1 - Introduction & Consumer Behaviour

Question 1

3 components within consumer behaviour

Answer 1

Decisions
Satisfaction
Branding

Question 2

Anchoring (two types also)

Answer 2

Establishing a price point for customers to refer to
Includes 9-ending pricing and reference pricing

Question 3

9-ending pricing

Answer 3

Consumers pay more attention to the left digit
Eg: 19.99 vs 20.00

Question 4

Reference pricing

Answer 4

Consumers reference to existing prices to judge value
eg: Regular 500, on sale now for 400

Question 5

Loss aversion

Answer 5

Consumers don’t want to “lose” something, and therefore will be incentivized to keep something in their possesion
eg: Netflix free trial

Question 6

Anticipated regret

Answer 6

Consumers infer that if they don’t buy a product or service, they will regret it later

Eg: a limited time offer, such as introductory offers

Question 7

Introductory offers

Answer 7

Provides customers with access to an offering at a discounted price, or for free for a limited time. Experiencing the offering is the best advertisement, and consumers will feel “loss aversion” when the trial expires
Eg: Spotify free for first month

Question 8

Store Design

Answer 8

Deep discounted items are often displayed far inside the store
Limited time/quantity offers are used to increase sales (anticipated regret)

Question 9

Why is customer satisfaction important?

Answer 9

Leads to repeat customers and repeat purchases
Benefits to firm include:
Price premium
Referrals
Lower costs of retaining customers
Increased sales volume

Question 10

How can firms maximize customer satisfaction?

Answer 10

Exceed expectations
Satisfaction with process of buying (salesperson training, retail ambience)
Minimizing dissatisfaction after purchase (customer service & compensation for poor performance)

Question 11

Two ways to measure customer satisfaction

Answer 11

Survey data (questions measuring satisfaction and drivers of satisfaction)
Sales data (sale records of customers - are they repeat cusotmers, and customer lifetime value)

Question 12

Brand Equity

Answer 12

The physiological and financial measures associated with a brand’s product that the same product without the branding has

Question 13

Why is brand equity important?

Answer 13

Allows brands to charge a premium
Ability to extend brand name to other categories