MKT 302 Quiz 3

megaphone effect

a huge audience is available to everyone

Factors that determine how much conflict family decisions may create

- Interpersonal need: a person's level of investment in the group - product involvement and utility: how much a person will use the product to satisfy a need - responsibility: People often have more disagreements about a decision if there are long term consequences - power dynamics: How much influence someone has over their family/living situation

Ways problems arise

- a decline in the quality of the actual state (need recognition) - a change in the ideal state (opportunity recognition)

superordinate category

-more abstract -Ex: drinks

Compromise effect

Alternatives that are priced in the middle of choice sets are looked on more favorably

types of noncompensatory rules

1. Lexicographic rule 2. Elimination-by-aspects rule 3. Conjunctive rule

Key features of endowment effect

1. Ownership influence: The mere fact of owning an item can lead individuals to develop a sense of attachment and overvalue that item. 2. Against expected utility theory: The endowment effect is a significant concept in behavioral economics. It challenges the classical economic assumption that people make decisions solely based on rational assessments of utility

Steps in decision making

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

Strategic Implications of Product Categorization: identify competitors

At the abstract, superordinate level, many different product forms compete for membership. Marketers sometimes try to create overlapping categories that encompass both items to make alternatives easier to compare

Two types of compensatory rules

1. simple additive rule 2. weighted additive rule

Reward power

A person or group with the means to provide positive reinforcement has reward power.

Information Power

A person possesses information power simply because he or she knows something others would like to know

Sunk-cost fallacy bias

A sunk cost is any expenditure we've already made that we're unable to get back - the cost can be financial, emotional, or time-related Individuals commit the sunk cost fallacy when they continue a behavior or endeavor as a result of previously invested resources (time, money or effort)

The surrogate consumer

A third party we retain to provide input into our purchase decisions (interior decorator, stockbroker, etc.)

familiar brand names

Consumers like brand names that they know (familiar brands) or those that have been around a long time.

Positive versus negative WOM

Consumers weigh negative word-of-mouth more heavily than they do positive comments.

probability weighting

Individuals tend to overweight low-probability events, making risky choices more appealing, and underweight high-probability events, impacting how we assess the likelihood of different outcomes

What makes evaluative criteria not a determinant attribute?

Criteria on which products differ from one another carry more weight in the decision process than do those where the alternatives are similar. Criteria that were used at the consideration set stage usually carry less weight in the final choice.

family decision making

Decisions create conflict among family members to the extent that the issue is somehow important or novel; conflict also occurs if individuals have strong opinions about good and bad alternatives.

habitual decision making

Describes the choices we make with little or no conscious effort inertia, which means that it involves less effort to pick a familiar brand. brand loyalty, which describes a pattern of repeat purchasing behavior that involves a conscious decision to continue buying the same brand

Decision Making

Every consumer decision made is a response to a problem Make some decisions thoughtfully, others we use simplifying strategies. Some actions contradict what rational decision making models predict.

Why these types of decision making?

Having too many decisions (hyperchoice) forces consumers to make repeated decisions that may drain psychological energy and decrease ability to make smart choices

referent power

If a person admires the qualities of a person or a group, they try to copy the referent's behaviors · Referent power is important because consumers voluntarily modify what they do and buy to identify with a referent

Strategic Implications of Product Categorization: create an exemplary product

If a product is a really good example of a category, then it is more familiar to consumers and they more easily recognize and recall it. · The characteristics of category exemplars tend to exert a disproportionate influence on how people think of the category in general.

Groups

Our desire to "fit in" or to identify with desirable groups is the primary motivation for many of our consumption behaviors

Loss aversions - marketing campaigns

Loss aversion is the idea that people hate losing things more than they enjoy getting things Marketers use this concept often by framing sales as a potential loss rather than a gain

Higher prices

Many people assume that a higher-priced alternative is better quality than a lower-priced option. Although this assumption is sometimes correct, the price-quality relationship is not always justified.

Buzz Building

Marketers simulate WOM (word-of-mouth) to build buzz around a product or service

Heuristics

Mental shortcuts or "rules of thumb" that often lead to a "good enough" solution (but not always). This "good enough" perspective on decision making is called bounded rationality.

Step 1: Problem Recognition

Occurs when we experience a significant difference between our current situation and some state we desire

Step 5: Post-Purchase Evaluation

Occurs when we experience the product or service we selected and decide whether it meets our expectations

innovative communicators

Opinion leaders who are also early purchasers (like to take risks and try new things)

diminishing sensitivity

People become less sensitive to changes in wealth or value as the magnitude of those changes increases or move away from the reference point. Small changes are more noticeable and impactful when dealing with smaller amounts or the closer the change occurs to the reference point.

Strategic Implications of Product Categorization: locate products in a store

Product categorization also can affect consumers' expectations regarding the places where they can locate a desired product.

Legitimate Power

Sometimes we grant power by virtue of social agreements, such as the authority we give to police officers, soldiers, and doctors.

Attraction effect

The introduction of an item in a choice set will increase the attractiveness of another item that is similar, but superior to it

Certainty effect

The overweighting of outcomes that are obtained with certainty relative to outcomes that are merely probable.

Strategic Implications of Product Categorization: position a product

The success of a positioning strategy hinges on the marketer's ability to convince the consumer to consider its product within a given category.

collective decision making

This collaborative or collective decision-making process includes two or more people who may not have the same level of investment in the outcome, the same tastes and preferences, or the same consumption priorities.

straight rebuy

a habitual decision Many organizations have an approved vendor list - as long as past experience is good, there is little or no ongoing information search or evaluation

Conformity

a change in beliefs or actions as a reaction to real or imagined group pressure. We usually approve of people who conform to norms, but sometimes, we approve of others who exhibit nonconforming behaviors

Brand communities

a group of consumers who share a set of social relationships based on usage of or interest in a product

Market Maven

a person who likes to transmit marketplace info of all types These consumers are not necessarily interested in the products they recommend; they just enjoy staying on top of what's happening in the marketplace

Reference group

an actual or imaginary individual or group that significantly influences an individual's evaluations, aspirations, or behavior. A membership reference group consists of people we actually know.

product curators

an individual, working on behalf of manufacturers or stores, that creates an exhibition and often includes recommendations about how to use the items

Ethnocentrism

belief that products from other places are inferior to local versions.

social scoring

both customers and service providers increasingly rate one another's performance

Types of decision making

cognitive: deliberate, rational, sequential habitual: behavioral, unconscious, automatic affective: emotional, instantaneous

lexicographic rule

consumers select the brand that is the best on the most important attribute

Content marketing

creating and distributing valuable and consistent content to attract and engage consumers and to drive profitable customer action

Expert Power

derives from the knowledge one possesses about a content area

prospect theory

developed by Daniel Kahneman and Amos Tversky in 1979 challenges traditional rational choice theory by considering how people actually make decisions, rather than how rational individuals should make decisions a descriptive theory rather than a normative one

buyclass theory of purchasing

divides organizational buying decisions into three types that relate to the level of risk and cognitive effort

eWOM

electronic word of mouth

product categorization

how consumers organize their beliefs about products or services Typically, a product is represented in a knowledge structure at one of three levels: 1. basic level 2. superordinate 3. subordinate

opinion leadership

individuals that are frequently able to influence others' attitudes or behaviors.

microinfluencers

influencers who have 10k-50k followers on a social platform - less expensive to partner with - perceived as more authentic - have more engagement with their followers

Roles in Collective Decision Making

initiator- identifies need (professor needs new computer) gatekeeper- The person who conducts the information search and controls the flow of information available to the group (department administrator checks records, needs) influencer- The person who tries to sway the outcome of the decision (department chair) buyer- makes purchase (college IT works with Dell or Apple) User- uses product ( Professor who made request)

Types of opinion leaders

innovative communicators, product curators, market maven, surrogate consumer

New task

involves extensive problem solving The company hasn't made a similar decision yet, so there is a serious risk if the product doesn't perform as I should or that it will be too costly Here, the organization gets specialists to evaluate a purchase, and they gather a lot of information before they come to a decision

modified rebuy

involves limited decision making Occurs when an organization wants to repurchase a product/service but also wants to make a few minor modifications (limited search for info)

subordinate category

more specific Ex: fruit juice, pop, energy drink

basic level category

most useful for classifying products we group products that have a lot in common with each other, but in a broad way that allows us to consider a wide range of alternatives Ex: healthy vs unhealthy drinks

information cascades

occur when a piece of information triggers a sequence of interactions

Viral marketing

occurs when an organization motivates visitors to forward online content to their friends.

feature creep

occurs when products become too overly complex with myriad features the typical consumer cannot or has difficulty understanding (consumers spend about 20 min figuring out how to use a product before giving up)

expected utility theory

people choose the option with the highest expected utility (probability of an outcome*expected utility of that outcome) theory based on calculating absolute values of an outcome

cognitive decision making

people integrate as much info as possible about what they already know about a product, weigh the pluses and minuses of each alternative, and arrive at a satisfactory decision

Implication of probability weighting

people tend to be risk seeking when exposed to losses and risk averse when exposed to gains.

loss aversion

people tend to detest losses more intensely than they relish equivalent gains

subjective assessments

personal beliefs and individual perceptions. People may rely on heuristics or intuitive judgments due to the difficulty of predicting outcomes In risky situations people know the probabilities of each outcome, in uncertainty situations these are unknown.

compensatory rules

products make up for its shortcomings on one dimension by excelling on another (usually under conditions of high cognitive involvement)

two step flow model of influence

proposes that a small group of influencers disseminate information since they can modify the opinions of a large number of other people Newer frameworks suggest that the influence is driven more by the interaction among those who are easily influenced. They communicate the information to one another and participate in a two-way dialogue with the opinion leader as part of an influence network.

Step 4: Product Choice

rational models suggest that we will choose based on the analysis of the alternatives (ex: Fishbein Model) Choosing a product getting more difficult b/c companies have been adding more and more features (more info to process)

context effects

refer to the influence of environmental factors (context) on one's perception of a stimulus. In marketing, these factors subtly influence how we perceive, evaluate, and remember the products we encounter.

The horizon revolution

refers to communications that no longer just flow top-down from companies and established media; they also flow across regular users via social media

impression management

showing off the products we think are socially desirable often increase our own social standing/status

Influencer marketing

social media marketing that uses endorsements and product mentions from influencers - individuals who have a dedicated social following and are viewed as experts within their niche. It works because consumers have a high trust towards those influencers, and their recommendations are weighted higher

Nudge Theory

suggests that adaptive designs of the decision environment (choice architecture) as ways to influence the behavior and decision-making of groups or individuals

Step 3: Evaluation of Alternatives

the alternatives a consumer knows about are called the evoked set the alternatives that a consumer seriously considers are called the consideration set

Covariation

the association among attributes that may or may not actually influence one another

elimination by aspects rule

the buyer evaluates brands on the most important attribute, but imposes specific cut-offs (ex: shopping for rain jacket that must have a hood, eliminate those with no hood)

Social Power

the capacity to alter the actions of others

online community

the collective participation of members who together build and maintain a site

weighted additive rule

the consumer also takes into account the relative importance of the attributes by weighting each one

simple additive rule

the consumer chooses the option that has the largest number of positive attributes

conjunctive rule

the decision maker establishes cut-offs for each attribute and chooses a brand if it meets all the cutoffs, but rejects a brand that fails to meet any one cut-off

evaluative criteria

the dimensions consumers use to judge the merits of competing options within a product category

collective value creation

the idea of experienced product users coaching new users in ways to maximize their enjoyment of the product, so that more and more people benefit from a network of satisfied participants

Decisions under uncertainty

the outcome of those choices is not known with certainty. There is ambiguity or lack of complete info about the potential outcomes, making it challenging to accurately predict what will happen

determinant attributes

the particular features that have the most impact in the final choice not all evaluative criteria are determinant attributes

Step 2: Information Search

the process by which we survey the environment for appropriate data to make a reasonable decision we search more when a purchase is important, when we have more of a need to learn more about the purchase, when its easy to obtain the relevant info experts have a better sense of relevant info, they engage in selective search (efforts are more focused and efficient)

Endowment effect

the tendency of people to assign a higher value to items they own (or believe they own) compared to the value they would place on the same items if they did not own them people often perceive the things they possess as more valuable than identical items they don't own.

The Red Sneaker Effect

the term given to an individual's actions that are nonconforming. Objective is to communicate confidence, status and competence

reference dependence

this idea challenges the conventional notion that we assess outcomes in absolute terms instead, our evaluation is influenced by a reference point, which is often our current state or the expected outcome

default bias

we are more likely to comply with a requirement than to make the effort not to comply.

constructive processing

we evaluate the effort we'll need to make a particular choice and then tailor the amount of cognitive "effort" we expend to get the job done

noncompensatory rule

when consumers make habitual or emotional decisions, or under less cognitive involvement, they tend to use this rule If an option doesn't suit us on one dimension, we just reject it out of hand and move on to something else

Country of origin (COO)

where a product is produced - matters. Consumers strongly associate certain attributes with specific countries.