Consumer Behavior- Exam #2
Choice Overload
- Emerging Results: people have difficulty choosing from too many options Too Many Choices Lead To: - Decision Paralysis (choosing not to choose) - Greater post-purchase regret - Less satisfaction with choice process
Ethics vs. Laws
- Ethics: moral principles and values that govern the actions and decisions of an individual or group (you can't get arrested for unethical behavior) - Laws: society's values and standards that are enforceable in a court of law (you can get arrested for illegal behavior)
Types of Deceptive Advertising and Labeling:
- False Objective Claims - Puffery
Public Policy Organizations & Consumerism (5)
- Federal Trade Commission (FTC) - Food and Drug Administration (FDA) - Federal Communications Commission (FCC) - Environmental Protection Agency (EPA) - National Highway Traffic Safety Administration (NHTSA)
What keeps us making progress towards our goal? (Goal Motivation and Progress) (2)
- Feedback is important - The Goal Gradient Hypothesis -
How to avoid falling prey to the liking tactic:
- Focus on the effects of unwarranted liking - Focus on product, not person
How can you increase compliance? (5)
- Give a reason - Reciprocity - Consistency - Liking - Scarcity
3 Types of Groups That Play a Role in Forming Public Policy
- Government Agencies (FTC, FDA, FCC, etc.) - Industry Self-Regulation / the companies themselves (ie. Movie and TV Ratings; Rated R, PG-13, etc.) - Consumer Groups (ie. Ralph Nader's Public Citizen, PETA, Netter Business Bureaus, etc.)
Self Control vs Grit
- Grit: describes how likely you are to bounce back after a setback when trying to achieve a goal - Self Control: being able to delay gratification in the moment to serve a larger goal
Positive Decision Making
- How people actually make decisions (descriptive) - Based on psychology and consumer behavior - Assumes that people satisfice - Assumes bounded rationality
How to Manage Customer Expectations
- Its best to set realistic expectations, know what you're capable of delivering. - Dont over- or under-sell.
Why are experimental purchases better than material purchases? (4)
- Less social comparison - We hold our experiences closer to our sense of self - Gratitude and social connection - Story telling utility (connect with others)
Is there an ideal amount of choice?
- Limited choice may be best - No choices can be bad - Excessive choice can be bad
Why should you buy less insurance? (2)
- we adapt surprisingly quickly to bad things (you will get over it) - product insurance and warranties might be a really bad bet (you're paying more for a risk than the probability of you experiencing a loss, the company wants a profit)
Hedonic Adaptation
- we adapt surprisingly quickly to possessions - we adapt far less quickly to experiences (experiences often grow sweeter in memory over time)
Compliance Tactic: Liking
more compliant with liked requestors; similar to halo effect (ie. physical attractiveness, similarity, contact and cooperation like already worked with someone before, associations with other positives like wearing our school's shirt, etc.) (ie. More likely to buy cookies from a girl scout we know)
Spotlight Effect
overestimating others' noticing and evaluating our appearance, performance, and blunders (as if we presume a spotlight shines on us)
Reference Point Effect
people use reference points to make evaluations ie. If someone has $10 yesterday and 1 million today, they will feel differently if someone had 10 million yesterday and 1 million today.
"Consumed Consumers"
people who are used or exploited, willing or not, for commercial gain ie. prostitutions, organ/blood/hair donors, babies "for sale" (surrogate mothers, sperm/egg donors)
Expected Utility Theory (Economics)
people will all feel the same about a gain or loss ie. someone making 20 million a year will feel the same about a 100k loss as a person making 200k a year. ie. Someone with $3,000 who losses $1,000 will feel the same as someone with $1,000 who gains $1,000. NOT TRUE
Affective Forecasts
predictions about the hedonic consequences of future events (Mis)forecast: - Money is merely an opportunity fo happiness - Drastically overestimate how happy a purchase will make us
Word of Mouth (WOM)
product information transmitted by individuals to individuals (C2C) - Perceived as more reliable/trustworthy than traditional marketing - Backed by social pressure to conform with recommendations - Influences approximate two-thirds of all sale of goods - WOM is especially powerful when we are unfamiliar with a product category
Environmental Protection Agency (EPA)
protects the environment from pollution, garbage, hazardous waste, etc.
Addictive Consumption
psychological or physiological dependency on products or services companies profit both by selling addictive products and solutions (ie. nicotine products, dieting, shopping, gambling, candy, etc.)
Federal Communications Commission (FCC)
regulates TV and radio broadcasts
Food and Drug Administration (FDA)
regulates drugs, food, and cosmetics so they wont be harmful to consumers
National Highway Traffic Safety Administration (NHTSA)
regulates safety of vehicles
Business Ethics
rules of conduct that guide actions in the marketplace - What is "right vs. wrong" - Differs among people, organizations, and cultures but some are universal values
Mere Measurement Effect
simply estimating your probability of doing some desirable activity increases your probability of that action (ie. A car company mailed surveys asking who will buy a car and it increased the likelihood of people buying a car if they indicated yes on the survey.)
Expectancy Disconfirmation Model
suggests that consumers form expectations about product performance prior to purchasing a brand Customer Satisfaction = Customer Perception - Customer Expectation - if CP < CE: dissatisfaction - if CP = CE: satisfaction - if CP > CE: delight
Conspicuous Consumption ("Keeping of with the Jonses')
the act of buying and using products to make a statement about social standing ie. You make purchases to keep up with our social group/our status.
Compulsive Consumption
the process of repetitive, often excessive, shopping used to relieve tension, anxiety, depression, or boredom
Consumerism
the set of activities of government, business, independent organizations, and concerned consumers that are designed to protect the rights of consumers
Grit
the tendency ti retain interest and action toward very long-term goals - persistence ("stick-to-it-iveness") in the face of failure - More important than talent (ie IQ) at many performance outcomes - Living life like a marathon, not a sprint
Halo Effect
the tendency to assume that if something is good on one attribute than it is good on all others; if someone is good at "x" is often assumed to be good at "y" ie. Attractive people are often seen as nicer, more skilled, etc. Opposite: horns effect
Compromise Effect (Extremist Aversion)
the tendency to chose the "middle" option in a choice set - we like to avoid extremes; makes justification of choice easier. ie. If there is wine for $10, $35, and $75, people often buy $35. (even though most can not tell the difference between the $10 &$35). Marketing Implications: good for service businesses selling intangible products that are not easily comparable. - avoid one-of-a-kind products sitting alone on shelves, gives customers three related choices at different prices
Confirmation Bias
the tendency to see hat you expect to see or want to see - ie. Price Quality Heuristic: if something costs more it is higher quality. ie. The unhealthier something is, the better we expect it to taste
Anchoring
the tendency, in making judgments, to rely on the first piece of information encountered or information that comes most quickly to mind ie. Asking how many African countries there are, vs if you think there are more of less than 98 countries. We then anchor on 98 countries.
Social Marketing
the use of traditional business marketing concepts and tools to encourage behaviors that will create individual and societal well-being (ie. Advertisements aimed at preventing drunk driving, wearing your seatbelt, stopping smoking, etc.)
Self Positivity Bias
thinking bad things happen to other people, but not to us ie. Why reason why people smoke, drive drunk, speed, tan too much, etc.
Self-Control
voluntary regulation of behavioral, emotional, and attentional resources (focused on short-term) - is a limited resource, will fatigue like muscles do
The Goal Gradient Hypothesis
we are more motivated by goals when were closer to completion (ie. animals expend more effort when closer to reward)
Impact Bias
we incorrectly predict how long certain purchases will make us happy
Consumption Affective Forecasting Error
we incorrectly predict which outcomes are going to make us happy
Representative Heuristic
when decisions are based on how similar and example is to a category prototype/exemplar; if what is being shown seems like what it would be like it if were true, the it is true (availability is memory of specific instances, representativeness is memory of a prototype, stereotypes, or average.) ie. I am used to my grandma's meatballs. I grade all other meatballs to how similar they are to hers.
Crowding Out Effect
when extrinsic motivation (ie. $$, grades, etc.) distracts from intrinsic motivation (ie. interest); providing an incentive can actually reduce behavior (ie. blood donation, people like to give blood, but dont like getting paid for it. They don't feel as good donating.)
Anchor Pricing
when we encounter a new product (and new business) we accept the first price we see and from then on hat price becomes the anchor for that we are willing to pay for that product (it becomes the context by which all other prices are judged) ie. After Starbucks, we see it acceptable to pay $5/6 for a cup of coffee.
Self-Control Dilemma
when you have a long-term goal, but a short-term, lower-priority temptation that interferes with it
Outgroup Homogeneity Bias
you feel people in an outgroup are more like each other than they themselves feel they are ie. A women making a man for a man will include sports, red meat, and car wax. A man making an ad for a woman would include fluffy pillows, kittens, and flowers. ie. Liberals think all Trump supporters are the same.
Fundamental Attribution Error
you over-attribute others' actions to their personality and under-attribute to the situation; you do the opposite for yourself -ie. I behaved badly because of the situation, they behaved badly because it is their personality.
Ecocentric Bias
you think people are more like you than they actually are ie. You hate Trump and assume everyone else does. You are surprised to learn he has supporters.
Why do we care after the sale? (Post-Purchase) (3)
- Low Involvement Purchases: attitudes are somethings not formed until after the purchase (positive consumption experiences matter) - Repeat Purchases (costs much more to get a new customer than to keep an existing one) - Consumer-to-consumer (C2C): Word Of Mouth (WOM) communication; product recommendations, online reviews, etc
Advertising to Children (3)
- Children do not understand the persuasive intent of ad (information is not always objective or true) - Is it appropriate to advertise unhealthy products to children? (ie. fast foods) -Hose selling / spokes-characters (ie. watching sponge bob and then a sponge bob ad comes on)
Conformity vs. Compliance
- Conformity: changing one's behavior or beliefs to fit in with norms (we change to fit in) - Compliance: yielding to persuasion/requests (we do what others want us to do)
Why do we conform?
- Desire for rewards: more likely to conform in public than private (ie. wearing a mohawk in public vs at home.) - Want to be liked or to be like another (not stand out) - Assume others have more info than you (At a fancy restaurant, you use the fork size that others use)
When should you follow the herd in life?
- Do not follow the herd in life; find your own passions and stand out. - Follow the herd when consuming; others ratings are more beneficial than your guesses (the wisdom of crowds) ie. Rotten tomatoes
Hindsight Bias
"I knew it all along" The tendency to look back at past events and believe that you correctly predicted the outcome One people know the outcome, they inflate original prediction by 15% to 20%. ie. Asking trump supporters if they thought he will win before and after election.) *Marketing implication: Can lead to over confidence in future decisions*
Happiness Definition
"the meaning and purpose of life, the whole aim and end of human existence - Aristotle
JFK "Consumer Bill of Rights" (4)
(1962) - the right to safety - the right to be informed - the right to choice - the right to be heard
Factors that influence who is blamed for issues with product quality/performance? (3)
(Attribution Theory) - Stability: Is the cause perceived to be temporary or permanent? - Focus: Is the problem perceived to be consumer or marker caused - Controllability: Is the cause perceived to be under the control of the marketer/consumer? Or impossible to control? (If permanent, marketer caused, and marketer controlled, the marketer will have a very upset customer on their hands)
Bait and Switch
(Deceptive selling) ad that attracts consumers with a low-priced product, then tries to sell them a higher-priced product
Misrepresenting the Selling Intent
(Deceptive selling) if you're intent is to sell something, you must be upfront with customer ie. Postcard Scheme: Consumer received a postcard claiming they have won a valuable prize, but its really an intensive selling scheme
The Fresh Start Effect (2)
(Goal Activation) - New beginnings (ie. new home, new job); breaks habits -Temporal Landmarks (ie. birthday, new year); encourages you to ask how you want to be
False Objective Claims
(deceptive advertising/labeling) making an invalid claim - ie. Claims that defy specific principles; Take this pill that will remove your fat. - Regulated by FTC
Puffery
(deceptive advertising/labeling) an exaggerated claim - ie. "America's best pasta sauce;" Overly appealing fast food pictures in ads. - Not typically regulated (illegal in Europe, legal in the US)
Goal Intentions
(how to help achieve your goals) specifying an end-point
Implementation Intentions
(how to help achieve your goals) specifying the when, where, and how - responding to a specific situation in a specific manner - ie. "When ___ happens, I will do ___." - Stimulus-response, like classical conditional
Normative Decision Making
(we assume all people are rational) - How people should make decisions (prescriptive) - Based on economics - Assumes that people optimize/maximize - Assumes full information, rationality, and consistent preferences (across time and context)
How to avoid falling prey to the scarcity tactic:
- 1: recognize the agitation (I am annoyed by the limited opportunity) 2: Recalculate its value (Do you want it more than you should?)
Why Use Influencer Marketing? (4)
- 47% of online customers use ad blockers - Higher customer retention for WOM vs traditional ads - Survey found that teenagers were more influenced by top Youtubers than by traditional celebrities - It is a hybrid of both aspirational and membership strategies
Heuristic
- Any decisions "rule of thumb" or shortcut - Make our lives easier - Nothing inherently "wrong" with them, but they can cause bias ie. I will buy the most expensive wine and it will atste the best.
How marketers can violate consumers' right: (4)
- Bait and switch (illegal if "bait" doesn't exist) - Misrepresenting the Selling Intent - Incorrect Statements (making promises that can not be delivered) - Advertising to children
When are we most motivated towards our goal?
- Beginning and near the end of the goal - Roughly halfway towards the goal, both the initial state and end state are distant and we may lose motivation
Spending money on yourself verse others
- people who spend more money on other people (prosocial-spending) are happier (tru e in all societies/wealth levels; all people predicted incorrectly)
Reference Groups and Marketing Strategies (3)
- Admiration Strategies: concentrate on highly visible, widely admired figures (ie. athletes or performers) - Membership Strategies: focus on "ordinary" people whose consumption provides information social influence (ie. a college student in an ad enjoys XYZ, so I may enjoy it too). - Avoidance Strategies: focus on undesirable people using competitor's products
Negative Effects of Marketing (3)
- Affects Self-Image - Misrepresents Segments of Consumers - Invades Consumers' Privacy
What Causes Compulsive Buying?
- Low Self-Esteem (may make purchases to buoy their sense of self) - Fantasy Orientation (feel more important then they actually are -> shopping gains them attention and social approval) - Alienation (having fewer friends and social contacts than most do -> shopping provides an opportunity for social gratification) - Family History (family history of compulsive spending)
Reference Groups are more Robust for Purchases That Are: (2)
- Luxuries rather than necessities - Socially conspicuous/visible to others
What leads to a willingness to dispose of possessions? (4)
- Major Life Events (movies, role transitions like kids, marriage, etc.) - Availability of/Desire to upgrade - Product Failure/Product loses functional value - Product becomes technologically obsolete
How to Improve Self-Control (4)
- Make goal pursuit a habit (ie. brushing teeth before bed); implementation intentions - Avoid temptations - Temptation Bundling - Clenching muscles and needing to urinate actually help self-control
Disposal (Final Stage in Consumption Cycle) (3)
- Need to understand flow of used goods to markets that depend on them (Second-hand Markets (eBay, flea markets, etc., Self- storage, charities) - Public policy implications of product and packaging disposal - Potential effects of attitudes towards firm/product: growing segment of "green consumers" that will be very influenced by whether they feel a firm manages it responsibility to the environment well - Need to understand reasons for products' replacement (is product faulty?, lacking new features or a new design?; marketers may want to shape product lifespan so people give up old products for acquisition of new product (Apple iPhones are designed dot only last ~3 years)
Key Findings in Prospect Theory (2)
- People act differently when something is framed as a loss vs a gain - Losses loom larger than gains (have a bigger psychological impact)
Loss Aversion
- People tend to bee more sensitive to losses than to gains ie. The loss of $10 is more significant than a gain of $10.
Five Situational Elements of the Purchasing Process
- Physical Surroundings: crowding, store layout, etc. - Social Surroundings: presences of other shoppers in aisle, etc. - Time: amount of time available, time of day, etc. - Purchase Task Definition: why are you buying -- for self or gift - Antecedent States: what do you bring into the buying situation in terms of your mood, your physical state, etc.
Unethical Consumer Practices (3)
- Pirating movies, music, & software - Fraudulent returns of merchandise - Fraudulent auto insurance claims, etc.
How can we increase relevance of a goal?
- Public Commitment (ie. tell everyone that you will quit smoking) - Allow people to set their own goals (ie. in a managerial setting, let employees help set their own goals) - Extrinsic Incentives (ie. money makes people motivated to work; can hurt for very difficult goals)
Consequences of Satisfaction (3)
- Repeat purchase intentions - Increased positive WOM - Basis for positive emotional connection to the brand and brand loyalty
Tip to improve happiness (4)
- Smile more - Be mindful about things that make you happy (less social media/tv) - Prioritize growth and meaning (dont grow old) - Habitualize gratitude, savoring, and self compassion (be grateful) - Frequency of positive emotion over intensity (little things in life)
How do heuristics lead us astray (system 1 vs 2)?
- System 1 jumps to an intuitive conclusion based on a "heuristic"- an easy but imperfect way of answering hard questions - System 2: allocates attention to the effortful mental activities that demand it, including complex computations
Methods for Creating WOM: (4)
- Teaser Campaign (ie. picture of a movie ad without the title, suspense) - Provide Free Trail/ Free Samples - Provide incentives for referral (ie. refer a friend to Uber, get a free ride). - Viral Marketing (when an ad becomes contagious, ie. ice bucket challenge)
Bias
- Use (or overuse) of a heuristic leads to a poor decision - Problems happen if we over-apply a heuristic to such an extent that it produces a wrong decision or poor judgement
Word of mouth about products is more likely if the product is: (5)
- Visible/ Observable - Risky - High involvement/ High MAO - Distinctive - New
Consequences of Dissatisfaction (4)
- Voice Response (complain to firm, product returns) - Private Response (complain to friends, negative WOM, boycott firm) - Third-Party Response (file official complaint, take legal action) - Post-Decision Regret: when consumers perceive an unfavorable comparison between chosen alternatives and unchosen alternatives (the option they didn't choose does abetter job of meeting their expectations than the option they did choose)
Human Mimicry
- We subconsciously mimic the behaviors of others in order to increase liking - The more similar we are to others with these subtle cures, the better chance we have of being liked by them
Does money buy happiness?
- Yes, in poverty. But... Once you make more than $75k per year, you no longer experience any goals in happiness - High incomes don't bring you happiness, but they do bring you a life you think is better. - Higher incomes bring higher life evaluations, you think you're doing better than others; not directly related to overall happiness though.
Three Groups of People that Influence Us (Reference Groups)
1. Aspiration Groups: groups that we admire and desire to be like (but dont yet belong to) 2. Identity Groups (Associative or Membership Groups): groups to which we currently belong 3. Dissociative Groups: groups we do not belong to and do not want to belong to or emulate
Ways to spend our money to make us happier: (7)
1. Spend money on others 2. Spend money on experiences 3. Make it a treat 4. Buy less insurance 5. Pay now and consume later 6. Follow the herd when consuming 7. Satisfice, Don't Maximize
Three Aspects of Negative or Destructive Compulsive Behavior
1. The gratification from the behavior is short-lived 2. The behavior is not done by choice 3. The person experiences strong feelings or regret or guilt afterwards
Three Types of Influences that Others Have on Our Behavior
1. Value-Expressive/Identifications: wish to identity with group/person/hero, (we buy brands/products associated with that person/group) 2. Normative Social Influence: meet society/group's expectations (we buy products because its what others bought/its trendy/expected of you) 3. Informational Social Influence: information to help make decisions (we buy because of WOM about products/product recommendations)
How to avoid falling prey to the reciprocity tactic:
1: Recognition 2: Refuse the initial gift or favor 2a: Even better, take the gift, but understand that it was not a gift (it was an influence tactic; the person is trying to profit so reciprocity states that you should do the same thing to them)
What is Satisfaction?
= Customer Perceptions of Actual Quality/Experience - Customer Expectations of Quality/Experience Evaluation of product after consumption - Satisfaction: positive evaluation of decision, associated with positive affect - Dissatisfaction: negative evaluation of decision, associated with negative affect (1/3 of marketing research expenditures go to customer satisfaction studies)
How can you change consumer choice by changing context?
Adding a decoy. ie. If you have a bread maker costing $99 that is not selling, release one at $199 so by comparison it is cheaper.
A powerful way to change behavior:
Change the norms (ie. To stop bullying in schools, alter the behavior of the "social reference" students)
Milgram Experiment
Compliance obedience; electrical shocks to incorrect answers; learners were paid actors.
Asch Study
Conformity Participants were asked to select the line closest to the length of line X. When cohorts gave obviously wrong answers, more than 1/3 of the subjects conformed and agreed with the incorrect choices.
Candid Camera Elevator experiment
Conformity When other people stand backwards in an elevator, one person is more likely to copy them. Our nonverbal cues are determined by social influence, subliminal influence, and embodied influence.
Why market ethically?
Consumers think better of products made by firms they feel behave ethically; halo effect (green marketing)
How to Improve Grit
Correcting maladaptive, incorrect beliefs; fixed vs growth Mindset (ie. some people believe that will always be as smart as they are now, where as others think they can grow and become smarter) - Intelligence is not fixed - frustration and confusion are not signals to quit - Mistakes should not be avoided at all costs - What you believe matters - So choose a growth mindset
Why is Self Control Important (5)
Critical for most things we value: - achieving higher needs - achieving growth - health - relationships - achievements, $, success Among the most important skills we can cultivate.
Regret vs. Post Decision Dissonance
NOT THE SAME - Regret: certain you made the wrong choice - Post Decision Dissonance: not sure if you made the right or wrong choice (easier for marketers to correct)
Framing Effects
Decisions are influenced by the way a set of choices is presented; two versions of a problem that are essentially the same can lead to different choices ie. In an outbreak 600 people are sick. Program A will save 200 people, Program B 400 people will die. They are the same yet more people chose the saving 200.
Gamification of Loyalty Programs
Gamification: the use of game mechanics in a non-game context to engage users - People like earning points, competing, unlocking things, leveling up, etc. (the best loyalty programs take advantage of this) ie. Chipotle Rewards Program
Are social connections important?
Good social connections are fundamental to happiness.
What determines who is likely to succeed at accomplishing their goals?
Grit (not just natural talent)
What influence do groups have? (2)
Groups influence both wether to buy and the decision of which brand to buy ie. You see your neighbor get a new car and you decide it's about time you should get anew car too.
How to avoid falling prey to the consistency tactic:
If you dont want to do it, dont do it (recognize foolish consistency).
How to increase self compassion?
Imagine someone you really care about is experiencing the same thing and tell yourself what you would say to them
Does trying to be happy makes us happy?
No, putting pressure on ourselves to be happy makes us less happy - 50% less frequent positive emotions - 35% less satisfaction - 75% more depressive symptoms
New Satisfaction Research
exploring differences between - satisfaction with process of choosing - satisfaction with the actual choice ie. the car you buy vs dealership bought at
Why doesn't money increase happiness? (Macrofactor & Microfactor)
Macrofactors: - income inequality: people are happier with less income inequality Microfactors: - dont spend money on things that actually make us happier; wastes it(ie. buys 20 sports car; 500 pairs of shoes, etc.)
How Can Companies Reduce Dissonance? (2)
Make customers feel good about their purchase - Follow up mailings and thank you notes - Salespeople at cash registers - Alumni newsletters Make customers confident about their purchases - Price protection policies - Warrenties - Return policies
Critiques of Marketing
Marketers manipulate needs and wants
What is influencer marketing?
Marketing/endorsements done though social media posts by which people with a larger social media following instead of by traditional celebrities - The grey area between an official product testimonial and a subtle product mention; like WOM
Satisfaction and Loyalty (Old vs. New Model)
Old Model: a satisfied customer is a loyal customer (makes sense, but not true) New Model: satisfaction is necessary, but insufficient condition for loyalty (will not lead to loyalty on its own, rather just the first step)
Mere Presence Effect
People do not even have to say anything to influence our behavior; just the mere presence of other shoppers change our behavior ie. - More likely to buy name brands - Less contact with products - Rush our decisions
Prospect Theory
People do not follow a traditionally "rational" theory of choice - Prospect theory contracts with expected utility theory from economics - Prospect theory replaced expected utility (objective) with subjective utility (how we see tings); incorporates human element of evaluation ie.
Why do framing effects work?
People have different sensitives to losses versus gains. - when choices are perceived as losses (ie. deaths), people tend to be risk-seeking. - when the choices are perceived as gains (ie. lives saved), people tend to be risk-adverse
Base Rate Fallacy/Neglect
Prior probability is ignored when making a judgment; place too little (or no) weight on the base (original) rate of possibility (ie. probability of A, given B) ie. The most common car to be stolen is a honda civic. YET, honda civics are the most popular car to own.
What are characteristics of the bets goals? (SMART)
S: Specific- clear and unambiguous; what, where, how, etc. (sub-goals help) M: Measurable- concrete evaluative criteria (ie. lose weight, can measure how much you lost) A: Attainable- moderate to high difficulty (want goals in reason, not impossible goals that unmotivate) R: Relevant- Goal has to matter to you (import when you are setting goals for others, ie. manager) T: Timeline- deadline and sub-deadlines (helps you know if you're on track, sets an idea of urgency)
Why shouldn't you maximize?
Satisfice, dont maximize (those who do are happier) - people feel like they have to get the best deal and be as efficient as possible in the marketplace - people are usually wrong - worry about making a "good" decision and not the "best" decision Making the "best" decision is very hard, almost impossible, dont live with regret.
Marketing Implications of Prospect Theory (3)
Segregate Gains: - Car descriptions list out attributes separately Integrate Losses: - Car dealers list price in one lump sum - Why we hate phone bills, itemized tuition bills - Why we like all inclusive resorts Silver Lining Effect: - Separate out small gain from big loss - $500 cash back when you buy a Nissan - Gifts with purchase
What are the benefits of setting goals? (2)
Setting goals automatically improves performance because: - directs attention and effort to goal-relevant activities (you will work towards goal rather than away from it) - increase effort and interest (you enjoy achieving the goal) - improve persistence (deadlines makes you work more) - increasing planning, use of skills, better strategies Goals are a standard for judging satisfaction - people with high goals produce more because they are dissatisfied with more (use goals to motivate yourself, not bring yourself down)
System 1 vs. System 2
System 1: - our fast automatics, intuitive and largely unconscious mode (heuristics) - ie. What color is the sky? Blue comes to mind without any effort. When you say banana, something comes to mind automatically. System 2: - our slow, deliberate, analytical and consciously effortful mode of reasoning about the world - ie. What is 14x27? You can figure it out, but it takes a second.
What is the greatest predictor of who will win an election?
Whoever is the most physically attractive Why?: compliance tactic "liking"
Temptation Bundling
doing two activities together: one you should do but are avoiding, and one that you love doing but isn't productive ie. You can watch your favorite Netflix show only when you're on the treadmill.
Often the most significant source of product info for consumers:
Word of Mouth (WOM)
Sunk Cost Effect
costs that have already been incurred and which cannot be recovered; one should not let sunk costs influence one's decisions, because doing so would not be assessing a decision exclusively on its own ie. You pay a $10 cover at a bar, but its lame, you should not stay just because you paid. You read the first 00 pages of a book you hate, dont read the rest just because you already invested 100 pages in.
Why do others have a big effect on our behavior?
We (wrongly) believe that they really notice us and care (spotlight effect)
Green Marketing
developing and promoting environmentally sound products and practices to gain a competitive edge
(T/F) Others heavily influence our thoughts, attitudes, decisions, behaviors, etc.
True
Common Sources of Dissatisfaction (3)
Unrealistic Expectations - People lie - Incorrect inferences and assumptions of brand/product Marketers are great at strongly activating needs Adaptation: we need more and more to be satisfied)
Does context matter in decision making?
YES. Economists used to believe that people made the same decision regarding what situation/context they were in, but this is incorrect.
Are goals and self control related?
Yes, it often takes self control to reach goals. But many times people do not have the self control to get to their goals.
Payday Loan
a relatively small amount of money lent at a high rate of interest on the agreement that it will be repaid when the borrower receives their next paycheck - Unethical industry - DO NOT consume now pay later
Social Proof
a tendency to conform to what we believe respected others think and do (ie. If it says best seller, others liked it so I should too.)
Black Market
an illegal market in which consumer pay (often exorbitant prices) for items not readily available ie. legal items in short supply, brands, illegal items
Why should we pay now and consume later?
anticipation makes us happy (ie. pay for the vacation up front so you can enjoy the vacation your past self paid for) - doing the opposite has the opposite effects
Compliance Tactic: Consistency
behave consistently with your prior actions and beliefs (ie. If you want to quit smoking, tell everyone hat you are going to quit.)
Inherent Marketing Conflict (Ethics)
conflict between the goals to success in the marketplace and the goal to maximize consumer well being by providing them with safe and effective products and services
Post-Decision Dissonance
feeling of anxiety experienced post-purchase when a consumer wonders whether they made the right choice (we feel anxiety over making correct decisions) - Should I have said that out loud? - Should I have deleted that file? - Did I buy the right brand? particularly likely when consumers experience approach-approach conflict: choosing between two attractive alternatives
Behavioral Decision Theory
helps marketers understand situations in which consumers make seemingly irrational choices; how people actually do behave in the real world, not how they should behave
Compliance Tactic: Reciprocity
ie. A charity gives you a free flower and you feel inclined to donate.
Compliance Tactic: Give a Reason
ie. May I cut you in line for the copy machine. vs. May I cut you in line because I am in a rush.
Nudge
if you want to change someone's behavior, change their environment so they are less likely to commit self control (ie. stock your fridge with healthy foods, dont keep unhealthy foods around)
Why limit our favorite purchases?
less diminishing returns and adaptation
Compliance Tactic: Scarcity
limit product; limit time available (ie. A clock ticking down on a website indicating sale timeline.)
Federal Trade Commission (FTC)
limits unfair trade practices like monopolies and price-fixing, investigates deceptive advertising
Experimental Purchases
made with the primary purchase of acquiring a life experience - bring more happiness than material purchases (acquiring a tangible object)
Availability Heuristic
making decision based on what comes to mind; if something is available to memory, it's judged to be more likely ie. We think sharks kill more people than falling coconuts, but its wrong.