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Consumer Behavior 1
Consumer Behavior Exam 1
Term | Definition |
---|---|
Marketing | The activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for consumers, clients, partners, and society at large (AMA) |
Consumer behavior | The study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires |
History of consumer behavior | Understanding (AKA satisfying/manipulating) the customer has been a goal for thousands of years, but the field of study is young--classes started in 1960s, Journal of Consumer Behavior founded in 1974 |
Economic/rational person approach | Transitivity: apples > bananas, bananas > cucumbers, so therefore apples > cucumbers |
Rationality | Adherence to a normative model such as probability theory or decision theory |
Rational Agent Model | People are well-informed, have ordered and stable preferences, and are selfish/calculating--basically they're computers. Therefore they maximize value and know whatever is knowable. |
Bounded Rational Model | People have variable tastes and malleable preferences, are impulsive and myopic, and their judgments can be context-dependent and mediocre |
Freud's research | 1940-1950--period when the least amount of rationality was assumed--thought the Ego/Superego had to keep the Id in check |
Stimulus/response | 1950-today--behavior is the result of reinforcement/punishment, and can be predicted from environmental conditions. Problematic bc it doesn't consider underlying mechanisms--what if a customer stops performing an action and you don't know why? |
Information Processing Approach | Says that the consumer is an active participant and problem solver who interacts with the environment and antecedent information--relies heavily on cognitive psychology |
Decision-making trends | Low involvement process (often we don't want to think too hard or spend time/energy on research--can lead to inertia, when you buy what you've always bought), letting emotions take control, following group behavior/going what others are doing |
Who benefits from the study of consumer behavior? | Consumers, public policy makers and regulators, marketing managers (so they can define their target market and identify threats/opportunities) |
Stage one in the consumption process: pre-purchase issues | Consumer recognizes a need and looks for information on different alternatives, marketers study how consumers form/change attitudes toward products and what cues they use to infer quality |
Stage two in the consumption process: purchase issues | For the consumer: is acquiring the item stressful or pleasant? what does their purchase say about them? for the marketer: how do situational factors like time of day and store displays impact purchase decisions? |
Stage three in the consumption process: post-purchase issues | For the consumer: does the product provide the intended enjoyment/serve its function? how will they eventually dispose of it? for the marketer: what determines customer satisfaction and repeat purchases? will the consumer recommend to friends? |
Meanings of consumption | Sometimes people don't buy products for what they DO, but instead for what they MEAN--product can express identity, show status, act as a reward, etc. Consumers can also develop relationships with brands. |
Leading brands for customer loyalty/relationships | Apple, Disney, Amazon, Harley Davidson, Netflix, Nintendo, Samsung, Whole Foods, BMW, Toyota |
Motivations to consume | Complex and varied--occur when a need is aroused and the consumer wishes to satisfy it. Goal: the desired end state. Involve factors that direct behavior and processes that lead people to behave a certain way. |
Needs | Are dynamic, exist in a hierarchy, can be internally or externally aroused, can conflict |
Maslow's Hierarchy of Needs | Physiological (water, sleep food) --> safety (shelter, protection) --> belongingness (love, friendship, acceptance) --> ego needs (pride, status, accomplishment) --> self-actualization |
Consumer terrorism | When a customer actively tries to harm the company or other consumers--e.g. poisoning products, suing the company over false defects |
Addictive consumption | When a consumer has a psychological or physiological dependence on a product |
Compulsive consumption | When a consumer buys too much, often due to depression, boredom, etc.--e.g. buying too many lottery tickets--more common than addictive consumption |
Illegal activities | Underage drinking, etc. |
Segmentation | Identifying all potential customer groups that are viable for the purposes of marketing products and services |
Targeting | Selecting the market segments that the firm intends to target or reach |
Positioning | Creating perceptions in the minds of consumers about the nature of a company, its brands, and its products and services--encouraging people to form a particular mental image and having it occupy a distinct/valuable place in the consumer's mind |
What makes a segment viable? | Members must be homogeneous (have similar characteristics) and different from the market as a whole, there must be sufficient demand for financially viability, there must be methods to reach the market in terms of marketing and delivery of products |
Demographic segmentation | Ethnicity, age, gender, income, etc. |
Geographic segmentation | Could be as small as neighborhoods or as big as countries, grouping people who share climates (do they need snow blowers?), income levels, cultures (spicy food in southern USA), values, living styles (urban v. suburban--how much space do they have?) etc. |
Psychographic segmentation | Includes attitudes (how do they feel about green products?), wants and needs, organization affiliations, traits (e.g. extrovert v introvert), expertise and involvement (e.g. motorcycle enthusiasts), risk orientation, goals/aspirations |
Behavioral segmentation | Grouping people based on how they use the product: heavy/medium/light users, potential targets/non-users/regulars/first-time users, loyalty to us v competition v no one |
Benefit segmentation | Grouping people based on what benefits they hope to receive--e.g. for toothpaste, people might prioritize price, decay prevention, whitening properties, good taste |
B2B v B2C segmentation | The main difference between the two is that their data sources are different--for businesses you might segment based on company size, industry, geographic base, type of firm, attitudes |
Selecting a market to target | Can select based on size, growth potential, accessibility, competition, compatibility with company goals--if the market is attractive and the company has strength in the area it is an obvious yes + vice versa |
Undifferentiated/standardized marketing | Using marketing mix A for markets A, B, and C |
Concentrated marketing | Using marketing mix A for market A and paying less attention to markets B and C |
Differentiated marketing | Using marketing mix A for market A, B for B, and C for C |
Individual marketing | Often used for major purchases, but can be smaller-scale too: e.g. when Google tells you happy birthday or when you get coupons on your birthday |
Positioning strategies | By competitor (you're better in some way), by product benefit/solution to a problem (but someone could copy that benefit), by use/user, by value for price (Walmart, Southwest), by product class (Pringles v other crisps, Wrigleys as smoking alternative) |
Points of parity and points of difference | Points of difference associations are what make you stand out, points of parity are when you say "we're as good as out competitor in X attribute BUT we're even better in Y attribute" |
Global, foreign, and local culture positioning | Global: making your brand a worldwide culture symbol, local: making your brand an intrinsic part of local culture, foreign: building brand mystique around a specific foreign culture |
Perceptual mapping | A visual representation of consumers' perceptions and preferences for a set of competing brands in a product categories, e.g. beaches v. city cross-compared with price, and how consumers perceive different vacation locations on these attributes |
Positioning statement | Succinctly communicates the parameters of your position--e.g. "for customers who want X, our brand is the best at [unique selling point]"--consider who you're trying to persuade, who you're competing with, and why you're better |
Decision making | The intent to pursue a particular course of action--reasoning varies wildly, includes stages, changing due to online resources, often uses heuristics |
Types of decision-making | Cognitive (when you're deliberate, rational, sequential), habitual (unconscious/automatic), and affective (anything involving emotions/feelings/moods, often instantaneous) |
Decision types | Habitual/routine decision-making (e.g. getting the same coffee every morning), limited problem solving (e.g. deciding on a restaurant when you have dietary restrictions), extended problem solving (e.g. cars, houses, medicine) |
Types of habitual decision making | Brand loyalty (brand is purchased habitually due to positive consumer attitudes), and inertia (brand is purchased habitually because doing so requires little effort) |
Two systems for how we think | System 1 thinking: fast, automatic, effortless, implicit, emotional; system 2 thinking: slow, conscious, effortful, explicit, logical |
Types of involvement | Product (might be high for a car/house/university decision and low for toothpaste/gum/paper towels), message (more involved when you spend more time processing), situational (more picky about SPF in the summer, more picky about quality when price goes up) |
Should we switch consumers from low involvement to high involvement? | Maybe. It could allow for more rational arguments for better products, but also: it's hard to get people to care, impulse buying may be in your favor, only one firm can have the best product |
Types of perceived risk | Monetary (will I be wasting money?), functional (will it work?), physical (is it safe?), social (what will others think of me?), psychological (will I regret this purchase?) |
Components of risk | Probability of something happening x severity of the consequences |
Real versus perceived risk | We overestimate the risk of low-risk situations and underestimate the risk of high-risk situations |
Factors influencing risk-taking behavior | People who take risks in one area are more likely to take risks in others, sensation-seeking is the primary predictor of risk-taking, men tend to judge risks as smaller than women do, increasing feelings of power makes people more optimistic about risks |
Risk compensation | Make people more willing to take risks by making them feel safer and offering safety interventions |
Steps in the decision-making process | Problem recognition --> consumer information search/acquisition --> evaluation of alternatives --> purchase --> post-purchase evaluation (buyer's remorse?) |
Problem recognition | Opportunity recognition (e.g. there's a better phone on the market than what you have), need recognition (e.g. your phone breaks) |
Information search | The process by which we survey the environment for data to make a reasonable decision--both prepurchase and ongoing, both internal and external |
Internal search | Includes what you've heard or experienced re: different products, your mood (e.g. hunger makes you more likely to buy food, patience makes you willing to research longer)--can be impacted by confirmation bias |
Confirmation bias | Tendency to seek out information that confirms your preconceptions, avoid contradictory information, and interpret information in a way that's consistent with your beliefs--could make you miss out on cheaper alternatives or bargaining opportunities |
External search | Marketer-controlled or not (e.g. the company's website v. an independent product review)? Personal (personalized recommendations, car sales, fancy suits) v impersonal (internet). Information overload: too much data to deal with |
Factors that influence searching behavior | Purchase importance, demographics (women and young people are more likely to search more), knowledge (people with medium knowledge do the most research because people at the extremes either don't know where to begin or already know what they want) |
Evoked set | Brands we recall from our internal search |
Consideration set | Brands we seriously consider buying |
Forming a consideration set | Draws from evoked set, brands found accidentally, and brands found through search |
Categorizing products: levels of abstraction | Superordinate level could be dessert; basic level could be broad categories like fattening v. nonfattening or specific categories like pie, ice cream, yogurt, fruit; subordinate level could be specific brands. |
Compensatory decision making | Evaluation depends on a weighted assessment of attributes, performance in one area can make up for a lack in another, assumes consumer picks "most preferred" brand |
Multi-attribute decision-making model | A type of compensatory decision-making model that involves selecting brands, rating them on categories, weighting the categories, and multiplying. |
Evaluative criteria | Dimensions we use to judge the merits of competing options. Could be absolute requirements that we don't use to make decisions, just to eliminate options--e.g. car safety, number of rooms in a house |
Determinant attributes | Features we use to differentiate among choices and make decisions, carry more weight |
Noncompensatory decision making | A high value on one attribute cannot make up for a low value on another, attributes are considered sequentially, assumes some consumers satisfice |
Elimination by aspects | A type of of noncompensatory decision making that involves rating alternatives on a variety of attributes and eliminating any one that has a score below a set cutoff on any attribute |
Lexicographic decision making | A type of noncompensatory decision making that involves rating alternatives on a variety of attributes and then choosing the one that is the highest on the most important attribute(s) |
Adaptive decision making | People use a variety of strategies depending on on personal factors and the task at hand |
Self-fulfilling prophecies in decision making | If you tell someone that something will happen, they're more likely to make decisions that will make it happen--e.g. teachers and "late bloomer" students, bartenders and tipping |
Endowment effect | People place higher value on something that already belongs to them--e.g. students without a Duke basketball ticket were willing to pay $170 for one; students who have a ticket weren't willing to sell for less than $2,400. |
Virtual ownership | We can begin to feel ownership before we actually have something--e.g. auctions gradually increase your feeling of ownership and lead you to bid higher |
IKEA effect | The more work you put into creating something, the more ownership you feel over it |
How to take advantage of the endowment effect | Stimulate virtual ownership (test drives, trial demonstrations), stimulate fear of loss (lose VIP status if you don't make a transaction this year), minimize initial burden of ownership (low introductory price, 30-day money back guarantee) |
Heuristics | Rules of thumb that we use to cope with complexity--could lead to biases and bad judgement |
Covariation (product signal) heuristics | Price (expensive = good), packaging (fancy = good), brand name (Nordstrom v. Wal-Mart), country of origin (Japanese cars, Belgian chocolate, French cosmetics) |
More examples of heuristics | Affect as information (using how you feel as a judgement tool), representativeness heuristic (comparing to a prototype), availability heuristic (based on ease of recall) |
Representativeness heuristic | Assessing the degree of correspondence between a sample and a population--but this often neglects the base rates of various categories (e.g. blue v. green cab or disease diagnosis math) |
Illusion of control | People like to think they have control, even over random events, and assume correlation between their actions and coincidences. e.g. lottery: people less likely to trade tickets when they picked the numbers, and if they win they attribute significance |
Consequences of illusion of control | Attributing chance to skill, engaging in wasteful rituals/superstitions, can be positive too: like feeling less pain at the dentist if you have a button to stop the procedure, or feeling more confident |
Misrepresentation of random sequences | The gambler's fallacy: thinking gambling devices have a memory and getting suspicious of "streaks," fewer winners when lottery numbers are sequential, people getting mad about truly random shuffle on iPod |
The availability heuristic | Estimating probability or frequency based on how easily something comes to mind--e.g. estimating earthquakes after one just happened, frequency of the letter K, thinking lists of names are longer when they have more famous names |
How the availability heuristic impacts how we rate ourselves and others | People rate themselves as more assertive when they only have to recall six examples of assertive behavior rather than 12, we remember our contributions to chores, group projects, class participation, etc. more |
Anchoring and adjustment | When we're primed with a number, either random (like our SSN) or relevant (like a year of a related event or a suggested answer), this number impacts future estimates (anchoring)--we adjust from there, but usually not enough (under-adjustment) |
Why are our adjustments insufficient? | We can't adjust to an answer if we truly don't know, people stop adjusting when they reach a plausible answer, adjustment requires cognitive resources--some people who have a higher need for cognition are better at it though |
Imprinting | Becoming attached to the first thing you see in a buying decision |
Expectations and presentation | MIT brew: people liked it, but only before they knew it had vinegar; upscale ambiance at a coffee shop increased coffee ratings and willingness to pay more money, New Coke |
Effect of stereotypes | Reminders about your identities/the stereotypes associated with them impact behavior--e.g. Asian American women performed better on a math exam when they were reminded they were Asian than when they were reminded they were women |
Priming | Words/ideas you encounter can subconsciously impact your behavior--e.g. polite v. aggressive words predicted how long it would take you to interrupt, words about elderly people caused participants to walk more slowly |
Regression to the mean | Usually our performance is close to average--not very good or very bad. Therefore it seems like we are becoming mediocre after a great praise-worthy event that was the result of skill and luck (e.g. Sports Illustrated cover jinx) |
Perception of value | People are more likely to take $100 for sure rather than 1/100 chance of winning $10,000 even though the expected value is the same--opposite for loss |
Prospect theory | Losses cause more pain than gains cause happiness--therefore it's better to aggregate losses and segregate gains |
Mental accounting | The set of cognitive operations used by individuals and households to organize, evaluate, and keep track of financial activities--people have different accounts for vacation, necessities, etc. and apply different rules to each |
Mental accounting example | For most people it's less painful to buy a $150 ticket after losing $150 than it is to replace the ticket if they lose it--that's because in the former situation, the money is coming from separate "accounts" |