Session 1 Flashcards
How does Marketing drive behaviour?
Behaviour = f (person: context)
Marketing drives behaviour through branding (person) & choice architecture (context)
What is the misguided view on marketing?
Sell what you make, start out with a product of which you produce as much as possible as cheaply as possible and then try to push it out of the door
What is marketing actually about?
Marketing is about creating value, focusing on benefits and not on the product (consumers buy drills and not holes)
What is the goal of marketing?
Get profits through customer satisfaction (relationship, ROMI, life-time value)
What are means to achieve this marketing goal? (HOW?)
Determining the needs and wants of customers and delivering the desired benefits more effectively and efficiently than competitiors.
–> Customer-focused thinking (marketing cannot create needs)
Explain word of mouth, its effectiveness and why it is so effective (a way to do marketing)
Word-of-mouth: a 10 times more effective than traditional marketing, while it generated twice the sales of paird advertising (we trust our friends much more than companies and our friends know us better)
Why should marketing be also focused on keeping customers? (focus of marketing)
Keeping customers: is more profitable than attracting new ones; long-term loyality is the goal, a cost of attracting new customers can be up to 5 times the cost of keeping a current one happy
What are the three fources for change?
- changing customers (heterogensity in states, access to information etc.)
- changing competitors (number, aggressiveness)
- changing technology (more types in small batches)
What are 4 key elements on what you should focus on vs what not? (think inward vs outward company view)
- customers instead of products (they have more information)
- benefits instead of product features (benefit: susatinable power use, feature: LED)
- external instead of internal (e.g. customers instead of mass production)
- > 1 transaction (satisfaction, relationship marketing and branding) and getting a compeitive advantage
what happens if you focus scale instead of sustainable differentiation? (inward view, not out outward view)
devastating competition
What is the prosepct theory?
- People are risk averse towards gains (avoid risk and choose safer guaranteed options) and risk seeking towards losses (take risks to avoid or to minimize that loss).
- People are more sensistive to towards losses than gains.
What is the endowment affect?
Overvalueing the things they own (parting with something owned is treated as a loss, which people want to avoid)
What is the status Quo Bias?
A new alternative might have losses and gains, as we value losses more than gains, we prefer sticking to the status quo (similar to the endowment affect).
What is the sunk cost effect?
when one has already invested in something, abandoning feels like a loss, which one wants to avoid, This leads to risk-seeking behaviour, where people continue to invest in the hopes of avoiding that loss, even if it is not rational.
Why do people make bad decisions in the stock market in line with the prospect theory?
Sell good stocks too soon because of being risk averse towards gains and not the bad stocks too late (or never) because of being risk seeking towards losses
Why do companies segregate gains and combine losses?
Segregate gains: people experience diminishing sensitivity to additional gains, while they value gains more
Combination of losses: if losses are combined, they will be perceived as less painful than when they are seperated into multiple losses
Are decisions of consumers consistent or inconsistent? explain why
Consumers often make choices that are sometimes not consistent with their own previous choices or with what they say they would buy (irrational choices). This is because consumers are influenced by the context in which choices are made. (buy french wine, when french music is playing)
When does choice overload occur? (jam example)
Choice overload occurs espeically if people have no clear preference for what they want.
In the jam example people stop at the jam shelf more often if there are 24 choices, but only actually buy jam if there are only 6 options
What is the consequence of choice overload?
People have limited attention resources, so they become overloaded with too many options to choose from and end up not choosing
When do people make better decisions?
Consumers often make better choices when basing their decisions on their immediate emotional reaction
What is attribute substitution to justify choices?
When presented with many options, people justify their choices by comparing alternatives in a set and so an alternative is considered as being more attractive if presented together with a clearly worse alternative
What is choice aversion?
Consumers are averse to making a difficult choice and so if presented with two similar options and one different option they will choose the different one to avoid the difficult choice (nurse/doctor example)
If people have to chose between eating a fruit or candy now and in the future, what do they choose when?
People are focused on immediate gratification such that they say they would prefer to eat a fruit in the future, but they prefer a candy for now.
Do people like to have the option to have options in the future?
Yes, when selecting several products for future consumption, consumers tend to seek variety
What is single-option aversion?
People are more likely to buy stuff, if there are at least two options.
Choice overload only occurs if people are exposed to many options. The best number of options depends on the level of involvement and on the attractiveness of options. In general best to offer 3 options
Do people like having choices in general? How many choices should be presented?
No, they get tired when having too many choices, as decisions cause mental costs. Thus, 3-6 options are best (at least 2 though)
