Notes - Summary Consumer Behaviour PDF

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Lecture 1. Why study consumer behavior?  To make correct predictions on how consumers respond to marketing actions  Economic models assume people are “rational” (理性)  Understand consumers how to …  Motivate  Understand (receive information, learn, pay attention, and interpret)  Learn  Form and change their opinions  Be influenced by other people  culture  Social comparison theory  People come to know themselves by evaluating their own attitudes, abilities, and status in comparison with others.  Comparing with the people standing behind me makes me feel good about my own position (downward social comparison) Framing effect  Prospect theory  Losses loom larger than gains!  For the same thing, phrasing it as a “gain” is more appealing than phrasing it as a “loss”  Daniel Kahneman, Laureate of the Economics Nobel Prize in 2002  He won the Prize for his work with Prospect Theory (irrational behavior) Consumer behavior  = The behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs. Theory: False Consensus  We tend to overestimate how the degree to which our own behavior, attitudes, beliefs, and so on are shared by other people. Corelation (significance) – as X goes up, y goes up too (positive)

2. Segmentation  Dividing the total market into fairly homogeneous groups, each with different needs and preferences -

Geographic (nations, regions, states, countries, cities…) Demographic (age, gender, income, family size and family lifecycle, occupation, education, religion, race, home-ownership…) Psychographic (lifestyle, personality) Behavioural (usage occasions, benefits, user rates, loyalty status)

Targeting  Select one or more segments to enter

Positioning  Developing a marketing strategy aimed at establishing a clear, distinctive, and desirable understanding of what the product does or represents in comparison with competing products Marketing research methods  Exploratory research  Characteristics  To gain insights or improve understanding of the phenomenon of interest  Use non-representative sample  The findings are NOT conclusive and need to be followed by conclusive research  Includes  Observation  In-depth interview  Focus group  Conclusive research  Characteristics  To draw conclusions

 Use representative sample  Includes  Survey  Find relationships  Experimental research  Find causal effect Relationship vs. causal effect  Relationship: A with B  Causal effect: A causes B CA B  Manipulating variables to find out their effects  Example: testing a new medicine’s effect  Condition A  Condition B  Control for Interaction effects  The effect of a factor depends on the other factor  An example: 2 (male vs. female) X 2 (new medicine vs. placebo)  To test whether the effect of the new medicine varies to different genders

3. Affordance effect An affordance is a quality of an object, or an environment, which allows an individual to perform an action  Needs  An internal state of tension caused by a discrepancy between the present state and the ideal state.  Goals  The desired end state.  Needs and goals are interdependent.  Needs and goals are interdependent.  Motivation  An inner state of arousal, with aroused energy directed to achieving a goal.  The driving force within individuals that impels them to action.  A motivated consumer is energized, ready, and willing to engage in a goal-relevant activity. Types of goals  Approach goal: the end state is positive and desired  Avoidance goal: the end state is negative and undesired Self-views  Independent self-view  the self is unique and different from others  tends to be nurtured in cultures where the values of independence are endorsed (e.g.. United States).  Interdependent self-view  the self is defined by others rather than distinguished from others  tends to be nurtured in cultures that encourage one's obligations and responsibilities (e.g., China). Maslow’s hierarchy of needs  Physiological needs  Basic biological needs of life: food, drink, shelter, rest, etc.  Safety needs  Relates to protection (physical well-being), order, and stability.  Love needs  Interactions with others  Esteem needs  Allow people to feel better about themselves (via status, prestige, etc.) and improve self-respect  Self-actualization needs  Feel completely satisfied with your life and how you live A Trio of Needs (Need theory, David McClelland)  Power  Individual’s desire to control other people and objects

 Closely related to “esteem” needs  Affiliation  Need for friendship, acceptance, and belonging  Closely related to “love” needs  Achievement  Need for personal accomplishment  Closely related to “esteem” and “self-actualization” needs

4. Fiske, Susan T. (2013), Social Beings: Core Motives in Social Psychology, 3rd edition, John Wiley & Sons. - Ch1 & Ch13 Core social motives BUC(K)ET  Belonging  People need strong, stable relationships with other people.  Understanding  People need to understand their environment to predict what is going to happen in case of uncertainties and to make sense of what does happen.  People prefer to develop meanings that are shared with other people.  Controlling  encourages people to feel competent and effective at dealing with their social environment and themselves.  Enhancing self  Some people emphasize putting oneself first and viewing oneself in a positive light, but others emphasize the humble self, always striving to improve and putting others first.  Trusting others  Confidence or faith that some other, upon whom we must depend, will not act in ways that occasion us painful consequences Social influence  Conform  The influence of the majority on individual behavior  Belong and understand by doing what others do  Social norms: the rules that a group uses for appropriate and inappropriate values, beliefs, attitudes and behaviors. These rules may be explicit or implicit.  yield to group norms by changing attitudes/beliefs/behaviors  Obey  The influence of an authority or a powerholder on a subordinate  Comply  provide a positive response to a request  Consumer obedience  Use of the influence of an authority or a powerholder on consumer decision making (Milgram, 1963, 1965)

 Consumer compliance  Consumers provide a positive response to a request/persuasion  To understand self as consistent  The foot-in-the-door technique Freedman & Fraser, 1966   A small favor (sure to be granted) is followed by a large, related favor.  People infer their attitude/beliefs based on their responses to the first request and then act on the larger request according to their inferred attitude/beliefs.   To maintain belonging with valuable others  The door-in-the-face technique  A big request (usually denied) is followed by a more reasonable request  The target feels guilty after denying the first request and perhaps needs to reciprocate by agreeing to the more moderate request.  

Comply to attractive others Physically attractive people are judged to be smarter, more successful, more honest, more sociable, more dominant, sexually warmer, mentally healthier and higher in self-esteem (Langlois et al. 2000)

  To control resources  People try to obtain items that are going out of stock, about to become unavailable, or with limited supply (Cialdini & Trost, 1998)   People use scarcity as a cue for value  Example: use of attractive salesperson

5.  Exposure  Consumer must see (i.e., be exposed to) the ad  The process by which the consumer comes into physical contact with a stimulus.  A TV commercial  At the beginning or end of a commercial break  A magazine ad  Back cover  Next to the content that most interest readers  (product shelf placement)  Wide-spread (take up a lot of shelf space)  End-of-aisle display  Height: Waist to eye  Point-of-purchase displays  Transit advertising  Wide spread  Moving objects  Attention  Consumer must look at ad  The process by which an individual allocates part of the mental activity to a stimulus.  Perception  Consumer must take in the message Characteristics of attention  Selective  we decide which items, out of possibly hundreds, we want to focus on at any one time.  Can be divided  Allocate some to one task and some to another.  Limited  Multi-tasking is possible only when the processing is relatively effortless. Methods of Enhancing Attention  Make the stimuli personally relevant  Appeal to your needs, values, or goals  Show sources similar to the target audience  Use dramas (mini stories)  Ask rhetorical questions  Make the stimuli pleasant:  Use attractive models, babies, cute animals  Use music  Use humor

 Make the stimuli surprising:  Use novelty or unexpectedness  Novel package, brand name, logo, or new advertising formats (e.g., a pop-out ad in a magazine)  Use a puzzle  To arouse our curiosity and cause us to analyze further  Make the stimuli easy to process  Prominent stimuli  Size, movement, loud sounds, etc.  Concrete stimuli  The extent to which we can imagine a stimulus  Contrasting stimuli Attentional habituation  The process in which a stimulus loses it attention-getting abilities due to its familiarity.  Solution: cosmetic variations in ads  Same theme with minor differences

6. Perception  The process by which an individual organizes and interprets stimuli into a meaningful understanding  Perceiving through five senses  Perceiving Through Vision  Location of product image on a package can influence the perceived heaviness of the product  Heavy/light?  Bottom (top), right (left), and  bottom-right (top-left)  of the package.

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 Color psychology  Warm colors (red, yellow, orange)  Activity and excitement  Health clubs and fast-food restaurant  Cold colors (blue,  green, black)  Soothing and relaxing  Spas, doctors’ offices Perceiving through hearing (speed of music) Perceiving through taste (food sampling) Perceiving through smell (perfume sampling, coffee shop, bakery shop) Perceiving through touch

Stimuli difference  Just Noticeable Difference (j.n.d.) or differential threshold  The minimum difference needed between two stimuli before they are perceived to be different  Weber’s law

s k s

  S: initial stimulus value  Implication: when marketers want/ don't want consumers to detect a difference Perceptual rules for organization  Figure and Ground  Closure  Grouping Figure and Ground (background)

 Consumers tend to organize their perceptions into figure-and-ground relationship  Figure is more clearly perceived  Ground “defines” figure  Use of reference prices Principle of closure  Individuals have a need to form a meaningful, complete picture.  They consciously and subconsciously fill in the missing pieces. Principle of grouping  A tendency to group stimuli to form a unified picture or impression. Hidden messages Subliminal Perception  Perception that can be discriminated by the senses, but fails to reach conscious awareness, in other words, it cannot be reported verbally.  Mere exposure effect (Zajonc, 1968)  the more we are exposed to a stimulus, the more we like it.  A psychology task  Semantic conditioning task  A consumer study  Evaluating brand names for a new product (a cola or a soymilk drink)  Participants' evaluations of the brand names depended on the matching between the product attribute and the color with which brand name is associated

7. Involvement  How much time, energy, and other resources the consumer devotes to information processing.  depends on  The consumer  Personal interest  Risk-averse  The product  Involving high vs. low risks  Opportunity and ability  Time constraints  Required knowledge to acquire or process the information Risks related to involvement  Performance risk  poor performance of the product  Financial risk  purchase price + cost of using the product  Social risks  others don’t evaluate the product positively  Physiological risks (safety risks)  a possible harm if the product does not perform properly  Psychological risks  the product does not convey the right image Elaboration likelihood model

Attitude  A relatively global and enduring evaluation (favorable or unfavorable) of an object, issue, person or action.

The theory of reasoned action (TORA)

TORA Behavioral Intentions

BI  Aact  SN Aact i biei SN  j NBjMCj    

B=continue with a Master program BI=intention to continue with a Master program Aact=your attitude toward continuing with a Master program SN=what influence others have on you regarding this decision

TORA Scales  bi = the likelihood that an outcome will occur is (0) very low to (6) very high  ei = if this outcome occurs, it will be (-3) very bad to (+3) very good

 NBj = this person thinks I should (-3) not do it to (+3) do it  MCj = how much do I care what this person thinks (0) don’t care at all to (6) care very much Marketing applications of TORA model  Change beliefs (bi)  Change evaluations (ei)  Add a new belief (biei)  Target normative beliefs Changing cognitively-based attitude  Communication Source  source credibility  Expertise  Trustworthiness (related to source reputation)  Company/brand reputation  e.g., licensing  Message factors  argument quality  one- vs. two-sided messages  comparative messages Argument quality  An argument with high quality needs good reasoning with supporting evidence One- vs. two-sided messages  Two-sided messages  Not claiming everything is good  Admitting other brands are better in some attributes  Two-sided messages work better with consumers that are  Critical or unfriendly (e.g., using competitive products)  Well educated  Likely to hear opposing claims Comparative messages  Claiming product superiority over one or more explicitly named or implicitly identified competitors, either on an overall basis or on selected product attributes. Changing affectively-based attitude  Communication Source  Attractiveness (e.g., Got Milk?)  Message Factors  Emotional appeals  Fear appeals

8.

 Attitudes based on low-effort  Heuristics  Affect transfer  Attitude toward ad  attitude toward brand  Mere exposure effect  Frequency effect Heuristics  The general knowledge gained by experience, sometimes expressed as "rules-of-thumb”  Brand name  Price (high or low)  Package  Endorsers  Convenience  Advertisement (I like it!)  Design  Promotion (discounts, buy one get one free, free samples, etc.)  WOM (friends, family, salesperson, online reviewers, etc.)  Color or flavor  …… Affect transfer: attitude toward the Ad  Attitude toward the ad can directly influence attitude toward the brand (in the ad) without brand cognition.  Dual-mediation Hypothesis

Mere exposure effect  Exposure  Familiarity  Liking  Exposure facilitates subsequent processing This ease in processing is misattributed as liking. Maximize exposure Repetition + variations Free trials Refund for no reasons  Reduce the purchase risk and increase the possibility of trying new products Frequency effect  Attitudes are based simply on the number of supporting arguments.    

High-effort TORA model

Low-effort

Heuristics Affect transfer Mere exposure effect Fluency effect Focus on information Focus on feelings and quality, logic, evidence number of supporting … arguments, etc. PIncrease source P Generate happy credibility mood PImprove argument P Maximize exposure

quality P One- vs. two-sided messages P Comparative messages Use attractive spokesperson and emotion appeals

P Present many supporting arguments

9. Learning (definition)  The process by which individuals acquire the purchase and consumption knowledge and experience that they apply to future related behavior Two Major Learning Theories

Behavioral Learning Based on observable behaviors (responses) that occur as the result of exposure to stimuli

Cognitive Learning Learning based on mental information processing Often in response to problem solving

Behavioral Learning  Classical Conditioning  Instrumental (Operant) Conditioning

Classical Conditioning

Implications of Classical Conditioning (1)  Repetition

 To increases the association between the conditioned and unconditioned stimulus  A problem: advertising wearout  Consumers get bored and satiated with the same ad that has numerous exposures  Solution: cosmetic variations in ads  Same theme with minor differences  Stimulus generalization  Activating the same response to slightly different stimuli  Examples  Brand extension (e.g. Dove MEN, Fujifilm’s beauty)  Licensing (e.g. Walt Disney)  The name of designers, manufacturers, celebrities, corporations, cartoon figures. etc. are used for a variety of products (for instant recognition and implied quality), and the licensees pay licensing fee. Instrumental (Operant) conditioning  Learning occurs through a trial-and-error process  Habits (e.g., learned behavior) are formed as a result of rewards received for certain responses or behaviors.

Four contexts of instrumental conditioning  Encourage behaviors

 Positive reinforcement (Reinforcement): a behavior is followed by a reward.  Praise a child when s/he does a right thing  Negative reinforcement (Escape): a behavior is followed by the removal of an aversive stimulus  Remove the “No TV on weekdays” rule if the child does a right thing  Discourage behaviors  Positive punishment (Punishment): a behavior is followed by a punishment  Ask the child to clean kitchen following an undesired behavior  Negative punishment (Penalty): a behavior is followed by the removal of a desirable stimulus  Take away a child's toy following an undesired behavior  Positive = adding something Negative = taking away something Implications  Reinforce  Provide best products and services in every possible instance  Rewarding customers for repeated purchases  Cater to personalized needs  Escape: medicine, insurance  Punishment: alipay in Taobao (the default payment method)  Penalty: a fine Modeling (observational) learning  Individuals learn behavior by observing the behavior of others and the consequences of such behavior.  Marketing implication  Use celebrities in advertising (AD)  Depict negative consequences for certain behavior (AD)

10.  Culture is the full range of learned human behavior patterns  Every individual is a product of the culture  Marketers must understand the components of culture so that  They can use product design and advertising to link their products to values in consumers’ mind.  Identify cultural differences when doing business with foreign partners. Values  The underlying beliefs about the appropriate ways the members of a culture should act, think, and feel  American core values  Achievement and success  Individualism  Progress  Material comfort  Freedom  Youthfulness  Fitness and health …… HK Values  High efficiency (10)  Hard-working (8)  Freedom of speech (7)  Materialism (6)  Family-oriented (4)  Democracy (4)  Anti-corruption (4)  Creativity/innovation (4) In the eyes of non-Asian students  Tidiness  Hardworking  Ambitious  Competitive  Obedience In the eyes of non-local Asian students  Lively and dynamic  Globalization  Family orientation  Materialism  Embracing cultural difference  Risk-taking (gambling)  The importance of appearance for women In the eyes of main-land students

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Health-conscious Cultural diversity (globalization) Democracy Anti-communist Materialistic Hardworking Fast paced Ordered

Verbal communications  Good translation  Coca-cola 可口可樂  Ikea 宜家  Mercedes Benz 奔馳 賓士 平治 馬賽地  Every culture has her vocabulary N...