MKT 310 Consumer Behavior Final Exam

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What are the 2 types of search

1. Internal Search 2. External Search

6 Stages of Consumer Decision Making

1. Problem Recognition 2. Information Search 3. Evaluation of Alternatives 4. Product Choice 5. Product Consumption 6. Post consumption evaluation

3 Systems of the Freudian Theory

1. The ID 2. The Superego 3. Ego

What are the 3 non compensatory decision strategies?

1. The Lexicographic Rule 2. The Elimination by aspects Rule 3. The conjunctive rule

Consumers do surprisingly little research before purchasing major things such as...

Cars & Furniture

Who do companies think you are?

Companies participate in real time bidding - to estimate who you are and what they may be able to encourage you to purchase.

How does perceived risk influence search?

Consumers search more when the purchase decision is seen as risky.

Covariation

Our associations among events that may or may not actually influence one another. (Ex: a buyer noticing how shiny a car looks without checking any of the mechanical aspects)

to think about losses (Loss Frame)

Risk aversion

Information Search

Step #2 in Consumer Decision Making. The process by which we survey the environment for appropriate data to make a reasonable decision.

Nudge

Subtle changes in a consumer's environment can change behavior. (Ex: Forcing consumers to opt out of something rather than asking if they want to opt-in)

Reactance

Taking choices away from people, making them feel pressured in to making certain decisions.

DeBeers Diamonds article and video

The DeBeers diamond empire created the desire for diamonds with strong marketing.

Habitual Decision Making

The choices we make with little or no effort.

Consumer Confidence

The extent to which people are optimistic or pessimistic about the future health of the economy influences how much discretionary (extra) money we will pump in to the economy

Non-compensatory rule

When we make a habitual or emotional decision based on a single attribute. (That color is gross, never heard of that brand)

Maximizing Solution (optimizing)

When you want to arrive at the BEST result

Brand Personality

is the set of traits people attribute to a product as if it were a person

Novice shoppers are more likely to rely on the opinions of others and on _____________ __________, such as brand name and price, to distinguish among alternatives.

"nonfunctional attributes"

4 reasons why expertise impacts search behavior

1. Economic model of search (more benefits, fewer costs) 2. Knowing what you dont know 3. consumption vocabulary (more external research) 4. Experts can do more internal search

What are the 5 Types of Product risk?

1. Monetary 2. Functional 3. Physical 4. Social 5. Psychological

The "Big Five" (The Neo-Personality Inventory)

1. Openness to experience - degree to which a person is open to doing new things 2. Conscientiousness - the level of organization and structure a person needs 3. Extroversion - how well a person tolerates stimulation from people 4. Agreeableness - the degree to which a person tolerates people 5. Neuroticism (emotional instability) - how well a person copes with stress

3 basic factors that impact amount of search a customer completes:

1. Optimize or satisfice? 2. Consumer Expertise 3. Product Risk

Implications of the Prospect Theory

1. Segregate gains - car descriptions list our attributes separately 2. Integrate Losses - car dealers list price in one lump sum. This is why we hate phone bills, itemized tuition bills, ticketmaster 3. Silver Lining Effect - separate out a small gain from a large loss (purchase). Giving $500 back with the purchase of a Nissan, receiving gifts with a purchase. 4. Cancel Losses against larger gains. Paycheck Deductions for insurance or investments.

Framing Effect

2 problems are essentially the identical, except that the choices are framed differently (The example about saving 400 ppl vs killing 200) As marketers, we can get people to make risk decisions based on framing.

Information-Processing Perspective

According to this view people calmly and carefully integrate as much information as possible with what they already know about a product, painstakingly weigh the pluses and minuses of each alternative, and arrive at a satisfactory decision. (Ex: Financial planning)

The Persuaders

Advertisers are having a heard time breaking through the "clutter." Advertisers are taking over movies and showing their products in more and more shows on network TV.

Economics of Information Perspective

Assumes that we collect just as much data as we need to make an informed decision. We search to find if utility exceeds the costs. This utilitarian assumption also implies that we collect the most valuable units of information first.

Pleasure Principle

Basic desire to maximize pleasure and avoid pain guides our behavior.

Framing Effects

Behavioral Decision Theory (BDT): Descriptive (how people actually make choices vs. the economics theory (normative) how people should make optimal choices.

Disagreement between behavioral economics and traditional economics.

Behavioral economics is the way people actually go through the process of making decisions while traditional economics suggests everyone makes a cost-benefit analysis to make a decision.

Optimizer

Believe they can find the ONE BEST option through information search.

Familiar Brand Names

Brand names that have been popular for years are still popular today.

The extraordinary science of Addictive Junk Food... Article

CEOs meet to discuss National Obesity epidemic. They decided it wasn't their fault or problem to handle. "Sensory-Specific Satiety" - Big flavors overwhelm the brain Lunchables are a huge success but very unhealthy.

Three basic reasons that drive product category in families

Car (ideological) Ketchup (Taste) Laundry Detergent (Expertise)

What role can children play within the household? Why do marketers care? Why do regulators care?

Children make up 3 distinct markets: 1. Primary Market 2. Influence Market 3. Future Market Children are subjects of marketing from birth. Disney, Gerber Etc. Regulators only get involved if there are complaints. Companies cannot make false scientific claims. They are allowed to use puffery. (an exaggerated claim - "Americas best pasta sauce."

Does Candy keep kids from getting fat... Article

Concludes - candy consumption did not lead to overweight children goal of the study - examine the association between intake of candy and weight/adiposity, data quality, and health risk indicators using nationally representative sample of children Some marketing companies pay for the research that they use to sell their products = biased results

Why and when are consumers "bad forecasters"? How can consumers be happier (or how can we make them feel happier)? What contributes to unhappiness?

Consumers are bad forecasters in the sense that they think they know what will make them happy in the future. They can be happier by having the things that make them feel as though they are in their "ideal state." Unhappiness is caused by feeling like you need something more than what you have. Stress and other non preventable issues can cause unhappiness.

Priming

Cues in the environment that make us more likely to react in a certain way even though we're unaware of these influences.

Data collection and micro targeting

Database marketing - tracking consumers' buying habits closely and then crafting products and messages tailored precisely to people's wants and needs based on this information

Do consumers optimize or satisfice?

Depends on both the importance of the purchase to the customer (high involvement) & their belief of a BEST choice.

Price Discrimination

Direct - high supermarket prices in low income areas Indirect - Lack of storage space, bulk buying becomes impossible (may not have space at home to store or room in car to transport.)

Framing Effects Take Away Rule #3

Evaluations are driven by individual events, not total outcomes

satisfying solution

Exert less mental effort and simply receive an adequate outcome

Golbeck Video "Curly Fry Conundrum"

Facebook can detect who you are based on likes and info you submit Curly fries are often liked by intelligent people, mostly by association of friend networks. Not because of a link between the fries and intelligence. you don't always control who sees and uses your data.

No Knowledge

Focus on known and easily comparable attributes (brand, price, others' opinions, etc.)

Household decision making roles

Gatekeeper Influencer Decider Buyer User

There is a shift AWAY from conspicuous goods the...

HIGHER you go in income and class.

How is spending different between high and low social classes?

High class purchases are focused more on luxuries and status. More discretionary income. Low class focuses more on needs and items that are necessary for survival. In low income communities, the supplier has the upper hand because they know these people may not be able to buy in bulk or travel far to get to a supermarket. (Ex: Cave City IGA charging more than Walmart)

Low Experts (Medium Knowledge)

Interested in multiple attributes, but don't know enough about them

Framing Effects Take Away Rule #2

Losses loom larger than gains

External Search

Magazines, sales people, opinion leaders, Word of Mouth

Marketers can impact the evaluation of alternatives by...

Making sure that dimensions on which your product is superior to its competition are the ones used as evaluative criteria by increasing salience (importance) of those dimensions.

Higher Prices (Price-Quality Heuristic)

Many people assume that a higher-priced alternative is better quality than a lower-priced option. This is sometimes true, but the price-quality relationship is not always justified.

Predictably Irrational

Markets are "created" by marketers to influence demand. (Ex. Places pearls next to diamonds to symbolize their worth) Mentions humans being loss-averse. Humans care more about what we lose than what we gain. Making something free takes away the worry of losing. The word FREE is a power trigger. People are LAZY. Anchoring - irrelevant things can influence decisions. Are people motivated or even capable of using a lot of mental effort? The placebo effect Emotions - changes everything we think/feel/decide. Emotion overrides cognitive decision making. It can overwhelm us and make us impatient. It can lead us to do things we wouldn't normally do. People are more likely to use Heuristics when they are emotional. Emotions can override the use of control.

Internal Search

Memories of personal experiences, beliefs

Heuristics

Mental shortcuts. Mental rules of thumb. Sometimes these shortcuts may not be in our best interests.

How does motivation and cognitive resource availability impact attitudes and decisions? What are some of the fundamental motivations that consumers have? How can marketers leverage these?

Needs of consumers provide motivation. having cognitive resources to make decisions is important. if people are emotionally unstable or stressed they may make different decisions. marketers can make it easy for people to make decisions.

Post- Purchase Evaluation

Occurs when we experience the product or service we selected and decide whether it meets (or maybe exceeds) our expectations.

Dr. Oz video

Oz is dangerously likable, he doesn't believe facts that back up his points. Celebrities can endorse products without having the knowledge to really know what they're discussing.

Happy Money Book

Pain of Payment - pay in cash so it hurts first but then you forget about it and move on to enjoy it in the future Make things a treat - Lattes and chocolate Do we really want happy consumers? No, we want them to keep wanting more.

Schwartz Video

Paradox of choice. Some people choose who they want to be every day. too many choices can cause choice paralysis. people believe they want as many choices as possible but this often just makes things more difficult.

Living under scarcity video

Payday loans - people become risk seeking time poor vs. money poor having problems takes away from your ability to solve problems poor people must make higher quality decisions.

Framing Effects Take Away Rule #1

People act differently when something is framed as a loss vs a gain (risk-seeking for loss and risk-adverse for gains)

Native Advertising - Oliver Video

People don't want to intentionally pay for online news/ads still need the separation of church and state Ex: women in prison article - Published by Netflix (OITNB) Native ads show up everywhere, especially with companies trying to show their product is beneficial in some way.

Case vs. Base Rate Effect

People tend to be more persuaded by cases than by base rates even though base rates are more accurate indicators of reality (Ex: Fan Duel winnings rates. There were very lucky/unusual responses. One case guy wins $2000, base rate is 98.7% of people lose)

Reference Point Effects

People use reference points to make evaluations. Context is important! Implications: 1. Pricing of product lines 2. need to know consumer's reference point 3. Reference prices -> Beer on the beach vs Walmart 4. Are too many discounts offered?

As a marketer, you want to encourage..

Problem Recognition & offer a solution.

The Conjunctive Rule

Processing by brand. Getting rid of an entire brand as an option if it doesn't meet all criteria.

Situational & context effects on attitudes and decision making.

Product choice depends on a number of contextual (situation and framing) and situational (setting) variables.

High Experts (High Knowledge)

Promote Selective search: Pay attention only to the most relevant information and process the info much faster

How can we help ourselves make better decisions?

Recognize when we're using mental shortcuts.

Kahnman & Tversky's Prospect Theory

Relies on this value function which shows a differential approach to valuing gains and losses

Money on the mind video

Rich people more likely to break the law, cheat & steal. Rich ppl felt like they deserved to win games.

Post-Consumption Evaluation

Satisfaction is the first step and repeating the purchase is the goal.

Expertise impacts...

Search Behavior

Loftus Video

She studies memory and what people remember. People can develop memories of things that didn't happen.

Freudian Theory

Sigmund Freud proposed that much of one's personality stems from a fundamental conflict between a person's desire to gratify her physical needs and the necessity to function as a responsible member of society.

What are the effects of social class on consumption?

Social class can predict SYMBOLIC purchases with low to moderate prices (clothing). Both income and social class is needed to predict the purchase of expensive and symbolic products (cars and homes)

Problem Recognition

Step #1 in Consumer Decision Making. A difference in ideal state from your current actual state. This can happen from either need recognition or opportunity recognition. *Similar to motivation*

How companies learn your secrets?

Target predicts when women are pregnant "Chunking" sequences of data in to a routine major life events can change who marketers see you as

The ID

The ID is the selfish and the illogical - about immediate gratification. No regard for consequences.

Predictably Irrational Book

The Truth About Relativity - We always seek to draw comparisons, and we are often unaware as to how seemingly irrelevant factors such as the simple presentation of options, actually influence what we select. The Fallacy of Supply and Demand - Anchoring has a major long-term effect on our willingness to pay. The Cost of Zero Cost - Why we often pay too much when we pay nothing. Zero/free is a source of irrational excitement. This is called the "zero price effect." The Cost of Social Norms - Why we are happy to do things, but not when we are paid to do them. The Influence of Arousal - Why Hot Is Much Hotter Than We Realize - Ariely and Loewenstein conducted an experiment on Berkeley undergrads (Ariely tried to do this at MIT, but couldn't get the necessary permissions). They asked them a series of questions. Then they had the undergraduates stimulate themselves to a state of sexual arousal, and asked them to answer the same set of questions. The Problem of Procrastination and Self-Control - Why We Can't Make Ourselves Do What We Want To Do Chapter 7: The High Price of Ownership Why We Overvalue What We Have The "endowment effect" means that when we own something, we begin to value it more than other people do. Ariely and Carmon conducted an experiment on Duke students, who sleep out for weeks to get basketball tickets; even those who sleep out are still subjected to a lottery at the end Keeping Doors Open - Why Options Distract Us from Our Main Objective The Effect of Expectations - Why The Mind Gets What It Expects - Previously held expectations can cloud our point of view. The Power of Price - Why a 50-Cent Aspirin Can Do What A Penny Aspirin Can't - The placebo effect is well-known and real. It's not just a matter of fooling oneself; placebos can actually trigger endorphins and opiates and other biological reactions that actually change body and experience. What is interesting, however, is that price has an impact on efficacy. The Context of Our Character, Part 1 Why We Are Dishonest, and What We Can Do About It The Context of Our Character, Part 2 Why Dealing With Cash Makes Us More Honest Beer and Free Lunches - What Is Behavioral Economics, and Where Are the Free Lunches?

Buyer's Remorse

The feeling of regret after making a purchase.

Trait Theory

The idea that personality traits can impact the kinds of buying decisions a consumer makes. (Extroversion and frugality are examples)

What is mass class?

The income distribution that allows "affordable luxuries". Ex: Lilly Pulitzer being available at Target. Marketers cater to the mass class with high quality products.

Contextual Effects

The influence of the context in which the decision takes places

Loss Aversion Example

The loss of $10 is more significant than the gain of $10

Generation Like

The people become the marketers. People are obsessed with getting "likes" on social media. We are the generation of like. People advertise using "mommy blogs" and youtube stars. The consumers are doing as much as the marketers in getting messages across. Kids are coming up with the content that's becoming popular.

Self-Esteem

The positivity of a person's self-concept.

How is Freudian Theory relevant to consumer behavior?

The product stands for, or represents, a consumer's true goal (The ID) which is socially unacceptable or unattainable. By acquiring the product, the person vicariously experiences the forbidden fruit.

Sunk Cost Effect

The reluctance to reverse decisions that have led to negative outcomes when resources have already been "Sunk" on that decision. Accountability exacerbates the effect

Kahnmen Video

The riddle of experience vs. memory.

The Ego

The system that mediates between the ID and the superego. Basically the a referee in the fight between temptation and virtue. The ego tries to balance these forces according to the *reality principle*. - which means it finds ways to gratify the ID that the outside world will find acceptable. (This is where the Freudian Theory applies to marketing.) These conflicts occur on an unconscious level, so the person is not necessarily aware of the underlying reasons for their behavior.

Compromise Effect

The tendency to avoid extreme responses or choices

Family Influence Rate

The tendency to buy the same products your parents bought. "Intergenerational Effect"

What is decision framing?

The way in which a person defines a choice as a gain or a loss

mental accounting (biases)

The way we pose a problem and whether it's phrased in terms of gains or losses influences our decisions.

How is the American "Household" changing? What does this mean for consumption patterns?

There is a trend among people in their 20s to wait longer to move out of their homes, wait longer to buy homes. More families are extended and living under the same roof (Older children, parents moving back in). People are getting married later, they're cohabiting , divorce is common, people are having less/no children. Consumption patterns are different for every home. Having adult children living at home and parents staying home changes how people spend their extra income. People with children buy diapers, baby supplies, more doctor's appointments, formula. Older parents need medical care, prescriptions, transportation, in home nurses

What are the effects of scarcity/poverty on decision making?

These consumers are unable to comfortably afford an "adequate" and "socially acceptable" standard of living. This makes their purchases different from those of higher classes. This puts them in a loss frame and can cause bigger risks.

How can consumers make better decisions?

They can become aware of when they are using heuristics and that alone can be a good way to avoid it.

Marketers can increase the perception of risk. T/F

True

Bias

Use of a heuristic leads to a poor decision

Gilbert Video

We can synthesize happiness. Synthetic happiness is just as real as natural happiness ability to make up your mind -friend or natural happiness, enemy of synthetic happiness Why is understanding memory important? Perceptions, decision making, effectiveness of marketing actions

What is the relationship between class and income?

Wealth is not distributed evenly across classes (top 1/5 controls 75% of all assets). Income is NOT directly related to social class. Income increases as age increases but older workers are not in a higher social class than their younger counterparts. Dual income families can have higher income but not a higher status.

Influence Book

Weapons of Influence. Reciprocation. Commitment and Consistency. Social Proofs. Liking. Authority. Scarcity.

Bloom Video

Why do origins of products matter? B/c of status. People show more brain reactions to expensive works

Compensatory Model of Decision Making

a mental cost-benefit analysis model used to make a decision.

Country of Origin.

a product's "Address" matters. Consumer's strongly associate certain items with specific countries, and products from those countries often attempt to benefit from these linkages.

Consumer demand for goods and services depends on both...

ability & willingness to buy

Satisfiser

as long as the product meets the criteria they set, they're okay with it

Framing uses the human tendency to...

be sensitive to losses.

When choosing a product, people feel that they want as many features as possible...

but, people normally enjoy the simplest products the most.

Shiv Video

can be good to give up drivers seat and let others make the decisions.

Brain Damage can cause...

changes in personality - which can change a persons buying behavior forever.

Separate Gains...

combine losses

Situational Influences

consists of the aspects of the purchase situation that impacts the consumer's purchase decision process. 1. The purchase Task - is it a gift or for personal use? 2. Social Surroundings - are other people present? 3. Physical Surroundings - the decor, music, crowding 4. temporal effects - time of day, amount of time available 5. antecedent states - consumer's mood, amount of cash on hand

In order to influence the ideal state, a manager must...

create dissatisfaction with the actual state (Ex. 4/5 women don't get enough calcium.) Help people realize they could be happier with "insert product here."

What is social class?

determined by income, family background, and occupation. Most predictive? Occupation.

Can Money buy happiness video

empathy, kindness, happy emotions. people experience the world differently based on status. lower class people = respond to emotions better.

Spreading Activation

explains our seemingly random thoughts

Gatekeeper

household member who collects and controls info to decifer

User

household member who consumes the product

Influencer

household members who try to express their opinions and influence the decision (Child)

sunk-cost fallacy

if we've paid for something, we're more reluctant to waste it.

Ideal Self

is a person's conception of how he would like to be

Costs more to attract a new customer than to...

keep an old one.

Losses loom...

larger than gains

Scarcity works to influence choice b/c of...

loss aversion.

Consequences of low income from buying behavior...

low variety of stores available, inadequate nutrient intake, psychological anxiety/stress, Stress-> anxiety, poor decision making (Prospect Theory), more likely to engage in heuristics

The "too much" paradox

more options can discourage consumers from searching & cause quick TRUNCATION. We think we need more options - utility theory

Salient

most notable or important

purchase momentum

occurs when our initial impulse purchases actually increase the likelihood that we will buy even more (instead of less as we satisfy our needs). It's like we get "revved up" and plunge into a spending spree.

Under the conditions of high cognitive involvement...

people tend to think carefully about the pros and cons of different option, almost like a computer that would follow a somewhat complicated formula to make a decision.

Decider

person who actually makes the decision

Buyer

person who physically acquires product

Personality

refers to a person's unique psychological makeup and how it consistently influences the way a person responds to her environment.

Actual Self

refers to our more realistic appraisal of the qualities we do and don't have.

Ethnocentrism

refers to the tendency to prefer products (or people) of one's own culture to those of other countries. These customers are likely to feel it is wrong to buy products made elsewhere, particularly because this may have a negative effect on on the domestic economy.

think about gains (Gain Frame)

risk seeking

Lexicographic Rule

selecting a brand that is best on the most important attribute. If two brands are equally good on the most important attribute, then compare them on the second most important attribute. This goes on until the tie is broken.

Expert shoppers have a better sense of what information is relevant to the decision, so they engage in...

selective search (which means their efforts are more focused & efficient)

Inflate the good things about a product..

so consumers are more focused on the positive aspects it can bring to their lives.

Occupational Prestige

stable over time and similar across culture. this is the single best indicator of social class.

Self-Concept

summarizes the beliefs a person holds about his/her own attributes and how he/she evaluates the self on these qualities. 1. Content (facial attractiveness vs. mental aptitude) 2. Positivity (self-esteem) 3. Intensity & Stability 4. Accuracy (the degree to which one's self assessment corresponds to reality)

Market Segmentation

targeting a brand only to specific groups of consumers who share well-defined and relevant characteristics

The Elimination by-aspects rule

the buyer chooses one aspect that is a "must have" and uses it to eliminate options.

The Superego

the counterweight to the ID. essentially the person's conscience. This internalizes society's rules (especially as parents them to us) and tries to prevent the ID from seeking selfish gratification.

Evaluative Criteria

the dimensions used to judge and compare products. a subset of all possible dimensions. consumer uses those that are salient.

Determinant Attributes

the features we actually use to differentiate among our choices.

Self-Comparison

the person tries to evaluate her appearance by comparing it to the people depicted in these artificial images.

Mere Presence Effect

the presence of other shoppers changes our behavior, even if we don't communicate with them. people are more likely to buy name brands people have less contact with products people rush their decisions

Cognitive Dissonance

the state of having inconsistent thoughts, beliefs, or attitudes, especially as relating to behavioral decisions and attitude change.

Anthropomorphism

the tendency to attribute human characteristics to objects or animals.

A consumer's social class affects his or her consumption decisions and impacts...

the way he/she perceives & responds to products.

Novice shoppers may process information in a "___-____" rather than a "______-__" manner - they focus less on details than on the big picture. For instance, they may be more impressed by the sheer amount of technical information an ad presents than by the actual significance of the claims it makes.

top-down, bottom-up

Impression Management

we work hard to "manage" what other's think of us; we strategically choose clothing and other products that will show us off to others in a good light.


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