MKTG 211 Exam 2

Types of Expectations in expectancy disconfirmation theory

1. "Will": what the firm promises it will provide 2. "Should": what consumers believe the firm should be able to provide Will expectations are controllable by the firm, should expectations rarely are.

High-Effort Decision Rules

1. Compensatory, like Weighted Additive and Additive Difference. Useful for smaller groups of alternatives & attributes. 2. Non-compensatory. N-C rules are decision policies that consider only a subset of all available info without making trade-offs. We typically use non-compensatory rules early in the choice process while screening for consideration set. We use compensatory rules later in the choice process when deciding amongst finalists.

How has social media changed the way firms can reach their intended audiences and extend social influence?

- People are now increasingly engaging in public consumption, making us more susceptible to social influence and also more able to influence others - new channels and methods to reach audiences

Surveys for measuring customer satisfaction

- can rate overall satisfaction, frequently accomplished using Likert scale agree-disagree "overall I was satisfied by the service provided by Uber" - can rate the product/service along various dimensions (like food, atmosphere, service quality, etc. for a restaurant) - can ask about willingness to recommend brand to others

Biases in Multi-Attribute Evaluations

- choice set effects - anchoring effects When people provide direct assessments of attribute importance or make choices among alternatives, these evaluations may be biased by presence of other information (like an anchor or less appealing alternative) in the task.

What determines how much one searches for information?

- cost of making a mistake - cost of search - felt involvement - need for cognition

When would consumers use the lexicographic non-compensatory rule?

- when choices need to be made in a hurry - when choices are overly complex - when only one attribute matters - as a tie-breaker when options are equally valued

Information Search Stage

As consumers search for information about alternatives, new options can be added to initial consideration set and/or initial options can be removed from the set. It's the "editing" stage. As consumers go from stage 2: formation of initial set to stage 3: info search, we add in another option to the consideration set so it now includes: 1. unknown brands - found through intentional search 2. unknown brands - found accidentally 3. familiar brands - evoked set Despite the added on brands here, consumers still mostly stick to initial options.

Weighted-Additive models | Multi-Attribute model

Assumes that consumers form preferences for products by allocating specific weights to different attributes. It's a model often used by marketers to predict whether consumers will like certain products in the marketplace. Values in model are completely subjective. Given the nature of the model, even if a brand is poor on one attribute consumers may still hold a positive attitude towards it because of other attributes. This is a compensatory rule because if you're losing out in one attribute, you can either try to improve desirability on that attribute, reduce the importance of that attribute, or add a new compensatory attribute to make up for that.

Size of awareness sets vs. consideration sets

Awareness sets can be quite large (up to 10-20) but consideration sets are often quite small (often just 2 brands, rarely more than 4 or 5) Because we're cognitive misers and evaluating many options is effortful, we only have a few brands in our consideration sets to make the choice as easy as possible.

Non-independence of events heuristic

Belief that past frequency affects future likelihood for statistically independent events examples including: - if a player makes a number of shots in a row, he's more likely to make the shot than he actually does - perceived trend in service experience: if my flight is cancelled, i think my next flight is now going to be more likely to get cancelled

How can marketers use the multi-attribute model?

By using things like a brand-attribute matrix or a comparative attribute checklist.

Cognitive Consistency

Consumers value coherence among their cognitive structures (attitudes, thoughts, beliefs, feelings, etc. because since we store so much info in LTM we want to simplify the organization of concepts in the semantic network. Because we are cognitive misers, we are motivated to maintain consistency among our attitudes. Theories of cognitive consistency: 1. Self-Perception Theory 2. Heider's Balance Theory

Types of non-compensatory rules

1. Conjunctive - an option is chosen if it is above some threshold on ALL of a set of important attributes. Called the satisficing rule because the option doesn't have to be the best, just above the threshold for all. Examples are admitting students if they meet a min GPA & SAT score. 2. Disjunctive - an option is chosen if it's above some threshold on at least one of a set of important attributes. Example is assembling an Olympic team. 3. Lexicographic - choosing the option that is best on the ONE most important attribute (like world's cheapest car or world's biggest burger lol)

How to reduce the likeliness that blame of dissatisfaction is put on the company according to Attribution theory

1. Minimize the number of things where blame can be attributed to your brand - fix flaws in product design, make sure service personnel are qualified, etc. 2. If you're to blame, reduce expectations of future failures by reframing bad experience as either unstable or uncontrollable

Downsides to loyalty programs/loyal customers

1. Over-justification: people attribute choice behavior to reward not the intrinsic value of the product. This idea is explained by cognitive dissonance. 2. loyal customers expect better services, lower prices, more in general 3. less likely to spread WOM since they're already settled in them 4. firm may overinvest in them

What drives customer satisfaction?

1. Procedural Justice Theory 2. Expectancy Disconfirmation Theory 3. Attribution Theory

What factors determine which brands are evoked from LTM?

1. Prototypicality 2. Familiarity 3. Episodic/autobiographical experiences 4. Preference

How to improve satisfaction & NPS

1. Recognize dissatisfaction is not driven by just one thing - many potential pain points through customer journey tat can lead to dissatisfaction 2. Journey Maps - describe how a purchase is made & where satisfaction can go awry. They're detailed visual depictions of a given customer's unique set of experiences with the brand. It allows the firm to identify where things go wrong and how to fix them.

Effects of Satisfaction on Consumer Behavior

1. Repeat purchase - customer acquisition costs 5x more than retention 2. Positive word-of-mouth - 81% of customers rely on online WOM when making purchase decisions

Structure of a Social Media Campaign

1. Seed a message in the hopes that it spreads (key is to rely on the initial customers you've attracted to share your content) 2. Identify tactics that maximize the spreading & make your content go viral.

Why is social media such a powerful platform for social influence?

1. Social media is targeted - powerful technology to target certain customers and also benefit from the network propagation of preferences 2. Can be persuasive because of the types of social influence at play (normative, informational, emotional)

How to measure Customer Satisfaction

1. Surveys 2. Net Promoter Score

Effects of Dissatisfaction on Consumer Behavior

1. Switch brands (switching behavior) 2. Negative WOM - bad news travels fast 3. Complaints 4. Returns 5. Tends to be enduring

Theories of brand loyalty draw on metaphors of:

1. economic exchange (social exchange theory) 2. religion 3. human relationships

Examples of strong arguments provided by marketers when appealing to central route:

1. facts 2. evidence 3. reasoning 4. logic (emotion appeals & celebrities can be effective if they logically fit with the brand & are related to the product itself)

Why are social influences so strong?

1. groups provide safety & support systems 2. groups provide norms & acceptable standards of conduct But these norms often elicit one of two responses: 1. desire for conformity (fit in) 2. desire for uniqueness (stand out) The way we perceive ourselves in relation to a group can also impact our behavior.

Core Ethical Values

1. honesty 2. responsibility 3. fairness 4. respect 5. transparency 6. citizenship

How can we economize the size of our consideration sets?

1. learning from prior choices 2. exploiting similarities among options

Problems with direct assessments like the weighted-attribute & additive difference models

1. people may not have good insights into their own preferences (like importance of RAM relative to price) 2. people may not want to reveal their own preferences (MBA example)

Confirmation bias

A tendency to seek out or create information that confirms our own beliefs - we tend to do this when we information search.

Loyalty programs

A way for firms to manage brand loyalty. Include: 1. discounts (supermarkets) 2. targeted offers (CVS) 3. cumulative points (punch cards or reward points)

Iyengar & Lepper Jam study

About the heuristic of people not buying at all when they're overwhelmed with the number of options. They set up a jam stand where some days they had 6 jams and other days 24. When they had more jams more people approached but significantly less people bought. Similar to the chocolate example where people were more satisfied with their choice when they had a more limited # of chocolates and significantly more likely to buy the chocolates than take the $5 when they had the limited number of chocolates.

Weakness in multi-attribute model accounted for by additive difference model?

M-A model doesn't account for the fact that attributes can interact to inform consumer decisions.

Elaboration Likelihood Model

Developed by Richard Petty & John Cacioppo, asserts that there are two routes to persuasion: 1. Central Route = attitude change based on careful & effortful analysis of arguments presented in a message 2. Peripheral Route = attitude change based on simple reactions to superficial cues in message, it's easily processed. Order is: Attention to advertisement -> motivation to elaborate. If you have a high involvement/high motivation to elaborate and a high ability to elaborate, you'll go through the central route processing. Then once you elaborate, if it's a weak argument, you're not persuaded. If it's a strong argument, you'll either favor or oppose it and make a decision OR you'll have neither and rely on peripheral route processing. If you have either low motivation to elaborate or high motivation and low ability, you'll go through peripheral route processing. Then if the peripheral cue is present, you'll be persuaded and v.v. if not. * The same stimulus can be processed through both routes.

Not-buy-at-all heuristic

Happens when we're confronted with choice overload

Procedural Justice Theory

Has to do with the purchase process step of the customer satisfaction model. Premise is that the process of should be fair regardless of outcome. Idea that there is a distinction between satisfaction with outcome & the process leading to outcome. Impact of this in a marketing context is that even if a consumer is satisfied with the product, if they're dissatisfied with the shopping experience at your store, they will simple repurchase the product elsewhere. Therefore it's important for firms to think about the full shopping experience not just individual products.

Attribution theory

Idea is that if a product/service fails, customers attempt to determine the cause of the failure. Satisfaction with brand is determined by where blame is attributed, between the company, yourself, and uncontrollable situational factors.

Human Relationship Metaphor

Idea that your relationship with a brand will be in the "new, dating, love, boredom, or divorce" stage. Brands want to stay in dating or love. People can love their brands because brands can be:

Conjoint Analysis

Used for: 1. product design 2. sales forecasting 3. market segmentation idea is that we infer importance by observing how people's preferences for alternatives change as attribute values are changed

Asch Study

Participants asked to select which line is longer, 100% accuracy when judged privately Put in a group of participants where they answered incorrectly and found that 35% always conformed 75% did at least sometimes

Insufficient Justification Study

Participants perform an extremely boring task and are paid either $1 or $20 to lie about it and say it was fun Results: participants who were paid $1 rated the activity more favorably while those who were paid $20 still stated they disliked the task. Reason is that you either would've said the task is fun for the money or because you actually thought it as fun. $1 isn't enough to justify you saying it's fun for the money, so it must be because you actually thought it was fun. $20 is enough to justify you saying it's fun for the money, so you must not think it's fun.

Religion Metaphor of Brand Loyalty

People are really devoted to brands and are more influenced by their values & messages than by religious figures these days, especially with younger consumers.

Amazon Dash Button

allows brand to manage loyalty by mechanically keeping customers in the loop

Persuasion

an active attempt to change consumers' attitudes 2 examples of theoretical models that help inform persuasion: 1. cognitive consistency 2. elaboration likelihood model

Representativeness Heuristic

an event seems more likely if it more closely resembles similar predecessors - "does it look like the prototype?" In marketing context, heuristic has implications for branding & packaging (making generic brand look like the well know brands)

Choice Set Effect

bias in multi-attribute evaluation that says items can be made more appealing when compared to an inferior or flawed alternative

Familiarity heuristic

choice is made based on whether an option is familiar or seems similar to previous choices assumption underlying this is that one's past choices were most likely correct and should be repeated marketing implication is that there is an increased likelihood that customers will repeatedly buy the same brand

Consumer Bill of Rights

codified the ethics of exchange between buyers and sellers, including rights: 1. to safety 2. to be informed 3. to choose 4. to be heard

Most critical steps in consumer choice process

consideration set formation & information search

What is the brand's goal in developing a loyalty loop?

develop a deep commitment by consumers towards the brand so that, with each trigger & need recognition, there is an automated decision to repeat-buy, which does not involve active consideration of alternatives

Simonson & Tversky

study on choice set effect - 36% of people chose the Cross pen versus getting $6 but 46% chose Cross pen versus getting $6 when a less attractive pen was included in the choice set

Additive difference model

looks at a series of pairwise comparisons, weighted or unweighted. Between iPad, Samsung, and Kindle, we look at each of the pairwise comparisons. iPad vs. Samsung -- let's say Samsung wins. Then you compare Samsung to Kindle -- whichever wins is the ultimate winner.

False Uniqueness Effect

tendency to overestimate one's own uniqueness in social comparisons Often the result of self-enhancement motive - my good qualities are unique to me.

Need

perceived difference between an actual state and an ideal state

Consideration Set

the subset of available options that are evaluated as potential choice options

Spotlight Effect

we often believe that other people are paying more attention to us than they really are Barry Manilow t-shirt study: participants estimated that 50% of strangers noticed when in reality it was 20%. Participants' own focus on the embarrassing shirt distorted their assessment of how much others noticed it.

default or status quo heuristic

when people aren't motivated to choose amongst a set of options or are unsure which is best, they often go with the "default" examples apart from pre-checking default options include: - firms can provide implied defaults by recommending an option (e.g. the "best value" option) - using introductory offers, you opt-in because it's cheaper, then once the trial period expires the default is the regular price and customers don't change that

How do heuristics get learned?

heuristic (choice tactic) -> choice -> usage (experience) -> outcome reinforcement (reward vs. punishment) -> learning which goes back to the heuristic/choice tactic

Social Exchange Theory

People evaluate the value of a relationship according to the rewards and costs, which correspond to the positive & negative things derived from the exchange. The relationships we choose to create & maintain are the ones that maximize our rewards and minimize our costs. People seek out relationships where the exchange between parties is equitable or fair. When my costs > firm's costs OR my rewards < firm's rewards = resentment. When my costs < firm's costs OR my rewards > firm's rewards = guilt. For customers to develop loyalty towards a brand, they must: 1. be satisfied with the brand 2. perceive the relationship with the brand as fair/equitable

Self-Perception Theory

People observe their own behavior and infer their corresponding attitude from the behavior. Examples include: 1. foot-in-the-door technique

Heider's Balance Theory

People will modify some attitude to make it balanced or congruent with the rest of their attitudes. Consumers have triads of relations they want to keep in balance. If you like your best friend, and your best friend likes beyonce, you will therefore start liking beyonce. Celebrity endorsement is an example of this, and it tends to work when: 1. the brand is low involvement 2. the celeb is a good fit for the brand 3. as long as the celebrity is liked

Why should we care about what happens post-purchase?

Post-purchase satisfaction has important effects on consumer behavior and profits

Satisficer vs. optimizer

Satisficer = seek a good enough option Optimizer = seek the best or optimal option Satisficers are more likely to engage in low-effort decision making. Optimizers lead to better objective outcomes, but post-choice, often experience: 1. rumination (was my choice actually the best available?) 2. reminders of opportunity cost (what about all the other options) 3. regret (I should've chosen a different option)

Probability of repurchase as a function of speed of firm's response to complaint

Memorize this chart - session 15 slide 12

NPS

Most popular way for firms to measure satisfaction. "On a scale of 0-10, how likely are you to recommend this brand to a friend or colleague" Promotors = people who respond with a 9 or 10 Passives = people who respond with a 7 or 8 Detractors = people who respond with ratings of 6 or less NPS = % of promoters - % of detractors

False Consensus Effect

Tendency to see own behavior as typical and to assume that others will behave the same way. False consensus effect often helps us justify bad or irresponsible behaviors bc of like safety in numbers. Social media echo chambers can lead to false consensus.

Goal-gradient effect

The closer you get to a goal, the faster/harder you work to attain the goal. Therefore cumulative points programs tend to be effective because perceptions of progress impact one's motivation to pursue a goal. Giving people a head start in cumulative points programs helps. Car wash example - illusion of progress is enough to motivate people.

Expectancy Disconfirmation Theory

Theory that satisfaction is determined by the difference between expectations and actual performance. Dissatisfaction occurs when expectations > actual performance. Satisfaction occurs when expectations <= action performance.

Darley & Gross Study

"The Hannah Study" Pretended it was a study on teacher evaluation methods. Told subjects to evaluate female subjects on her academic abilities. One condition had her as an urban & low-income area (negative expectancy) and the other had her as a middle-class & suburban area (positive expectancy). Half of the subjects were shown a video of Hannah verbally answering a series of reading & math questions, and the other half were not shown the video. The subjects then judged Hannah's grade level. The outcome was that people interpreted Hannah's ability in a manner that confirmed prior expectations. Those who had high expectations consistently rated her performance level as higher than the lower expectations, even moreso when the subjects viewed the video!

What creates perceived need in our actual state?

1. Depletion (I finished trash bags, need to order more) 2. Change in situation (Used to be content with my flip phone, then I got to college and everyone else had an iPhone so I felt the need to own an iPhone)

3 Ethical Principles of Marketing

1. Do no harm 2. Foster trust in the marketing system 3. Embrace ethical values

What determines our ideal state?

1. Expectations (as informed by experiences with past products 2. Aspirations (like driving a luxury car) 3. Life Change (ideal state as child vs. as adult)

Types of Heuristics in Low Effort Decision Making

1. Familiarity heuristic 2. Availability heuristic 3. Non-independence-of-events heuristic 3. Representativeness heuristic 4. Default or status quo heuristic 5. Not buying at all heuristic

3 factors that determine whether customers are dissatisfied with brand according to Attribution theory

1. Focus - who's at fault?Me, bad luck, or the firm? 2. Stability - will it happen again? Happened once or happens all the time? 3. Controllability - was it within the firm's control? Could it have been avoided or not?

How can marketers influence initial consideration sets?

1. Have consumers "accidentally" discover your brand. 2. Ideally, get brand into consumer's evoked set Examples: - organize shelf placement - end-of-aisle displays (more likely to see and not venture in to aisle) - allow consumers to develop customized options

Steps in Journey Map

1. Identify consumer segments and personas. Describe an example customer, humanize them, and understand the factors that will be involved in her purchase decision. 2. Map the journey. Evaluate their thoughts & feelings as well as emotional experience across the phases of the journey. The example has the phases as inquiry -> comparison -> purchase -> installation. 3. Identify company-side factors that affect satisfaction.

Types of Social Media Influence at Play

1. Information influence - other people as sources of information, can change attitudes/behavior based on info gained from others 2. Normative Influence - social standards or rules on what's appropriate behaviors; we act consistent with group norms because of implicit rewards & punishments controlled by group 3. Emotional Influence - compare our feelings & attitudes & behaviors to those of other people (upward comparisons are aspirational while downward comparisons boost our ego)

How can firms make the purchase process as pleasant as possible for their consumers according to Procedural justice theory?

1. Treat customers fairly & be consistent 2. Explain procedures clearly & be transparent 3. Give customers a voice & opportunity to express opinions

Content & ideas are more likely to be share if they contain:

1. Triggers (things that spark the urge to share - like hump day) 2. Active emotionality (evoke emotions that trigger us to take action - we like to trigger things that have highly activating emotions regardless of valence so like happiness/excitement/surprise or anger/anxiety/fear) 3. Social capital (we share what makes us look good or cool)

Common features of videos that are desirable to watch

1. Unexpectedness - get attention with surprise, hold attention with interest 2. Emotionality - make people care, appeal to self-interest & identity 3. Story arcs - stories can tell people how to act or inspire people to act 4. Simplicity & Concreteness - help people understand & remember your message by providing a concrete context to help put people into the story

How are consideration sets formed?

1. Unknown brands are found accidentally 2. Familiar brands are the evoked set Initial consideration sets are mostly comprised of familiar brands evoked from LTM.

How can firms manage customer expectations?

1. align "will" expectations with customers' "should" expectations 2. spell out clear, definitive, and simple messages to set accurate "will" expectations 3. communicate consistent messages and have consistency across channels

Brand Love: people can love their brands because brands:

1. can be a part of self identity 2. give life "meaning" 3. are often top-of-mind 4. are described in terms of "passion" 5. have a long autobiographical history

What makes a price "acceptable" or "fair"?

1. comparison to alternatives - either competitor's prices for the product or prices paid by other customers for the same produce 2. comparison to expectations - past experience (price is higher than you've paid in the past = dissatisfaction), in certain product categories price fluctuations are considered normal, markup over cost is also considered normal but only when the buyer's benefit/cost ratio is proportionate to seller's)

What do customers do when they're dissatisfied?

1. complain to firm 2. avoid firm 3. take overt actions like spreading negative WOM or encouraging others to boycott

How can firms exert social influence using compliance tactics

1. reciprocity - you're nice to me, so i will be nice to you as well (giving people a mint with their bill substantially increases tips) 2. liking - we want to agree with people we like and disagree with those we dislike (customers are more likely to comply with requesters they like, so brands can enhance liking using celebrity endorsements or establishing similarity between sales reps and customers since familiarity breeds liking. Example is of tupperware party) 3. authority - experts provide shortcuts to decisions requiring specialized info, but the expertise needs to be noticed via uniforms or diplomas (think Dr. Oz endorsed products) 4. scarcity - items & opportunities become more desirable as they become less available (flash sales, while stocks last) 5. social proof - we determine what is correct in part by finding out what others thing is correct (best-sellers)

Types of Elaboration on Message Argument in Central Route processing

1. source derogation 2. counterargument 3. support arguments

Value/worth of a relationship is determined by:

1. subjective cost-benefit analysis (value = benefits - costs) 2. comparing worth vs. expected worth 3. comparing worth vs. worth of available alternatives

Attitudes tend to predict behavior when

1. they're more accessible 2. they're more specific 3. consumers are more knowledgeable about the domain ATTITUDES DO NOT ALWAYS PREDICT BEHAVIOR but they are linked

When do we tend to economize the size of our consideration sets?

1. when costs of a "mistake" are low 2. when we have a low need for variety (like toothpaste) 3. when retailers restrict variety

Post-decisional Dissonance

3 products: A&B are equally desirable while C is less desirable. Asked to choose either between A&B or A&C. When asked to choose between A&C, nothing changed but when asked to choose between A&B, rated the chosen one as higher. It's an example of cognitive dissonance at play.

Information search - external vs. internal

External - brands found through intentional search & those found accidentally. Can include things like: 1. online search 2. word-of-mouth (interpersonal sources are enormously influential) - 80% of online shoppers use reviews - one 5-star review on Amazon = 20 additional sales - 93% of millennials read reviews and 97% of those trust reviews - Yelp & TripAdvisor are extremely powerful in determining which restaurants/hotels customers decide to visit

Standard customer satisfaction model

Purchase process -> expectations of performance/quality -> product usage/consumption -> expectancy dis/confirmation -> emotional response -> attributions of cause

Peripheral Route persuasion via source

The source of the info can affect whether people buy or not based on the source's: 1. attractiveness/likability (halo effect) 2. credibility/trustworthiness 3. expertise/status of communicator

When do people use high-effort decision making? When do people use low-effort decisions?

When they're highly motivated to process information and make the right choice. When we are trying to decisions using the lowest effort possible (i.e. we face time pressure, are distracted, or have a lack of interest), we make low-effort decisions, which are defined by the use of simplifying heuristics (satisficing rules). Heuristics are sometimes used for high-effort decisions but always used for low-effort decisions. Heuristics in low-effort decisions operate via peripheral route/system 1 processing while for high-effort decisions can be mixed but often operate via central route processing. This is because non-compensatory rules are often more deliberate/thoughtful.

When are we triggered to buy something?

When we perceive a need

Anchoring effects

When we're asked to form an inference about an uncertain quantity, we start with an initial impression then adjust off of that number. Anchors can be completely arbitrary. Example is Gandhi age question.

Availability heuristic

judgment of the probability of an event occurring is influenced by the ease with which past instances of that event can be recalled also called base-rate neglect marketing implications are that you should make the benefits of your product so vivid that they're easy to recall and thus seem more believable (by providing vivid descriptions of positive product-related experiences, encouraging customers to imagine benefits they could derive from the product, and stimulate positive WOM) example is of insurance companies depicting people in accidents in their ads