Consumer Behavior: An Introduction

Lecture 1: Introduction to Consumer Behavior

• Consumer behavior's approach focuses on methodology, consumer research, experiments and their results.
• People are consumers all the time
• Consuming includes activities like eating, attending lectures, listening to music, using apps, and even paying taxes.

Definition of Consumer Behavior

• It encompasses the entire behavioral process of consumption, including selecting, buying, using, and disposing of products, services, ideas, and experiences to fulfill needs and wants.
• Consumer behavior focuses on how consumers decide to purchase something, their feelings, and actions after the purchase
• The buyer and the user aren't always the same person.
• Ideas can include political topics, trends and social inspiration
• Motivation is key to understanding consumer behavior

Obtaining, Consuming, and Disposing Products and Services

• Obtaining includes the decision-making to choose a brand, the location, the method, and the mode of transportation
• Consuming involves how frequently and when you use a product, who uses it, and the experience of using a product
• Disposing includes recycling, reselling, and getting rid of a product

Factors Affecting Consumer Behavior

• Personal consumer factors: age, gender, feelings, motivation, and attitude
• External Marketing Factors: brand, reputation, ads, promotion, and store

Responses in 3 Levels (ABC)

• Affect: emotions felt about a product
• Cognition: beliefs about a product
• Behavior: actions taken with a product

Why Study Consumer Behavior?

• Studying consumer behavior helps target audiences effectively
• We are all consumers, we understand the need, decision process and things that make consumers happy
• Studying consumer behavior helps to predict consumer reactions to products or services
• There's a risk in assuming everyone behaves the same way you do
• Consumer behavior is complex and can be influenced by situational factors
• You may think we know how we behave, but we are not all the same. It's not that easy.

Problem with Understanding Consumer Behavior

• Not everyone is like you due to false consensus
• There is an overestimation that one's own beliefs are shared by others
• People are not always aware of their own thought processes when predicting or studying consumer behavior
• People overestimate the impact of events and consumers aren't always rational
• Scientific ideas should be complex, careful, and situational.

Intuition Problems in Consumer Behavior

• Intuition is often wrong and focuses on confirming instances rather than a broad view
• Personal preferences are not always representative of the larger consumer base

How to Study Consumer Behavior

• Identify the research problem
• Literature study/review
• Problem definition dictates the research plan
• Data collection
• Data analysis/interpretation
• Writing and evaluating the research

Research Methods in Consumer Behavior

• Interviews: qualitative, subjective, and expensive
• Surveys: quantitative data
• Experimental research
• It is most effective to combine qualitative and quantitative methods

Irrationality in Consumer Behavior

• Consumer actions are irrational and hard to track.
• There are predictable irrational effects in consumer behavior.
• Preference reversal: how things are presented can change individual preferences

Predictable (logic) effects

• Anchoring: influenced by something completely irrelevant
• Hyperchoice effect: a lot of choices can overwhelm the consumer
• Compromise effect: comparison with other products
• Setting prices: Huge preference for free prices
• Endowment effect: Owners assign greater value to a product than non-owners

Factors Influencing Consumer Preference Construction

• Reference dependence, context dependence, and description dependence influence preferences

Consumer Rational Economic Effects

• People consider pleasure, price, and overall value when making decisions

Lecture 2: Methodology of Consumer Behavior

• Research strategies are the general approach and goals of a research study

Descriptive Research Strategy

• It describes individual variables and provides a snapshot of specific characteristics through polls and facts
• It focuses on researching relationships between variables

Correlation Research Strategy

• It explores the relationship between two variables for each individual
• Sign +/- indicates the direction of the relationship
• Numerical values from 0 to 1.0 indicate the strength and consistency of the correlation
• Small correlation: r = 0.10, r^2 = 0.01 (1%)
• Medium correlation: r = 0.30, r^2 = 0.09 (9%)
• Large correlation: r = 0.50, r^2 = 0.25 (25%)
• Predictor variable: 1st variable
• Criterion variable: 2nd variable
• Regression: a process using one variable to predict the other variable

Strengths of Correlation Research

• Describes relationships between variables
• Has high external validity
• Reflects natural behavior

Weaknesses of Correlation Research

• Cannot assess causality
• Suffers from the "3rd variable problem" (a confounding variable explains the results)
• Directionality problem: Reversed causality – may work the other way around
• Low internal validity

Experimental Research Strategy

• Designed to answer cause-and-effect questions about the relationship of 2 variables
• Quasi-experimental research strategy
• Nonexperimental strategy
• Demonstrates relationships between variables, but doesn't explain it

Research Validity

• External validity: the extent to which results of a research can be generalized
• Internal validity: Just one single unambiguous explanation for the relationship between 2 variables
• To maximize internal and external validity
• Internal and external validity must be balanced

Possible Threats to Research Validity

• Generalization from a single sample to the general population
• Generalization from one study to another
• Generalization from a study to a real-world situation
• Any alternative explanation for the results

Lecture 3: Scientific Method and Motivation

• The scientific method is a systematic approach to acquiring knowledge
• It involves formulating specific questions and combining several methods

The Steps of the Scientific Method

• Observe: What do you notice?
• Question
• Hypothesis: A statement describing a relationship between variables
• Method: How to test your hypothesis?
• Result/conclusion

Key Points of Science

• Empirical real-world data
• Public
• Objective
• Theoretical framework: Researcher's understanding how variables connect with each other
• Causal relationships
• Coherent
• Parsimonious: few concepts to explain
• Testable hypotheses i.e falsifiable
• Solves a theoretical question
• Stimulates future research

Motivation

• Extrinsic motivation: perform to earn a reward or avoid punishment
• Intrinsic motivation: Do it for yourself, for personal rewards
• External rewards can reduce intrinsic motivation
• People attribute behavior to reward and less to personal interest, reducing enjoyment
• Performance: external motivation can lead people to do more
• Enjoyment: external motivation may reduce enjoyment of activities (feels like work)

Requirements for a Hypothesis

• Predict a relationship between 2 or more variables
• Be testable
• Be justifiable based on theory

Being Cautious with Surveys

• Surveys rely on people knowing the causes of their own behavior
• People may have inaccurate memories and are not good at predicting future behavior

4 Basic Elements of an Experimental Study

• Changing one variable value (manipulation)
• Measurement of the second variable
• Comparison of treatment conditions
• Control for other variables that could be in play

Components of an Experiment

• IV: Independent variable (the manipulated variable)
• Levels: different values of the IV
• Condition: situation or environment characterized by specific levels of the manipulated variable
• DV: Dependent variable: observed variable to assess the effects of manipulating the IV
• Extraneous variables: Variables other than IV and DV

Hypothesis Testing

• It is important to test whether a hypothesis demonstrates a significant result
• The difference must have been caused by the treatments.
• Null hypothesis = no effect --> can be rejected
• Rejecting does nut guarantee that null hypothesis is false
• Type 1 error: Falsely reject the null hypothesis (accept the effect)
• Type 2 error: Fail to reject a 'false null hypothesis' (reject the effect)

Lecture 4: Experimental Research (Online Marketing)

• Experimental research demonstrates cause-and-effect relationship between two variables through manipulation, measurement, comparison, and control.
• Online marketing uses A/B testing

Between Subjects

• Some people see variation A
• Some people see variation B

Advantages of Between Subjects Design

• Each individual score is independent from all other scores
• Score is not influenced by factors such as experience from other treatments, boredom, or contrast effects.

Disadvantages of Between Subjects Design

• Requires a larger number of participants
• Higher variability in scores due to personal characteristics

Within Subjects

• All people see all conditions (A and B)
• Confounding variables exist in between-subjects designs

Different Variables

• Individual differences
• Environmental variables (large/small room)
• Large differences between treatments are good, providing evidence of different treatment effects.
• Conversely, large differences within treatments are bad

Mediating Variable

• Explains why a relationship is happening
• Factor: independent variable in an experiment
• Factorial design: a research design that includes 2 or more factors

Types of Factorial Designs

• Single factor: one IV
• Two-factor: 2 IVs
• Two-factor with 2 IVs each with 2 levels is a 2x2 design
• Two-factor with 2 IVs one with 2 levels and one with 3 levels is a 2x3 design

Interaction Effect

• One factor has a direct influence on the effect of a second factor
• Nonparallel lines on a graph indicate an interaction between factors; statistical test is needed to determine significance
• Purely experimental is when both factors are independent variables that are manipulated
• Non-experimental or quasi-experimental is when all factors are non-manipulated or quasi-independent variables.
• ANOVA is used to evaluate statistical significance of the mean differences

Lecture 5: Factorial Designs & Consumer Decision Making

• Analysis of variance is a standard practice with multiple values
• Factorial designs can test interaction with continuous measures, in consumer decision making
• Problem recognition: Discrepancy between actual and desired state. Difference exceeds awareness threshold
• Want = Change in desired state. (new tastes, new technologies)
• Need = Change in actual state

Firm Influences on Consumer Perception

• Firms can influence problem recognition by reminding consumers of needs, lowering the perceived actual state, and raising consumers' plausible desired state

Search for Information

• Internal (memory, knowledge)
• External (active vs passive)
• Amount of search: Search increases as expected costs of search decrease, or expected benefits of search increase

External Search for Information

• Marketer sources: advertising, stores, brochures
• Non-marketer sources: family, friends, media
• Search is determined by involvement, marketing environment, available resources, mood state, and efficient search opportunities

Evaluation of Alternatives

• Feelings based
• Mood --> Brand evaluation
• Association-based: transfer the evaluation of spokesperson, commercial, product category, parent brand, and origin country
• Attribute-based (for more important decisions only)

Lecture 6: Consumer Decision Making and Consumer Perception

• Consumer decision model includes problem recognition, search for information, evaluation of alternatives, purchase decision, and post-purchase evaluation

Problem Recognition

• Discrepancy between actual and desired state
• Drop in actual state --> NEED (desired state the same)
• Desire state is going up --> WANT (new iphone on the market)

Search for Information

• Internal: from memory (own knowledge)
• External: (active vs passive)
• Source from marketers and non-marketers

Evaluation of Alternatives

• Universal set: All options possible
• Awareness set: All options aware of
• Evoked set: Options one can recall
• Consideration set: Options considered.
• Constructed by feelings or associations from spokesperson etc
• Constructed from Transfer of evaluation of spokesperson, commercial, product category, parent brand, and origin country
• Attribute-based – for more important decisions

Purchase Decision Factors

• Purchase timing
• Purchase method (web, store)
• Location of purchase
• Quantity
• Purchase can be changed even after decision

Post-Purchase evaluation

• Customer satisfaction is important for marketing research
• Influences repeat purchase intention (degree of satisfaction matters)
• Increase positive WOM (word of mouth)
• Minimize complaints and avoid legal actions
• Expectancy disconfirmation model
• Satisfaction depends on perceived quality compared to expectation
• Under-promise and over-deliver

Consumer Perception

• Perception process: receiving, selecting, and interpreting information during the search for information stage
• Exposure: All information you are exposed to.
• Attention: Grab intention from some information (focussing)
• Interpretation: Making sense of the information (understanding)
• Subjective and gateway to a consumer for a marketer, includes awareness of objects and events
• Consumers actively block advertisements through selective exposure

Sensory Threshold

• Minimum level of stimuli to experience something
• Lowest level to distinguish two intensity levels

Methods of limits

• Increase difference until the difference is noticed
• Decrease difference until they noticed the same
• There is an ability to sense change that depends on the strength of the original stimulus, based on Weber's law

Implications

• Make a slight difference in price, not noticeable
• Change in volume, not noticeable
• Incorporate negative changes, but not discernible to the public
• Make a product improvement, but must be clear to consumer (but not extravagant)

Attention

• It is relatively easy to direct attention, if you're really focused one can easily miss information and can't pay attention to multiple things
• There are limits of attention

Consumer Attention Grabbing

• Advertising is sometimes in unexpected places, to get attention.
• Promote voluntary attention (strong need/situation) and make the message personally relevant and active
• Saliency and vividness of message grabs involuntary intention
• Saliency deepens on context, vividness not
• Use motion, changing colors, big size, make it more intense

Marketing Attention Grabs

• In the rit spot: eye level, front of magazine etc...
• Surprising effect: shocking, unexpected
• Celebrities, sex appeal, humor
• Conditioned attention grabbers: Doorbells, phone rings, sirens
• Escape the overstimulating cluttered environment.
• Grabbing attention can distract from the brand name
• Understanding, focus, and recall (nost) is effective with attention
• Vivid sensation

Interpretation

• Illusion tricks in the use of marketing (play with perception)
• Shape: Centration hypothesis (focus on one stimulus dimension) and Elongation bias (focus on the elongated dimension)

Lecture 7: Product Consideration, Evaluation & Choice

• Product evaluation and choice depend on behavioral decision theory
• Consider the set of products consumers consider when influencing consideration
• Classic choice theory assumes stable preferences, choosing option with highest value, and preferences independent of context
• Introducing a new option will affect the likeability of the existing option

Influence of Context in Product Choice

• Choosing with the most important attribute; there might be a better alternative
• Adding a third alternative increases which the attractiveness of the asymmetrically dominating alternative
• Compromise effect: addition of an option that shifts preferences, is acceptable on all features, and occurs mostly with difficult decisions

Decision-Making Strategies

• Heuristics: Simplified decision strategy using rules of thumbs to simplify decision making, which is helpful, adaptive, and predictable

Biases In Decision-Making

• Systematic errors in judgment
• When we judge the probability that an object or event A belongs to class B by looking at the degree to which A resembles B -> we neglect information about the general probability of B occurring. (Representativeness Heuristic)
• Make judgements about the likelihood of an event based on how easy the option is. (Availability Heuristic)
• Develop estimates with an initial anchor from our available information and adjust from there (Anchoring and adjustment Heuristic)

Behaviorial Decision Theory

• People think about uncertain events in gambles
• Utility components are Probability and Value
• P x V = expected value of a gable

Dominance, Transitivity and Invariance Principles

• Gambles are ranked from best to worst expected value
• Transitivity principle: if you prefer A to B and B to C, you must prefer A to C
• Invariance principle: preference should remain invariant or stable

Framing Effect on Decisions

• When problems are framed positively, people are risk averse
• When problems are framed negatively, people are risk seeking

Prospect Theory and Loss Aversion

• Prospect theory suggests there is a reference dependence evaluated to a neutral reference point
• "The pain from a loss is larger than the pleasure from a gain
• Outcomes have a weaker effect when distance from reference point increases

Endowment Effect

• People pay more to retain something they own than to obtain something owned by someone else
• Sellers tend to overvalue their sell
• Buyers tend to value les for the product they buy

Marketing Use of Endowment Effect

• When you subscribe a month for free, then after that month you have to pay, you do it otherwise you lose it.
• Money-back guarantee offers
• Retailers try to hide how much buyers have spent
• Separate purchase from consumption (subscription)
• Package deals: multiple purchases or season tickets
• Price bundling: includes all inclusive concept

Separate vs Joint Evaluation

Separate evaluation: evaluates products one at a time by selecting favorable information and neglecting unfavorable information Joint evaluation: evaluating two or more products concurrently Selective thinking: consumers interpreting information as supporting their views. Brand positivity effect: Unrealistic favorable evaluations of brands when using separate evaluations

Lecture 8: Attitude and Judgement

• Attitude is formed by either cognition and affects
• Definition: personal evaluative rating about something or objects, activites concepts
• Valence: Negative, Neutral, Positive
• Strength: weak, moderate, strong

Components of Attitude

• Affect (feelings)
• Beliefs (cognitions)
• Conation (behavior)
• Reciprocal relationship between affect, beliefs and conation
• Semantic differential: uses opposing adjectives to measure attitude, based on Agree/Disagree
• Likert scale: a way to measure attitude

Predicting and Understanding Attitudes

• What will people buy?
• How much will they consume?
• How much will they complain?
• How will they react to changes?
• Strong attitudes are high accessible from memory, maintained with confidence, held with little uncertainty, and strongly correlated with behavior.

Cognition

• Thoughts and beliefs about an object.
• BelieNon-evaluative judgement about relationship between object and attribute.
• Descriptive beliefs (direct experience)
• Informational Beliefs (indirect information, heard from others)
• Inferential Beliefs (own conclusions)
• Halo effect (evaluating something positive on the base of one positive aspect)

Multi-attribute Model of Attitudes

• Fishbein: Attitude is sum of beliefs weighted by evaluation.
• Rosenberg: Attitude is sum of beliefs, weighted by their importance.
• Trough communication change the importance of evaluations and changing beliefs

Beliefs and Marketing

• To improve consumers' attitude, strengthen the rating of an important attribute, add a new attribute, decrease its competitors' ratings
• It is important to measure beliefs and importance weights so you can gain insights, provide strategic insights, segement and adjust campaigns, devlop the product and change the overall attitude
• Attitude confidence Theory of Reasoned Action (Fishbein & Ajzen) uses subjective norms The products of the normative beliefs and motivation to comply

Lecture 9: Learning and Memory

• Learning: acquiring new information and knowledge through experiences and training
• Memory: Information that is stored in the brain

Classical Conditioning

• Learning by repeated pairing of a stimulus response
• Associative learning
• A neutral stimulus becomes associated with a meaningful stimulus, resulting in a conditioned response
• Conditioned response (neutral stimulus)

Evaluative Conditioning

• Classical conditioning with a positive or negative stimulus to change a person's attitude towards the neutral stimulus
• Marketers link products with positive stimuli

Principles for Pairing Products

• Pairing products with positive stimuli
• Stimulus Generalization: pairing unconditioned stimulus with conditioned stimulus leads to similar responses to both
• Forward Conditioning: more effective
• Backward Conditioning: less effective
• Pre-exposure effect: A previously encountered unconditioned stimulus will not be effectively linked to a conditioned stimulus
• Blocking: If one stimulus is strongly predictive (e.g., taste), other cues become unpredictive

Operant Conditioning

• Learning by trial and error, using positive and negative stimuli
• Marketers use awarding to reward customers
• Memory is defined by short-term memory's max limit and long-term memory through repeating
• Long-term memory has information that stays permanently in memory
• Easier to learn something forgotten than to learn something for the first time.

Principles of Long Term Memory

• Organizational principle: Information as a part of a network structure is better to remember
• Associative principle: One thing activates another thing. Associative network.
• What comes first to mind?
• Priming: Response a stimulus seen bfeore

Seven Sins of Memory

• Transience (general decline of a specific memory)
• Absent-mindedness (forgetting through shallow processing)
• Blocking (failure due to interference from related information in memory)
• Misattribution: Source confusion
• Suggestibility: misleading questions that can be added to our memory
• Bias: product experiences are open to multiple interpretations
• Persistence: not forgetting things we want to forget

Lecture 10: Motivation

• Motivation: the driving force that moves consumers to act with needs being negative motivation, and "wants" being positive motivation
• Need + Discrepancy between Actual Desired State drives Tension drives Goal Object
• Valuation and devaluation effect: poor children judged the size of a coin much bigger than rich kids did
• Also possible a category fits in multiple layers

Basic Needs

• Physiological needs such as, hunger, thirst, shelter
• Safety needs such as, security, stability, protection
• Esteem needs are broken down into social worth Love and belongingness like partiners, friends
• Examples of needs brands meet: physiological (food), safety needs (insurance), and community needs(phones).

Consistency Theories

• Consumers are motivated to hold consistency in relations
• Balance theory: Consumers strive for balance among relationships
• Three relationships, or two and one
• If an associate product is a celebrity, for example there is a positive association or markerts relationship with a celebrity is a postitive relationship.

More Theories

• Cognitive dissonance theory: Change behavior to feel better, so it is in harmony with your attitudes
• Self-regulation:Acheiving goals, systematic efforts to direct thoughts, feeling, actions towards goals
• Promotion focuses: achievements, growth, goals, positive outcomes
• Sensitive to negative outcomes

Vigilant Strategy

• Being careful to avoid moving
• Self-Determination Theory: (intrinsic/extrinsic motivation)
• Autonomy, learning, meaning, love, curiosity Extrinsic meaning (competition, rewards, money)

Lecture 11: Automatic Information Processing

• System 1: Automatic What comes directly into mind intuitively with Unconscious emotion, Very fast, involuntary, Associative implicit responses
• System 2: Conscious thinking Checking rationally. that is Slow, Controlled, Rule following explicit Reponses

Automatic Reactions

• Occur unconsciously and is processed without awareness or intentions but influecne judgement, feeling, goals and bahavior
• Consumers base decisions on automatically retrieved attitudes
• Adaptive to use subconscious mind frees up and mental Resources cannot navigate complex environments in a subconsious manner

Automatic Effects for Consumers

• For Automatic processing with Awareness efforts, there in no intentional, there is no controllabilty
• Consumers don't always speak and know about themselves
• This produces differnece between attitudes consciously and unconsciously and can be used for the conscious divergences

Explicit/Implicit Measures

• This produces Differntion where there are self-implicit assessments to have individual attitudes.
• Using a specific stimulus makes a product more accessible and is more influential to our responses in a sub-consicous manner which can be used for priming

Distinctions with Primes Below Threshold Awareness

• The items form becomes more noticable, this is more pro-social more good and neutral and more aggressive and action conseqeutal
• Independent versus interdependent can be useful
• Application has to fit, be contextual, clear and vague

Influence on Behavior

• Effects the scrambled sentecence tasks
• Priming can affect advertising given the conditions, effects can be limited and there is no "mind control"

Lecture 12: The Self

• Consumer choices highly depends on the Self whether communal, social relations or general memberhsip
• The overall self concept is a self esteem product with extended self and identity sinaling
• We also interprete the "motivations" within these concepts for consumers and they provide a way to feel no dissonance
• One's identity affects other's orignial behavior and are a way to reduce cognitive dissonance