information, potential bias or other problems (Davies and Laing 2002).

5. Discussion. Start point of the discussion and potential guide are questions from the

questionnaire, but the numbers 12- 17. The high focus is on their discussion between

themselves.

Brief description of dm drogerie markt and its scope dm drogerie markt is one of the leading chain cosmetics store in Central and Eastern Europe.

The very first shop was opened 1976 in Austria, Linz (dm 2013). As it can be found on the

official webpage, since 1992 it has been spreading on the markets of Hungary, Czech

Republic, Slovenia, Slovakia, Croatia, Serbia, Bosnia and Herzegovina, Romania, Bulgaria

and Macedonia. These countries are the members of one part of the concern with the

headquarters in Salzburg. In Bosnia and Herzegovina, dm was launched on 29th

of June 2006

(dm 2013). The disposition and number of stores can be seen in the Figure 2.1. Today, there

are more than 50 stores all over Bosnia and Herzegovina, organized by the high dm standards.

10

Figure 2.1: Number of stores in Germany (Njemačka), connected countries without B&H (dm

Povezane Zemlje bez dm BiH) and dm Bosnia and Herzegovina (dm BiH). Data is updated on

30th

of Semptember 2013. Source: http://www.dm-

drogeriemarkt.ba/ba_homepage/preduzece/brojevi_i_~injenice/statistika/

Economically, in 2011/ 2012 dm B&H achieved turnover in amount higher than 83, 2 million

Bosnian convertible marks (BAM), which is 14% higher than the previous year (dm 2013).

Turnover decrease is possible to observe in the Figure 2.2.

Figure 2.2: dm Bosnia and Herzegovina turnover. Vertical axes shows turnover in millions

BAM. Source: http://www.dm-

drogeriemarkt.ba/ba_homepage/preduzece/brojevi_i_~injenice/statistika/

11

dm, in the whole concern has 43.900 employees, more than 400 working in Bosnia and

Herzegovina only, 91% of them consider dm as great employer and 80% are proud to be part

of dm empire (dm 2013).

From the conversation with Mrs Čović- Mezet, I found out that dm assortment includes more

than 10.000 products for beauty and health, for babies and households, pet food, textile and

season products. Variety of the assortment is enriched with 22 dm brands, including organic

food and natural cosmetics.

Based on conversation with Mrs Čović- Mezet, promotions in dm BiH are done every

Wednesday and lasting for 14 days according to previously agreed term plan. Mrs Čović-

Mezet also stated that prices of the articles and product on shelves are changed according to:

Sales promotions that supplier is doing in the market after the supplier’s

announcement (this part includes the whole national market- the action that is

undertaken at the level of Bosnia and Herzegovina);

According to supplier’s notification about changes in his price list/ catalogue;

Changing of prices for the purpose of promotions or the price offer for particular

product with the agreement of the supplier of that product;

Seasonal sales promotions of items for the purpose of lowering the level of

inventories;

Lowering prices of delisted items.

Mrs Čović- Mezet also stated that target group include women in the ages from 16 to 50

years. They represent the centre of their world. dm motto declares: “Tu sam čovjek, tu

kupujem”, meaning “Thereon I am a man, thereon I buy.” It probably in the best way

describes dm strategy towards the customers. The human is in the centre of the attention. dm

offers variety of products that will highlight individuality of each person. It provides quality,

accessibility and kind staff. dm already has the tradition in Bosnia and Herzegovina market

and loyal customers as well. Additionally, they are very successful, as Mrs Čović- Mezet said

in the interview, in both creating trend and bringing up the novelties in marketing practices.

All those create overall valuable and enhanced experience in contact with dm of any kind.

Their heading for the future and open- minded management provided the possibility to this

research to be conducted, since they were the only retailer who positively replied to the

appeal.

12

THEORETICAL BACKGROUND The following part of the thesis will focus on theories behind the previously mentioned terms

and approaches. Theoretical background will be given for the terms used in research questions

as well as all relevant fields this diploma thesis aims to cover. If speaking in wider manner,

neuromarketing does not possess overreaching theoretical framework to guide its research

agenda, rather it is intersection of consumer behaviour and cognitive neuroscience (Garcia

and Saad 2008). Therefore, the theoretical part includes, as it will be shown, the overview of

these two.

Since the central part of the thesis is neuromarketing and it represents to core to which all

research tools lead, the first part will cover that field. Story of neuromarketing cannot be

placed without turn to neuroscience which has strong roots in the brain science. Therefore,

this part starts from the core- human brain. From the evolution, through anatomy of the most

complex human organ, instruments used to observe it, study techniques and to the mystery of

emotions, feelings and reason, both visible and non-visible brain parts are covered.

Additionally, in the part talking about the emotions, feelings and reason, it is retold what are

physical processes behind those.

After the basis for the understanding the brain machinery had been explained, the

neuromarketing came into the focus. Hereby, some of the most important perspectives and

theories of neuromarketing have been introduced.

The second important part of theoretical background represents the overview of consumer

behaviour. Since the research of this thesis is based on behavioural studies, I believe that this

field is relevant to mention in order for reader to get clearer perspective and understanding of

the complete story. It talks shortly about consumer perceptions and needs, in- store shopping

behaviour, types of purchase and possible consumers’ response.

The last, but not the least topic in theoretical part is merchandising. In this section the most

important aspects of merchandising are presented, with the highlight on pricing, because it is

relevant for the nature of the research for this thesis.

13

Neuromarketing- A Perfect Blending of Science and Marketing

Evolution of human kind and the brain

A complete and accurate understanding of the human mind cannot occur without recognizing

evolutionary forces that have shaped it. This approach implies that human purposive

behaviour has some biological basis and is the result of selection for traits that lead to

relative fitness for individuals or groups (Garcia and Saad 2008:398).

According to the previous statement by Garcia and Saad, it is possible to conclude that

evolutionary theorizing can enrich the explanatory power of neuromarketing. Therefore,

following text will lead the readers of this thesis through the short explanation of evolution of

human brain.

Human brain of our ancestors was not in the same structure and shape as ours is today.

Human kind generally, went to enormous changes, better known as evolution. The first claims

that evolution happened were brought up in eighteenth and nineteenth centuries when

archaeologists found fossils of creatures that were somewhat between humans and apes

(Ornstein 1991: 22). As Ornstein (1991) mentioned, the life on Earth has been mysterious for

centuries and some of the answers to its central riddle were given by Darwin’s book On the

Origin of Species in 1859. It proved and showed that every living creature was in some other

form before and was evaluating over time. However, it was unacceptable for a single reason-

the issue of how evolution operated, which was later explained as the endeavour to

accommodate to the environment, striving for food and similar reasons for existence

(Ornstein 1991:23). It is possible to go even more into the deep of this matter, but for

knowledge of brain it is enough to know that human brain evaluated and needed to adjust to

the development of the world around. Darwin stated that organisms change, adapt and get

selected by their world, impersonally, slowly and naturally, and the same thing happened to

the mind (Ornstein 1991).

The human brain is the largest among all mammals, but what makes it spectacular is its

different structure and amazing adaptability, including millions of cells at birth (Ornstein

1991:44-45). Afterwards, the brain is developed by the world around, socialization, contact

with family, in other words- external factors. Ornstein (1991:63) mentioned an amazing fact

that the human brain area is 2.200 square centimetres large and has approximately 30 billion

neurons. Interconnections between neurons are unimaginable. Sometimes, it is hard to

imagine system of billions of cells working in production of humans’ movements, reactions,

thoughts, desires and knowledge. Science assumed that all human knowledge and reason had

come from the experience (Ornstein 1991:68). But it is almost absurd to imagine the mind as

tabula- rasa. It needs to have some inbred premises to serve as a base for the learning and

adapting process. Thus, for example, Freud supported Darwin when arguing that most

childhood fears, like neurotic phobias, are phylogenetically endowed (Ornstein 1991:70).

Ornstein (1991) also claimed that Freud’s genius was in his ability to relate everyday conflicts

with their roots in the human ancestor heritage. That proves that idea of human mind as blank

piece of paper is ridiculous. And every human brain and mind is story for itself. Humans are

both, biological and cultural beings. Neuromarketing explores, as Garcia and Saad (2008)

14

stated, the effect of cultural products on biological organ and it should likely benefit from the

evolutionary principles.

Anatomy of the nervous system and the brain

We are a blend of cells, neurons, experiences and selves (Ornstein 1991: 104).

It might seem that this area is not necessary to be pinned to the story, but when trying to

explain the neuromarketing, it is fundamental to start from the basis. Therefore, the parts of

human nervous system, including parts of the brain at the first place have to be mentioned and

evaluated. In an effort to avoid abundance of information, the focus will be on the brain as a

central and the most important area of thoughts and feelings. Indubitably, it is a machine that

moves a person.

As mentioned before, the brain cell is called neuron. According to the Pradeep (2010:34),

neurons are the basic units with the aim to transmit information to other nerves, muscles and

cells, and are physically consisted of a cell body, dendrites and an axon (the bottom). In

interaction with other neurons, important is synapses- a contact points between two neurons

(Pradeep 2010:34).

Figure 3: Diagram of the human brain parts (Source: http://kb4brainfunction.com/diagram-of-

the-human-brain-parts/)

Generally, the nervous system is divided into central and peripheral (Damasio 1994:25). The

brain itself is a part of central nervous system and the familiar fact is that it has two parts:

right and left hemisphere. As it can be seen at the Figure 3, inside the brain there are different

centres and the brain parts and the brain cells called neurons are connected to every inch of

the human organism by nerves. The highest attention from the neuroscience has the part of the

15

brain called cerebral cortex or just cortex (Damasio 1994:27). It is mantle of the brain,

covering all parts inside and making brain look wrinkled. Grey matter below cortex is called,

as Damasio (1994:27) depicted a subcortical and together with cortical is known as limbic

system. That is where all magic happens. The magic is examined by the neuroscience.

Renvoise and Morin (2007) distinguished three types of the brain: the new, the middle and the

old one and according to them, the old brain decides because it has been concerned with our

survival for millions of years. The old brain is self-centered and egoistical and in marketing

matters it cares about what the product can do for it. Humans differ from other mammals

mainly by cortex, where the centres for learning and reasoning are located. The cells at the

layer of the cortex are organized into columns and every cell has special function for data-

processing (Ornstein 1991:133). This is supported by the fact that each neuron makes

connection with specific target, in other words, knows where it goes. Cortex cells turn data

into information, signals into language, interpret sounds and much more. Additionally, as

Ornstein (1991) explained, inside the cortex, centres for talents are located. The most recent

development of human brain is believed to be the division of cortex into two hemispheres

connected by 300 million neurons and it makes us distinctively human (Ornstein 1991). As it

is already well known, the left side of the brain controls the right side of the body, language

and logical activities, while the right side of the brain controls left side of the body, spatial,

simultaneous and artistic things. These two hemispheres coordinate and communicate

together in split- brain operations (commissures) through connective nerve tissue of the

corpus callosum (Ornstein 1991:136).

Damasio (1994) explained that the stimulus from the outside firstly sets the neuron on fire,

goes through the whole cell body to the bottom part axon, arrives at synapse and triggers the

release of chemicals neurotransmitters (the brain’s chemical messengers) which operate on

receptors. Human senses take around 11 million bits of information every second (Pradeep

2010:4). One neuron affects the other and produces a form of chain reaction. That is basically

how an action happens, for example when person sees something, hear something or feel.

Consequently the behaviour is produced. Speaking of stimulus from the outside, smell and

vision are particularly important for the brain reactions. The aromas influence the brain in the

high manner. By the smell, males get attracted to females and vice versa. When H. G. Well’s

mistress was asked why unattractive writer had success with women, she responded that he

smelled of honey (Ornstein 1991:93). This tells a lot about the power of fragrance to human

inner emotions and preferences. Referring to the power of latter, only in the human visual

cortex there are more than 100 million neurons (Ornstein 1991:170).

The body and the brain are interrelated and work as a team. More deeply, even the sections of

the brain work together. If there are more pathways for information in the brain, the action is

more complicated (Pradeep 2010:40). The organisms generally get stimulus from the outside

and the brain gets the signals through body. People, as very complex organisms require more

intermediate processing between stimulus and response (Damasio 1994:89). In other words,

the process until the behaviour is provoked is more complex. Different parts of the brain are

conducting different functions of body and mind. Thus, frontal lobes intersect the paths

conveying information about events and people in the world and one’s own state (Ornstein

16

1991:153). Therefore, the “selfish” brain lies in this part and it is tightly connected to

emotions.

The evolution of the body and the brain is affected by the activities in which an organism

engages through the life. Damasio (1994:111) clearly emphasized that neither our brains nor

our minds were blank paper, tabula rasa when we were born, but also they were not

completely determined. In other words, the genes give certain stamp to the brain, but

additional steps are created and determined on the way. As Lee and Senior (2008) said, the

evolutionary theory gave a significant theoretical framework to the future of neuromarketing

research, while showing how human behaviour in marketing could be explained with more

accuracy which has been a “must have” in any neuromarketing manifesto.

Study of the brain

We can’t perfectly explain the mind, as we might someday explain the molecule, because we

have to deal with the wild individuality of individuals (Ornstein 1991:76).

EEG and EMG

One of the ways to examine the brain is via EEG- electroencephalogram. This so called

“passive” technology is using sensors to capture electrical signals produced by brainwave

(Pradeep 2010:11). It was probably the first device used for discovering the brain signals and

looks like a swim cap. The first studies were done back in 1979 (Morin 2011:133). However,

it was not very precise, as Ornstein (1991:142) described, comparing it to the trials to

understand what was happening in New York by listening the noise from different areas from

the satellite places 250 miles above the ground. In other words, it could be said that it is based

on assumptions what is happening between neurons. In addition, the outer area of cortex is

represented by EEG in the best way, and it ballooned up 2 million years ago (Ornstein 1991).

Luckily, this area is particular for researchers, because it plays significant role in creativity,

thoughts and action. Ohme et al. (2009) stress out the main benefit of the EEG, which is very

high temporal resolution, meaning it can monitor brain changes second by second. It is

important to mention that these techniques were used in the beginning of 19th

century. With

the development of technology, it is nowadays more easy to get to certain insight and pictures

of how brain works. Even EEG technology is supported by the advanced computers with

statistical programs as MATLAB- a high- level technical computing language and

environment for data visualization, analysis and numeric computation (Ohme et al. 2009:23).

It serves as a great contribution to EEG research.

As an addition to be mentioned with EEG, there is EMG (electromyography) as a tool for

measuring and evaluating the physiological properties of facial muscles and has a long history

of research in the context of emotions (Ohme et al. 2009:25). Therefore, this tool can be

perceived as a channel for defining and examining both, existence of emotions and their

intensity.

EEG and EMG technology was mostly used by neuromarketing agencies due to its relatively

low cost (Morin 2011:133). However, the more promptly result are able to be obtained by

magnetic resonance technologies, as it will be explained in the following part.

17

fMRI

The abbreviation stands for functional Magnetic Resonance Imaging and it can accurately

indicate the activity of certain brain parts by measuring oxygen levels in blood that flows

within the brain (Pradeep 2010:13). In physical form it looks like a tube, long and narrow and

inside it is surrounded by powerful magnets, which can be seen on Figure 4.1.

Figure 4.1: Photo of fMRI device from the presentation about Neuromarketing at the World

Business Dialogue conference in Cologne, Germany (Source: Photo was taken by the author

of the thesis, Anida Krajina, who attended the conference in March 2014).

MRI is used for observing other body parts as well, but in neurological terms, fMRI is used

for observing the brain. Advantages of this method are in its speed, which is scanning the

whole brain in approximately three seconds and the possibility of repetition without

concerning the negative effects of the person (Alčaković and Arežina 2011). Pradeep (2010)

mentioned that disadvantage of the fMRI for marketing purposes was that the time for added

blood supply to reach specific brain area could take up to 5 seconds. Therefore the reaction of

the brain can be late if the subject is shown some ad during the examination. If the attention is

dragged to the brain scan images, they look like the colourful images of this mysterious

organ. Those colours are actually statistical tests and represent the comparison between brain

activity in the area during experimental scan and baseline (control) scan (Green and Holbert

2012:14). fMRI might not be the only method available to the cognitive neuroscientists, but

surely it is the most trustworthy one since it seems relevant to wonder what neuroimaging is

able to show us and why it has so much power and possibilities (Lee et al 2011).

In the following Table 3 taken out of Lee and Chamberlain (2007) article, it is possible to see

the comparison of these two main measures of brain activity, according to their key features,

strengths and weaknesses. The data are put into the table for the purpose of better

transparency for the readers of this thesis and later on understanding the core of

18

neurmarketing practices, challenges, advantages as well as limitations by using these tools. As

Lee and Chambarlain (2007) indicated, their combination might bring the best possible

results.

Table 3: Neuromarketing technology comparison (Lee and Chamberlain 2007:26-27)

Modality Key features Strengths Weaknesses

EEG

Detects (at scalp

surface) electrical

potential differences

derived from neural

activity.

Subjects have a

number of electrodes

attached to their

heads.

Widely available,

non- invasive, long

history of use

leading to well-

accepted body of

theory, excellent

temporal resolution.

Does not measure

neural activity

directly, signal must

travel through tissue

and skull to surface,

relies on the

accurate modelling

of this path, unable

to conclusively

determine the actual

location of

activation in the

brain (the ‘inverse

problem’) leading to

poor spatial

resolution.

MRI

Detects magnetic

field distortions that

can result from

changes in cortical

activity, chemical

composition of the

brain, tissue damage,

etc. Imaging of brain

function tends to use

changes in

oxygenated blood (the

‘BOLD contrast’), but

other contrasts are

possible and used for

other purposes.

Non- invasive, easy

to use, able to locate

the source of the

signal very

accurately

(excellent spatial

resolution).

Expensive

equipment, latest

technology not

available to all, poor

temporal resolution

as signal changes

occur in post-

cortical activity,

subjects exposed to

loud noise due to

rapid switching

on/off of

radiofrequency

signal, can be

stressful.

In the part about MRI in the Table 3, the term BOLD is mentioned. It is the abbreviation of

Blood Oxygen Level- Dependent and it is the blood level that is brought in the brain when

some reaction happens. Forbes (2013) explained that more desirable was something, the more

blood rushed to the brain part activated for certain emotion or sense. More precisely, the

additional blood brings more oxygen and hydrogen to the area needed to replenish the system

of neurons and it increases the magnetic field during a scan by detectible amount (Wilson et

al. 2008:391). With the help of computer software, these information and signals are turned

19

into the pictures of the brain slices. In the following Figure 4.2, it is possible to see how those

pictures of brain look like.

Figure 4.2: The activated brain areas with additional blood while being happy and sad from

the presentation about Neuromarketing at the World Business Dialogue conference in

Cologne, Germany (Source: The photo was taken by the author of the thesis, Anida Krajina,

who attended the conference in March 2014)

Other brain research methods are magnetic resonance imaging (MRI), near infrared

spectroscopy (NIRS), positron emission tomography (PET), event related potentials (ERP),

magneto encephalography (MEG), transcranial magnetic stimulation (TMS) and eye tracking

(Zurawicki 2010). However, aforementioned EEG and fMRI are the most frequent and

famous ones which is the initial reason why they are emphasized in this thesis.

Certainly, every brain is unique, just like finger prints. However, Wilson et al. (2008)

advocated that by involving more subjects in the study, researchers disposed brain images of

different persons and then had the ability to compare them between each other. Consequently,

it is possible to create certain patterns and points of connection and similarities between them

and with additional information taken out from the different fields included in the matter

create a broader image of reactions, both biological and psychological. Other things equal, for

better or worse, as Wilson et al. (2008:390) said, the possibility and opportunity to influence

consumers without their full awareness mightincrease, as a result of the research of brain

activity. However, it is impossible to ignore that the humans are systems consisted not only of

biological processes, but also vertigo of emotions, feelings and reasons.

20

Emotions, Feelings and the Reason

Unrevealing the mystery of the mind somehow began with Plato, who described the human

soul as “chariot pulled by the two horses of reason and emotion” (Fugate 2008). Here, the

“soul” can be perceived as equivalent to “mind”. Through the history there has been a non-

stopping battle between these two, from “economic man” who is reasonable, through Adam

Smith’s rational allocation of resources and recent marketing scholars who talk about the

importance of values, satisfaction and expectations.

Probably one of the most particular characteristic of humans is the possession of emotions and

feelings and moreover, awareness about them. Emotions and feelings are quite important for

marketers because all of them are trying to evoke some emotion or feeling in other persons. It

is important to understand them.

Emotions are the main drivers, while subsidiary roles are given to habits and cognitive factors

(Ambler et al. 2004). According to Damasio (1994), there were primary and secondary

emotions. Primary are innate emotions that by the logic start to develop from the birth, have

power point in amygdala and depend on limbic system (Damasio 1994:133). They are the

basic mechanisms, more unconscious and automatic. Secondary emotions are built upon them

and they arise when person becomes aware of connections, sense, experience and consistency.

By the definition given by Damasio (1994:135), secondary emotions occur when person

“experience the emotion”, feels the change in the body and the conscious is at the higher

level, although changes within the body are unconscious and cannot be stopped.

Damasio made difference between emotions and feelings. The way he describes it was that

“all emotions generate feelings, but not all feelings originate in emotions” (Damasio

1994:143). In addition, there are varieties of feelings. Damasio (1994:149) explains how some

are based on universal emotions like happiness, sadness, anger, fear and disgust and others are

based on variations of universal emotions, like euphoria, melancholy, panic and they arise

from experience. The last, but not the least are background feelings, which can be pleasant or

unpleasant and people are subtly aware of it (Damasio 1994:150). Affected by these feelings,

humans make decisions, behave, act and interact with others.

Behind the story of the brain, there is always issue of the reason, meaning that everything

decided by the brain means it is reasonable. However, the situation in reality differs a lot.

Emotions make shift in mental states, sometimes even changing memories and ideas without

the knowledge of a person (Ornstein 1991:80). Even when people feel, they think. It is

inseparable. Ornstein (1991) explained that brain gets emotional information through separate

system of nerve paths, through the limbic system to the cortex, and thus happens that

emotions are out of the conscious control. More simply, this happens when we feel something

even though we know we should not. In other words, we buy something we know we do not

need. Recent analysis, as Ornstein (1991) declared, have shown that there are differences

between left and right hemisphere in emotional expression, where the left responds to the

verbal content and the right to the tone and gestures.

In the most general term, everything we decide and evaluate is based on positive and negative

emotions regarding that. As Ornstein (1991) said, it is the most primary system, when people

21

ask question if something is good or bad. Important is to mention that the feeling comes first

because of the two things. First one is that they appeared first in the mind’s evolution and

second, they are result of humans’ experiences (Ornstein 1991:92). Basically, not knowing

why we like something, or why we are attracted to it can have basis which is beyond our

possibility of understanding. It is assumed that the emotions evolved during the evolution to

satisfy in the optimal way the needs of organisms (Ornstein 1991:92).

Sometimes, people have spontaneous actions, which they call “without thinking”. And it is

the truth. They do not think. The same happens when we move. We do not stop and decide

that we will move. This leaves the place for noticing new things. Spontaneous actions begin

before people decide to act, more precisely, that decision is unconscious and independent

(Ornstein 1991:147). The truth is that the majority of information our brain receives is

processed unconsciously. Pradeep (2010) was more precise about this and concluded that out

of 11 million bits of information our senses are taking in a second, conscious brain can

process only 40 bits per a second the rest is on subconscious brain, which mathematically

equals 99.999 percent. Ornstein elaborated the struggling with the mind and the reason at the

first place in a following sentence:

Reason is all; our mind, as we have it, is what we are stuck with, and the best we can hope for

is some kind of eloquence as we realize we’re the pawns of fate. Maybe computers will help

us (Ornstein 1991:227).

The other side of the coin is consciousness which is more or less possible to understand more

easily. The picture of the world, based on sense and information, expectations, hopes, fantasy

and other cognitive processes is built upon consciousness, but we are aware only of a small

part of what our minds are taking (Ornstein 1991:228). Our minds split, and it is usual that

most of the people felt as being out of something. Many of those inner selves work as a team

in order to give consistent interpretation of the world. Conscious processes are more flexible,

take effort, happen at one time and are inefficient (Ornstein 1991:230).

Subliminal perception

We can know more than we know we know (Ornstein 1991:235).

Beyond the conscious we can also find the phenomenon called subliminal perception. In the

most basic words, subliminal perception is the ability of humans to perceive things without

knowing about their perception, i.e. without conscious of them. This is the proof to the claim

that the brain worked well before self- awareness (Ornstein 1991:234). Ornstein (1991)

defined the subliminal stimuli as “sensory information below the threshold of conscious

perception”. It is hard to defend from these influences, because it is hard to know about them.

However, it is useful to understand the effects. As Ornstein (1991) mentioned, subliminal

messages affect sensitivity, behaviour and perceptual mechanisms. These subliminal

messages have been present in media for some time. Somehow, it brings up the question of

mind controlling and influence. Examples of these are pictures in milliseconds, backwards

messages, signs and meanings in speech. One of the well- known examples is with the written

messages on cigarette boxes, stating the negative influences and consequences of smoking.

However, people continue to consume cigarettes. That creates confusion. However, what has

22

been relieved is that those messages activate nucleus accumbens, centre for pleasure, rewards

and desire and thus actually encouraging smoker to consume the cigarettes. The most famous

cases in history concerned the hard- rock group Judas Priest, when parents of two boys who

killed themselves after listening band’s album believed that the suicides were caused by

backward message indicating “Do it, do it, do it” (Ornstein 1991:237). Lee and Senior (2008)

dragged the attention to the “buy buttons” in the brain, mythical regions, which, when

activated, provoked subsequent consumer behaviour that human did not have to be aware of

at all. It can refer to the subliminal advertising.

Neural Machinery in Back of the Emotions

Sometimes, the same acts visually on the outside do not trigger the same areas inside the

brain. The good example how emotion- related movement turns on the brain in totally

different location than a voluntary act is elaborated by Damasio (1994:140). The face had the

same expression, the smile was normal, the arena for the movement is the same in both cases

and face was shaped as it should be. However, if the smile is provoked by humorous remark,

meaning it brings out some emotions, it is triggered in the brain in the totally different area.

This is exactly the explanation of how it is possible to recognize fake and true smile. Often it

is possible to hear that eyes tell the truth and it is correct. There are certain muscles involved

in laughing and smiling. First group are eye muscles and the other mouth and face muscles,

where the first ones can be controlled only unconsciously and the others consciously

(Damasio 1994:143). Basically, the real satisfaction and joy can be seen only in the eyes.

At the bottom line, all comes to connect certain people, things or situations to certain feelings

or emotions. The brain must have a means and it is desired to avoid connecting an emotion,

positive or negative to the wrong person or event. Therefore, there are some limits and

restrictions in the brain itself. Stimuli taken from the environment are constantly monitored by

frontal cortex which makes split- second decisions about the importance of the stimuli and

transfers in the memory only important ones (Pradeep 2010:185).

Secret World of Neuromarketing

Perhaps George W.Bush knew a little something about the brain- when asked what Americans

could do to contribute in the fearful, unsettled days and weeks after 9/11, he replied with a

simple monosyllabic: “Shop.” (Lindstrom 2008:200).

Neuromarketing at the glance

Following the quote written above, Lee and Chamberlain (2010:19) wrote that 1990s were

determined by United States President Bush as the “Decade of the Brain”. It has been

impossible for some time to think about the marketing and science collided. For the past

couple of decades, it was more related to math than psychology. Math includes statistical

relevance, sample size, standard deviation, etc. However, in the past decade, things are getting

even more different. After the first neuroeconomic papers, marketing scholars have

recognized the potential for neuroscientific methods as a new approach instead of quantitative

and qualitative ones (Javor et al. 2013). Now, it is able to speak about combination of medical

knowledge, technology and marketing in one sentence and have some completely new

approach to all matters. Thus neuromarketing was born and it was in 2004 (Touhami et al

23

2011). However, some authors claim that the term was coined in 2002 by Lewis and Briger,

while the brain’s response to marketing stimuli had dated from 1969 (Kalliny and Gentry

2010). Fisher et al. (2010:231) claimed that it was June 2002 when press released by Atlanta

advertising firm, BrightHouse announced there was a business division using fMRI in

marketing research process. More precisely, they opened a neuromarketing division in 2001

(Wilson et al. 2008:390). The focus is in scanning the brain and understanding the brain

language. And the brain speaks constantly. As Lindstrom (2008:2) stated, this process might

be unconscious and instantaneous, but it happens every second, minute, hour and day for the

rest of our lives. There are varieties of definitions of neuromarketing. One of them is that it

represents the application of neuroscientific methods in process of analysing and

understanding the human behaviour regarding markets and exchanges in marketing (Lee and

Senior, 2008). As Kalliny and Gentry (2010) mentioned, neuroscientific methods have

allowed researchers to study the cortical activity directly and at the moment when the subject

is exposed to marketing stimuli. So far, there has been dozens of studies in the field of

neuromarketing, in other words, application of functional magnetic resonance imaging for

market research (Eser et al. 2011). These studies can be overviewed in the Table in Appendix

C, listing the authors, field, question and results of the particular studies.

The main question is: Why? Why do we buy certain product, why do we like some brand or

why do we enjoy it. Lindstrom (2008) realized that the answers are in the brain and the keys

for building the futures of the brands lays exactly over there. Undercover emotions,

subconscious feelings, desires and thoughts drive purchase decision which consumers make

every day. Even besides controversies and speculations arising when mentioning

neuromarketing, Lindstrom (2008) did not believe the neuromarketing was instrument of

corrupt governments or crooked advertisers, but simply the tool. It discovers what consumers

are already thinking about products or brands (Lindstrom 2008:4).

Looking from the researchers’ side, neuromarketing was born in the intersection of qualitative

and quantitative branches of traditional marketing research (Lindstrom, 2008: 6). That

actually represents the future of marketing and the path to optimization in understanding the

consumers. It can provide insight in various processes within market exchanges. There are

certain areas measured in neuromarketing and those are: Attention, Emotional Engagement,

Memory, Purchase Intent/Persuasion, Novelty, Awareness/Understanding/Comprehension

which all give the level of Effectiveness (Pradeep 2010: 104). These neuro- metrics are

developed by NeuroFocus, Inc. founded by Dr. A.K. Pradeep. All neuromarketing research

needs to have strong theoretical background, including experimental hypotheses, goals and

methods (Lee and Senior 2008).

Fisher et al. (2010:231) hence said that neuromarketing had dual characteristic according to

different authors- business activity and academic field.

Javor et al. (2013) mentioned that in 2008 there were 800,000 hits on Google for the term

“neuromarketing”, while in 2012 that number rose up to 1,4 million hits. It cannot be said that

the neuromarketing is key to everything, since it includes study of human brain and scientists

have not understood it completely yet. But the science has been improving and technology

24

developing and all that can contribute in creating the fundamentally good way for companies

to reach their customers. According to the IXP Marketing Group, approximately 21, 000 new

brands are introduced per year around the world, and based on history data, only few reach

the next year on the shelves (Lindstrom 2008:24). This is shocking information that makes

marketers think about costs, wasted material and unrealized desires. Therefore, it is important

for marketers, as well as economists to understand why consumers behave the way they do.

George Loewenstein, a behavioural economist said that “a lot of what happens in the brain is

emotional, not cognitive” (Lindstrom 2008:28). The irrefutable fact is that there are unique

imprints in subconscious that are made if something causes neurological response. According

to the Pradeep (2010:139), they were called Neurological Iconic Signatures and they showed

what was the most powerful about the product from the standpoint of the subconscious.

Findings from the field of cognitive neuroscience, neurobiology, organizational neuroscience

or neuromarketing can contribute each other, as well as other sciences and practices. Thus, for

instance, recent research of cognitive neuroscience research on emotions in the process of

decision making is relevant to organizational decision making (Senior et al. 2011).

Human behaviour studies are always context- laden (Javor et al, 2013). That means that the

study of consumer behaviour requires examination in daily, real- world settings. According to

the Javor et al (2013), there have been three concepts of neuromarketing that are particularly

relevant for neurologists and study of the human brain: (1) relation of reward system with

decision- making and brand preference, (2) neurobiological background of trust and (3) the

ethical issues attached to the story of neuromarketing.

The old brain theory

Our brain is the most metabolically expensive organ to operate- representing only 3 percent

of the body’s weight, yet requiring up to 20 percent of its energy (Pradeep 2010:18).

As previously mentioned in the text above, some neuromarketers, as Renvoise and Morin,

distinguish three parts of the brain: new, middle and the old. In this part, the most interesting

is the old brain, which is in the very centre of the brain mass and was the first part of the brain

that developed within the humans. In other words, it is the ancient brain. There are six stimuli

that directly influence the old brain, very simplified and very logical (Renvoise and Morin

2007):

1. Self- centred;

2. Contrast;

3. Tangible input;

4. The beginning and the end;

5. Visual stimuli;

6. Emotion.

Self- centred means that the old brain is oriented towards inner “me” and thinks only about its

own survival and well- being. Second stimuli show the simplicity of the old brain in

recognizing the contrast. It can make a good decision quickly and easily. As Renvoise and

Morin (2007:13) said, the old brain constantly seek for what is familiar and friendly, concrete

25

and immutable, and recognizable, in other words, it sought for tangible input. Moreover, the

strong beginning point and the strong ending point will trigger the old brain, just like in the

example of fast reading abilities, where it is enough to read the beginning and the end of the

sentence to get the sense to certain extent. The old brain is visual as well, mainly because the

optic nerve in the brain is directly connected to the core of the brain (Renvoise and Morin,

2007:15). In the end, the power of emotion is at its highest level and neurological background

of emotion has been explained in the previous paragraphs.

Convincing the consumers’ brain

One of the justification why affecting the human brain has to be in focus for marketers and

advertisers is that the brains react in millisecond. As Pradeep (2010:29) said, they were

honest, unaffected by language, education, culture, completely unambiguous and universal,

which gave the opportunity to create projections, conclusions and recommendations.

Moreover, the studies have shown that the human decisions at its simple manner are rather

rational than emotional (Lee and Senior 2008). Role of the reward is to trigger the emotions.

There are several concepts that are unable to be ignored by the brain. Probably, the success in

dealing with the brain of humans lies in using these concepts in the right manner. One of the

crucial ways to capture brains precious attention is by novelty, innovation or unfamiliarity

(Pradeep 2010:29). Human brain has been thought to react to something that stands out from

the crowd and something it has never seen or tried before. That is the first contact. If it is

possible to make successful first impression, later on, the job is easier. Speaking of contact,

another concept, according to the Pradeep (2010:30) is the eye contact. This is important for

social beings, because it reveals the empathic emotions, nearness and understanding. The last,

but not the least is the pleasure/reward images, which are irresistible for brains, especially if

one knows exactly what those are (Pradeep 2010:30). Somehow, this shows the simplicity of

brain response, meaning that it needs the reward/pleasure for a given attention, answering the

question: What is the benefit? What advertisers and marketers need to focus on, among

everything else, is that benefit of their products, actions, campaigns for customers’ brains.

When trying to pursue customers to buy a product, or simply to attract them, there is one

interesting concept- to find their pain. Here, it is not the story about the physical or

psychological pain as a disease, but the pain for the product. Following example will say

more. A pizza company found out in a survey that the customers’ pain was not the taste of

pizza or how hot it was. The number one pain of pizza customers was the anxiety of not

knowing when the pizza will arrive (Renvoise and Morin 2007:26). When they found out that,

they made a great offer. Renvoise and Morin (2007:26) cited their very successful slogan:

Thirty minutes or less (or it’s free). So they recognized the pain and find the way to solve it.

And the customers value that. Therefore, a customer story, according to the Renvoise and

Morin (2007:54) is 80 to 100 percent the proof for the gain of the product.

If the company wants to “talk to the old brain” it should use the power of the word “you”. By

using this word, any of the message building blocks can become customer- centric (Renvoise

and Morin 2007:135). In creating the message for customers as well as the advertisement,

there is also an extreme power of colours. Renvoise and Morin (2007) explained that the

colours have affected the old brain at the subconscious level. In the following Table 4, it is

26

possible to check the symbol of vary colours as well as which companies are using them in

the world. It is interesting to think about the strategy of these companies and if they are

accomplishing those aims that are raised from the colours’ meanings.

Table 4: Power of colours (Source: Renvoise and Morin 2007:141)

Additionally, the sellers need to think as buyers. It is familiar that all humans feel more

comfortable when dealing with people who are similar to them, because they are able to relax.

Well trained salesperson needs to identify him/ her with customers and somehow show the

relation. Cicero, the Roman orator and statesman said a word that can be perfectly applied in

the situation like this: “If you wish to persuade me, you must think my thoughts, feel my

feelings, and speak my words” (Renvoise and Morin 2007:148).

The reaction to things, products, advertisement and external stimuli are based upon the

memory in many cases. The memory can be positive or negative regarding certain contact

from the past. If it is positive, humans accept revealing of that memory and if it is negative,

they try to avoid it. The question is where do the memories live in the brain? Pradeep (2010)

elaborated that most of the studies concluded that there was no single centre in the brain in

charge for long- term memory. Therefore, many centres in the brain interrelate in creating

storage of memories. As Pradeep (2010:39) gave examples, the hippocampus,

parahippocampal region and parts of cerebral cortex were in charge for remembering

numbers, while behavioural memories were supported by amygdala, striatum and cerebellum.

There is important catch to mention regarding the brain function. If one region of the brain is

activated and refers to certain emotion, action or behaviour, it cannot be said it is the region

Colour Symbolizes Used By

Red Power, Activity, Rescue Coca- Cola, Red Cross,

Business 2.0

Pink Calm, Feminism Barbie, Pepto- Bismol,

Mary Kay

Orange Movement, Construction,

Energy

Cingular Wireless,

SalesBrain, Home Depot

Yellow Light, Future, Philosophy Kodak, National

Geographic, Best Buy

Green Money, Growth,

Environment

John Deere, Starbucks,

British Petroleum

Blue Trust, Authority, Security IBM, Microsoft, American

Express

Purple Royalty, Spirituality, New

Age Sun, Yahoo, Barney

27

only for that. Lee et al (2011) explained that region in the ventral cortex implied in perception

of faces, but it was not the region solely responsible for face perception.

Critics of neuromarketing

In the previous text it is possible to see all advantages of neuromarketing and how it can help

marketers and bring totally new perspective to consumer approach. However, there is the

other side of the coin as well, where neuromarketing fall into negative critics. Thus, for

instance, Commercial Alert, Gary Ruskin, Ralph Nadar and Lior Arussy explain

neuromarketing as the new chapter of the old cheating techniques, where marketers push the

consumers to make wrong choices by exploiting biologically defined brain structure

(Alčaković and Arežina 2011).The concern is related to possibility of finding the “buying

button” in the brain and the way to make consumers act as advertisers want. In other words, in

this case there is equality between neuromarketing and brainwashing. As Fugate (2008) states,

there has been no evidence that something like this has happened. The actual explanation and

justification lays in the lines written by Lindstrom (2008:5) where he said that if consumers

could better understand own seemingly irrational behaviour, they could have more control

and defend themselves against advertisers. On the other side, if companies know more about

subconscious needs and desires, they can serve better in satisfying those needs and desires by

their products (Lindstrom 2008:5). Additionally, Fisher et al. (2010) believed that the current

technology could not predict human decision making and there has been no “magic spot” that

would affect consumers’ behaviour in the way to control them. Complex social behaviour

cannot be inferred by observation of specific activated brain regions, but it can somehow

contribute to this bigger picture or at least be the starting point.

Obvious limitation is that not everybody understands scientific graphs that are presented after

fMRI scans, or EEG/EMG data. However, if those methods are popularized, scientific and

technological limitations have tendency to be ignored (Fisher et al. 2010).

To wrap up, there are several limits that neuromarketing in general suffers from. First of all,

ethical limits, then methodological, like search protocols, number of subjects, financial limits

in the form of high prices of techniques and in the end, there are legal limits for the number of

procedures, since the subjects are under the brain imaging examinations (Touhami et al 2011).

28

Short Overview of Consumer Behaviour Relations between psychology and marketing are quite close. As Lee and Chamberlain (2007)

explain, marketing, strategy, economic behaviour, operation research and similar disciplines

are based on the development of the behavioral, social psychological or cognitive fields,

while on the other side, achievements within psychology can owe much to economic and

organizational contexts. Neuromarketing should be used to confirm, reconfigure, or improve

coventional theories of consumer behaviour (Fugate 2007:391). Therefore, in this part of the

theoretical background, I would like to take a look at psychological and social factors shaping

the consumer behaviour.

Consumer behaviour

Consumer behaviour before, during and after the purchase is very important. Consumer

behaviour is as discipline studies, among all, behaviour of individuals, groups or organization

during the proces of selection, usage and disposal of the products and services, experiences

and ideas to satisfy needs and impact of those processes on consumers and society in general

(Husić- Mehmedović, Kukić and Čičić 2012:5) .

Hefer and Cant (2013) enhanced that consumer behaviour is constructed of consumer

activities (buying and using) and consumer responses (expressive, social and psychological).

It can be seen that they are dependent on each other. For example, psychological responses

can obtain in customer‘s head, when s/he imagines product, how it can be used, observing the

characteristics of the product and relating them to own experience, needs and desires. On the

other hand, expressive responses, for instance, are related to feelings and emotions, the way

product influence customer‘s state of mind. In the end, example of social responses are the

actions during the purchase decision making, or activity, including comparing prices, store

atmosphere, ads, etc.

Consumer perceptions and needs

Consumer perceptions reflect how people observe, select, organise and react to environmental

stimuli in a way that is important for business (Cant and Hefer 2013:5337). It is constant

process where retailers have to track what makes consumers actually buy the products, their

feedback reaction to the product and product placement, as well as promotion activities. This

is not easy at all. In other words, retailers have to translate consumer perceptions (stimulation

of their senses) in a way that is applicable to own strategies and operations. Understanding

consumers is long process and requires years of experience and examinations. When retailers

understand desires, needs and reactions of their consumers, they can work on creating the

loyal relationships between them and thus put basis for a long- term benefit for both sides.

Retailers thus can identify what consumers actually see, hear and sense when getting in touch

with the product (Cant and Hefer 2013:5338).

Customer needs are the number one consideration and factor in any B2C relationship.

Vendors need to start from service that they can provide to ultimate consumer which implies:

responsiveness, promptness, knowledge- ability, accuracy and accessibility (Kunz, 2010:

444). Kunz (2010) also emphasized that in losing customers, 75% of reasons were because of

the service quality, 13% referred to the product quality and the rest overlapped other reasons.

People often talk more about their positive shopping experience than negative and if that is

29

the case, it should be used and applied wisely into the business towards customers. According

to Cant and Hefer (2013:5340), consumers always enjoyed the stores that had strong and

welcoming brand entity, just like the dm has built since it has been present in the market,

because they are loyal to that brand and feel comfortable with the quality and offering. This is

important for the findings of this thesis research and will be presented later.For the purpose of

giving a short glance, during the focus group consumers were refering a lot to values of dm

store brand and their loyalty to it.

After providing the service needed for the customers, the products themselves need to satisfy

their need as well. Products can satisfy customers based on their purpose. In the process of

meeting needs and desires, customers often buy something they can afford and that can, in the

best way, provide to them prestige, health, the feeling of personal worth or better life (Kunz,

2010). Kunz (2010) also mentioned that people have bought products that can make them feel

better parents, recognized, important, kind, outstanding, to be accepted by others and achieve

personal goals. As it can be seen, buying decisions are much deeper than just a hunger game.

There has to be the difference made between needs and wants as well, where the first one is a

functional desire and the latter one an emotional (Kunz 2010:458). The emotional desire on

the surface can look like the functional one, which means that by waking up the emotional

desire and shaping them in the advertising, vendors can create practical need.

In- store Shopping behaviour

„Customers do not buy merchandise. They buy what the merchandise will do for them.“

(Kunz 2010:453)

Chronsell and Lizette (2006) stress that in the store there are two zones: cold and hot, based

on the sales per square meter. Product exposure in the store has important role in optimizing

consumers’ response to product placement and promotion. Thus, the hot zones are, for

example, those located near cash desk, highlighted areas, special places where products on

promotions are exposed. On the contrary, the cold zones are the ones with lack of lightening,

near the entrance, at the corners and un-cleaned areas of the store, etc.

Shelf placement is in connection to this and it can be the “award” a product gets based on sale

results. If the product has higher sales, it gets more shelf space and those with low levels of

sales receive less shelf space (Chronsell and Lizette 2006:16). The next step, after the shelf

spacing, the process of facing is applied. In the basic words, it represents the number of

product units placed next to each other and the level of product visibility on the shelf

(Chronsell and Lizette 2006:16).

A model of in- store shopping behaviour has several stages including: demographic and

situational factors, shopper’s intensions, stock situations and in the end, purchase decision

making (Kunz 2010:188). Each of these stages has its own factors inside. Thus, the

demographic and situational factors overlap the customers‘ background (knowledge, loyalty,

time, surrounding...), shopper’s intensions include the product type (specific, general or no

item in mind at all), stock situations tells about conditions at the shop (customer service,

brand, size, color, style...) and purchase decision gathers current, potential and lost sales

(Kunz 2010).

30

Very particular situation during the purchase process happens in the second stage of

behaviour which are shopper’s intensions. The shoppers are categorized based on the purpose

of shopping trip and divided in three groups: specific item in mind, general item in mind and

no item in mind (Kunz 2010). For the first two situations, shopper is called purposive,

meaning he or she has intention to make a purchase, and the third type customer is searching

for pleasure or information for future shopping trips (Kunz 2010:293).

Maybe the most relevant stage for retailers is purchase decision. For years, retailers,

marketers and other included in retailing and selling industry have been trying to influence

this level of behaviour in positive way for them. However, not only buying the product i.e.

current sales is positive outcome. There are also successes in postponing a purchase, browsing

and coming back in the future. These situations are called potential sales (Kunz 2010:294). As

it can be assumed, the worst outcome in this stage is lost sales and it happens when customers

quit the shopping or go to another store (Kunz 2010). Retailers need to take into the

consideration the psychological side of humans and the patterns by which they make

shopping decisions. For instance, Daniel Kahneman said that psychologically, people are

more worried to lose what they already have, than taking a risk to gain what they do not have

(Greenberg and Lowrie 2012).

Planned and impulse purchase

There are three shopping habits used by customers: planned purchase, suggested purchase and

impulse shopping (Chronsell and Lizette 2006:17). The first one refers to consumers buying

according to previous list or plan, meaning that they actually know what to buy, how much

and at which price. Further, suggested purchase happens at the selling place of the product, in

the store, and it often means convincing customers to buy certain product that is promoted in

the store. The last, but definitely not the least is impulse shopping. That is why the both,

placement of the products in the store and their display have high significance.

The impulse purchase is particularly important for this study, because the decision is made

apart from consumer consciousness. It is also known as unplanned purchase and it represents

buying action provoked by certain stimulus (Peštek et al. 2006). Peštek et al. (2006)

mentioned that there are several types of this purchase which include:

- Proper impulse purchase- change in purchase habits;

- Suggested impulse purchase- triggered by an advertising stimulus;

- Prompted impulse purchase- limited supply of the product provokes purchase;

- Planned impulse purchase- intention to buy product offered at discount prices.

In the USA, studies in 20th

century showed that impulse purchase make up 39% of all

purchases in department stores and 90% of customers buy on impulse (Peštek et al. 2006).

Peštek et al. (2006) stated that the classical economy declares that consumers are rational

when making purchase decision, but in practice, there is high degree of quasi- rationality.

Authors also conducted the research in supermarkets in Sarajevo and found out that

consumers either buy the products because of rational reasons, or quasi- rational. First include

the need for quantity, personal need, etc. and the others include reasons such as: interesting

product, advertisement, tasty, etc. (Peštek et al. 2006).

31

Consumer response

According to the research of Godfrey (2009:35), retailers who have enhanced understanding

of consumers would consequently improve sales and invest marketing budget for value in

return.

Advantage of consumer insights, among others, helps the steps in category management

cycle. That includes help with category definition by tracking consumers’ needs, desires and

preferences; role of the category via pen pointing shopping- occasion behaviour; category

assessment including where, how much, when and why do they buy products within category;

qualitative and quantitative benefits of the category and tactics of the category overlapping

consumers’ perceptions and reactions (Godfrey 2009: 36- 38).

In measuring the consumer response, the term ECR (Efficient Consumer Response) can be

introduced. Efficient consumer response represents the tool and strategy used by business

channel members to evaluate and enhance the joint work in order to provide the greater value

to the end customer with as less cost as possible (Godfrey 2009:12). Within ECR, it is

possible to define four different strategies: efficient store assortment (ESA), efficient

replenishment, efficient promotion and efficient production introduction.

ESA is defined as both way retailer and supplier process of determining the optimum of the

assortment within a product category that ends up with better results and higher consumer

satisfaction (Godfrey 2009:14). In this way, the target consumers can be reached more

effectively and efficiently. If we take a look at the time we live in, the consumers’ needs and

wants are increasing towards higher diversity daily. The store assortment is very important

issue in covering that diversity and gaining positive results in any manner. Another important

thing is entailing removal and improvement of stock- keeping units (SKUs) according to the

consumer needs and retailer aims (Godfrey 2009:15). Related to this is the term “efficient

replenishment” (ER). Godfrey (2009:16) emphasized that ER filled shelves inside the store

with the right products aimed at the customers and the efficiency could be measured in low

costs and high level of customer service.

One of the key elements in retailer’s strategy is effective and efficient promotion. It provides

the general picture about the products and store in customers’ minds. Efficient promotion is

the third ECR strategy and it overlaps communicating benefits and values (Godfrey 2009:17).

Promotion itself is the combination of tools and techniques used for commercial purposes and

internal and external communication. Sales are highly dependable of promotion. As Godfrey

(2009:18) stated, according to Pricewaterhouse Coopers, 65% of retailers’ sales in promotion

were influences by some form of price incentive.

The last strategy is called Efficient Product Introduction (EPI), which involves meeting the

evolving customers’ needs. That is done by developing and introducing products, bringing

idea to reality or taking a product to the market (Godfrey 2009:18).

After this story, the question is where the exact connection to neuromarketing is. Consumer

behaviour is quite the part of marketing and goes within the frames of marketing research.

Morin (2011) explained it in a very picturesquely way when said that what was

neuropsychology to psychology that was neuromarketing to marketing. Moreover,

32

neuropsychology studies the relationship between human brain and cognitive and

psychological functions, while neuromarketing focuses on looking at consumer behaviour

from the brain perspective (Morin 2011:132).

33

Theoretical Overview on Merchandising Retail success is now dependent on responding to customer wants, not dictating customer

needs (Kunz 2010:15).

Merchandising at glance

As a key business function, merchandising was recognized all the way back in 1924 (Kunz

2010). There are two types of theories that are used for describing the activities of the firm

and those are economic and behavioral theories. The letter one refers more to the

merchandising nature and describes the way of thinking about how business firms operate and

why do they operate in certain way (Kunz 2010:10).

Merchandising is, above all, a business process and many of the producers cannot be

imagined without using at least a fraction of merchandise tools. For instance, the cosmetic

store applies merchandise techniques and processes when choosing the lines of products,

sorting the products on the shelves, deciding about the variety and size of the offer,

communication and signage tools, assortments and prices differing during the whole year, etc.

Previously mentioned points are just a small part of the entire proces of merchandising.

Kunz (2010) gave really simple and easily understandable definition of merchandising when

he said that it represented process of planning, developing and presenting the product (or

product lines) for target market previously defined in the frame of prices, assortmants, style

and time. In other words, merchandising can describe the steps that lead to the final delivery

of desirable products to customers at the right time and afordable prices. The steps lead to

final goal, which is giving customers value for the money. Merchandising has three major

components, according to the Kunz (2010), which can be seen in the following Figure 5.

Figure 5: Major components of merchandising (Kunz 2010:9)

Line planning

•merchandise mix

• forecasting merchandise offer

•planning budgets for merchandise

•planning assortments

•delivery and allocation determination

•analyzing and updating plans

Line development

•selecting finished goods to fill the lines

•developing product internally

•combining bought finished goods, product development and sourcing

Line presentation

•evaluating line plans and presenting designs (internally)

•offering products to retail buyers in showrooms or via sales respresentatives (wholesale presentation)

• types of retail stores, catalog, television or Internet selling (retail presenttaion)

34

Kunz (2010) stressed the term merchandising constituency, where he believed that it provided

the basis for the intergated function among the five areas involved in product line: target

market, executive management, finance, operations, marketing, merchandising and supply

chain. Thus it is possible to conclude that merchandise has a major role from planning and

developing product lines in the terms of target market wants, negotiate with management to

get approvals, finance for budget, operations for delivering the products in the right way and

marketing for promotion, selling and research. All that respresent the pieces of supply chain

puzzle. In other words, mechandising keeps the whole process harmonized.

What is quite interesting point of view is that Kunz sees merchandising and marketing as

interactive, yet equivalent functions, especially in the apparel business (Kunz 2010:9).

Merchandising is the income machine producer, profit center of the company and sources of

funds that cover costs of other operations. Also, as mentioned before, it tracks product lines

from the beginning to handling to the end customer. On the other side, marketing activities

help in process of defining the market for the company, creating and shaping the image and

products using the promotion, as well as optimizing and establishing strategies for growth

(Kunz 2010:17).

Visual merchandising and in- store design

Speaking about apparel business and tracking product lines from the beginning to the end,

visual merchandising cannot be avoided. Visual merchandising, followed by in- store design

is the first (and second) step in this process, because it is the first contact between consumer

and the product. Additionally, it can be seen as one of the touch points in abovementioned

merchandising and marketing interaction. Visual merchandisers are the people who take care

of the visual presentations of the windows and in- store displays (Morgan 2011:19). Based on

that it is possible to conclude that their work is the premise for effective promotions, stating

standards for stores and overall tracking of products movements, as well as the aesthetics.

Morgan (2011) stated that there could be large merchandising teams and each of them could

have several roles to maximise the results of their work.

It can seem hard to be able to measure success of the visual merchandiser‘s work. Let us think

as a consumer and remember what attracts our attention. First of allit is a window, and

secondly the in- store design. Before any purchase consumers make, they notice these

environmental points that make their purchase more or less enjoyable. A window that is well-

presented can create overwhelming sales, not suddenly, but in a long- term (Morgan 2011:27).

In- store design, as well as window decorations have the effect in the long- term, so they can

be called investments. For the comparison, the windows are love at first sight and in- store

design is the relationship.As Morgan (2011) declared, it was two- way relationship, because

visual merchandiser needed to use customers feedback in order to improve the environment

and atmosphere of the store in general. It creates and strenghtens professional relationship

(Morgan 2011:27). Visual merchandising in the store can have huge significance in affecting

the customers, making them feel good, because it can happen that sometimes they do

shopping unconsciously, which is the circumstance that merchandisers have to take into

consideration. Based on these premises, emotions, sensations and stimuli, consumers seek for

the inner connections with the messages found within the store.In- store design leads the

35

customer through the store, show him/her a path and logical order, makes them to stop and

finally make purchase (Morgan 2011:112). Of course, it is expected that the style, as Morgan

(2011) stated, vary from shop to shop, depending on the type of products that are sold, and

sometimes on decisions of the managers and the company’s strategy.

When mentioning shelf allocation in the retail stores, it is necessary to highlight overall rule

that refers to Verticality and Horizontality interference, which states that higher priced

products are located in the top rows- vertically, and at the right- hand side- horizontally

(Valenzuela and Raghubir forthcoming). In addition, Valenzuela and Raghubir (forthcoming)

proposed that consumers are aware of vertical, but not of horizontal placement.

Here, we are coming to the belief that there are some parts of behaviour, related to horizontal

and vertical positions, that are conscious and the other that consumers are not aware of.

According to Valenzuela and Raghubir’ research (forthcoming), horizontally schemas are out

of people’s awareness, whereas vertically schemas are related to stronger meta- beliefs that

higher is better. This matter will be discussed further on more.

Which products sit to each other is the starting point in sorting and itis officially called

product adjacencies (Morgan 2011:114). It would be unlogical and even hillarious nowadays

if the socks are placed next to fruits, or ketchup next to pillows. Human brain is very logical,

and by placing similar products next to each other the confusion of customers is avoided.

Positioning the products within the store has a major importance, and it is not only familiar to

retailers but to customers as well. Customers notice bigger, closer, highlighted products, and

their attention is kept by creating gaps between products or introducing a different type of

mixture (Morgan 2011:121). And for sure, they must not get bored.

In- store traffic

Driving in- store traffic can be one significant field of merchandising and it directly

influences the overall shopping experience of customers. Keith Carpentier, Senior Business

Development Manager at Tensator, Inc. thinks that the stores have advantage in providing

memorable experience and immediate gratification (Subramanyan 2013). Merchandising

certainly should not be left to chance and good retailers need to take this into consideration.

There is a whole science in mapping the customers’ in- store traffic patterns. By observation,

the retailers can look for the hot and cold spots- areas of high and low density of traffic

(Retail Customer Experience 2008).

While observing the nature of consumers, there have been three laws indicated by Specialty

Retail Collective (2011):

1. 90 percent of customers will enter store, turn right and walk through the store in the

direction opposite to clockwise.

2. Wide aisles encourage customers to walk briskly; narrow aisles encourage them to

browse more, while clogged aisles make them leave the store.

3. Shoppers are attracted by light.

Taking these basic laws into consideration could maximize the effect of store layout and

overall shopping experience of customers.

36

B2C transactions in retailing

Under this topic, there are several concept needed to be described. First of all, B2C is the

abbreviation for Business to Consumer and represents the approach or the scope of the

observation of some business. Transactions are relations of that business with the ultimate

consumer, or target market. In the most common sense, retailing represents selling goods and

services to those customers that represent the target market (Kunz 2010:75). Despite the size

of the retail store, each product line has to be merchandised. Within the retail, all aspects of

merchandise are included, starting from assortment, pricing, presentation and promotion

methods and technical organization. What is probably the most interesting for this particular

study was the price positioning, which, according to Kunz (2010) could refer to discount,

closeout, off- price, one- price, outlet, warehouse and wholesale. In addition, within

assortment, several categories can be emphasized: boutique, category killer, department,

private brand, specialty and variety (Kunz 2010:76). And the last one, but also important

category are presentation (distribution and communication) methods, presented by Kunz

(2010) as one of the following: big box, brick- and- mortar, catalogue, door to door, Web site,

kiosk, online, party plan or road/street- side cart.

When examining types of retailers in consumer- goods markets and placing the dm stores in

one of the group, a look should be taken at the exact descriptions of the category and dm

goals, strategies and nature. According to that, it can be concluded that dm falls in two

categories, taking some of the aspects out of each. Those categories are mass merchandisers

and specialty retailers. Kunz (2010) stressed that first one were the form of established retail

utilities that use self- service techniques to sell a variety of merchandise categories including,

among others, health and beauty products as well, with broad appeal across income wages,

lifestyles, occupations, etc. On the other side, the latter one creates a large selection of a

limited line of consumer goods (in this case cosmetics, healthy and organic food and baby

products) and defines narrow target group by certain variable (Kunz 2010:77). In the case of

the dm, these variables are age and sex.

Every firm has to adopt the merchandise techniques and methods for their own nature of

business and customers. Each channel has to customize the merchandise plans in order to

work effectively and in a profitable manner. It is alwaysaimed and related to satisfied

customers. Kunz (2010) described how shopping today has changed and most customers have

improved in terms of education,access to information and theirexposition to media and trend

of crave goods. He also points out that shoppers are less likely to be browsing, but more with

a clear picture of the product in the head and want to spend less time and money in one

shopping experience. In this case retailers have big challenges that new ages have brought,

including creating strong brand image, providing enriched assortments and forming fair

prices, because those aspects are at the top of consumers’ searching list. Additionally, the

internet boost has brought higher transparency which can have both positive and negative

influence. Positive influence is on the side of consumers, present in the way of reaching the

consumers in huge geographical area and providing them needed information at low cost.

However, negative effect is presented among the competition, because internet can make

competitors more informed about eachothers, thus creating obstacles to bringing the

attractive, unique and competitive offer to consumers.

37

Pricing

Sale goods can be used as a magnet to draw customers to the back of the store, leading them

past the non- sale items (Morgan 2011:162).

Prices represent the amount of money that has to be paid for certain product. It also can define

the quantitative measure of quality and tool for comparison of products. Within merchandise

sector, list prices and first prices are set up, first one representing foundation in the

manufacturing sector and second one in the retail sector (Kunz 2010:152).From the side of

merchandising, sales can be quite profitable for retailers (Morgan 2011:162).

From the customer side, the sale signage is the important, since it has to be clear, readable and

provide the information needed. This signage is the addition to pricing tickets. The best and

most obvious way to communicate to customers is via signages. Signages are used for many

different purposes, such as showing the content of the part in the store, presenting discount

prices, promotions, price comparisons and offers for products (Arora et al. 2007:6). As Arora

at al. (2007) stressed out, the discounts were messages communicated by signages that

customers had preference to look at. After that comes price comparison and branding.

Another particular finding, that can be applied for dm stores is that women in general terms,

and especially non- working woman are more influenced by signage than men in their

purchase decision making (Arora et al. 2007).

Price changes

Very often, customers connect high price with high quality and low price with low quality.

That happens only if they are not well informed. This may give the opportunity to

merchandisers to sell lower quality products at higher prices (Kunz 2010:195). Price changes

also include sales promotions. They are the part of advertising activity and stimulate testing,

increase demand and usefulness of the product (AMA, as cited in Peštek at al. 2006).

Promotional activities that are related to price discounts can influence impulsive buying

directly (Wansink, Kent, Hoch as cited in Peštek et al. 2006).

What dm is doing is officially called temporary markdowns. Firstly, markdown is decrease of

first price presented in percentage, and temporary markdowns are used for one selling period

(Kunz 2010:210). In the case of dm the period is two weeks and it is used to stimulate

purchase and customers‘ traffic during those days on previously agreed products. These

markdowns can be taken more times during the whole selling period, like dm is doing. In

addition, they are doing high- low promotional pricing. More precisely, it involves periodic

temporary markdowns for traffic stimulation (Kunz 2010:207).

38

FINDINGS The surveys, focus group or other customer related techniques are the tools for getting inside

the brain and mind of the consumers, which is relevant for marketing practices and getting to

certain conclusions. However, more recent explorations use equipment too, like scanners,

magnetic resonance, etc. For the purpose of the research presented in this thesis, several

techniques are used, as mentioned in Methodology part. Hereby, behavioural studies are

applied, according to the advice from Professor Nick Lee, whom I talked to before the

beginning of the whole research process. The only reason is the lack of availability of medical

equipment and the costs it requires.

Predictability of Human Brain The first thing we notice about the individual mind is that minds are individual (Ornstein

1991: 113).

The aim of the experiments conducted was to show, in its most natural way, how the brain

works and to submit some hypothesis stated before in academic works from different authors.

In the research of this thesis they serve as supportive tool which aims to show that, to certain

extent, human brain is predictable and the reactions are scientifically justified. Since the issue

of brain predictability is one of the research questions for this thesis, starting from triggering

the human brain is a good basis for the justification. Triggering the human brain is done via

experiments. Experiments were explained in the Methodology part, so here, the focus will be

on their explanations, results and conclusions. Therefore, in the Table 5, it is possible to see

the outcomes of both experiments which will be explained more briefly further on.

Table 5: The results of the experiments

The experiment number one (Ex.1.) is the simulation of the blind test or Pepsi Taste

Challenge from eighties (Domenegheti 2012). In the four cases out of seven in blind

experiment (Coke and Pepsi), it is possible to notice matching between first and second part.

However, there are certain things that should be mentioned here. In this particular case, M.P.,

whose answers matched, said after the first part: “Now, my answers will not match, I am

sure.” Basically, she was not aware that she decided the same in both cases. When she was

told which glass was filled with which drink, she said: “Now when I know, the Coke is

Participant initials Age Occupation

Part I Part II Part I Part II

M.P. 32political

scientistTaste 1 (Coca Cola) Coca Cola 12 15

S.S. 22 student Taste 1 (Coca Cola) Coca Cola 12 12

S.K. 45 housewife Taste 2 (Pepsi) Coca Cola 12 15

Z.G. 60 retired Taste 1 (Coca Cola) Pepsi 12 12

R.S. 50 entrepreneur Taste 2 (Pepsi) Coca Cola 12 15

J.B. 53economist-

accountantTaste 1 (Coca Cola) Coca Cola 12 12

E.B. 23 student Taste 2 (Pepsi) Pepsi 12 15

Ex.1. Coca Cola/Pepsi Ex.2. Prices

39

better.” This tells a lot. By this sentence, M.P. basically affirmed the whole story about the

blind experiment. So, what actually happens in the brain?

When tasting the Cola, or Pepsi, different brain areas get activated. For example, studies from

before showed that when tasting Coke, active areas are hippocampus, the dorsolateral

prefrontal cortex and midbrain, while those areas do not have significant activation when

tasting Pepsi (Touhami et al 2011). The reason why this is happening is connected with

emotions. It seems like the Coca Cola is more related to emotions than Pepsi. As mentioned

before, Touhami et al (2011) also stated that hippocampus was connected with emotions and

episodic memory and dorsolateral prefrontal cortex was related to goal- directed behaviour.

Activation of these two areas can evidence that the preference for a brand can change, it is

matter of behaviour and not always connected with products’ components. Brand knowledge

positively affected preference (Garcia and Saad 2008:404). The process of “branding” is very

important in preference and loyalty. The branding that is mentioned here is not just the sound,

colour, logo, music, but also the whole spectrum of emotions that the product triggers within

the consumer. The reason why the answers were matching in both part was that the subjects

were talking during the experiment and commenting the sweetness and sparkling of the drink

sample, so they were perhaps leading each other in the direction which is not completely

instinctive and based on inner preference.

The other three cases in experiment showed the deviation. Two of them chose Coca Cola

when they knew what was in the glass, while one of them chose Pepsi. These deviations

meant that the aim of the experiment was accomplished and that was to show that there are

truly patterns of the brain that can be predictable and have reasonable explanations in the

background. Since the first blind experiment of Coke and Pepsi, the tastes of both have

probably changed to certain extent and nowadays it is possible to differentiate tastes better.

Why do some subjects choose Pepsi in the first and Coke in the second part? Damasio (1994)

explained that knowledge required for decision making came in the form of images and

therefore human thoughts came in the form of images, too. Coca Cola, by its advertisement

surely has created images in consumers’ minds and thus tasting the Coke withdraws the red

colour and images of Santa Clause, home, winter, family time, etc. Those images are called

recalled- images and they constitute images of possible future, that might not happen but they

reflect people desires (Damasio 1994). Therefore, it is important to visually affect customers.

The power of advertisement is huge and in the focus group discussion all subjects confirmed

that the Coca Cola has the best ads without any competition. And they remember Coca Cola

advertisements. Lindstrom (2008:50) explained this phenomenon by the theory that Coke had

“affiliated itself with dreams, aspirations, and starry- eyed fantasies of potential idols”. The

single situation in the experiment of choosing Coke in the first and Pepsi in the second part is

negligible and for the purpose of this research can be ignored.

Before making the general conclusion of the experiment it is necessary to mention important

limitation. This was a “sip test”, meaning that there is difference when taking a sip and

downing the entire can. Lindstrom (2008:25) elaborated that in a sip test people tended to like

sweeter products, but in drinking the entire can there was the possibility of high blood sugar.

Therefore, Pepsi usually prevails in the taste test, because it is sweeter, while Coke prevails in

40

the market. The conclusion of the story is that based on those scientific findings it is possible

to see how human brain can be predictable when relying on tastes, preferences and emotions

and that people like something when they are not even aware of it. Those areas under

awareness can be revealed by neuromarketing techniques.

The second experiment can be called successful, because the hypothesis behind this

experiment was from the experiment with beer conducted before, which saidthat more than a

half of number of subjects (around 80 percent) when they were offered to choose between two

prices would choose the lower one, but if they were offered three prices would choose the

middle one (Laja 2011). What happened here was that four out of seven subjects chose the

middle price in the second case and all of them chose the lower price in the first case, as it is

shown in the Table 5. When people want to adapt, their sensors make instant comparisons and

pick the stronger, louder, more delicious, less frightening alternative and the selection

depends on what do we expect (Ornstein 1991:111). During this experiment, the subjects

were also talking with each other and consulting to certain extent, even though the moderator

was consulting them not to. However, that did not change the course of the experiment and I

do believe that in the end they gave the answers they wanted. As it can be noticed, no one

chose the highest price in the second part of the experiment. Comments when choosing the

middle price were in the form: “Golden middle.” Daniel Kahneman said that people do not

have good solution in communicating small risks, because the variations in predictions can be

too wide to be comprehend in decision- making (Greenberg and Lowrie 2012:1115). That

means that for them it was a comfort zone and by choosing the one of the extremes they could

make a mistake. Three alternatives choice is easier to handle emotionally than two trade-off

choice (Zurawicki 2010:127). Zurawicki (2010) also explained what happens in the brain

when comparing three and two alternatives choice: decrease in the activation of amygdala

(decrease in negative emotions) and medial prefrontal cortex (the evaluation of preference),

while dorsolateral prefrontal cortex and anterior cingulate cortex activities increased (stronger

reliance on summary evaluation, greater conflict control). Basically, if a retailer wants to sell

certain product, it should put it in the middle price.

Tapping Into the Consumers’ Minds These days, we’re yanked, tugged, pelted, pushed, prodded, reminded, cajoled, whispered at,

overloaded, and overwhelmed by a constant stream of in-your-face product placement. The

result? Snow-blindness (Lindstrom 2008:46).

Categories of behaviour- R12

Experiments within the focus group lead to the more comprehensive and deeper observation

of consumers and their behaviour in the real surroundings and conditions. That includes

observation in dm stores. For the purpose of getting the more comprehensive and realistic

picture, the interior of dm store is wide, with a lot of light, the products are orderly sorted and

everything has its own place. From the interview with Mrs Čović- Mezet, I found out that

within dm there is a standard called “Category management by dm” that is used by all

assortment managers in dm. It has the goal to manage the category of products, improve the

2 Abbreviation R1- R11 here and in the further text stands for individual research questions.

41

category and influence the exposure and sorting of the products in order to satisfy the

customers’ needs. In other words, their merchandise rules are standardized among dm stores.

During the observation that lasted for two weeks and at three locations, a lot of customers

went through dm stores. The design of the observation itself was described previously in

Methodology part of the thesis. In order to be more focused and not to go too broad in the

observation and research, the focus was on those customers that were paying attention,

considering or buying some of the three chosen products that were exposed to price change

i.e. sales promotion. By observing the customers and coding the observation notes, there

could be some clusters/ categories created. Categories refer to the different behaviours’

patterns that could be noticed during the observation, which were similar in the number of

features.

As for the exact methodology of categorization, it was the continuation of the methodology

used for revision of the observation notes. For the observation notes, the process of coding

was applied, as the first step. Coding is the process of transforming the collection of materials

into writings that speak to outside audience (Emerson et al. 1995:142). According to Emerson

et al. (1995), it has two phases: open coding and focused coding. Basically, the first one is

reading line- by- line to identify any of possible ideas or themes and focused one is done in

second reading and it analyses only ideas of particular interest for the topic. While doing this,

I was constantly questioning the reasons for certain behaviours of observed subjects and

trying to notice the repeated behaviours. Based on that, the categories were crystallized and

the last step was putting the similar behaviours into one cluster. Coding is about that also,

since Emerson et al. (1995:155) said that it was uncertain and not simply discovering what

was in the data, but more linking specific events and observations to more general analytic

categories. During the creation of categories I have been leaded by that, decided on core

themes and grouped related codes together. Some authors, like Richard (2005:90) advocated

that the first step should be descriptive coding, which has been more like quantitative one and

describing a case (mentioning number of involved, gender, etc.). To follow up, I did the

combination of two approaches, first step according to Richard and the following steps

according to Emerson et al.

When talking about the descriptive coding, first of all, the number of observed subjects needs

to be mentioned. Approximately 179 people, mostly women, were examined, observed and

tracked during their shopping experience. The age varied from 15 to 60 years old, whether

they were shopping in the group, alone or in a couple.

During the observation, there were several issues raised from the process. Those issues are

particular behaviours which were unusual and interesting for further reconsideration. The

neural machinery behind some of characteristic behaviours will be explained in answer to

research question number 10. Those behaviours are as following:

- Women are trying (smelling, reading the wrapping material, etc.) different products

and in the end buying the one they did not try at all.

- Customers entering the store are moving to the right side.

- Women are trying the smell of products.

42

- Women do not notice emphasized shelves with items on sales promotion.

- If women spend more time in choosing the product, smelling, reading the packaging,

after consideration of several products they pick the first one tried.

- Women are just looking around, without buying anything.

After careful consideration, observation, coding and categorizing, several categories based on

similar behaviour have been formed. By stating the categories of behaviour, the answer is

given to the first research question. I have to mention that the categories were primary created

based on observation, but enhanced and elaborated by the findings and conclusions from

surveys in the stores and conversations within the focus group. That was the best way to get

more precise picture of behaviours and understand customers better. The observation gives it

a skeleton and the additional research methods put it in the more sensible form.

Category I- Traffic towards the right side

This behaviour cluster is particular for the majority of customers entering the shop. When

asking the customers why they move to the right side, they are not even aware of that

phenomenon and the answer is: “It just feels natural to go in that way.”

Category II- Targeted/ Planned purchase customers

Out of the whole observed sample, 30 of customers were behaving as if they are intentionally

buying certain products, previously knowing which one they needed. This behaviour is

recognized by their questions to sellers in the form: “Where is the product X located?”

Another form of the question was: “In order not to walk too much, can you please tell me

where the product X is placed?” Additionally, this group of customers is particular for the

shopping of some extra products, since they are already in the store. That means that they are

buying other products on the way, not only the planned ones. One more particular situation

that comes into this category is buying products from the list created before. There were two

cases of this behaviour during the observation.

Category III- Hesitance in the beginning and coming back afterwards, plus changing the

decision

This behaviour category can be divided in three typical, noticed and observed types of

behaviour and one sub- category. Firstly, almost ten customers are noticed to try the smell of

several different products from the same product line (for instance, shampoos), and then

going back to the first tried and buying that one. Second, the same process occurs, with the

difference in the last part. Hence, they look around, try the smell of products in certain order

and then buy the one they have not even tried at all. I assumed that this product is familiar for

them from before and that they have already used it. The third type of behaviour is similar,

but with the postponed purchase. To be more precise, customers come to the shelves, look

around the products, try the smell and go away from the shelves (of shampoos, shower gels,

etc.) without buying. After couple of minutes spent inside the store, they come back to the

same shelves and just pick some of the products randomly. The last and the least common

behaviour, as sub-category is decision changing. Customers would quickly decide about the

product, put it in the basket, but after some time in the store, they would come back and return

43

the product on the shelf. This behaviour is interesting, but not so often, since only 2 subjects

were acting in this way. However, I found it quite particular and wanted to find the roots in

brain for such behaviour, therefore I included it in this category as sub- category.

Category IV- Purchase for fun and relaxation

Members of this category would just look around the shelves inside the dm store, try the smell

of different products from different products lines and categories without actual purchase.

Observed subjects are women only.

Category V- Reaction to segregated shelves that are called POS in dm

Customers behaving according to this category are the ones that notice POS shelves, but they

do not buy anything from them. This behaviour was quite particular, because in survey they

would say that they look for the discounts, but they actually do not buy items from these

shelves. The reactions to POS were in the form of shortly paying attention, stopping buy for

several seconds and continuing, looking around while passing by, etc. Only small number

(three out of sixteen) was checking out the products (smelling, reading wrapping material,

etc.).

Category VI- Purchase of the products on sales promotion and discount

Even though this group of behaviour was expected to be the most frequent one, it was not the

case. Customers would buy products in discounted prices from their original shelves, but not

so often from the POS shelves. For the purpose of comparison, six customers bought products

on sales and only two from the POS. One explicit case was when the lady took the Nivea In-

Shower Gel from its original shelf (where it is usually placed) and not from POS, where it

was exposed as “special offer”. As they said in the survey, they bought items on sale because

they thought it was a good value for money and they felt as if they should not miss it.

Category VII- Distracted buyers

This behaviour is particular for the customers entering the shop with their kids, husbands,

friends, while talking on the phone, etc. Therefore, these customers were not able to do the

shopping on their own and looked distracted all the time. In other words, they were not

focused on buying, but rather on talking with friends, keeping eye on the kids and look after

them, concentrating on the phone conversation, etc. The purchase was their “following

activity”.

Category VIII- Long shopping experience

This type of the behaviour was noticed four times among all other, which makes it quite rare.

The customers analyse products in detail, move through the store slowly and pay attention to

all information they can find. The shopping process is long. In a short interview with one

shopper acting in this way, she said that she liked to take it slow and did not let anything to

distract her, because it was her time for relaxing. Plus, these customers wanted to know

exactly what they were buying and to stay informed.

44

To wrap up, Zurawicki (2010:200) asked interesting question regarding the types of

behaviour customers might have and it was: “Do personality types predict the choice of

specific brand?” He elaborated that for example people with negative view of the self were

sensitive for “brand personalities”, meaning that paradigm of “I am what I buy” should be

substituted by “I buy what fits my dream profile” (Zurawicki 2010:200). Therefore, the state

of mind plays significant role in shopping behaviour and different personalities can shop

differently. Even certain external factors can influence them in various ways, like price. The

effect of price is going to be tackled in the next part.

Price effect- R5 and R8

From the interview with Mrs Čović- Mezet, I found out that the prices in dm are standardized

in all branches at the country level. In the process of creating prices they are following the

prices of competition and place themselves according to that. Mrs Čović- Mezet also

indicated that they do price changes for several reasons: sales promotions every two weeks,

seasonal discounts, delisting because of novelties or package changing, reducing prices for the

purpose of getting rid of the stocks or following market trends. In addition, with their

merchandising system they do observe psychologically consumer behaviour to certain extent.

During analysing the results from short interviews in the store, this matter is present in the

answers to the questions number 8, 9 and 15. The form of the questions can be found in the

Appendix A. Number of questioned customers is 13. Pradeep (2010:11) enhanced that when

dealing with the brain and neurology in general it required far smaller sample sizes (about 10

percent of the test subjects required by conventional surveys), because even though the human

brain differed to some extent, the fact has been that the brains have been more alike than

different. First two questions are in the form of Likert scale and the answers are as follows:

Q8: I always check for bargain offer/discount prices of products in sales promotions flyer, ads

or in- store promotion/discounts.

Figure 6.1: Question 8 answers’ distributions in in- store survey

Q8

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

45

Q9: I always actively search for bargain/discount prices of products when making shopping in

retail shops.

Figure 6.2: Question 9 answers’ distributions in in- store survey

Table 6: R4 frequencies of questions 8 and 9 in survey

Q Min Max Frequencies

1 2 3 4 5

Q8 1 5 0 3 1 3 6

Q9 1 5 2 2 4 2 3

The Likert scale range for questions was 1 to 5, which means that the average value of scale is

3. According to that, if the majority answered by numbers higher than 3, then the answer to

the research question that refers to this part of analysis is affirmative. Therefore, research

question number 5 evaluates if the purchase decision making process is affected by price.

Majority (6) of questioned subject answered that they check for bargains and discounts in ads,

flyers or in- store sales promotions (question 8). Additionally, three customers answered that

they agree with this claim. That makes nine out of thirteen questioned customers who have

affirmed this question. During the conversation in the focus group, women discussed that

sometime ads about the promotions remind them that they need something. One of them

admitted that she has followed dm on their Facebook page, where they put promotion

catalogues and that she often would go and buy something that she actually did not need, but

it was in discount. This issue is very particular and it can be answered by neuromarketing.

Further on, I will explain how and why. Referring to question number 9, majority of

customers could not decide, meaning that they were not sure if they always actively search for

discount prices in retail store or not. However, from the Table 6 it is possible to see that the

positive side of this question (agree and strongly agree side) is higher than negative (disagree

and strongly disagree) by 1. This can be supported by the answers to the open questions. The

subjects claimed that they did not plan to buy discounted product, but they saw it in store and

got attracted to by good value for money and they wanted it after they had seen it at sale

promotion. Putting all these pieces together, it is possible to conclude that the purchase

Q9

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

46

decision and all buying process are affected by the price and price changes in wider picture,

ignoring minority of opposite opinions and situations.

Now, I would like to refer to the role of neuromarketing in this story. Therefore, I will take a

glance to the research question number 8 and try to answer it. From the previous text, it is

possible to distract certain consumers’ actions that are not consistent. For example, they know

they buy something only because it is on sale and not because they need it. Further, they say

they check the promotions, but yet do not buy from sales promotion shelves (POS in dm).

Rather, they do buy products at their regular prices. Why this is happening? It is something

that can be discovered by examining human brain. All answers are hidden there and the

neuromarketing is the channel that leads to them.

The effect of prices can be applicable in the process of brain connected with reward system.

In 2008 there was a study about the effect of prices and congruence of neural activity and

rewarding. As Alčaković and Arežina (2011) said, if subjects knew they were drinking

expensive wine, they would like the taste more and activity in the brain reward system was

growing. Therefore, marketing activity referred to the price and increased the perception

proportional to the price level. Before the act of purchasing, nucleus accumbens is activated

and it correlates with product preferences, while high prices for example activate the insula

because of the anticipation of loss (Javor et al 2013). Thus, high prices can affect dually,

anticipation of loss or feeling of reward/ utility. If it is a reward, then amygdala activates. In

search for rewards, human brain leads to winning them. In 2008, Plassmann confirmed by his

experiment multiple theories that claim the price acts as signalling tool (Kalliny and Gentry

2010). The experiment included five different wines which were tasted by subject one by one,

first by low and after by higher price (the same wine two times). Kalliny and Gentry

(2010:102) retold that the subject confirmed enjoying the higher- priced wines more and

fMRI showed increased blood-oxygen-level-dependent activity in medial orbitofrontal cortex-

the area encoded for experienced pleasantness. Clear relation is that the perceived price

affects experienced pleasantness of consumption (Kalliny and Gentry 2010). By the

application of neuromarketing techniques and findings, it is thus possible to find what human

brain considers as reward and according to that justify price offered for certain products

particularly and categories of products generally.

Additional aspect is taken out from the Pradeep’s (2008) research context. He indicated that

consumers do define a “valid” price and there are limits of price elasticity in the consumers’

minds (Pradeep 2008:152). Pradeep (2008) provided Deep Subconscious Response test,

checked if particular prices are ridiculously low or ridiculously high to them at subconscious

level and thus defined price elasticity (how much the price can be stretched).Therefore, the

retailers like dm need to take into consideration that sometimes consumers can perceive low

price as low quality and vice versa. Mrs Čović- Mezet believes that neuromarketing can be a

good tool for expertise in creating new needs for customers, satisfying their desires in a better

way and thus increasing consumption.

47

Buying process in dm and purchase decision making- R3, R4, R6 and R7

According to the observed behaviours within the store, the whole category was named by the

customers that were behaving as they knew what they wanted to buy. They were approaching

directly to the shelves, carrying lists, moving fast and not considering products much. That

was behaviour related to the planned purchase. However, the surveys showed that those that

bought products on sale promotion were not actually planning to buy the items. Thus, it is

possible to see inconsistency in behaviour. The impulse or compulsive purchase is more

interesting for examining for this particular matter. Compulsive buying is what has been

interesting for marketing experts for years, especially those in the field of consumer

behaviour. However, Javor et al. (2013) considered that it was significant for both neurology

and consumer neuroscience and that they have the common interest in examining what

happens during the process of compulsive buying. It somehow shows that the consumers are

pushed to buy the products by retailer, but the interesting thing to think about is how people

react to that, how come that they do not show resistance. For inconsistency in behaviour and

differing in claims, it is hard to answer the research question number 3 of the thesis with great

precision. Among the dm customers it is hard to make clear line and ratio between planned

and unplanned purchase. Even loyalty does not play significant role. The focus group

conclusion is that they are loyal to dm as a store in general, but not loyal to particular

products, at least not the ones from the categories of shampoos, shower gel or lotions. But the

one opinion is accepted by all within the focus group and that is that they are becoming

consumer robots because retailer makes them buy products that they do not actually need, but

they cannot figure it out in the moment of buying. This claim is also supported by the

shoppers within dm stores, where 9 of them, out of 13 answered that they think that retailers

make them consumer robots with different activities.

That upgrades by the analysis for the fourth research question and issue of conscious and

unconscious purchase. If customers are aware that they can be manipulated by the price

reduction, decorations, TV ads or in- store atmosphere what makes them shop “without

thinking”? Majority of dm customers, as mentioned before, enter the shop with plan, but buy

additional items on the way. In the surveys provided inside the stores, 7 out of 13 respondents

answered that they are not aware of the processes of their brain and that they cannot control

their emotions (question 12 and 13 from the survey). This matter was in detail explained by

the focus group participants. Regarding the questions of consciousness and dealing with

emotions and brain processes the opinions were divided in two clusters: money- constrained

and emotions- triggered. First group was claiming that they do not think and calculate if they

have enough money, but calculate a lot if they are limited by the budget. However, even those

are affected by some attractive offer and they think about it after and go to buy it when they

have enough money. On the other side, there are the ones who buy without thinking and it

depends on their mood in the particular moment. Emotions prevail over the reason and they

do not care much about the price. Therefore, dm customers are both conscious and

unconscious about the purchase decisions. It is challenging to uncover how it is possible to

affect them unconsciously and satisfy their inner desires, which they are not aware in the

moment.

48

Unconscious reactions are the ones shown in the phenomenon of not noticing POS shelves3

inside the dm shop and claiming in the survey and focus group that they do search for

products on sale promotion and discount prices. By observation, it was obvious that

customers from the observed sample pass by POS shelves. The other reaction is that they give

it a short glance and move on without buying the product. Additionally, customers buy

discounted- price products from their original shelves, and not exposed ones. That was

confirmed in the focus discussion as well, where subjects confirmed that they notice product

rarely on POS shelves and rather buy from regular shelf product at discount price. If you ask

them the reason for that, they would not know the exact answer or they would say that it has

not been highlighted good enough. Thus the answer to sixth research question can be drawn

from the observation itself, unquestionably in negative tense. Why this is happening is the

issue that can be explored within neuromarketing terms and frames. Inconsistency between

claim and behaviour goes beyond the understanding of behaviour or interpretation of

discussion answers. As mentioned before, the human brain is oriented towards reward and all

processes conspire in the system of achieving it. Therefore, the behaviour is explained

according to that as follows. Behaviour of the humans is closely related to the reward system

which is present in the old brain. It is the system opposite to the pain, meaning that the human

brain strives to avoid it and thus getting the reward as an explanation for the behaviour.

Reward prediction is the process in human brain which includes several parts. According to

the Javor et al (2013), anticipation of loss, pain or punishment activated insula. The whole

reward system, on the other hand, is based on meso- limbic pathway which includes ventral

tegmental area- VTA, nucleus accumbes- NACC and the limbic system as well as

orbitofrontal cortex OFC (Javor et al 2013). Javor et al (2013) also explained that nucleus

accumbus was integration site, received impulses from orbitofrontal cortex and expected

reward, while amygdala and dopamine neurons predicted reward. Of course, the reaction to

reward stimuli and the intensity of all these processes are very individual. But if the general

example is taken, like receiving the monthly payment, there are some evidence needed to be

elaborated. Cortical networks implicated in this process are the same ones that are active

when taking a chocolate, morphine, listening to music, looking at attractive faces, practicing

sexual activities or even watching sport cars (Senior et al 2011). These “reward” networks can

predict further activity in the brain regions. After the reaction to the stimuli, certain behaviour

happens, which is motivated by the reward- purchase, productivity, effectiveness, efficiency

etc. At this moment, dorsolateral prefrontal cortex (DLPFC) is active and it integrates goals

and reward information (Javor et al 2013). Neuromarketing techniques can confirm if

consumers deep down under the surface evaluate the POS shelf in dm as a reward or for them

it has “wallpaper effect”, something that they ignore by the time.

During the buying process within dm, there were a number of customers who were distracted

by external factors, as explained in the behaviour category VII. How does it happen is the part

of analysis in the research question number 7. While distracted by some external factors

occurring at the same time as shopping experience, it is hard to conclude if the buying process

is the main or activity in the background. Thus, it is hard to evaluate the buying process, since

it can be done automatically, without paying attention to it. For instance, if a mother comes to

3 POS are portable shelves in dm where the products on sale promotion are exposed.

49

the store with a kid, and needs to take care of him/her, it is her number one activity, because

the fact is that kids need to be taken care of. All other stimuli that mother is exposed to within

the store are also present. However, the reactions to stimulus go through the certain process

lasting for a half second before they reach consciousness. That means that we are not actually

aware of any event at the exact time it happened but half second later. Ornstein (1991)

explains this phenomenon of the attainment of neural adequacy as filter that stops some trivial

information to enter the human consciousness. If some events happen in the time quicker than

half a second, responses to them are unconscious (Ornstein 1991:150). As a result, the

distracted purchase can be in highly level done unconsciously. Further research of this matter

could be supported by neuromarketing techniques, whereas the processes in human brain

would be tracked while s/he is purchasing with kids, talking on the phone or chatting with

friends about some topic unrelated to buying.

Painting the “black box” of buying process and purchase decision making- R9

During the observation and exploring for the first research question, many categories of

behaviour were able to be noticed among the dm customers. In addition, surveys and focus

group have helped to shape the whole picture in more consistent way. In research question

number 9, I focused on explaining the background of processes in human brain during the

whole process of buying. It is important in order to show the complexity of the process itself

as well as to stress out the importance of being familiar with them in order to elevate the

understanding of customers on higher level.

Somehow, everything starts from the commercial. I would like to mention TV and other

media channels’ advertisement and look back on them briefly. Purchase decisions start from

them. Fugate (2007:389) claimed that even advertisement that receives little attention can be

quite influential in purchasing intentions. During the focus discussion, subjects were

categorical in disliking the TV ads, despite the few of them (for particular products) that they

like, because of the context. If you ask an average consumer if he/she remembers some TV

commercial, his/her face would go blank (Lindstrom 2008:38). However, they would say that

they notice the advertisements, like the answers on the first question from the short interview

(in Appendix A) were majority positive (2 out of 13 answered that they disagree with the

claim). There are couple of reasons why the consumers’ memories regarding the TV

commercial are like goldfish memory lasting for seven seconds. The most obvious are: media

assault, which makes the brain to grow thick and self-protective and lack of advertisers’

originality, which is the important factor behind consumers’ amnesia (Lindstrom 2008:38).

Inevitable fact is that the success of the product needs to be measured by consumers’ memory

of that particular product. It is possible to conclude that the companies waste large amounts of

money on something that has no success. The point is that it is extremely hard for companies

to predict if consumers will respond to their products or not. And neuromarketing could be the

answer to their prayers, as Lindstrom (2008) stated. Ornstein (1991) explained that

unexpected and unusual event had very fast access to people’s consciousness, while

unchanging, usual and monotonic noise, appearance were put into background. This means

that both neuron and the mind react easily to new information and to shocks. Ornstein

(1991:109) said: “When an event continues, we stop noticing it.” The same happens with ads.

He continues with the explanation of these, when saying that human minds operate

50

economically, and they stop responding to the things that do not change, thus leaving the

neural room for those that are changing.

If the process of buying and creating need in the ads fails, the emphasis should be put on the

activities within the store. Starting from the visual effects in the store, to disposition and

behaviour of staff, everything conspires to provide attractiveness for customers. For instance,

dm customers involved in focus group within the research for this thesis were describing the

dm as a way above all other similar retail shops. They feel comfortable, personnel is

professional and kind, the store is clean, tidy, lightened and the products are visible and easy

to find. One of the subjects even said that she usually just has to buy something, because if

not, she would feel sorry.

After entering the shop, there are decisions within the buying process that refer to the brand

preference. Why do customers prefer one brand over other is the question that can be

addressed to brain scientists and consequently to neuromarketers. Part of the brain responsible

for the preference judgements is called ventromedial prefrontal cortex (VMPFC) and it is

located in the front part of the cortex of human brain (Javor et al 2013). What is particular for

this area is that in the blind testing, there is no difference in response, while in open testing,

when subjects know about the brand, hippocampus and the DLPFC showed activity according

to the brand preference (Javor et al 2013). This is the general matter. But Javor et al (2013)

enhanced that when talking precisely about the taste preference, like in the case of Coca Cola

and Pepsi, VMPFC was active, and when the judgements were based on both sensory and the

brand, hippocampus and DLPFC were active. Both of them are located in the midbrain.

Increased reaction and preference of the brain for certain brands is, as Lee and Senior (2008)

mention, triggered by the interactive relations between information of the brand itself and

ambiguity. In other words, brand information lowers the ambiguity and thus puts preference

at the higher level. For example during the blind test, VMPFC reflects the “cerebral

preference” towards one of the two brands (Touhami et al 2011).

Not only brand preference in the form of information and ambiguity influence the buying

decision. Huge impact is made by the emotions, memories and senses. This explains why dm

customers, especially women, during their shopping process taste the smell a lot, for instance.

The memories are triggered by the senses and probably at most, the sense of smell. The

logical key for advertisers and marketers to use is to engage customers’ brains and make

scents available to delights. Smells that human encounter provoke recollection of images and

visual interpretation of events from the past. In other words, it is the whole experience. The

first contact should be smell. The reason for that is, as Gerald Zaltman, NeuroFocus Advisory

Board member, explains that if a TV ad is showing a person tasting aroma of fresh coffee, it

can trigger olfactory senses in watchers (Pradeep 2010:47). Since the dm products are

majority cosmetics ones, and the target market are women, the smell is even more important.

The issue of smell will be explained more in the next part that refers to the roots of consumer

behaviour in the brain. According to Pradeep (2010), women had much more sensitive noses

than men and were better at connecting the smells to particular experiences, words or pictures.

The importance of sense stimulation was supported by the claim within the focus group, when

the one of ladies said that she got attracted by the products wrapped in decorative paper and

51

later on she stressed out that she got amazed by nicely decorated windows of the shops. In

2008, there was a research in which the fMRI was used to measure the difference activity

when the customers were exposed to attractive and unattractive packaging (Kalliny and

Gentry 2010). Further on, as Kalliny and Gentry (2010) described, the attractive packaging

triggered brain areas for visual attention, memory and reward, while unattractive ones

changed the activity in brain areas for research conflict, uncertainty, disgust and expected

risk. Therefore, sense stimuli are of high importance.

Seductiveness of neuroscientific findings- R10

Ignoring neuroimaging as a way to understand consumer behaviour would be as absurd as

astronomers refusing to use electronic telescopes (Morin 2011:132).

Roots of consumer behaviour come from the “buying brain”

According to the answers to previous research questions, so far it has been possible to

conclude that certainly it is possible to find the roots of observed and noticed consumer

behaviour patterns in human brain, which falls into the scope of research question number 10.

However, in this part, I would like to wrap up that story and disassemble behaviours and

processes.

Starting from the broader scope, when people have thoughts or ideas, scholars say that their

brain lights up like a Christmas tree, but the fMRI does not say why this is happening (Green

and Holbert 2012). There are many questions to be asked in that manner starting from the

psychological processes behind “lighting up”, which area to focus on or which brain areas are

involved for which reactions. Therefore, as Green and Holbert (2012) stressed out, the tangle

foundation of neuroimaging was neuroscience theory and statistics. It is impossible to ignore

that there certainly will be a “black box” that will always remain a bit of mystery, since the

human brain is complex organ. However, we do witness every day that people, who are

expected to be logical creatures, very often do not make their decisions based on logical

procedures. Consumers do make irrational choices by incorporating more internal and

exogenous variables into the basic economic model, which made the illogical choices seem

more rational even not in purely economic sense and that is something marketers have

accepted (Fugate 2007:389). Neural dance can be measured, as psychiatrist Carl Marci says,

through non- conscious activity, emotion- based signals that frame the decision of whether to

buy a product or not (Bartelme 2012).

It has to be taken into consideration that if one observes the activity in certain cortical region

as a response to some task, that does not mean that this particular region is necessary for the

task performance, rather it can be connected to anticipation of future, motor functions or some

side effect (Lee and Chamberlain 2007:25). However, it is relevant that investigation based on

cognitive neuroscience can extend the knowledge in organizational issues. Lee and

Chamberlain (2007:33) referred to that by claiming that it could solve the debate over “the

manner in which consumers make decisions about different brands”.

In the following Table 7, I am planning to present characteristic behaviours observed in dm

stores and neurological and psychological explanations behind those behaviours. For the

purpose of transparency I chose to present these relations in the Table 7. Additionally, it is

52

easier for the reader to get clearer perspective. In the left column, B1 to B11 stands for

different behaviours noticed, while N&P stands for neural and psychological machinery

behind individual behaviour.

Table 7: Neural and Psychological Machinery behind Consumer Behaviours in dm (Table

created by Anida Krajina)

B1

Women are trying (smelling, reading the wrapping material, etc.) different

products and in the end buying the one they did not try at all (familiar from

before).

N&P

Assumption behind this behaviour is that the product they did not try is familiar from

before. This assumption is based on the claims of customers in the shop (in the in-

store interviews). The particular actions within this behaviour are smelling

shampoos, shower gels and reading the wrapping material. The smelling will be

explained in the next section. As for checking the wrapping paper, the power of

visual senses is employed. What actually happens?

First of all, the critical area for normal decision making is in ventromedial prefrontal

region and it is confirmed by subjects’ inability to make decisions when this area

was damaged (Ambler et al. 2004). Some authors, like Lee and Chamberlain (2007)

supposed that enhanced activation of primary visual response in the occipital cortex

could be caused by subjects’ intended purpose of perception (more complex brand

choice). That means that subjects’ brains recalled previous experiences or

associations with the brand. There is another prove for this, also mentioned by Lee

and Chamberlain (2007) when Broca’s area- a brain region associated with process

of speech activated for low- salience brands. Therefore, what happened was “silent

vocalization” (Lee and Chamberlain 2007). This reaction was confirmed in Lauri et

al. (2012) research as well, where the subjects’ brains showed the process of silent

reading of concrete words. When information is received in the form of a picture, it

is processed for shape, colour and location and immediately via hippocampus it

triggers memories, which are stored in cerebral cortex and processed by amygdala

(Wilson et al. 2008).

Herby, one question arises: Why do at the end consumer choose familiar products,

even though they analyse others? That is the issue of familiarity.

This feeling of familiarity is, in other words, awareness of the previous occurrence of

an event and it magnifies the sensation much more comparing to unfamiliar

(Zurawicki 2010:83). Pradeep (2008:120) explained that we loved novelty and

change, but at the same time had strong need for constancy and commitment. If the

brand is recognized by the consumer, their prefrontal cortex is active and the brain is

thus engaged longer during shopping experience (Garcia and Saad 2008). It is

expected to be taken into the consideration the fact that cognitive processes involved

in making purchase decision are much more complex and cannot be reduced to the

single area activation. As Ariely and Berns (2010:286) explained this matter, using

striatal orbitofrontal cortex activity as a representative of “liking” and the insula as

53

“disgust- meter” was too simple to be used in a real- life setting.

B2 Women are trying the smell of products.

N&P

Olfaction, as the oldest of our senses (Zurawicki 2010:21) is powerful trigger and in

combination with other senses can provoke reactions, wake up emotions and cause

behaviour. The deepest and the most primitive part of our brain is located close to

amygdala and hippocampus (Pradeep 2010:45). Considering the amygdala is centre

for emotion and memory and hippocampus responsible for storing memories, the

smells are thus mainlined directly to human centres for emotion and memory. The

memory that plays crucial role in recognizing smell is scientifically called episodic,

the most developed in humans, and matures around the age of five (Pradeep

2010:46).

Behind this story is the fact that smell differs from other senses because it goes from

nasal cavity to olfactory bulb and from there directly to the hippocampus (in the

limbic system), which means that neural projections do not cross to other hemisphere

through thalamus (Zurawicki 2010). This direct connection, Zurawicki (2010:22)

explained, suggested that a smell had a great potential to evoke emotional memories

and whether aroma was pleasant or not depended on the memory with which each

person connected it. In other words, dm customers, while smelling the product are

exploring the treasure chest of their memories.

B3 Women do not notice emphasized shelves with items on sales promotion.

N&P

Participants of focus group as well as shopper inside the store, when asked the reason

why they do not notice these shelves (called POS in dm), they simply say they are

not so noticeable or that they do not know the exact answer. In the part of this thesis

talking about buying process in dm and decision making I mentioned the time

needed for some stimuli to come into human consciousness.

When something happens, it evokes some neural activity in the cortex, but the

stimulus needs to be strong enough to keep the neurons in cortex active and make for

neural adequacy half second later (Ornstein 1991:149). Speaking more

understandable, somehow our brain, below our awareness, spends few milliseconds

deciding whether we should be aware of some event or not. When talking about the

shelves that are not noticed by the customers, mainly it should evoke visual centres

at first.

B4

dm costumers buy products at discounted (or lower) prices not from the

emphasized shelves (POS), but rather from the shelves where those products

are usually placed.

N&P

The respondents in the focus group were not able to give the answer to this question

directly. More or less, they just said they are used to finding those products in the

regular shelves. However, inside the shop, when customers do not pick up product

from “promotion shelves”, but from the regular ones, it is possible to bring up issue

of “reward”. However, this is just assumption, and the suggestion is to be explored

54

more in the future.

Additionally, there is the question if those products look more attractive at their

regular shelves than at the ones for sales promotion. Ohme et al. (2009) provided the

study which showed that consumer’s brain could produce different reactions to

marketing stimuli, even if, at the conscious level, consumer did not recognize any

differences between the stimuli. That advocates that there are undercover processes

at subconscious level that consumers are not aware of. This might be interesting field

to research.

Obviously, emotions are highlighted when consumers are exposed to strong stimuli,

the ones that trigger their self- reward centre and feeling of pleasure. Tiny nucleus

accumbens (NAcc), an area that is actually containing self- reward centre is highly

activated when attractive products like sport cars are viewed (Fugate 2007).

Therefore, Fugate (2007) concluded that product designs that were producing

pleasure were probably more likely to be purchased than those that did not. Eser et

al. (2011) explained how NAcc actually received inputs from dopaminergic neurons

in the ventral tegmental area, which was the mesolimbic pathway connected to

reward, pleasure and addiction. Additionally, probability and magnitude of gain

activates the mesial prefrontal cortex (Wilson et al. 2008:393).

B5

If women spend more time in choosing the product, smelling, reading the

packaging, after consideration of several products they decide for the first one

tried.

N&P

It is connected with the level of importance the brand represents for the person. It

seems that higher level of brain activation when assessing the brand/ logo means that

the brand is more important to the person (Fugate 2007:388). The knowledge of the

brand and its importance plays significant role in the position of that brand in the

market. As Pepsi and Coke experiment showed, what brain “knows” about Coke is

more important than what it “feels” about Pepsi. After seeing the product, visual

cortex in the back of the head activates, during checking the product (turning around)

the mind triggers memory circuits in the left inferotemporal cortex, slightly above

and forward of the left ear (Eser et al. 2011).

A phenomenon called “time inconsistency” suggests that the brain operates in two

radically different ways. One part, the “reward in the future” part that operates out of

the prefrontal cortex is fairly rational (from an economic perspective). The other

part, the “immediate gratification” part operates out of the more primitive limbic

region and behaves in an emotional, selfish and largely irrational (from an economic

perspective) way (Fugate 2007:390). The researchers say that act of deciding

whether to buy a product or not lasts 2.5 seconds (Eser et al. 2011). That means that

in the first 2.5 second of the contact with the product, the brain decides whether the

purchase will happen or not. Eser et al. (2011) elaborated that when product was

registered as “preferred” by the brain, the right parietal cortex switched on, this time

above and slightly behind the right ear.

For this behaviour, it was particular that women take in the hand every product they

observed and there is an interesting explanation for that. Zurawicki (2005:85) wrote

55

that “touching products stimulates the desire to buy by conferring the sensation of

ownership.” Additionally, he explained that this applies to neutral impressions as

well, which can clarify dm customers’ act of taking each product from the shelf in

choosing process (Zurawicki 2010:85).

B6 Women are just looking around, without buying anything.

N&P

In the focus group conversation and during interviewing within the shop, women

claimed that sometimes “it feels good just to walk around the dm and look through

the shelves, because in that way they relax and have fun”. This claim is on the side of

dm atmosphere within the shop and overall perception of its consumers. On the other

side, the general perception of dm store for focus group participants was highly

positive. The dm store is full of warm colours, and warm colours do attract

customers (Lubin 2011). “Feeling good” is the expression of pleasure (Zurawicki

2010:56). Understanding the nature of pleasure is crucial in defining the consumers’

decisions.

It is possible to conclude that visual centres are highly active with dm customers,

because focus group participants talk about aesthetics, exposure and light. Brain area

for vision control is much older than the one used for language and therefore, many

marketing scholars advocate that marketing stimuli must be more visual and that any

talk should be accompanied by visual metaphor (Fugate 2007: 389). It is the reptilian

brain. Particular for that brain part was, according to Morin (2011: 134) that it could

process visual stimuli without use of visual cortex, and this was why people prefer

images over words and experiences over explanations. Consumers are exposed to

millions of stimuli every day, whether it is print advertisements, TV advertisements,

or directly products and signs in the store. It has been more than 10 000 messages per

day, as Morin (2011:135) mentioned. What actually happens inside the brain when

people look at products in dm and when they look around the dm store shelves? The

light itself activates around 125 million visual neural receptors, rods and cones (in

each eye), then those signals travel to midbrain, which coordinates eye movements,

while the other signals pass through optic nerve fibers, left side of an object is

received by the right side of the brain and vice versa (Wilson et al. 2008). The visual

reaction play significant role in the process of evoking emotions.

According to Lee and Chamberlain (2007:34) emotions played critical role with the

basic theory behind referring to somatic market hypothesis, which indicated that

emotions were triggered before and after the decision making process. They have a

huge power in guiding the decisions people make. It relies on shopping decisions as

well and overall shopping experience (even without actual buying). Bartelme (2012)

in his article mentioned the research with Campbell Soup, when it redesigned its

displays and labels (adding steam to pictures of soup) and thus provoking emotional

reactions within consumers, because the images suggested the food was warm. In the

same way, visual experience gained by dm consumers triggers their emotions, and

that hides between their claims: “I just feel good inside”.

56

B7 Customers entering the store are going to the right side.

N&P

During the conversations with dm customers within the focus group, they were not

quite aware of this behaviour, meaning that the process is done unconsciously. Why

is this behaviour particular? This might be interesting, especially for merchandising

(assortment for example), because if consumers mainly look at the right side, the

products wanted to be noticed and sold should be arranged according to that. In his

article at Business Insider, Lubin (2011) claimed that most stores moved customers

from the right to the left and it was not accidently that the products likely to be

bought were along the right side of the aisle. The explanation for moving to the right

is in the fact that most of the people are right footed, they prefer to turn right and like

to walk counter clockwise through the store (SRC 2011). SRC (2011) also mentioned

the studies that showed customers looked to right wall at a 45 degree angle from the

entrance. That means that this area is an incredibly important visual cue to dm

customers. However, exact processes in human brain have been unknown and could

be the subject of future research frames.

B8 What happens during long and careful shopping of dm customers?

N&P

When consumers were highly engaged in shopping process there were several brain

areas that were experiencing higher activity, as Fugate (2007) indicated:

- The orbital frontal cortex (where emotion and cognition are integrated);

- The temporal pole (engaged in accessing memory);

- Fusiform gyrus (implicated in facial recognition).

Therefore, in the purpose of better understanding of this process, the more customers

are engaged, the more memories are dragged out and they recall faces, probably all

experience they had before with the retailer and they are consequently more active in

integrating emotional and cognitive information. Additionally, Lindstrom (2008)

claimed that studies have shown that more stimulated customers were, the harder

was to catch and keep their attention. If there is extreme passion for the retailer, there

are two parts of brain that will light up: amygdala, recalling the emotions and

anterior cingulate gyrus, deciding between good or bad (Fugate 2007:390). The brain

thus squeezes incredible amount of memories, facts and emotions into a rapid

response dictating what consumer puts into shopping cart. Very highlighted reason

behind consumer behaviour and decision making is searching for reward or avoiding

punishment. Additionally, Ambler et al. (2004) claimed that if products were equally

unfamiliar or equally familiar, the decision making lasted longer. It should not be

forgotten that dm customers are mainly women. Why this has particular impact? As

Pradeep (2008:72) said, the female brain, compared to male, has had four times as

many neurons connecting the right and the left side of the brain, meaning that she

processed information both emotionally and rationally at the same time. Therefore,

her decision making can be much longer and more complicated than males’.

57

B9 Women choose a product, put it in the shopping cart and after some time and

looking around, they return it to the self and take another one.

N&P

This behaviour background hides behind emotions again and the impulse reactions of

the non-thinking brain. In the past ten years, one of the most interesting discoveries

regarding emotions was the one by the American neuroscientist LeDoux. His work

proved that the amygdala has privileged status of “emotional guard” and it has the

ability to take over the power in the brain (Goleman 2012:17). Goleman (2012)

explained the process: signals from the eyes and ears firstly go to thalamus and then

through just one synapsis to amygdala, another signal goes to neo-cortex, the

“thinking brain”. Therefore, the explanation is clear. This allows to amygdala to

react before neo-cortex, and therefore, some decisions are made “without thinking”.

The circle explains the power of emotions over the reason (Goleman 2012).

Fugate (2007) explained the phenomenon as activation of limbic system in the

animal brain (reptilian), which was impatient and often leading to rash choices. That

happens when consumers choose the product “without much thinking”. On the other

side, it does happen that they change the decision or behaviour abruptly. The frontal

cingulate takes advice from the both prefrontal cortex and limbic system, then

chooses which to follow and if even small changes in conditions happen it can make

it go from one choice to the other (Fugate 2007:386). That happens when consumers

are hesitant.

B10

During the focus group and survey within the stores, majority of shoppers

claimed that they were searching for low prices, but according to observation

conclusions, actual shopping was not done according to that- meaning they

would rather buy the product which was not on sale.

N&P

When it comes to purchasing decision, shoppers are highly motivated by what makes

them feel good (Forbes 2013). If the decision is risky for any reason, it appears to

asks for increased cognitive effort comparing to non- risky ones, because during the

fMRI observation, prefrontal and parietal cortices are active (Garcia and Saad

2008:403). In addition, emotional processing is also present. Emotional processing is

included more in distinction over product preference and prices (Garcia and Saad

2008). This feeling of reward and all reward system of a brain aforementioned in this

thesis can explain why some customers buy more expensive products and choose

them over less expensive. The famous experiment that proves that consumers choose

the more expensive product just because of the feeling of “reward” is done in 2008

with the various kinds of wine (Garcia and Saad 2008). Participants were made to

believe that they tasted the wines of different prices and their pleasantness increased,

as well as neural activity when tasting more expensive wine (even though all of the

wines were the same). Medial orbitofrontal cortex (OFC) activated when consumers

were told the wine was expensive versus inexpensive (Ariely and Berns 2010:287).

As an addition to aforementioned effect of price, price differential as Eser et al.

(2011) claim is difference between what is subject willing to pay and displayed price

58

and is correlated with activation in medial prefrontal cortex (MPFC). Sometimes, the

customers are willing to pay more than they actually have to pay.

B11 Women identify with each other, share experiences, advice one another and are

prone to react to recommendations

N&P

This behaviour was concluded from the focus group discussion and in- store

behaviour of the groups of women that were coming. Women brain speaks out and

share information about the experience (Pradeep 2008:76). What makes people want

what others have or at least try that? The answer is mirror neurons. Again, it has

strong roots within the brain. Mirror Neuron system at women is enhanced (Pradeep

2008:76).

This field has been one of the most attractive and exciting within neuroscience.

There is a whole theory as a basis for examining Mirror Neurons. Mirror Neuron

theory says that if one person sees other person performing an action, for example

eating, the first person automatically stimulate the same action in the brain (Pradeep

2010:95). Basically it is like a person has certain template in the brain for the action

performed. There are a lot of examples of experiences in the environment where the

knowledge of Mirror Neurons can be applied and used. For instance, the familiar

term “halo effect” is based on the Mirror Neuron theory. As Pradeep (2010:99)

explained, Mirror Neurons operated in the subconscious and it has been happening

all the time, without the possibility to turn it off. He also mentions that women have

more active Mirror Neuron activity in general than men do. Therefore, while

shopping for cosmetic products, women rely on comparison to other women,

recommendations and popularity of some products within their social group. During

the conversation within the focus group these ideas were intertwined. Additionally,

during the observation and short interviews in the stores, one of the women, for

example, confirmed she was persuaded by friend to choose the product, while the

other claimed she saw her friend using it and wanted to try. When people observe the

emotions and behaviours of others brain activation patterns are quite similar to

situation when people produce analogous actions themselves (Zurawicki 2010:238).

Bartelme (2012) explained the research by Marci, who showed that human brains

were designed to be sociable and via mirror neurons people have felt and sensed

what others did.

Generally speaking, after one study conducted by Ambler et al. (2004) that included body

care products as well, the time for different neural reactions was defined. Therefore, this can

be taken as model and time-frame in which the whole process of decision making of dm

customers (or any other customers in retail business) can be put and observed. Table 8 shows

the parts of the brain and the time of the response. According to Ambler et al. (2004:255),

stages refer to the senses included in the process of stimulus analysing.

59

Table 8: Time of response inside the store for different brain regions (Ambler et al. 2004)

Stage Brain part Response time after the stimulus

(in milliseconds)

V- visual Occipital cortex (OCC) 90

T-

temporal

Left anterior- temporal cortex (AT) and

middle- temporal cortex (MT) 325

F- frontal Left interior frontal (IF) cortices 510

P- parietal Posterior parietal cortices (P) 885

As aforementioned OCC is the visual area, AT and MT are responsible for memory recall, IF

encompasses motor speech area of Broca and P is the centre of complex sensory input,

association, higher order integration and motor planning (Ambler et al. 2004). Therefore, the

visual response is primary followed by recalling the memories connected to what eyes

perceived, after that aforementioned “silent vocalization” in Broca area happens and in the

end complex process of delivering decision. Ambler et al. (2004) gave the overall conclusion

that brain choice engaged brain longer and in more complex ways than height discrimination,

and that the brain used vocalization.

There is the very simple framework of applying EEG measures in order to serve to

neuromarketing as well as merchandising. This framework is used by EmSense, a

neuromarketing firm, to bring the study of emotions and cognition to package research

(Young 2011). The framework is presented in Figure 6.

60

Figure 7: Emotion- Cognition measure framework by EmSense. Source:

http://www.brandpackaging.com/articles/82861-neuroscience-explains-the-emotional-

buy?v=preview

As it can be seen from the Figure, they have two critical dimensions: cognitive and emotional

response. In addition, there are four possible reactions: Confusion, Interest, Unengaged and

Easy Enjoyment. As Young (2011) retold, it was expected that retailers wanted their brand in

the Interest quadrant, but many successful pack fell into the Easy Enjoyment quadrant,

meaning that they did not demand significant thought, but were familiar. In a following study

with personal care products, they found out that the design system was not working and

changes of cap colour and on-pack messaging were the drivers (Young 2011). For this matter,

in dm on- field observation, buyers (mainly women) were definitely paying attention to on-

pack messaging, probably even observing colours of packages while choosing the desired

brand. Therefore, this could be important not to ignore. Neuroscience can help retailers in

creating stronger connections with shoppers and drive more sales by understanding the “why”

behind emotions and reactions towards products (Young 2011).

The overall conclusion is that the roots of the observed behaviours could be found within the

processes of the human brain. The special highlight is put on the decision making itself and

all affections on it. Ambler et al. (2004) advocated that brain imaging of decision making has

been possible and that the branding supposed to make buyers’ decisions faster. These

61

information should be used in order to, first of all, be able to explain what happens in human

minds during some action, to predict their reaction and the most important thing- to

understand them. Ultimately, the optimal resultfor both sides is what the whole story is about.

Neuromarketing and Merchandising collided- R11

If any other study field want to benefit from the neuroscience, there should be shifting of the

neural science focus to applied research in merchandising for instance (Fugate 2007). As

Fugate (2007) gives an example for marketing to include American Marketing Association

(AMA), Association for Consumer Research (ACR) or the Marketing Science Institute

(ACR), the similar states for the merchandising itself. If we speak about dm merchandising,

the focus should be on the higher level, not only national (in Bosnia and Herzegovina), and

the willingness for giving a mutual effort to produce useful results.

It is hard to speak about certain behavioural models and clusters, which consumers can be

placed in. However, Fugate (2007:387) thought that after more research and study it might be

possible to hypothesize a brain function based model of consumer behaviour in the future. All

in all, neuromarketing can shape, among everything else, better branding solutions, products

and services, because people will have the chance to participate in the design of them before

actual launching to the marketplace.

One of the meeting points of neuromarketing and merchandising certainly lays in the

persuasion. As Canning (2012) mentioned, the risk-averse consumers needed more

compelling reason to try the product and not only the existence of it and presence on the shelf.

She emphasizes seven steps in the process of mastering the art of persuasion for trial and

ultimately long-term sales (Canning 2012):

1. Build a brand that boost personality and emotional pull, make sure it has a story and

include customers in its creation;

2. Packaging speaks to customers at the point of purchase, it has to tell “brand’s story”

and be aesthetically appealing;

3. Edit the assortments according to consumer research results and analysing product

turnover;

4. Rethink shelf placement to make it more prominent;

5. Put it on display and create the messaging for the position of the brands and trigger the

trial or purchase;

6. Give shoppers a sample of a new offerings which relies on human interaction to

engage shoppers;

7. Adjust the message according to category with benefit emphasis, because it triggers

the purchase.

Persuasion Models

To support aforementioned steps, neuromarketing techniques and methods can play

significant role, because all of them conspire in involvement of consumers in the whole story.

In the following figures four consumer persuasion models will be presented and compared:

traditional, revealed preferences model, collective neuromarketing and individual

62

neuromarketing model. The aim is to see how neuromarketing models differ from traditional

ones and what the benefits of their application are.

As it can be seen from all figures, there are three phases: Screening, Intervention and

Outcomes. The Traditional Persuasion Model in the Figure 8.1, as Wilson et al. (2008) said

has been used by marketers and retailers for creation of more effective promotions.

Figure 8.1: Traditional Persuasion Model (Wilson et al. 2008:395)

Following the Figure 8.1, during the first phase, the test group was exposed to marketing

stimulus, and together with feedback via surveys and interviews, the general persuasion

attempt could be refined. The next stage starts with refined persuasion attempt and creation of

promotion by which consumers’ cognitive and neural processes are triggered, resulting in

formation of attitudes towards the promotion and behavioural intentions to make a purchase.

The final phase, outcome is happening when purchase happens or does not happen. That has

the consequences on individuals as well as society in the form of attitudes or word- of- mouth,

which can be positive or negative.

The Revealed Consumer Preferences Persuasion Model, as it is visible in the Figure 8.2.is

more or less similar to the Traditional Consumer Persuasion Model and this can be seen if we

compare Figure8.1.and Figure 8.2. The differences are in the screening phase and beginning

of the intervention phase, which is not done on test group, but rather by creating loyalty cards,

club cards which consumer sign- up for. During purchases and re- purchases by tracking via

the card, retailers and marketers collect data. Wilson et al. (2008) also said that this model

collected and used data about customers’ preferences in order to target the individual as well

as others that were “like” him/her.

63

Figure 8.2: Revealed Consumer Preferences Persuasion Model (Wilson et al. 2008:396)

Britain’s larger retailer and private employer, Tesco, for example, uses the loyalty card

program to record the purchasing behaviour in Tesco stores. The same is done by dm stores in

Czech Republic.

The next model to take a look at is Collective Neuromarketing Consumer Persuasive Model

and it can be seen on the Figure8.3. It is the first model in this raw that introduces

neuromarketing technique of neuroimaging in the screening phase. The neuroimaging is done

for the test group and it collect their brains’ images which are later used in the intervention

phase for refining persuasion attempt for the masses. Wilson et al. (2008) emphasized that in

this model, a subset of consumers agreed to neuroimaging measurements while observing

different marketing stimuli.

Figure 8.3: Collective Neuromarketing Consumer Persuasion Model (Wilson et al. 2008: 397)

From the previous chapters of this thesis, it is possible to conclude that in this model, if

neuromarketers are able to trigger areas of the brain associated with reward, or pleasure, the

64

consumers’ attitudes toward the products is positive, s/he forms the intention to buy and

consequently purchase the product in outcome phase. The process in this model allows

constant revision of marketing stimuli based on a combination of brain imaging and actual

consumers’ behaviour (Wilson et al. 2008:398).

Figure 8.4: Individual Neuromarketing Consumer Persuasion Model (Wilson et al. 2008:398)

According to Wilson et al. (2008), the model of Individual Neuromarketing Consumer

Persuasion was at that time a model that might exist in the years that were coming. The main

difference of this model is in intervention phase where persuasion attempt is targeted to

consumer (Figure 8.4). That means it is highly customized and aimed to influence

individual’s neural and cognitive processes and get his/her attention. It is opposite to

undifferentiated mass of consumers. As Wilson et al. (2008) stated, this model suggested the

focus on personal awareness and consent. They continue the story by emphasizing that the

intent is to trigger emotions that encourage purchase, rather than providing mechanical

information about the product and make him/her make beneficial decision (Wilson et al.

2008).

If the disadvantages of the models that include neuromarketing would be mentioned, they

would be from the consumers’ points of view, who will probably feel violated regarding the

lack of awareness and consent and understanding. In other world, Wilson et al. (2008:403)

said that potential customers were unable to make decision to what extent they would choose

to be exposed to marketing stimuli and influenced by them. However, if we think broadly, this

problem exists with all persuasion attempts. The worst possible scenario is the one that

violates consumer free will, but it is extreme that opens completely different questions and

issues. After all, neuromarketing is business as any other, and it certainly has more positive

than negative influence and on the side of consumer, it can help them understand what they

really should want (Wilson et al. 2008).

Alternative neuromarketing contributions to merchandising

Neuromarketing may be better suited for collecting responses before actual product is

marketed, exposed or promoted (Ariely and Berns 2010). If used after, it can explore the

65

matter of predictability (predictable and unpredictable choices), which can be related, as Lee

et al. (2006) emphasized, to both, prior usage of the product or time between the exposure to

stimuli and the choice. Another way for merchandising to benefit from the neurmarketing

falls in the frames of consumers’ trust and even more closely- pricing strategy. As professor

Lee et al. (2006) suggested, neuromarketing could explore effects of prices on consumers.

This area is significant for this thesis especially, because the reaction and behaviour of

consumers within the store were observed in accordance to products with changed prices. Lee

et al. (2006) believed that understanding the psychology of pricing should be crucial if the

firm wanted to make optimal decisions.

Another effect is the merchandising role in shopping experience. It has an extreme influence

in overall experience, especially visual merchandising, as well as in the creation of brand

itself (Kaur 2013). By application of neuromarketing techniques it is possible to quantify and

compare superior experiences in the retail environment. Therefore, Pradeep (2008) invented

The Shopper Experience Framework which relied on analysis and evaluation of in- store

shopping experience. Following critical points are stated (Pradeep 2008: 174- 180):

1. Information (It is necessary to measure Deep Subconscious Response to findability,

ease, simplicity, discovery and pleasure.);

2. Environment (Pradeep’s studies showed that environments that mimic consumer’s

natural environment for product consumption provoke superior Purchase Intent than

environments that do not.);

3. Entertainment (It provides emotional relief, minimizes the pain of purchase, and

increases overall shopping time.);

4. Education (Having extracted insight, that becomes the part of overall experience

triggers higher levels of brand loyalty.);

5. Simplicity (It is often related to numerosity, colour, taxonomy and the fluency of

processing.);

6. Self- Worth/Social Worth (Consumers react positively to acts or in-store elements that

make them feel good about themselves and their contribution to society.);

7. Community (Humans are hard-wired to want to belong.).

With the help of neuromarketing, retailers can define these critical points according to their

categories, brands, stores’ nature and target group and thus provide overwhelming and unique

shopping experience to their customers. It is doubtless that environment offered by store can

influence customers’ decision to visit the store at the first place and further on can guide their

inferences about merchandise, service quality and enjoyment inside the store (Sharma and

Stafford 2000:183). Even from the focus group discussion it was possible to notice that the

environment is important component in shopping experience. Additionally, sales persons

within the store and available staff play significant role. Sharma and Stafford (2000) indicated

that customers related the salespeople with the level of trustworthiness and competence. Thus,

it is possible to conclude that the store ambience positively influences customers’ perceptions

of salespersons, brand or retail. The influence of retail atmospheric can be seen in the Figure9.

Hereby, there are two levels of influence: atmospheric and organisms. As it can be seen from

66

the list, atmospheric are basically the physical components that customers can face in the

contact with retail store, including human variables as well. In other words, those elements

cannot be influenced. Organisms are employees and customers themselves. Response is the

overall experience of employees and consequently customers who are gaining positive or

negative shopping experience after leaving the store. Merchandising is thus perceived as the

best tool for persuasion. How certain elements of merchandising affect consumers’ brains can

be discovered by neuromarketing methods.

Figure 9: The influence of retail atmospheric (Turley and Milliman 2000:196)

Besides all models presented, what happens in the store has not stopped being the puzzle for

retailers. Tim Ambler of the London Business School invented an approach to compare

sensation when customers are confronted with different products or brands, as well as

reactions to products and big signs of sale (Zurawicki 2010:225). The model was tracking

cognitive and emotional responses. As Zurawicki (2010:225) explained, one of the findings

67

pertained to the in- store signages and their stopping power, resulting in the conclusion that

symbolic codes like colour dot for special offers would attract attention more strongly.

Therefore, the merchandising, in many forms, can benefit from neuromarketing and in the

following part, the benefit dm can gain is presented.

How dm merchandising can benefit from neuromarketing?

There are, in fact, enormous risks in not doing anything. Doing just what comes naturally can

only please those who are unable to imagine better worlds and better ways, those who believe

they are already in the best of all possible worlds (Damasio 1994:254).

With each new discovery comes the opportunity for correction and improvements in

marketing management decisions and tools. If the confirmation is the outcome, there comes

the more confidence that current understanding of dm consumers’ behaviour is a basis for

exchange relationships. As Wilson et al. (2008) claimed, the usage of neuromarketing

techniques could bring win- win for both, retailers and consumers. In this particular case, it

would bring benefit for both dm and its customers. Real pay- off would probably come during

the design process. Since dm has customers who usually come back to their stores, by using

neuromarketing methods dm could even more analyse the existence of trust their customers

have. By this, the central question would be whether dm buyers have the trust in dm as a

whole or consumers are loyal to the single brand that they can find in dm? Do they trust to dm

private brands or there is some other factor that makes them choose it? Lee et al. (2006)

suggested that trust could be explored in the way if the trust in seller or brand was the same

kind of trust as the one towards friends or family, according to the activated brain regions.

Taking into consideration the claim from Mrs Čović- Mezet, when she said the customers are

the centre of dm’s world, investment in strengthening relations with customer can never be a

waste.

Optimistically, any of the neuromarketing tools, techniques or approaches could contribute in

interaction between dm and its customers and in that way foster, as Ariely and Berns (2010)

claimed, more human- compatible design of the products. For instance, dm products are

mainly possible to be tasted, smelled, viewed, in other words, they are able to activate the

senses. From the brain point of view, activation of the orbitofrontal cortex (OFC) happens

when observed subjects anticipate pleasant taste, look at pretty faces, hear good music,

receive money or experience social reward (Ariely and Berns 2010). That means that

neuromarketing, particularly neuroimaging can be used to define preferences.

Another important aspect that needs to be taken into consideration relates to the nature of dm

customers. There are mainly women, which is also dm’s target market. Garcia and Saad

(2008:407) mentioned that women displayed greater activation of the brain regions of

posterior temporal sulcus, associated with intention and deception. It is easier to get their

attention, but by paying the more attention to stimuli, it is much harder to mislead them.

Additionally, women are more successful in memorizing products or to use shopping list

(Ambler et al. 2004). However, it is impossible to have a “black- and- white approach”, since

there are many other factors included. Ambler et al. (2004:249) said that brand choice

involved memory and emotional activation not required for more simple discrimination tasks.

68

Additional part of merchandising of dm that can benefit from neuromarketing is the creation

of prices. That is particularly important in the countries like Bosnia and Herzegovina is, with

a fall of purchasing power, as Mrs Čović- Mezet mentioned. Lee et al. (2006: 202) said that

all pricing research was behavioural in nature, and relied on assumptions about what actually

happened when individuals perceived price, but neuroimaging could discover why, for

instance, prices in the form of 4.99 were perceived as cheaper than 5.00. Neuromarketing

could reveal if dm customers relate prices with rational or emotional reasons and

explanations, and how does it changes while changing the purchasing power. Moreover, the

social impact of price could be interesting as well.

As dm has the branches all over the Europe, the attention should be paid to cultural

modifications and different approaches. As Harvard professor Karmarkar mentions, in one

culture happiness and pleasure can be expressed differently than in another, so it is possible to

get two different fMRI results that actually mean the same thing (Forbes 2013). Moreover,

there are no only psychological factors within individuals that differ. There are variations of

social stimuli, situation and processes that affect individuals (Lee et al. 2006).

To wrap up the previous story, dm merchandising could benefit from applying

neuromarketing techniques in several areas:

- Recognizing the cause and factors that maintain dm customers’ trust in dm or brands

and enhance it as competitive advantage;

- Understanding the perception of price and develop the platform for optimal pricing

strategies and decisions;

- Improving the difference between individuals and cultures and potentially use those

information to modify assortment strategies, disposal of products, visual

merchandising techniques and creation of prices;

- Enhance the design of the stores, private brands and categories according to the

recognized consumers’ preferences.

The way this could be done is hard, demands high costs and long time. This is especially

because we are talking about the developing market of Bosnia and Herzegovina. However, the

dm is internationally recognized company and it is possible to, at least, show certain attempt

in applying new marketing techniques. For instance, everything could start from creating

alternative arrangements and test them to determine which works the best to boost positive

reactions within their particular stores. In addition, one of the methods can be the search for

backup explanation in the human brain. As Lee et al. (2006:203) said, the neuroimaging gives

the “layer of theory” on top of the actual cortical activity measure. And the human brain can

never lie.

Concrete suggestions to dm

In the following paragraphs, I would like to introduce some concrete suggestions for dm

stores, according to the observation results, focus group conclusions and interviews with

customers. Based on the neuromarketing findings about the reaction of human brain, the main

focus is put on gaining attention of customers, making their shopping experience more

69

pleasant and overall increase the general satisfaction with dm. The final purpose is to improve

merchandising based on the neuromarketing knowledge. What is already working, and

working well, should not be changed, because females already cherish the particular bonds

they have with retailer (Pradeep 2008:91). dm has established those bonds and its strength

lays in the private brands. However, certain improvements, starting from small steps could not

harm. In general terms, dm could benefit from fresh designs, new application of lighting,

sound, textures, innovative way of presenting merchandise, etc. As Pradeep (2008:191)

emphasized, the brain delighted in novelty, preferred natural textures over artificial, assigned

priority to the sense of sight and disliked sharp lines. Some of the concrete suggestions are

mentioned in following paragraphs.

Music

Special area that I would like to drag attention to is the power of music and its effect on the

brain of the consumer. Academic research showed that music played in the store affects time

spent in the store, and for retailers there is correlation between time spent in shopping and

amount purchased (Yalch and Spangenberg 2000:141). As Lubin (2011) indicated, studies

have shown that slow music made people spend more money, loud music made them move

faster through the store and classic music made them buy more expensive products. dm store

in Sarajevo could introduce certain background music. From the informal conversation with

employees, I found out that before there was music, but since recently it has been gone. dm

could test consumer behaviour after bringing some music in the stores and compare the sales

numbers with current ones. Talking about the brain itself, music has shown to have interesting

and significant power. Pleasant music affects longer consumption and perception time, less

negative emotional reaction and more desire to affiliate with retailer (Dube and Morin 2001).

This could enhance consumers’ response to the dm store environment. Zurawicki (2010:81)

stated that the results of one research from 2005 showed increase of psychometrical ratings

and psychological involvement when sound and picture were combined (compared to solely

picture or solely sound effects). Therefore, visual perceptions enriched with music can

enhance emotional experience, which is crucial in customers’ decision making and brand

connection.

Moving the POS shelves

Based on the observation, customers do not often notice POS shelves in dm. The concrete

suggestion for this issue would be to place them near the cash desk. For instance, dm stores in

Czech Republic have products that are on sales promotion near the checkout line and the cash

desk lady suggests the product in the special offer. Lubin (2011) mentioned that the most

profitable area of the store was checkout line, explaining that after few minutes in line, people

succumbed to temptation. Additionally, if the dm would rely on old brain theory

aforementioned, the old brain recognizes the contrast and it can easily and quickly make

decisions in such surrounding (Renvoise and Morin 2007:101).

Club Card

According to the example of dm in Czech Republic, introducing the club card instead of

collecting stickers for the small catalogues could have positive outcomes. First of all, dm

could have the data base of its customers, could track their purchases, and make them feel

70

valuable. Pradeep (2008:75) explained that for women, any bonding activity that had link to

retailer or brand would be appreciated and remembered. Social connections are crucial and

women like the feeling of being included.

71

CONCLUSION

Summary As professor Lee et al. (2006) said, the idea of introducing the neurological background into

the matter of consumer behaviour has brought the excitement into the marketing profession.

Putting all puzzles together, neuromarketing is the application of neuroscientific method to

analyse and understand the consumer behaviour in relations to markets and marketing

exchanges (Lee et al. 2006:200).

Why the brain in marketing matters so much? Most of the functions we are obtaining every

day are processed under the level of the consciousness. Human brain is a powerful machine, it

is like the company with divisions and departments and they all together work as a big team

in processing information, communicating with an environment and getting outcomes. The

mass that takes 2% of the body, but at the same time uses 20% of the energy is vertigo of 20%

of conscious, and 80% of subconscious traits (Morin 2011). That subconscious part is the

puzzle that has been the focus of neuroscientists and nowadays even neuromarketers.

Evolutionary theory can bring framework for neuromarketing. Garcia and Saad (2008)

enhanced the importance of making the sense of biological architecture by application to

consumer behaviour, which accordingly served as epistemological benefit for guidance in

neuromarketing research. We are highly controlled by our reptilian brain. That is the oldest

part of the brain that makes humans extremely selfish and drives strong preference for mental

shortcuts over the long deliberations (Morin 2011). The brain will certainly show some

preferential activity in different tasks the consumers are put in front of, but the role of the

neuromarketing researcher is to determine the meanings and to make connections. Even

psychiatrists think that brain clues can help marketers target customers more precisely (Fugate

2007:386).

All in all, collaboration between neuroimaging and marketing can comprehend in advancing

the knowledge, not only within the field of understanding consumer, but many other key areas

(Lee et al. 2006).

Contributions of the Thesis

As another work in the field of neuromarketing, this thesis serves as additional demonstration

that emotional and rational thinking depend on each other. As Butler (2008:416) elaborated,

researchers should use neuroimaging initially to confirm, reconfigure or improve

conventional theories about consumer behaviour. Observing the consumer behaviour in real-

time settings (in the store), as Wilson et al. (2008) indicated were procedures that involved

affecting in public setting and therefore did not need to violate individual privacy rights. This

claim was supported even during the interview with Mrs Čović- Mezet, where she said that

she does not see neuromarketing as threat to the privacy when buying process is public

process by itself.

This thesis particularly can contribute to dm stores in Sarajevo, as well as dm in Bosnia and

Herzegovina in general in many ways. The aim was to approach to dm customers in a little bit

different way than usual, to directly observe their behaviour and find roots of those

72

behaviours in some other level of consciousness. Therefore, it could be a good guide for

application of some new techniques for the purpose of satisfying customers in the best way

possible. As mentioned before, customers are the centre of the world for dm. Therefore, any

attempt to make them feel better, more pleased and to enjoy the dm purchase experience is a

valuable contribution.

Additionally, this thesis should provide to dm management other point of view in marketing

terms. That is what neuromarketing is actually about. It should encourage and motivate them

to rise upon traditional tools and approaches and join the world of new discoveries which will

provide them stronger relationships with their customers in the long- term.

Suggestions for the dm merchandise based on the knowledge of previous neuromarketing

research and theories could serve as a good starting point, where they will be able to test by

themselves if those steps have effect and in which way. Every dm customer will be observed

as the complex puzzle needed to be solved, but through neuromarketing findings certain

patterns could be defined. Therefore, this thesis should have purpose to serve as an attempt

towards changes in Bosnia and Herzegovina market and dm, as one of the leaders in retail

business, is not accidentally in the focus.

Limitations and Recommendations Naturally, I wish I could say that we know with certainty how the brain goes about the

business of making mind, but I cannot- and, I am afraid, no one can (Damasio 1994:258).

The observation of consumer behaviour was done in accordance to four products, which can

give limited results and conclusions regarding the price effect. Potential correction of this

could be obtaining observation at larger level, for instance via cameras in the whole shop,

thus tracking all products with changed prices. Even Ambler et al. (2004) suggested, after

their study of supermarket products, that the more visible differences could be addressed

while observing more variety of products.

Because of the exploratory nature of the study, the result of it can be considered as

observational. The number of subjects included in the research process might be considered

potentially low, and the test population should be larger in order to avoid low number of

respondents for certain stimulus, or low number of subjects as representative of certain

behaviour category.

Probably the most important limitation of all is the lack of exact neuromarketing equipment

for measuring brain signals and further research of this matter should include the direct use of

those. The lack of the equipment is certainly due to its unavailability and high costs.

However, the usage of any brain scans would make the whole research process wider and it

would place it on the higher level.

73

Heading to the Future The impact of neuromarketing is likely to be less chaotic and more positive if both marketers

and consumers have the (hopefully justified) belief that they can understand and control what

is going on in the lab and in the scanner (Green and Holbert 2012:15).

Future familiarity with neuroscientific methods and applying biometrics to the practice of

marketing is based on cost- benefit approach. Millward Brown- the marketing research

company- performed in one study the experiment with observing the brain waves via EEG

while presenting TV ads, and got similar results to ones from questionnaire survey (Zurawicki

2010:211). Therefore, as Mrs Čović- Mezet also indicated, just confirming what marketers

already know cannot practically justify the expenses. However, in testing products, for

example, Unilever, with the help of Vienna- based Neuroconsult, discovered that eating ice

cream is more pleasurable than consuming yogurt or chocolate (Zurawicki 2010:223). Hence,

the new discoveries are evident.

From this perspective it is hard to make precise predictions for the future paths of the

neuromarketing. Neuromarketing has both, advocates and critics, but the inevitable is that

advanced neuroimaging technologies will bring changes into the market and marketing

persuasion (Wilson et al. 2008). Forbes (2013) wrote that Uma R. Karmarkar (an assistant

professor at Harvard Business School who sports PhDs in both marketing and neuroscience)

expected that brain data would play a key role in the future research about the consumer

choice. The inevitable potential of neuromarketing is to “hit on the subconscious biases”,

which has been unable to be discovered by traditional advertisement and marketing research

methods (Lauri et al. 2012).

Neuromarketing is here to stay

Neuromarketing is an attempt to understand consumer behaviour without asking question

(Bartelme 2012:12).

In 2010 it was still not clear what neuromarketing was and it had several critics and doubts in

the form of misunderstandings of its purpose for companies, presentations, level of

involvement of medical professionals and academicians, etc. (Fisher et al. 2010). It was just

four years ago. However, things have been changing very fast in 21st century. Definitely, the

more research is needed in order to better understand neuromarketing, neuromarketing

companies, their practices and claims. The neuromarketing, by the psychiatrists Carl Merci’s

opinion should be treated as any other scientific research, without inherent evil connected to

it, with the only goal to better understand consumers (Bartelme 2012). On the other side,

companies may have the motivation to take a risk with neuromarketing implication by the

idea of proving if they were right or wrong. Additionally, the relevant statistic would be the

correlation between sales figures and decision to employ neuromarketing, as Green and

Holbert (2012) elaborated. The brain imaging has brought something that no one was able to

do before- prove that the brand makes more difference than product itself (from the

experiment with Pepsi and Coca Cola). It is challenging and tempting to see what it can bring

next.

74

The equipment used by neuroscientists is quite expensive and not affordable for most of the

companies with low budget, like it is mostly the case with companies in Bosnia and

Herzegovina. However, there is a good start with examining how the old, so called “simple”

brain reacts. This is the extra value of the old brain theory provoked by Renvoise and Morin

(2007). They say that by using the model of an old brain anyone can get valuable results,

skills and techniques above just the selling and anyone can alleviate them (Renvoise and

Morin:2007:212). In any case, marketers do believe that neuromarketing can provide better

trade- off between benefits and cost, because the cost of providing neuroimaging studies can

be outweighed by benefit of better product design and increased sales (Ariely and Berns

2010). According to Eser et al. (2011), a medium- sized neuromarketing research do not have

to be as expensive as people estimate, only slightly more than the average cost of conducting

focus group. Additionally, even if fMRI, magnetoencephalography (MEG) or positron

emission tomography (PET) will not be available, EEG and galvanic skin response (GSR)

will likely be (Lee et al. 2006).

There could be certain impediments in providing neuromarketing research among customers.

As the focus group discussion showed, majority of them agreed about the claim that they

would be suspicious and hesitant towards letting companies tap into their brain. One of them

did not even believe that some new things could be revealed. This is not the problem only in

Bosnia and Herzegovina, but in general scope. Green and Holbert (2012:15) mentioned the

study which proved that only 16% would feel comfortable allowing their brain to be scanned

for marketing purposes, while 80% favoured legal constraints. If they would know about the

application of neuromarketing techniques, they might change purchasing decisions and habits

on purpose, boycott business or ask for government regulations. Zurawicki (2010:228) named

two reasons why consumers should have interest in neuromarketing approach and the way to

improve self-control in purchase:

1. To become immune on tactics used by companies;

2. To better know oneself, in terms of irrationality and biases and make better decisions.

Additionally, Eser et al. (2011:860) mentioned that some participants in neuromarketing

studies were reported to have positive attitude toward these practices. The aim of brain studies

is to understand the brain waves, not controlling them, and that should be advocated to the

audience. Neuropsychological measures can be objective supplement to subjective,

declarative data and provide to marketers possibility to explain both conscious and

subconscious consumers’ reactions (Ohme et al. 2009:29). Fugate (2007) thought that

legitimation for this field of study needed behavioural model that would predict what kind of

problems needed to be solved and experimental methods which would determine contribution

of each brain structure to the study.

If companies in Bosnia and Herzegovina in the near future start to introduce neuromarketing

in everyday business, there is another potential opportunity. If we look broadly, nonmedical

market for MRI and other neuroimaging machines can bring investment opportunities for

companies in that business and thus inject money in Bosnian- Herzegovinian economy. In

general terms, the study done by Eser et al. (2011) proved that marketing academics,

neurologists and marketing professional agreed that neuromarketing was not a manipulative

75

way to sell goods and services that were not necessary. Therefore, the reason not to believe

might be negligible. We should witness the opening of new era of research in the field of

marketing, targeted at consumers and should not forget that far more guerrilla stories are yet

to come.

76

REFERENCES Books

Barneys, Edward L. 1928. Propaganda. USA: Horace Liveright Inc.

Blythe, Jim. 2005. Essentials of Marketing. Harlow, England: Pearson Education Limited.

Damasio, Antonio. 1994. Descartes’ Error- Emotion, Reason and the Human Brain. NY,

USA: Penguin Books.

Emerson, Robert M., Rachel I. Fretz, and Linda L. Shaw. 1995. Writing Ethnographic

Fieldnotes. Chicago, USA: The University of Chicago Press.

Goleman, Daniel. 2012. Emocionalna Inteligencija (Emotional Inteligence). Zagreb, Croatia:

Tisak Denona.

Husić, Melika M., Slavo Kukić, and Muris Čičić. 2012. Consumer Behavior. Sarajevo, BiH:

School of Economics and Business in Sarajevo.

Kunz, Grace I. 2010. Merchandising: Theory, Principles and Practice. NY, USA: Fairchild

books.

Lindstrom, Martin. 2008. Buyology: How Everything We Believe About Why We Buy is

Wrong. NY, USA: Random House Inc.

Mladenović Dušan. 2014. Marketing Plan. Case Study- Market Entrance Yugomar d.o.o.

Saarbrücken, Germany: Lambert Academic Publishing.

Morgan, Tony. 2011. Visual Merchandising- Window and in-store displays for retail.

London, UK: Laurence King Publishing.

Ornstein, Robert. 1991. The Evolution of Consciousness- Of Darwin, Freud and Cranial Fire:

The Origins of the Way We Think. NY, USA: Simon & Schuster Paperbacks.

Pradeep, A. K. The Buying Brain: Secrets for Selling to the Subconscious Mind. Hoboken,

New Jersey: John Wiley & Sons, Inc.

Renvoise, Patrick and Christophe Morin. 2007. Neuromarketing: Understanding the “Buy

Buttons” in Your Customer’s Brain. Nashville, Tennessee, USA: Thomas Nelson, Inc.

Richard, Lyn. 2005. Handling qualitative data: A practical guide. London, UK: SAGE

Publications Ltd.

Smith, Scott M. and Gerald S. Albaum. 2012. Basic Marketing Research: Volume 1.

Handbook for Research Professionals. Utah, USA: Qualtrics Labs, Inc.

Zurawicki Leon. 2010. Neuromarketing- Exploring the Brain of the Consumer. Heidelberg,

Germany: Springer- Verlag Berlin.

77

Weiss, Robert S. 1994. Learning from strangers: The art and method of qualitative interview

studies. NY, USA: The Free Press.

Journals

Ambler, Tim, Sven Braeutigam, John Stins, Steven Rose, and Stephen Swithenby. 2004.

“Salience and Choice: Neural Correlates of Shopping Decisions.” Psychology & Marketing

21(4):247- 261.

Andrija, J., Monika Koller, Nick Lee, Laura Chamberlain, and Gerhard Ransmayr. 2013.

“Neuromarketing and consumer neuroscience:contributions to neurology.” BMC Neurology

13(13):1-12

Ariely, Dan and Gregory S. Berns. 2010. “Neuromarketing: the hope and hype of

neuroimaging in business.” Nature Reviews Neuroscience 11:284- 292.

Arora, V.P.S., Shivani Sharma, and Nirdesh K. Singh. 2007. “Nature and Functioning of

Visual Merchandising in Organized Food Retailing.” Agricultural Economics Research

Review 20 (Conference Issue):441-456.

Butler, Michael J.R. 2008. “Neuromarketing and the perception of knowledge.” Journal of

Consumer Behaviour 7(2008):415- 419.

Cant, Michael C. and Hefer Yolandé. 2013. “Visual Merchandising Displays – Functional or

A Waste of Space in Apparel Retail Stores.” Gender & Behaviour, 11(1):5336- 5341.

Davies, Anne- Marie and Richard Laing. 2002. “Designing Choice Experiments Using Focus

Groups: Results from an Aberdeen Case Study.” Forum Qualitative Sozialforschung/ Forum:

Qualitative Social Research 3(3). Retrieved March 5, 2014 (http://www.qualitative-

research.net/index.php/fqs/article/view/837/1818).

Dube, Laurette and Sylvie Morin. 2001. “Background Music Pleasure and Store Evaluation

Intensity Effects and Psychological Mechanisms.” Journal of Business Research 54

(2001):107-113.

Eser Zeliha, Bahar F. Isin, and Matehan Tolon. 2011. “Perceptions of Marketing Academics,

Neurologists and Marketing Professionals about Neuromarketing.” Journal of Marketing

Management 27(7-8):854- 868.

Fisher, Carl E., Lisa Chin, and Robert Klitzman. 2010. “Defining Neuromarketing: Practices

and Professional Challenges.” Harward Review of Psychiatry 18(4):230-237.

Fugate, Douglas L. 2007. “Neuromarketing: a layman’s look at neuroscience and its potential

application to marketing practice.” Journal of Consumer Marketing 24(7):385-394.

Fugate, Douglas L. 2008. “Marketing services more effective with neuromarketing- a look

into the future.” Journal of Services Marketing 22(2):170–173.

78

Garcia, Justin R., Gad Saad. 2008. “Evolutionary Neuromarketing: Darwinizing the

neuroimaging paradigm for consumer behaviour.” Journal of Consumer Behaviour

7(2008):397- 414.

Greenberg, Michael and Karen Lowrie. 2012. “Daniel Kahneman: How we think and

choose.” Risky Analysis 32(7):1113- 1116.

Hefer, Yolandé and Michael C. Cant. 2013. “Visual Merchandising Displays’ Effect On

Consumers: A Valuable Asset Or An Unnecessary Burden For Apparel Retailers.”

International Business & Economics Research Journal 12(10):1217- 1223.

Kalliny, Morris and Lance Gentry. 2010. “Marketing in the 22nd

Century: A Look at Four

Promising Concepts.” Asian Journal of Marketing 4(3):94-105.

Kaur, Amandeep. 2013. “Effect of Visual Merchandising on Buying Behavior of Customers

in Chandigarh.” International Journal of Engineering Science and Innovative Technology

(IJESIT) 2(3):247- 251.

Lee, Nick, Amanda J. Broderick, and Laura Chamberlain. 2006. “What is ‘neuromarketing’?

A Discussion and Agenda for Future Research.” International Journal of Psychophysiology

63(2007):199-204.

Lee, Nick and Laura Chamberlain. 2007. “Neuroimaging and Psychophysiological

Measurement in Organizational Research- An Agenda for Research in Organizational

Cognitive Neuroscience.” New York Academy of Sciences 1118(2007):18-42.

Lee, Nick and Carl Senior. 2008. “A manifesto for neuromarketing science.” Journal of

Consumer Behaviour 7(2008):263–271.

Lee, Nick, Carl Senior, and Michael J.R. Butler. 2012. “The Domain of Organizational

Cognitive Neuroscience: Theoretical and Empirical Challenges.” Journal of Management

20(10):1-11.

Morin Christophe. 2011. “Neuromarketing: The New Science of Consumer Behaviour.”

Springer Science and Business Media 48:131- 135.

Ohme, Rafal, Dorota Reykowska, Dawid Wiener, and Anna Choromanska. 2009. “Analysis

of Neurophysiological Reactions to Advertising Stimuli by Means of EEG and Galvanic Skin

Response Measures.” Journal of Neuroscience, Psychology and Economics 2(1):21-31.

Senior, Carl, Nick Lee, and Michael J.R. Butler. 2011. “Organizational Cognitive

Neuroscience.” OrganizationScience 22(3):804–815.

Sharma, Arun and Thomas F. Stafford. 2000. “The Effect of Retail Atmospherics on

Customers’ Perceptions of Salespeople and Customer Persuasion: An Empirical

Investigation.” Journal of Business Research 49(2000):183–191.

Steinmetz, Lawrence L. 2005. “Price Equals Perception.” Spring Manufacturers Institute

44(1):6-9.

79

Touhami, Zineb O., Larbi Benlafkih, Mohamed Jiddane, Yahya Cherrah, Hadj O. El Malki,

and Ali Benomar. 2011. “Neuromarketing: Where marketing and neuroscience meet.” African

Journal of Business Management 5(5):1528-1532.

Turley L.V. and Ronald E. Milliman. 2000. “Atmospheric Effects on Shopping Behavior: A

Review of the Experimental Evidence.” Journal of Business Research 49 (2000):193–211.

Valenzuela, Ana and Priya Raghubir, n.d. „Are Top- Bottom Inferences Conscious and Left-

Right Inferences Automatic? Implications for Shelf Space Positions.“ Journal of Marketing

Research. Unpublished manuscript.

Wilson, Mark R., Jeannie Gaines, and Ronald P. Hill. 2008. “Neuromarketing and Consumer

Free Will.” The Journal of Consumer Affairs 42(3):389- 410.

Yalch, Richard F. and Eric R. Spangenberg. 2000. “The Effects of Music in a Retail Setting

on Real and Perceived Shopping Times.” Journal of Business Research 49(2000):139–147.

Presented and unpublished papers

Alčaković, Slavko and Nada Arežina. 2011. “Neuromarketing: Nov način razumevanja

potrošača” (Neuromarketing- New way of understanding consumers). Presented at 8th

Scientific conference with international participation Sinergija, March 2011, Bjeljina, Bosnia

and Herzegovina

Tihi, Boris, Almir Peštek, and Dženana Husremović. 2006. “Impact of Promotional

Techniques at the Place of Purchase on Making Decisions about Purchase Quantity.”

Department of Marketing Management, University of Sarajevo, Sarajevo, Bosnia and

Herzegovina. Unpublished manuscript

Magazines

Bartelme Tony. 2012. “Meet Carl Marci: A Doctor Who Wants to Measure Your Emotions.”

The Physician Executive Journal of Medical Management, January/February 2012, pp. 10- 14

Green Sean and Neil Holbert. 2012. “Gifts of the Neuro-Magi: Science and the Speculation in

the age of neuromarketing.” Marketing Research, Spring 2012, pp. 10- 15

Master thesis

Ahmić, Maja. 2014. Interethnic Marriages in Mostar, Bosnia and Herzegovina. Master thesis,

Department of Sociology, Masaryk University Brno, Czech Republic

Godferey, Amanda J. 2009. „The Convenience Role in Category Management: An

Experimental Study: Comparing a Manipulated and a Controlled University Retail Setting.“

Master thesis, Restaurant, Hotel, and Institutional Management, Texas Tech University,

Lubbock, TX

80

Chonsell Anna and Lizette Nauclèr. 2006. “Private Brands Conquer the Swedish Market -

How Retailers Regard and Handle Private Brands.” Master thesis, Business Administration,

Jönköping International Business School at Jönköping University, Jönköping, SWE

Web

Canning Kathie. 2012. “The Art of Persuasion.” Retrieved February 22, 2014

(http://www.plstorebrands.com/top-story-the_art_of_persuasion-1671.html).

Crossman, Ashley. 2014. “The Purposes of Research: Exploration, Description, And

Explanation.” Retrieved February 12, 2014

(http://sociology.about.com/od/Research/a/Purposes-Of-Research.htm).

De Simone, Daniel. 2010. “Top 10 media manipulation strategies by Noam Chomsky.”

Retrieved December 8, 2013 (http://www.scribd.com/doc/43992243/Top-10-media-

manipulation-strategies-by-Noam-Chomsky).

dm drogerie markt d.o.o. 2014. “Preduzeće- Kratki Prikaz” (Company- A Brief Overview).

Retrieved December 5, 2013 (http://www.dm-

drogeriemarkt.ba/ba_homepage/preduzece/kratki_prikaz/).

dm drogerie markt d.o.o. 2014. “Statistika Preduzeća” (Company’s Statistics). Retrieved

December 5, 2013 (http://www.dm-

drogeriemarkt.ba/ba_homepage/preduzece/brojevi_i_~injenice/statistika/).

Domenegheti, Roger. 2012. “The Coke Wars: When the Pepsi Challenge Nearly Killed Coca

Cola.” Retrieved February 13, 2014 (http://sabotagetimes.com/life/the-coke-wars-when-the-

pepsi-challenge-nearly-killed-coca-cola/).

Knowledge Base for the BrainFunction. 2013. “Diagram for the Human Brain Parts.”

Retrieved January 17, 2014 (http://kb4brainfunction.com/diagram-of-the-human-brain-parts/).

Laja, Peep. 2011. “Pricing Experiments You Might Not Know, But Can Learn From.”

Retrieved February 13, 2014 (http://conversionxl.com/pricing-experiments-you-might-not-

know-but-can-learn-from/).

Lauri, Palokangas, Suomala Jyrki, Heinonen Jarmo, Maunula Sini, and Numminen Jussi.

2012. “Measuring the Willingness to Purchase Using Methods of Neuromarketing.” Retrieved

January 17, 2014

(http://www.laurea.fi/fi/tutkimus_ja_kehitys/julkaisut/laurea_julkaisut/Documents/7.%20Palo

kangas%20et%20al%20Measuring%20of%20Willingness%20of%20Purchase%20using%20

methods%20of%20Neuromarketing.pdf).

Lubin Gus. 2011. “15 Ways Supermarkets Trick You Into Spending More Money” Retrieved

March 3, 2014 (http://www.businessinsider.com/supermarkets-make-you-spend-money-2011-

7?op=1).

81

Nobel Carmen. 2013. “Neuromarketing: Tapping into the “Pleasure Center” of Consumers.”

Retrieved February 24, 2014

(http://www.forbes.com/sites/hbsworkingknowledge/2013/02/01/neuromarketing-tapping-

into-the-pleasure-center-of-consumers/).

Retail Customer Experience. 2008. “Learning From In- Store Traffic Patterns.” Retrieved

March 4, 2014 (http://www.retailcustomerexperience.com/article/4119/Learning-from-in-

store-traffic-patterns).

Specialty Retail Collective. 2011. “Traffic Flow: Make it Work to Maximize Sales.”

Retrieved March 4, 2014 (http://www.specialtyretailcollective.com/traffic-flow-make-it-

work-to-maximize-sales/).

Subramanyan, Vignesh. 2013. “How to Drive In-Store Traffic: 20 Experts Share Their Retail

Strategies.” Retrieved March 4, 2014 (http://www.business2community.com/consumer-

marketing/drive-store-traffic-20-experts-share-retail-strategies-0602024#!yiRsc).

Sullivan, John. 2004. “A Pre- Interview Questionnaire for Improving Candidate Screening.”

Retrieved March 5, 2014 (http://www.ere.net/2004/08/30/a-pre-interview-questionnaire-for-

improving-candidate-screening/).

Young, Scott. 2011. “Neuroscience Explain the Emotional Buy.” Retrieved February 24, 2014

(http://www.brandpackaging.com/articles/82861-neuroscience-explains-the-emotional-

buy?v=preview).

82

APPENDICES

Appendix A: In-Store Survey Questions

Appendix B: Deep Interview Questions

Appendix C: Previous Neuromarketing Studies

83

Appendix A: In-Store Short Interview Questions

Fill the information

1. Gender:

2. Age:

3. Occupation/ Job:

4. City:

Define the number based on your agreement with the statements bellow.

(1 strongly disagree- 5 strongly agree)

5. I always notice ads while I am watching TV, reading magazines or surfing on the

internet.

1 2 3 4 5

6. When I see the product on ads I feel desire to buy it

1 2 3 4 5

7. I always buy the product after I notice it on the TV, radio or some other kind of

advertising.

1 2 3 4 5

8. I always check for bargain offer/discount prices of products in sales promotions flyer,

ads or in-store promotion/discounts.

1 2 3 4 5

9. I always actively search for bargain/discount prices of products when making

shopping in retail shops

1 2 3 4 5

Choose one or more answer(s) (multiple choices)

10. Why are the advertisements mainly made for:

Presenting product

Satisfying customers

Earning money/making profit

Fulfilling the firm’s strategy

Filling the gaps in TV or radio programs, empty spaces on the internet pages

Other reasons___________________________________________________

11. Why are sales and discount prices mainly made for:

Keeping customers loyal

Keeping customers satisfied with the bargain

Sale of seasonal products

Sale of less demanded products

Other reasons________________________________________________________

84

Answer following questions with Yes/ No and add explanation if possible

12. Do you think that you are aware of all your brain activity?

13. Do you think that you can control your emotions?

14. Do you think that nowadays people have been turned into consumer robots? Why?

15. Remember the last time when you bought something on sale, under promotion, low

price, etc. Have you had in mind to buy this particular product before you had entered

the store and seen it on shelf? If not, what did make you buy this particular product?

What was your purchase decision based on?

16. Have you ever heard about neuromarketing?

17. If neuromarketing is used as a tool to analyse people’s response to products and

promotions by tracking brain activities, do you think it is against humans’ privacy and

against ethics?

Thank you for your contribution! And do remember that your brain is involved in

EVERYTHING you do.

85

Appendix B: Deep Interview Questions

Introductory

1. What is your position in the company?

2. What are your areas of competences? What do you deal with?

3. How long are you working for the company in this position? If some other position

you were obtaining before, which was it?

4. Has your company already introduced some new marketing practices? Which ones?

5. It is well known that the consumers are the most important wheel of company’s

success. The strategy of the company, especially marketing strategy has to involve

them in high manner. How do you manage to involve them?

6. Do you realize your own primary market research? If yes, how often, what are the

most important problems and topics for research and what for do you use the results?

If not, do you outsource this activity? And if yes, what are the most important

problems and topics for research and what for do you use the results?

7. What techniques and tools do you use to measure their satisfaction and response to

your campaigns and actions? (Please, provide very specific and detailed answer)

8. During your carrier, has it ever happened that the predictions of company’s managers

(based on previous research of the market) do not match with consumers’ behaviour?

Why?

Merchandising

9. What techniques and methods do you use to set up prices and price discounts for your

products?

10. What are drivers for price discounts?

11. Do prices in your retail shops differ in the country and/or in one town/city? If yes,

why and how do you know how to set the right prices for the concrete shop?

12. What information and data do you use for merchandising and display of the products

in your shops?

Neuromarketing in general overview

13. The term “neuromarketing” has been bandied about for a while now. How do you

define it?

86

14. What is the value of approach that includes combining neuroscience techniques with

traditional OR total replacement of traditional ones?

If they serve to validate existing methodologies, would it be worth the often hefty

price tag?

15. What is the exact benefit, in your opinion? And what can be the opportunity cost of

not using it?

16. Do you think that above mentioned techniques threat consumers’ privacy and carry

ethical issues in the background? Why?

17. In your opinion, is it possible to introduce new marketing techniques among

companies and consumers in Bosnia and Herzegovina in the near future? Why/ why

not? What are your predictions?

87

Appendix C: Previous Neuromarketing Studies

Table: Overview of the selected previous studies in neuromarketing (Eser et al. 2011: 857-

858)

Author Field Question Results

Erk et al. (2002) Decisions between

different products,

fMRI

Is it possible to find

neural correlates to

evaluate the

attractiveness of a

product?

Products that

symbolise wealth and

status lead to a higher

activity in areas that

are responsible for

rewards.

Deppe et al.

(2005a)

Choice between

different brands,

fMRI

Which neural

correlates form the

basis of brand

information as a frame

in decision processes

connected?

In situations of

doubtful credibility,

brand information has

an important influence

on the decision-making

process, which results

in higher attractiveness

in fields including

rewards in decision

making.

McClure et al. (2004) Choice between

different brands,

products, and their

flavour perception,

fMRI

How does brand

information influence

the flavour perception

of sensorily similar

products?

Depending on the

brand information

given to the test

person, different areas

are activated by the

consumption of a soft

drink. If the consumer

believes the drink to be

his favourite brand,

areas of reward are

activated.

Klucharev et al.

(2005)

Advertising effect of

celebrities, FMRI

How does the so-called

‘expertise hook’

influence recollection?

The presumed

expertise of celebrities

leads to an increased

activation in memory

structure and a

significant positive

influence on purchase

intention.

Plassmann et al.

(2006)

Choice between

different service

brands, fMRI

How do information

Asymmetries influence

the neural favourite

brand effect?

The favourite brand

effect of an anterior

study (Deppe et al.,

2005) could be

replicated for decisions

with uncertainty. In

particular, with

uncertain decisions, the

favourite brand leads to

activation of areas

responsible for the

integration of rewards

88

into decision making.

Plassmann et al.

(2006)

Choice between store

brands by loyal and

disclosed customers,

fMRI

What is the neural

mechanism behind

brand loyalty?

Loyal retail store

customers, as

compared to disloyal

customers, show

significant neural

activations in brain

areas involved in

reward processing

when their preferred

store brand is the

choice.

Schaefer et al.

(2006)

Choice between

different car brands,

fMRI

What are the neural

correlates of culturally

based brands?

Activation of a single

region in the medial

prefrontal cortex is

related to the logos of

the culturally familiar

brands. The authors

interpreted the results

as self-relevant

processing induced by

the imagined use of

cars with familiar

brands, and suggest

that the prefrontal

cortex plays a crucial

role for processing

culturally based

brands.

Yoon et al.

(2006)

Choice between

different brands

Are there parallels

between human

personalities and brand

personalities?

Brand personalities and

human personalities are

processed differently in

the brain. Brand

personalities are

processed in areas of

object recognition, and

human personalities in

areas that are

responsible for

integrating rewards in

decision making.