consumer behavior exam 2

what are weathermen less overconfident and better calibrated than doctors

weather men repeat the same risk analysis day after day, get instant feedback, and learn by doing feedback for doctors is not always well defined and sometimes diagnoses remain uncertain

4 ways marketers take advantage of the fact that people tend to be overconfident

weight loss programs gym memberships credit card interest rates putting greens in gold stores

under what conditions is the foot in the door technique the most effective?

when the initial commitments are: - active - public - effortful - internally motivated

what factors contribute to overconfidence

wishful thinking confirmation bias hindsight bias self serving bias

right and wrong way to leverage descriptive norms

you shouldn't emphasize that most people are doing the wrong thing because that makes it seem less wrong and like less of a big deal that it is

2 biases that result from reliance on the availability heuristic

overclaiming ease of recall bias

unity principle

people are more likely to be persuaded by people with whom they share an identity use specific/unique jargon, convey exclusivity, define the out group, invoke family ties

adjustment

people basing their judgements on an initial value (anchor) and adjusting accordingly BUT it's often insufficient, irrelevant, and can happen for many types of estimates

conflicts of interest

people believing their own connections to an issue are enlightening and others' are "biasing"

3 examples of the power of thin slice judgments

people can tell when people are lying based on facial movements honesty, deception, emotions, relationship success, personality, voting behavior, etc.

prospect theory

people choose to take on risk when evaluating potential losses and avoid risks when evaluating potential gains

overclaiming

people claim more responsibility for collective endeavors than is logically possible

diffusion of responsibility

people fail to take responsibility for action or inaction because of the presence of other people sharing the responsibility

insensitivity to sample size

people judge samples as having similar properties to their population and do not take into consideration sample size paying attention to the quality and nUMBER of reviews

bias blind spot

people tend to believe that their own judgments are less prone to bias than others

How to avoid diffusion of responsibility

single out someone and tell them what to do

Internally derived reference point

"fair" price, price often / most often charged, last price you paid, price of brand usually bought

descriptive norms

"how things are" -> what most people in a group think, feel, or do "this is how much energy most people are using" "billions and billions served at McDonalds"

injunctive norms

"how things should be" -> how people should act, feel, and think in a given situation, irrespective of how people typically respond in the setting and people who violate these standards are often judged negatively "eat healthy. get active. make a difference!" = the socially appropriate thing to do is the eat healthy and stay active

externally derived reference point

"regular retail price", what it's placed near, how other items in the line are priced ex: it's hot and you're at the beach. you want a refreshment. how much would you pay for ice cream? pay more for 7 oz in a 5 oz cup compared to 8 oz in a 10 oz cup

system 2 processing

- "reflective" - controlled - effortful - slow and often serial - may be abstract - rule-based

outside view

- considering others' failures - considering their own past failures - other students were better at predicting students' completion times

thin slice judgments

People can make surprisingly accurate judgments quickly and automatically

what is construal

The way in which a person interprets the world around them

what's a central cue

argument strength

what are 3 factors of attitudes formed via the peripheral route?

- central cues (argument strength) - peripheral cues (source factors like likability, attractiveness, status, expertise, etc.) - message factors - # of arguments, length of argument, etc.

3 tactics that marketers can do to leverage the insight that consumers are loss averse

- discounts vs. surcharge framing (10 cent a gallon cash discount, 10 cent a gallon credit surcharge) - save more tomorrow - opt in vs opt out framing

inside view

- focus on plans and intentions and construct a (best-case) scenario in which the task gets done - the imagined scenario is typically optimistic because it sets goals for the participants in the activity - leads to more optimistic predictions

system 1 processing

- intuitive - automative - effortless - rapid and parallel - concrete - associative

what are 3 factors of attitudes formed via the central route?

- persist longer - are more resistent to new persuasion - are more predictive of behavior

3 things that influence ability

- personal expertise - distraction/multi-tasking -message comprehensibility/complex

3 things that influence motivation

- personal involvement/relevance - responsibility/accountability - need for cognition

4 insights of the prospect theory that offer insights to how we construe the world

- we evaluate prospects as changes relative to a reference point - we are less sensitive to each additional unit of change - we are risk averse when choosing among gains, and risk seeking when choosing among losses - we are more sensitive to losses than we are to gains

5 factors that increase likeability

1. physical attractiveness 2. similarity 3. compliments 4. contact and cooperation 5. conditioning and association

2 days marketers can help consumers be better calibrated

1. provide clear, frequent, immediate feedback 2. encourage consumers to construe situations in multiple ways

3 factors that increase conformity

1. the unamity of the majority 2. the public nature of the judgements 3. the size of the group (the bigger the group, the more likely you will conform with them)

representativeness heuristic

making predictions by assuming that a specific instance will be prototypical of and/or similar in essential characteristics to the general category to decide if someone is a lawyer, i compare that person's characteristics to the characteristics of a typical lawyer

what is an attitude

A favorable or unfavorable evaluative reaction to something exhibited in one's beliefs, feelings, or intended behavior

Are we more or less likely to fall prey to the planning fallacy when we are making predictions about our own behavior or others' behavior? Why?

more

Is making a detailed plan likely to make you more or less susceptible to the planning fallacy? Why?

more

what two factors determine whether consumers process persuasive messages via the central or peripheral route?

motivation and ability

3 cues that signal authority

titles clothing trappings

what is more likely to have an influence in terms of the affect heuristic

vivid, relatable examples instead of cold, hard, statistics

likeability principle

we are more likely to say yes to someone we know and like

loss aversion

we are more sensitive to losses than we are to gains

how can marketers increase availability

Marketers can make recall feel easier and thus increase availability via... - Personal experience - Vividness - Recency

introspection illusion

we treat conscious introspections as a sovereign source of evidence in making self assessments and give less consideration to our behavior we do the opposite when assessing other people by placing less diagnostic weight on others' introspection and more weight on their behavior

what are the key features of the ELM model?

ELM makes predictions about how persuasive communication, and whether we take the central or peripheral route which route we take depends on our ability and motivation

What are two ways that marketers can help consumers avoid the planning fallacy?

Encourage consumers to take an outside view - Focus on other peoples' experiences AND why we might have similar experiences Focus on relevant past experiences AND why this might turn out like before Consult an unbiased outside observer (Observers naturally tend to take an outside view)

how can marketers use gain/loss framing to leverage the insight that consumers are risk averse when choosing among gains, and risk seeking when choosing among losses?

Gain Frame Program A: Preferred!- 200 customers will be saved Program B:There is a 1/3 probability that 600 customers will be saved, and 2/3 probability that no customers will be saved Loss Frame Program C: 400 customers will be injured Program D: Preferred! There is a 1/3 probability that no customers will be injured and 2/3 probability that 600 customers will be injured

boston surcharge example

In Boston, you must pay a surcharge for bags. Other places will offer a discount if you bring your own bag. Charging the surcharge is more effective at getting people to bring their own bags because of the fine. If people miss out on the discount, it is more acceptable than paying a fine.

social proof principle

One important means that people use to decide what to believe or how to act in a situation is to look at what other people are believing or doing there

authority principle

People often defer to authorities in a relatively automatic fashion, and there is a tendency to do so in response to the mere symbols of authority rather than to its substance

Reject-then-retreat (door in the face)

Start with a big request, then bring it down (increases yes's by 40%)

Milgram experiment on obedience

Studied authority Used fake electric shock to simulate a person in distress and ultimately dying

affect heuristic

The tendency to consult one's emotions instead of estimating probabilities objectively.

risk aversion

The tendency to prefer a sure gain of a moderate amount over a riskier outcome, even if the riskier outcome might have a higher expected payoff.

power of first impressions

Todorov's face judgment study people were shown pictures of candidates for congress and predicted the winners based on who looked more competent

availability heuristic

making a decision based on the answer that most easily comes to mind

heuristic

a mental shortcut used in judgment and decision making can lead to faulty beliefs and subotpimal decisions

aggregated losses

adding shipping into the cost of an order, including dessert or beverages with a meal, one price for an entire set

3 common marketing tactics that take advantage of reference dependence

advertising sale items and raising the price on non sale items multi unit pricing (4 for $2) quantity limits (limit 12 per customer)

foot in the door technique

asking for a small commitment and, after gaining compliance, asking for a bigger commitment

scarcity principle

asserts that opportunities seem more valuable when their availability is limited

what point does conformity level off

at numbers beyond 4

scope insensitivity

cognitive bias that occurs when the valuation of a problem is not valued with a multiplicative relationship to its size

what is framing

describing the same options in different ways can lead to different preferences and choices the way in which we construe that information is what differs

what point does the "bat and ball" problem illustrate

dual process theory illustrates the power of system 1 to throw an answer into our heads without recruiting system 2 to think about things more deeply

pluralistic ignorance

error of assuming that no one in a group perceives things as we do

Asch Experiment

experimented how people would rather conform than state their own individual answer even though they know the group's answer is wrong

what's a peripheral cue

factor that's external to the merits of an argument and can be used to provide a low-effort basis for determining whether an attitude object should be positively or negatively evaluated

best feedback to combat overconfidence

feedback that is: unambiguous frequent immediate

loss and gain framing example

forgoing a possible gain doesn't feel as bad as incurring a fine having to pay a surcharge feels worse than forgoing a possible gain or bonus people are more upset when it's framed as a loss than a gain

how to dispel pluralistic ignorance

hold a peer session about pluralistic ignorance

why does the reject then retreat technique / door in the face technique work?

if people see the second request as a concession, they feel inclined to respond with a concession of their own the second request appears even smaller in comparison to the larger request, and we now have 2 chances of being sucessful

normative reasons for conforming

in the service of avoiding the disapproval, scorn, or ostracism that accompanies norm violations people don't want to be labeled as jerks of weirdos

informational reasons for conforming

in the service of learning what is right or appropriate in a situation sometimes people don't know what to do

2 biases that result. from reliance on a representativeness heuristic

insensitivity to sample size regressive fallacy

seggregate gains

itemize all the things you get in a package present as a list of individual items

how can marketers leverage diminishing marginal utility

losses are more acceptable when integrated and gains are more valued when segregated

consistency principle

once we make a choice or take a stand, we feel pressured to behave consistently with that commitment

not framing example

our new fan uses 50% less energy than our old fan vs. our new fan uses twice as much energy as our old fan

framing example

our new fan uses 50% less energy than our old fan vs. our old fan uses twice as much energy as our new fan

regressive fallacy

people make predictions that expect exceptional results to continue as if the correlation between past performance and future performance was perfect, failing to account for natural fluctuations

ease of recall bias

people tend to overweigh the importance of recent events and their vividness in our memory

how does opt in vs opt out framing impact people's choices

people tend to retain the default or status quo, because the disadvantages of leaving it loom larger than advantages

overconfidence

people's subjective confidence in their judgments is reliably greater than their objective accuracy if people were perfectly calibrated, their 90% confidence intervals would include the correct answer 90% of the time

2 reasons why scarcity works

rareness signals value reactance --> people desire things they're told they cannot have

what are three aspects of the reciprocity principle that make it so influential

reciprocity is powerful, often more than other factors applies even to uninvited first favors can spur unequal exchanges

What are Cialdini's 6 principles of persuasion?

reciprocity, consistency, social proof, authority, liking, scarcity

peripheral route

requires little thought and relies on judgmental heuristics focuses on anything but the argument strength such as context, how attractive the arguer is, whether they like the expert or not, etc.

2 ways in which framing choices as gains vs. losses affects our judgments and decision

risk aversion for gain VS. risk seeking for losses

reference point

standard comparison against which an observed price is compared

central route

strength of arguments determine the persuasive outcome what's the quality of the argument, etc.

planning fallacy

tendency for people to overestimate their rate of work or underestimate how long it'll take for them to get things done

identificable victim effect

tendency to offer greater assistance to an identifiable victim as opposed to a larger, unnamed statistical group of people

third person effect

tendency to think we are less influenced than others by ads and other persuasive messages

differences of opinion

the greater the difference in opinion, the more people believe their own opinions are valid, and others' opinions are "biased"

what is the reciprocity principle

the rule that one should pay back in kind what one receives from others

anchoring

the tendency, in making judgements, to rely on the first piece of information encountered or information that comes most quickly to mind