Chapter 2 - Contemporary perspectives on consumer behavior

Fast trackers: - Young families who rely on smartphone and banking apps Young aspirational: - Singles with varied interests and little bank loyalty Simplifiers: - Middle-aged lower-income wage earners loyal to their local bank Middle of the roaders: - Middle aged wage earners who wait until technology is proven Value seekers: - Older, well-educated, and financially comfortable customers; little interest in technology Conventional stalwarts: - Fixed-income retirees who prefer paper statements and live tellers.

Another classification of banking consumers based on key demographic, behavioural and attitudinal measure, including their inclination to use banking technology products and service was made by First Direct. What was the 6 classifications?

- Consumer identity - Marketplace cultures - The socio-historic patterning of consumption - Mass-mediated marketplace ideologies and consumers' interpretive strategies.

Arnould and Thompson (2005) have divided the past 20 years of CCT into 4 themes. What are they? See page 53 for decription of them.

Pre-consumption experience: - Searching for, planning, and imagining the experience. Purchase experience: - Includes the choice process and the interaction with the service setting. Core consumption experience: - Involves the sensation of consumption and whether we feel good or not about it Remembered consumption and the nostalgia:experience - Are about reliving the past experience and classifying this experience amongst others.

Arnould et al. (2002) divide the consumption experience into four stages. What are they and describe them.

Behavioral economics focuses on the contexts of decisions, placing emphasis on the environment within which consumption choices take places. For example, you may be on a diet, but when invited to a dinner party you eat more because of social nature of the occasion and beacause you do not want to offend your host. The behavioural economics perspective recognizes different modes (or ways) of behaving, and how these influences our behaviour in different ways.

Behavioural economics have contributed to understanding consumerism. What's the focus 'contexts of decisions" about?

Are those that tend to create a little change in consumption pattern, and generally involve the introduction of a modified product rather than a totally new one. For example a new update on Windows/apple.

Def: Continuous innovations

Is a preselected option without active choice. Default behaviour relies on out inertia, i.e. its more bothersome to have to do something than to remain with the status quo. Yet as consumers we are often the losers because of our inertia while companies gain from an understanding of defaults. For example many people do no change their savings accounts even when there are better interests rates elsewhere.

Def: Defaults (behaviour)

Has a disruptive effect, and will require the establishment of new behavioral patterns. Are usually characterized as revolutionary such as a self-driven car.

Def: Discontinuous innovation

Create some change in behavioural patterns, but the magnitude of change is not very great. The introduction of digital cameras is a good example because consumers may stille take photos in the same way as before but the practices around printing and sharing the photos are different.

Def: Dynamically continuous innovations

Can be defines as informal rules that govern behaviour. Norms are cultural and social and may be rule-driven - for example, not smoking in a pub, train or plane. Often they are generally known in a social or cultural group. Norms can be both positively and negatively. In a study of energy use in 300 US households, Schultz et al (2007) informed the householders how much energy they had used in recent weeks alongside with information about the average consumption in their area. In the following weeks the above-average users decreased their use, but unfortunately the below-average users increased their consumption. This is known as the boomerang-effect and reveals the danger of showing people that their behaviour is better than the existing social norm.

Def: Norms. Come with an example on how it can be both positively and negatively and what that effect is called?

You are operating routinely with little effort and no feeling of voluntarily being in control. For example you smile when you see a baby, flinch or jump when you hear a sudden loud sound. Automatic mode is more involved with the context of a situation. Going to the same supermarket everyday knowing where all the groceries are, is automatic mode. See page 42 for visual representation.

Def: automatic mode

How the way a choice is presented influences the choice made. This is for example when you mark a dot in the men's urinal is a minor change in the environment, but it caused 80% less spillage. You influence people to move from automatic to reflective mode.

Def: choice architecture

First proposed by Erik Arnould and Craig Thomson in 2005, aims to capture an approach to the study of consumers which emphasizes the social and cultural aspects of consumption. The CCT approach places consumers in a wider context than previous research. For example, a CCT investigation might consider consumer food shopping behaviour focus on the various practices around food shopping, including menu planning, list-making, domestic storage availability and use, family routines and practices around shopping, and cooking arrangements, in order to develop a full and deep about of how these various aspects of food shopping come to influence the acts of purchasing food.

Def: consumer culture theory (CCT)

Digital natives: - The generation who has grown up with techonology. Digital immigrant: - They learn to adapt to their environment, they always retain, to some degree, their 'accent', i.e. their foot in the past.

Def: digital natives and digital immigrant (Prensky (2001)

Shows that people assign specific values to a thing that is relative to their situation.

Def: endownment effect

Proposed by Morris Holbrook and Elizabeth Hirschman in 1982. Their purpose was to shift emphasis from the consumer as rational decision-maker to a model where the consumer was viewed as an experience-seeker, because the idea of experience is central to activities where humans are not directly consumers; for example like going to the gym.

Def: experiential marketing

How we generally dislike losses more than we like gain of an equivalent amount.

Def: loss aversion

Is when individuals allocate assets into separate, non-transferable groupings in which they may assign different levels of utility. How people save provides a good example of mental accounting: for instance parents may have a current account, a savings account, and an account earmarked for medical bills or for their children's education. We use these mental accounts to help us control our lives parents will think carefully before removing money from a child's account to pay for some immediate household need. Sometimes this results in irrational behaviour, such as putting money into savings account while continuing to pay a higher rate of interest on outstanding credit card debt. The reason we engage in mental accounting is because it acts as a way to frame and keep things under control within our cognitive limitations. While it might not always be the most economically sound way to behave, mental accounting can help feel more secure.

Def: mental accounting

This is particularly important for government initiatives; if you are automatically considered to be in some kind of scheme and have to make an effort to opt out, you are probably liked to remain in it unless you feel very strongly against it. Similarly in you have to do something to opt in you may just not find the time to complete whatever paperwork is required.

Def: opting in or opting out (under category from defaults)

Is the altering of people's behaviour outside of their conscious awareness as a result of their fist being exposed to certain sights, words, sensations or activities. In other words, behaviour or feeling can be changed by priming people with certain cues without their being conscious of this happening. One of the most striking things about priming is that people do not appear to be aware of the effect of the different cues on their behaviour, especially cues like words, sights and smells.

Def: priming

A person gives effortful attention to a mental activity, and this is often associated with considered choice and concentration. Reflective mode represents the cognitive information-processing aspect of decision-making. Going to a new supermarket and not knowing where your groceries will be, would be a reflective mode. See page 42 for visual representation.

Def: reflective mode

- Location-based services - Transparent pricing - Deep discounts - Immediate gratification

In 2010 Morgan Stanley identified 4 important current trends that directly affect consumer behaviour, mobile technology wise. See page 65 for examples

- Innovators - Early adopters - Early majority - Late majority - Laggards

Rogers (1995) argued that there are 5 main categories for adopters based on their readiness and desire to adopt innovations and new ideas. This categorization applies in the contemporary technological innovation context. What are those 5? See page 59 for description.

- Ethonography - Introspection - Narrative analysis/inquiry

What 3 methods are especially favoured in the CCT approach? See page 54 for description.

Def: Nudging: A nudge is any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not. Obesity is a big problem and here are some initiatives for nudging consumers for a better help: - For example putting yellow tape on shopping carts and only allow vegetables and fruits in that area makes people buy more. - Having fruit at the end of a lunch canteen makes people buy more fruit. - LazyTown is a kid's shows which informs kids about a healthy life style.

What is nudging and how is it changing consumers behaviour about health?

50 million users

Whats the number of users that's often mentioned when discussing the adaptation of new technology?