Chp 1 Basics: Fundamental of Choice and Behavior Flashcards
Central Fixation Bias
Tendency to first look at the middle of sth important for poisitioning and communication
Gaze cascade effect
Looking at products leads to
preference leads to further looking
Consideration set
Alternatives that are considered acceptable for further consideration in decision-making
Operant conditioning
The desired behavior may be learned over a period of time, as intermediate actions are rewarded (“shaping“)
stimulus - desired outcome - reinforcement - leads to repeat purchases
Habit formation
a learning process in operant conditioning, which
reliably learns associations between a stimulus and the
associated motor response
habit formation in operant conditioning involves the repetition of behaviors in response to specific stimuli, with reinforcement playing a key role in shaping and strengthening those habits over time.
Construct evalustions two categories
- Categorical Process
- Piecemeal Process
Categorization Process
Evaluation of a choice alternative based on the evaluation of
the category to which it is assigned
The Categorization Process - Consequences
Categorization evokes the schema of the category – important role of Memory – Schema is a set of associations linked to a concept or category (e.g., luxury car) * Attributes
* Benefits
* Drawbacks
* Users
* Use situations – Because of this categorization and schema-application, we can then more easily…* Make inferences about the new target * Evaluate the new target * Include or exclude the new target in our consideration set * Decide whether we are satisfied/dissatisfied with the new target
The Piecemeal Process
Constructing an evaluation of a choice alternative by considering its advantages and disadvantages along important product dimensions
– Determine the particular criteria or product dimensions to be used in evaluation
– Evaluate each considered alternative based on the identified criteria
– Cutoff: restriction or requirement for acceptable performance
– Signals: product attributes used to infer other product attributes (e.g., using high price to infer higher quality
Noncompensatory Evaluation Strategies
A product’s weakness on one attribute cannot be offset by strong performance on another attribute
example: Lexicographic strategy: brands are compared initially on the most important attribute, and
the winner is chosen
Compensatory Evaluation Strategies?
- Simple additive
- Weighted additive
Simple additive
the consumer counts or adds the number of times each alternative is judged
favorably in terms of the set of salient evaluative criteria. The alternative with the largest
number of positive attributes is chosen
Weighted additive
judgments about an alternative’s attribute performance are weighted by
the attribute’s importance. The alternative with the best overall performance is chosen
Basic Markov-Model
- Fully stochastic choice model buying decision as random mechanism
- Result of the model: Likelihood that a customer will choose a certain product/brand
Attraction Model of Product Choice:
Luce’s Choice Axiom
Biased utility perception implies probabilistic choice model
Probabilistic model: Determination of purchase probability instead of purchase decision Purchase probability is proportionate to the utility of an alternative
Modified Luce-Model
Desirable: adaption to the buying context
High Involvement-context: Intense information search = accurate utility information and higher confidence in the utility
perception
Stronger tendency to choose the best product (e.g., buying a car/house)
Low Involvement-context: Less intense information search = less (accurate) utility information and less confidence in the utility perception
„Satisficing“ tendency
Integration of an exponent β into the model High β: High likelihood to chose the utility maximization alternative Low β: Tendency to chose the different alternatives with the same probability
If Utility is not known –
Approaches for analyzing consumer preferences
- Revealed Preferences: Logit analysis and variants
- Stated Preferences:
-Compositional approach: Only at the product feature level At the product feature and feature value level
-Decompositional approach: Ranking-based
Conjoint-Analysis
Rating-based
Conjoint-Analysis
Choice-based
Conjoint-Analysis (CBC)
- Hybrid approaches: Adaptive ConjointAnalysis (ACA)
The Utility model of stated preferences 3 methods?
- Compositional Approach - First determines Partworths then Utility
- Decompositional approach - First determining Utility and then PartWorths
- Hybrid Approach - Combination of both approaches
Steps or processes in the Decompositional approaches: basics of conjoint analysis
- Definition of salient attributes and corresponding attribute levels
- Specification of how data is collected from customers
- Estimation of the utility values
- Interpretation of the utility values
Step 1: Definition of salient attributes
and corresponding attribute levels
- Attributes should be relevant for the buying decision
- All key decision criteria (price, quality, …) must be included
- Attributes must be influenceable by the firm
- Important competitive products should be representable by the attributes* Attributes should be independent from each other
- Compensatory relationship between attributes
- No “must-have” criteria
- Number of manipulated attributes limited
Step 2: Specification of how data is
collected from customers
- Rating Based Conjoint analysis: Simulation of a concrete decision-situation involving two alternatives, participants are asked to indicate their preference for the respective profiles
- Choice based conjoint analysis: Participants are asked to make choices among products withvarying features and
prizes
Step 3: Estimation of the utility value
The total utility U of a product P results from an additive function:
Where:
– PWij = part-worth utility of attribute i with attribute level j
– xij = 1, if attribute i with attribute level j exists; 0 if not
The multinomial logit model (MNL)
If Xtj is a vector of attributes of alternative j in choice task t, the probability of choosing option j during choice t is:
Step 4: Interpretation of the utility
values
Product design and development: identification of potential over-engineering - Sensitivity Plots
Willingness-to-pay analysis
In a model where we estimate a single parameter for price, we can compute the average willingness-topay for a particular level of an attribute
Alternative Models (I): Perceptual Mapping
Objectives
* Determination of central dimensions of product perception
* Identification of the relative position of products to each other * Product positioning along these dimensions
* Illustration of product positioning in comparison to competition
Alternative Models (II): Perceptual Map with Ideal Vector
Idea: Product evaluation does not entail information about preferences
→ Extension of the perceptual map by a preference analysis
Alternative Models (III): Perceptual Map with Ideal Point
Choice of the product with the
shortest distance to the ideal
point
Concentric circles around the
ideal point indicate same
preferences
Compensatory relationship
between attributes
Possibility to weigh the attributes
by creating ellipses
What is Priming?
priming is a technique in which the introduction of one stimulus influences how people respond to a subsequent stimulus. Priming works by activating an association or representation in memory just before another stimulus or task is introduced
ex. wendy advertised get a sandwich but people went to subway instead
The human information processing system?
slide 33
Considering how memory is structured:
* What are options for a second mover to overcome these advantages and
enhance preferences?
Operant conditioning
What is a schema?
a set of associations linked to a concept or category (e.g., luxury car)
* Attributes
* Benefits
* Drawbacks
* Users
* Use situation
