midterm Flashcards
What is consumer behaviour
study of decisions (low and high effort), study of satisfaction, study if branding
Consumer decisions are important: managers, consumers, society
Decisions translate into sales, market shares and profits
how to maximize and measure cust satisfaction
How to maximize cust satisfaction:
Exceed expectations
Satisfaction with process of buying vs product
Minimize dissatisfaction
How to measure customer satisfaction:
Survey data (qs measuring cust sat and drivers of dat)
Sales data (sales records of customers, clv)
Problem recognition, how to increase gap (3)
Gap between actual state (is) vs ideal states (should)
Moves consumers from passive –non decision– state to active –decision– state
INC GAP = Increases motivation to act (ie make a decision) how to inc gap??
1. Point out low actual state
2. Provide high ideal state (must be authentic, super key, culturally relevant)
3. Contrast low actual vs high ideal states
Brand authenticity & sources of authenticity
brand faithful to itself, true to consumers, motivated by responsibility
Sources of authenticity: Realistic ideal points in retailing / advertising, Transparent & fair manufacturing process, Original designs/handmade products, Firm’s origin story with founders, Firm’s behavior consistent with its values/mission statement
Search (2)
- Internal (ie memory) search…… memory → brand names, brand attributes
- Top of mind brands/attributes - External search (google search, amazon search, ecommerce sites, review websites, product websites, consumer reports magazine, talking to friends) paid ads, organic search
-Paid ads
-Make a list of keywords relevant to your offering
-Specify where your ad will appear (Google search website or affiliate websites)
-Bid on your keywords (i.e., maximum price/click)
Google will accept or offer a higher price for your keywords
-Set a total advertising budget for a time period
**Online retailers/streaming services have advantages on external search (can recommend / sell products to consumers, can get consumer data for targeted product offers / developing new products)
High effort decisions, come from (3)
=more time and energy
Comes from 1)high motivate 2) high ability/more knowledge about product features 3) high opportunity/more time to think
decisions can be either….
cognitive or affective
Brand attribute matrix
Table of brand and attributes that you collect as a first step towards choice of high effort products (ex. In video slides) can be provided in advertising
Through external search
Through internal search
Cognitive-TORA
Compensatory (Assumes that bad performance on one attribute can be compensated by a good performance on another attribute)
How do consumers choose one brand for high effort? One method is TORA or theory of reasoned action (formula in slides)
Consumers form attitudes using mental process represented by this formula, more positive attitude is more likely is choice → Approximates our thinking
Decision making apps use TORA
Useful tool for individual consumer decision making, managers, social marketers
4 steps of TORA
- People list attributes
- People think about performance and importance of each attribute (scale in head)
- People combine performance/importance of each attribute (weighted utility of that attribute)
- People add utility (value) from all attributes ( add up tp get total utility of product as a whole)
Cognitive-Non compensatory, explain and explain 2 kinds
But Consumers Often Have Minimum Cut-offs,i.e.,Non- Compensatory
Minimum cutoffs for attributes
- Conjunctive = high cutoffs on all attributes (chosen alt is the only surviving alt)
- Disjunctive = variation in attribute importance, different cutoffs for attributes (chosen alt has greatest number of acceptable features)
Cutoffs in Choice Are More Important When…
When there are many brands and attributes, because using cutoffs simplifies choice in these situations
When attribute is very important to consumers (e.g., fuel economy, CO2 emissions…)
=> Firms should provide numerical choice cutoffs to consumers that favor their brand (ex. Battery life, time saved)
=> Firms should price products below maximum price cutoff (i.e., maximum willingness to pay) ………..does not work for luxury products where consumers cant use price cutoff easy bc price not given
Which (compensatory or non compensatory) is consumer likely to use??
if brand attribute matrix has more brands and attributes then use non compensatory
BC cutoffs reduce brands in consideration set → reduce info, reduce effort
Compensatory on surviving brands
Marketers should be cutoffs to consumers
affective decision making (2 types)
- Emotions at point of sale
- Especially important for hedonic products (iphone, xbox), product trial and sampling creates positive emotions
- Can create feelings with new car smell, test drive experience, upbeat music, VR - Affective forecasting: we make predictions about how we are likely to feel in the future (consumers overestimate future regret) (pay more at auctions than at regular sale is effect of affective forecasting???)
How can firms use TORA
Can do consumer survey for large number of people, calc average attitude towards a brand and competing brands→ find out what attributes the managers should focus on to improve attitude towards their brand
Trade offs! Focus on important attributes and attributes brand is doing bad on
Diagnostic tool in slides (if important and brand poorly then 1) add new attributes 2) change beliefs 3) compare with comp)
TORA strengths
Ensures we dont miss important attributes relevant to decision making (important for high effort decisions)
Ensures rational n long term analysis of info
Allows objective ie numerical comparisons between brands/choice options
TORA weaknesses
Incomplete set of attributes can bias results (e.g., insurance cost )
Does not permit cutoffs on attributes (e.g., families want the safest car, i.e., will not compromise on safety for price)
Does not measure feelings towards the brands (e.g., people fall in love with Mini Cooper, Mustang, Audi TT.
- Feelings arise first (before thoughts) and feelings (influence/bias) subsequent thoughts
advertising
Both affective and cognitive appeals
Advertising needs to first create positive feelings → feelings are experienced automatically by people (feelings come first) → Feelings influence subsequent thinking through confirmation bias (sometimes called “motivated reasoning” or “halo effect”)
Five senses (vidual, audio, smell = marketer has more control) (taste, touch = marketer has less control)
Smell effects mood, memory, and brand
language and decision making
Language Should Avoid Negative Feelings & Create Positive Feelings
The Chevy Nova never sold well in Spanish speaking countries because Nova means “no go” in Spanish
When Pepsi started marketing its products in China, they translated their slogan, “Pepsi Brings You Back to Life” too literally. The slogan in Chinese read: “Pepsi Brings Your Ancestors Back from the Grave.”
Low effort decision making (def and 3 ways to them)
Low effort decision making (low motivation/ability/op)
- Cognitive and affective heuristics
- Simple feelings
- Position/advertise the brand - Choice heuristics
- If x (on sales, coupon, like, remember, works well) then y (buy now)
- Types: cognitive (performance, price) affective (liking, familiarity) - Single attribute
- Ex. all bran = high fibre → single important attribute
Judgments
estimates we make → important bc judgements influence decisions
name 4 judgment heuristics
availability, framing, anchoring, decoy
Availability
Vivid (easy recalled): information more important/true than less vivid information for risk/probability judgments[
- Lower availability - lower perceived risk
Vivid events = higher perceived probability (ex. Plane crash inc sales of insurance) → this is for probability judgements
For other judgments (time, money, quantity, liking)
- Immigration lineups (for cust satisfaction, this heuristics says one line is better bc movement is vivid)
- Cash vs card spending → credit card = availability = difficult to visualize loss = more spending
- Get in short and wide glass, drink looks less
Easily remembered info has ring of truth
- Ex. store brand, has same packaging as branded one, dependable association
- Ex. why diff colours matter (fresh association = green)
2 versions of availability
IMPORTANT vs TRUE
framing
Negative repels more than positive attracts
- Weight negative > positive (there are some exceptions like fatty=tasty)
- Ex. gun control → losses loom larger than gains → opponents emphasize losing guns while proponents emphasize gun safety
- Ex. carbon taxes → opponents say higher taxes, proponents sat cleaner environment
- Opponents have advantage bc ppl DONT want loss!!
Anchoring
We use anchors (reference points) when making judgements
Price
- Originally price was this, now this!
- High credit card limit → anchoring, many credit cars → anchoring
- Anchoring in wages (u should start with a high #)
Surveys (answers to previous questions influence subsequent answers)
- Pop of turkey study (first # changes estimation a lot)
Life (lottery winners vs paraplegics)
Anchoring and framing = besties (39.99$ for the 1st 4 months)
Decoy
Adding a decoy favors the middle option → middle option = best of both worlds
Class
Gas types
Upsell
Judgment bias
DEF: gap between rational and actual judgment (ex. Availability heuristic)
Availability heuristics
Can lead to bias in probability judgments
- Bias = gap between actual probability and perceived probability
- Actual prob of being shot in toronto, perceived probability of it
- Higher perceived probability → increased sales of safety products
ex. Subjective bias in judgements of break-in risk VS probability of break-in
Reinforced by availability in media!!!! Influences
name the biases (6)
distance bias, coherence bias, peak end bias, confirmation bias, sunk cost, overconfidence
Distance bias
People think abstractly for things that are distant in time/space, but concretely for things that are close in time/space (i.e., pay more attention to details of close things)
Research finding: people underestimate the time it takes to finish tasks in the distant future (e.g., after 1 month) than in the near future (e.g., after 1 day)…because they overlook task details for events in the distant future → time
Common in todays hybrid world, emerges in meetings when folks in the room fail to gather input from their remote colleagues → space
distance bias implications
- Front load your work for long-term projects (distant in time)
- When booking a holiday months in advance, think carefully about specifics such as insurance, ongoing projects, time off from work etc.(distant in time)
- Airlines should advertise distant destinations using statements related to “why you should go” but close destinations using statements related to “easy to go” (distant in space)
- Try to attend hybrid meetings in person (distant in space)
- Global warming (distant) need to suggest immediate steps to take
Coherence bias
“Events often happen randomly but people don’t like randomness and instead seek patterns, coherence, cause-and-effect. Coherence makes people feel more in control of their lives (e.g., lucky lottery numbers, lucky haircuts, lucky t-shirts..)”
- People see order in randomness
News items: lottery winners attribute win lucky #s, lucky hairstyles, divine intervention
Research finding: Basketball fans often say that a player has a “hot hand” during free throws ((i.e., higher chance of third basket success if first two throws enter basket) ……but analysis of NBA free throws shows no correlation between success of first/second/third throws
coherence bias implications
- Don’t buy a stock just because it is increasing in price
- Don’t think there is any pattern in quiz answers
- Health supplements can suggest that they improve health (since people are predisposed to see an effect from taking supplement
peak end bias
People prefer experiences that get better over time and end on a high
Research finding: people prefer a job with a salary that increases over time compared to one whose salary decreases over time, even though the total amount earned is the same for both
peak end bias implications
- Plan your holiday such that the last days are the best
- Restaurants should offer multi-course meals accordingly
- Music festivals should schedule acts accordingly (each day as well as across days)
confirmation bias
We focus on later information that confirms our initial expectations
- Ex.good first impression carries a lot of weight (expectation dominates what ppl think of you)
- Ex. gap b between objective quality and perceived quality
Confirmation in language: Few letters in a word can form our expectation of the word => our mind then confirms this expectation (i.e, fills in blanks)
Confirmation bias in perception : our mind confirms expectation of what we will see
Confirmation bias in society : We expect to see certain traits in social groups => our mind will seek to confirm these expectations
Ex. home → attractive first appearance, neutral to visualize you living their, bathroom rlly nice to differentiate (sellers will remember it, availability heuristics)
sunk cost
Tendency for people to escalate commitment to a course of action to which they have already made substantial commitments
Time
Money
Effort
Ex. casino, sports (draft), acquisition of firm thats doing badly (rarely sell)
Rationally……….we should consider the future marginal costs and benefits of actions going forward
In practice………….we consider past costs even if they can never be recovered, we lose sight of future marginal costs and benefits
“Throw good money after bad”
Overconfidence bias, what is the REASON
We are more confident in our own abilities than is warranted by the facts
- Ppl are quick to start because of overconfidence bias, but gap between confidence and performance can lead to dropping out
What Is The Reason For This Bias?
- We are motivated to get the best for ourselves
- This motivation biases our confidence in ourselves
Is This Bias Always Bad?
- Gives us confidence to initiate tasks
- Can also set us up for disappointment in tasks
Reducing biases
(3)
Knowledge
- Knowledge of heuristics & biases→ To use this knowledge in daily life, we need high motivation and high opportunity during decision-making
Review
- Review your past decisions and note examples of bias w Availability heuristic => examples are vivid, and will help you avoid bias in the future
Feedback
- Get feedback about your decisions from others
You may be using heuristics & biases so often that you fail to notice them
Difficult to see your own flaws without a mirror
KAFEH for reducing bias
knowledge of heuristics and biases
application of knowledge (use in daily life need high op during decision making)
feedback (from others)
examples (are most memorable, look at ur past)
habit (establish good habits of decision making – repeat/reinforce)
Be careful about biases in judgment and decision making when…
You are in low effort sits (low MAO - motivation, ability, opportunity)
For more automatic heuristics (anchoring, confirmation)
Status quo bias
We have a general preference to stick with what we already have/do
Ex. sitting in same seat all sem, eating similar food every week, order same drink at the bar, keeping “default option”
FOBO bias
Fear of better options - FOBO or FOMO
the fear that the option we are currently considering buying may not be the best one out there
Are you prone to FOBO? → satisficer-maximizer scale (the more you are a maximizer the more prone to FOBO)
Customer satisfaction def and leads to..
cust sat = attitudes (like/dislike) based on actual experience
ˆmeasure with surveys
Customer satisfaction leads to repeat purchase = more profitable for firms!
Lack of competition and price reduction also contribute to repeat purchase
But managers want to get it through customer sat
satisfaction is driven by 3 factors DEP
- Performance: of brand on attributes (ex attributes/features for airlines → on time, price, upgrades, ect)
- Expectations : of customers about attributes, customers have expectations about attributes
- High expectations are good as long as performance is close to expectations!
- Disconfirmation : when performance is far from expectations thats where disconfirmation comes in → has the biggest effect on satisfaction
disconfirmation model of driving satisfaction
If performance < expectations:
Negative disconfirmation => reduced satisfaction
If performance > expectations:
Positive disconfirmation => increased satisfaction
How can managers use disconfirmation model to max sat??
- Hook → reason to buy + reason for sat
- High expectations on Attribute #1
- Set these expectations through advertising
Meet these expectations
- High expectations on Attribute #1
- Surprise → reason for high sat (difficult to sustain tho)
- Low/Absent expectations on Attribute #2
- Keep something in reserve
- Exceed these expectations
- Using surprise to effectively create high satisfaction: Stream of surprises, creativity required, small surprises ok, cheaper surprises better, easier to program surprises in digital products
- ST benefits: repeat purchases
- LT benefits: positive reviews, confirmation bias
guidelines from hook and surprise
** don’t only use hooks, surprise can become unsurprising over time, need to be creative to develop new attributes, minor surprise better than no surprise, customers can react negatively if attribute is withdrawn
attribution model of driving satisfaction
Applies when there is negative disconfirmation → performance is much below expectations
Consumers think about poor performance,
3 types of thoughts (attributions) influence satisfaction
1. Focus (who is responsible?) fight against availability heuristic, tell cust why problem has arisen
2. Stability (what is the frequency?) display records if favorable
3. Control (what is being done about it?) give periodic updates to customers
Firms should provide information about these ^ attributions to minimize dissatisfaction
What are the results of dissatisfaction?
Complaint mgmt
Complaint = negative WOM
Negative info has greater impact than positive info
We share bad things more than good things
Losses loom larger than gains!!!!!
Greater memory for bad than good
Complains can be an opportunity → exceed expectations for solution = positive disconfirmation = high satisfaction and positive WOM
Experience design- 4 realms of experience (from experience economy reading) aeEE
2 dimensions create four realms of experience
X: Customer participation (passive/viewer – active/participant)
Y: customer connection (immersion/inside 360 degrees – absorption/outside)
4 realms: entertainment, educational, aesthetic, escapist
Las vegas sphere, disney show = immersive but passive
Tv show, theme park, vr gaming = immersive but active
Key principles to design memorable experiences (5) from experience economy reading THEME
- Theme the experience
- Harmonize impressions with positive cues
- Eliminate negative issues
- Mix in memorabilia
- Engage all five sense
Peak end bias says : ppl prefer experiences that get better over time and end on a high
Customer journey
- Customer touchpoints over time through experience
- Before, during, after → identify pain and pleasure points along customer journey
- Online and in person
- Visual Representation Of Customer Journey Over time through the experience
Gives firms a view of all customer “touch points”
Surprise at key touch points
Active/immersive at key touch points
5 principles of experience design at key touch points
Pain/pleasure points at key touch points
Expectation measurement before and satisfaction/drivers of satisfaction measurement after the experience (at key touch points)
Peak-end rule for entire customer journey
experience economy reading main points
experiences = economic offerings = differentiated/premium value
- when a company uses services as a stage and goods as props to engage individual customers in a way that creates a memorable veent
- personal, memeorable, entertaining, –> charges admission
Customer lifetime value and simple equation
LT future financial value of customer satisfaction, loyalty, repeat purchase
CLV=m*L-AC
m = contribution margin of cust, variable cost/year (variable cost from
company income statement for customer services, divided by number of customers)
L = # of years expected to be customer in the future,based on churn or defection rate of customers in the past
Ac = acquisition cost
Equation for CLV that incorporates time value of money
without time value of money: CLV = sum (m*rr^t-1)-AC
with time value of money:
CLV = sum (m*RR^t-1)/(1+i)^t-1 -AC
where t tis time, FV is value of each cash flow at time t, and i is firms annual discount rate
Churn /defection rate (AKA L in CLV formula)
Churn rate/defection rate: % of customers who leave each year
More is churn rate, less should be expected lifetime of a customer
L Can Be Calculated As Follows(expected lifetime of a customer):
Expected Value = Probability x Outcome (summed across outcomes)
Expected Lifetime of a Customer => (Probability of staying for year 1) x 1 year + (Probability of staying for year 2) x 1 year + (Probability of staying for year 3) x 1 year + ………………..
calculating m in CLV
total variable cost…..for example call center expenses, technician expenses, material/labor cost for manufacturing routers….Divided by number of customers
AC from CLV
total marketing expense (adv exp, price discount exp, free gift exp)
m*L in CLV
CLV = sum (mrr^t-1)-AC
ml= sum (m*rr^t-1)
RR retention rate from annual report , m : sales from invoice - VC from annual report, AC from annual report
How can managers use clv? 5 insights
- CLV can be calculated at the individual level, as well as at the segment level
- Invest in current valuable customers (platinum level, retain high CLV through incentives, LT contracts, personalized offers – INCENTIVES)
- Upgrade current unprofitable customers (Try to further increase CLV by upselling, Try to reduce churn)
- Fire current highly unprofitable customers (Cancel contracts/offer higher price to costly customers)
- Acquire new valuable customers (Focus on segments with high CLV, Determine how much to spend on acquisition for desirable CLV)
Measuring/managing satisfaction (reading): Benefits of Satisfaction Modeling (5 from class, rest from reading) CSD qb
- Comprehensive Insights
(We can study many drivers and outcomes of satisfaction) - Strategic Focus
(What we should focus on for maximizing satisfaction)
3.Detailed
(Can apply to sub-segments, repeat survey over time) - Quantifiable
(Objective, not subjective decisions about satisfaction) - Benchmarking
(Compare satisfaction scores across subunits of hospital, segments of patients, competitors…) - dynamic trend analysis
- financial and non financial planning
- predictive ability
- multiple data sources
regression equation for cust sat survey
regression beta coefficients = importance of each drive of overall satisfaction
Regression Equation:
Overall Satisfaction = a + b1Quality of Care + b2Physician Interaction + …
measuring patient satisfaction reading summary
- measure patient perspective based on satisfaction ratings captured in a survey –> large sample to make meaningful conclusions about quality of care, clinical outcomes, and malpractice risk
- satisfaction profit chain SPC = analyze antecendents and consequences of cust sat = used to construct a patentien sat survey map
- use it? ^ look for areas with highest importance weight, in each are what attributes are focus of process improvement, benefits from overall patient sat
- PSSM begins with the end user in mind
social influence
How other people influence our judgments and decisions!
Sources of influence → (this sessions focuses on non marketing sources)
They are more believable, bc nothing to sell
Less control, cant dictate what ppl say
Reach (mass=greater reach)
Cialdini’s social norms (6) FCS ASL
- Fairness
- Door in the face
“If i do something for you you should do something for me”
(I reduce my price, you should place order , Free gifts from charities, give them more)
- Combining fairness (ie reciprocity) with scarcity & anchoring → donations wikipedia, red cross - consistency
- Foot in the door
“If people take a small step towards a product, then later they are likely to take a bigger step towards the product”
- “Get someone do a small action, later they are more likely to do a bigger action”
- Put loss leader earlier in the store
- Loyalty programs = consistency and reciprocity and availability (rewards visible) - Social proof (Sailing to the tip jar, People tend to follow others behaviour, Illegal downloading, eating at full resto, taking escalator → fill tip jar, Crossing red light, line outside theatre)
- Authority (Doctor recommended: tylenol, People tend to follow experts, Going along with supervisor doing something illegal)
- Scarcity (While supply lasts, People think scarcity = valuable , Time/quantity (combines with social proof) )
- Liking
(Like me like my request, People tend to follow those who are likable Personalize (starbs), Similarity)
The effect of social norms on behaviour depends on
which of the following is …… STRONGER/weaker
- LOW vs high effort
Level of effort determined by motivation, ability, opportunity (MAO)
e.g., issue importance, knowledge, time pressure/multi-tasking - LOW vs high persuasion knowledge
Persuasion knowledge is knowledge of persuasion techniques in general & knowledge that it is obviously being used - HABITUAL vs non habitual behaviour
Habit is thoughtless behavior established through repetition and reinforcement - HIGH vs low importance of social services
Other people (“social” in social norms)
Wisdom of crowds
Social proof: others behaviour …. Wisdom of crowds : others opinion
- Basic Idea: Collective opinion of a group of people offers more wisdom than the opinion of any one person in the group
Wisdom of crowds depends on: expertise, group size, diversity, independence
Consumer reviews
Average rating (net wisdom of crowd)
Consumers rely more on average rating when (sample size is high, variance is low, average is high or low, raters are similar to the self, raters are xperts)
What is self control
Have self control when we Value long-term gains over short-term gains
High Self Control: Accept immediate pain for later gain
Low Self Control: Seek immediate gain, but suffer later pain
Why is self-control important
Marshmallow study! Tray of marshmallows, teacher leaves, if you wait you get two
Benefits: success and happiness in life
- Socially competent, personally effective, self assertive, trustworth, etc….. (result of marshmallow study)
Benefits: better decisions
How can we increase our self control?
Baumeister model of self-control
HIGH = deliberative / long-term decisions
LOW = impulsive / short term decisions
- Self control is required in life when we experience STRONG EMOTIONS!!! Like love desire, fear anger (aka positive and negative)
Increase self control? Baumeister model of self-control proposes 3 factors
- Goals
- What you want to accomplish
- Can be general or specific
- Need clarity! Know specifically what you want (features , brands you want) shop with a plan in mind
- Goal conflict! Causes negative feelings → immediate gains valued more
- Resolve goal conflicts in advance (minimize) - Monitoring
- Whats your progress? Keep track of behaviour = higher self control
- Record meals, track exercise, note daily expenses - Capacity
- What is self control like?
Like a muscle (in the mind) – reduces with use
Like a light switch – on and it stays constant
Like swimming – skill, improves with use
Apply Baumeister Model to Increase Self-Control
Be Careful When You’re Tired (physically/mentally)
- Self control is like a muscle
Don’t Go Grocery Shopping When Hungry
- Strong desire
Block that urge
- Put barriers to preempt strong desires
Think About Your Goals
- Clarify & Resolve
Precommitment and self control
Making a binding decision ahead of time (to save, block screen time, remindersO
When is it effective?
When its credible / cant be readily changed
Make initially smaller and later larger precommitments (consistency norm)
More self control techniques
- Marketers increase temptation → Discount items at end of store = more temptation
(Airport duty free shops) - Policy makers reduce temptation
- Self control techniques
- Reduce temptation
Structural barriers
Memory (reduce memory if temptation)
- Increase self control
Goals = clear, monitoring = continuous, capacity = mental/physical energy
Social pressure
Increase MAO
Creativity
how can we design creative adv and new products
New (not seen before), useful (customer benefit)
New products drive profitability because
- Customers’ ideal points for attributes go up over time due to competing firms offering better products/features….this leads to lower choice for current products
- Lower Choice for Current Products Over Time - Customers become used to current product’s performance over time….this leads to lower surprise/satisfaction for current product
- Lower Satisfaction for Current Products Over Time
Increasing creativity
(3)
- interest in product
- Having interest in category on creative output
- Research study correlated self rated interest in category to annual performance review (positive correlation) - Knowledge about product->customer (who, what do they need, how does product satisfy needs)
- Market research
Incubation period (needs to incubate in mind to create smt creative out of it) - moderate time pressure
- 2 day minimum (at least one overnight to allow unconscious mind to work without interference)
Innovation
how can we successfully launch creative new products / how do consumers choose new products
improving attitudes
Attitude under high effort (theory of reasoned action)
How can ppl mentally combine attribute info into attitude → important attributes for new products (relative advantage, use innovativeness, price, switching costs)
Framing!! Negative repels more than positive attracts
- If both pos and negative attributes present, negative have more weight = resistance to innovations is high
How to improve attitudes?
- Highlight positives for consumers (advertising, product trial)
- Minimize negative for consumers (price -penetration pricing, complexity- touch screen, apps)
Attitude-behaviour gap and how to reduce
Gap between what we rate a product and if we have purchased it? Reasons: budget, purchase cycle, competition, low memory
How to reduce the gap?
1. Reminder
2. Implementation method (provide the how, a plan, easy)
3. Behaviour consistency (get someone to do a small action and then they will be more likely to do a bigger action)
designing breakthrough products article key points
- how to design them?: Pain points remove, pleasure points add
- most companies do narrow innovation strat (technology ssubstitution), want to do tehcnology epiphanies
- phillips team create Aeh to reduce patient stress, steps: people layer, context layer, enabler layer
Successful new products are at the intersection of 3 circles
a. Customer need (unmet, often hidden)
b. Technology (ready, works well) → firm level or industry level technology
c. Cost (low enough for consumers)
Two stages of brainstorming
for new products
- Divergent thinking = free association, no constraints, creative new product/advertising ideas
- More difficult than convergent thinking
- Its inhibited by…. Education system in schools that values one right answer, groupthink in teams
^ tendency for members of group to seek consensus, don’t consider all alternatives
- Can be facilitated by: Playful Work Environment, Encouraging Risky Projects, Creating Diverse Teams - Convergent thinking = constraints (time, money, tech)
new product development process (8)
II CM BPM C
- idea generation
- idea screening
- concept ddevelopment and testingg
- marketing strategy development
- business analysis
- product development
- market testing
- commericalization
look at diagram
Concept development and testing
Concept Development
- Specify attributes of the new product (key: rel adv, use innovations, price, switching costs, trialability complexity)
- Create a prototype
Concept Testing at Trade Shows
- Interest from manufacturers/distributors at trade shows
- Response of testers/target consumers at trade shows
Concept Testing in Focus Groups
- Frequency of positive vs. negative comments
- Attitude towards the product on 9 point scale (1/dislike a lot……9/like a lot)
Forecasting new product sales (radical or incremental innovation)
When innovation is incremental or an extension of “comparable” with other innovations - forecast by analogy
- E.g., forecast HDTV sales using Flat Screen Color TV sales
When innovation is radical, “nothing like it,” one-of-a kind, then use:
- (Size of potential market) x (Likely market share)
a. Identify innovator target segment (similar innovations in the past)
b. Size of potential market = calc # of ppl in innovator target segment
c. Convert purchase intentions into likely market share
E.g., first electric/driverless cars or first augmented reality display
Forecasted sales after launch – Once initial sales data of new product is available, where is sales on the product life cycle
online consumer behaviour
Many choices online → need more choice of known brands
More choice postponement → more time and effort to assess many movies, more anticipated regret when assessing many movies
Counteracting choice postponement → ntflix my list, autoplay next episode, social connection/precommitment
More choices =
= more temptation = lower self control = greater serendipity
Stumbling across smt greater while browsing
Serendipity = surprise = high satisfaction = high loyalty
Ex. mystery gift
Why Does Fake & Partisan News Online Have Strong Effects on People’s Judgments and Decisions?
Stream of targeted fake/partisan news feeds confirmation bias (echo chamber)
- Echo Chamber Can be Passive and Active
- Passive
- Social media algorithms send confirming information to us based on what we see more and forward more - Active
- We can choose to watch TV channels and Whatsapp groups that provide confirming information
- We can search the internet using search terms that are likely to give us confirming information
example of clustering, framing and availability in online consumer behaviour
Online and offline confirmation bias reinforce each other (residential clustering)
Negative opinions are confirmed more easily than positive opinions (framing)
Video/pictorial information is more common online than before (availability)
recency and sleeper effect
Recency effect (remember more clearly what I see recently)
Sleeper effect (forget the source, remember the allegation)
- Fake but looks real sources
- repetition = truth
Negative effects of SM
- Fake/partisan news
- Upward social comparison and anonymity on social media
- Upward special comparison is psychologically hard wired, magnified by social media
- Anonymity on SSM encourages bad behaviour
- Ppl are aware of negative effects of SM (market for authentic plaltforms)
- Govts are aware of ^^^ (guidelines for childrens use of SM)
What can consumers do to counter the effects of SM??
Knowledge is power (reducing biases, KAFEH)
Technology as shield (detect deepfake, facial recognition CCTV)
Why do ppl share personal info online?
Reciprocity, availability (attractive current task more top-of-mind than future risk) , habit, social proof, FOMO
^^^ these heuristics are esp strong under low effort
- Low MAO, consumers are often low effort when using internet
Marketing research types
- Exploratory
METHODS: case study, focus group, qualitative
CHARACTERISTICS:flexible, versatile not conclusive
USEFUL FOR: discovery of ideas and insights - Descriptive
METHODS: surveys, panels, scanner data
CHARACTERISTICS: preplanned, structured, conclusive
USEFUL FOR: describe market chars or functuions - Casual
METHODS: experiments
CHARACTERISTICS: manipulation and control of variables
USEFUL FOR: det cause and effect relationship
focus group, survey
Focus group
Find out what ppl think of a brand, packaging, advertising
Surveys
Customer satisfaction survey
Attribute importance survey = segmentation of customers
Experiment
Special type of survey
Understand cause and effect
- Cause & Effect is Basis of Scientific Knowledge
- Physics → Mass * Acceleration (cause) & Force (effect)
- Biology → Vaccines (cause) & Immune Response (effect)
- Chemistry → Salt (cause) & Lower Freezing Temperature of Water (effect)
Conditions for establishing causality in experiments (first two are obvious conditions but not enough)
- Association (Condition #1) : concomitant variation/association = two variables co-vary together
- Temporal precedence (Condition #2): time order of occurrence = indep variable must precede the outcome variable in time
- Eliminating other causes (Condition #3)
- Mechanism between cause and effect (Condition #4): Underlying reason of cause and effect , Ex. handwashing to precent disease, mechanism is soap, Psychological Mechanism Between Cause and Effect Benefit Information => TORA => Attitude/Behavior (TORA is mechanism)
Conditions for establishing causality in experiments (explain number 3)
- Eliminating other causes
Control group vs experimental group
- Other Causes (i.e., alternative explanations such as more sales experience, better customers etc) are likely to be eliminated by random assignment of salespeople to the two conditions
- Pre-test and post test design: accurate measure of effect (music) ie before music after music
Cost of Pre-Test & Post-Test Design: Bias due to Consistency with Initial Measures of Brand Liking/Brand Intent to Purchase
- Consistency bias, why post-test ONLY is used in marketing
- Do pre and post for objective
reading: experimental research for customer focussed insights key points
can make a cause and effect statement if … internal validity, causal variable resp for change in outcome variable
- positivist = gather data to make conclusions
- symbols; R=random assignment to treatment and control group, X=treatment, o=observation
- BAD DESIGNS: one shot case study, one group pre/post test design, static group comparison
- GOOD DESIGN: post test only control group design, pretest/post test control group design
2 experiment design benefits and costs
- pre test, post test
- benefit: pre measurement gives aurate measure of effect
- cost: pre-measurement might bias post/measurement/consistency bias - post test only
- benefit: simpler (less measurement required)
- cost:less accurate
Validity in experiments (from reading on experimental design)
- Internal Validity: Ability to conclude that cause and effect, 4 conditions above
- Threats: history, maturation, instrument variation, experiential mortality, pre-measurment, selection bias, statistical regression - external validity : Ability to generalize cause → effect to a broader population
- External validity refers to whether the cause-and-effect relationships found in the experiment can be generalized to the population in question (rather than only those who took part in the experiment).
- High external validity (i.e. generalizable) if
- Using right sampling frame that covers entire population
- Random sampling of experiment participants from the population
- Pick an adequate sample size (1000-2000)
- threats: surrogate situation, measurement of dependent variable, measurement timing, sample selection not rep
What is symbolic value
What is the value of that offering?
Theres functional value (like nutrition, price0
Symbolic value = CONNECTION
- Ppl have individual side and group side of personality, leverage both to add value to product
first type of symbolic value
Emblematic
- Connection transfers cultural meaning
- External connection
Ex connection to subculture
Ex. connection to Canada
There’s global external groups and local ones you can attach brand to
Larger groups and less personal contact with groups - geographic emblems, ethnic emblems, social class emblems, gender emblems, reference group emblems
- marketing implications: symbol communication, reinforcement, removal
second type of symbolic value
Connectedness
- Local / narrow attachment
- Connection transfers individual meaning
- External connection , but smaller groups, more personal
- the use of products as symbols of our personal connections to pppl events or experiences
third type of symbolic value
Role acquisition
- Connection to lifestyle
products/brands help us connect with lifestyle (current or aspirational)
Student, professional, married, upper class - Role transition are sales opportunities
- marital, cultural, social status transitions
- phases: seperation from old role, transition from one to antoher, incorporation od new identity
- use symbols and rituals in role transitions
-marketing implications: cons in transition rep important target market, secondhand stores can get new stuff, promote products as instrumental in transition, manage rituals
fourth type of symbolic value
expressiveness
Connection to ones unique identity
- products/brands can help us connect with our identity (current or aspirational)
- Unusual clothes, tattoo, caars, decor
- Past present and future
- Nostalgia = past
- Aspirational = future
- marketing implications of connectedness and expressiveness: invoke feelings of nostalgia through connection, suggest that products enhance uniqueness
Special possessions have… also give characteristics and 4 categories
….. high value through functional, emotional and symbolic value
Characteristics; high WTP, low willingness to sell, not discarded, new uses, personified, few or no substitutes
- categories: pets, achievement symbols, collections, memory laden objects
Rituals Reinforce Meaning in Special Possessions (regular contact with special possessions); posession ritual, grooming ritual, divestment ritual
- consumer characteristics affect what is special
3 reasons to buy
1.Cognitive
2.Affective/feeling
3. Symbolic
- Symbolic and affective are more important than others
- Emotions come first and influence subsequent thinking through confirmation bias
symbolic cons beh reading key points
- we have cultural categories (grouping of objects), and cultural principles (values)
- need to be able to draw the diagram thing its also in notes
- self concept=mental conception of who we r, symbols help define and maintain it, actual and ideal identity schemas influence our cons beh
- assure product , brand , advertising fit with self concepts of target consumers
- marketers can create and maintain sacredness
- stages of gift giving: gestion stage (consider what to give), presentation stage, reformulation stage (reevaluate relationship based on gift giving experience)
- for marketing^: promite g/s as giftsss
