Marketing: A/B Testing

• These are study notes for marketing and consumer behavior

A/B Tests

• A/B tests are used by companies to assess singular variation.
• Variations are similar to independent variables.
• These tests determine which version performs better but offer no insights into the underlying theory.
• Metrics in A/B testing resemble dependent variables, like KPIs or continuous variables.
• Click-through rate (CTR) is the percentage of people who click on an ad after seeing it.
• Conversion rate measures the percentage of users completing a desired action.
• A/B testing involves comparing a control group against treatment group(s).
• A/B testing determines the performance of different strategies.
• A/B testing helps to find the specific effect.
• Independent variables (IV) are manipulated by the experimenter.
• Dependent variables (DV) are measured and recorded by the experimenter, affected by IVs.
• A/B testing automates the randomization process.
• Results from A/B testing might not generalize to the overall population.
• A/B testing may not help in understanding general theories or influencing the average person.
• A/B tests have high internal validity ("X causes Y, Y doesn't cause X").
• A/B tests provide a precise estimate of the efficacy of the variation.
• A/B tests elicit very naturalistic responses.
• A/B tests may have low external validity, struggling to generalize findings outside of a specific subset.
• Correct A/B testing combines precision and control of an experiment.
• Correct A/B testing combines external validity of field study.
• Multivariable tests conduct several simultaneous A/B tests.
• Multivariable tests can test combinations of factors for interactions.
• A/B testing can influence behavior in subtle ways.
• A/B testing personalizes environments to suit unique individual preferences.

Artificial Intelligence (AI)

• Artificial Intelligence involves machines performing tasks characteristic of human intelligence.
• AI encompasses prediction, anticipation, and planning.
• Automation is a core element of AI.
• AI typically uses pre-existing rules and depends on humans for generating rules/equations to compute data.

Machine Learning

• Machine Learning provides the ability to learn without being explicitly programmed.
• Machine Learning is one way of achieving AI, allowing AI to happen.
• Creating AI without machine learning is technically possible but would require hand-coding.
• Machine Learning is a method of "training" algorithms for specific tasks, such as image recognition.

Deep Learning

• Deep Learning represents an approach to machine learning.
• Deep Learning involves interconnecting many neurons.
• Artificial neural networks (ANN) are algorithms that mimic the biological structure of the brain.
• ANNs include multiple layers, making deep learning "deep."
• Machine intelligence (MI) with multiple layers models data after the human brain.
• MI prediction processes can be unclear.
• Applications of AI include consumer and marketing applications.
• Consumer applications comprise online search, recommender systems, fitness trackers, IoT devices, streaming software, self-driving cars, and smart homes.
• Marketing applications include product recommendations, content curation/creation, chatbots, A/B testing, and "visual listening in".

Exposure

• Exposure determines whether consumers come into contact with a stimulus.
• Exposure is the process by which a consumer has physical contact with a marketing stimulus.
• The stimulus must be within range of the sensory receptors.
• Consumers have the possibility of noticing the stimulus when exposed.
• Consumers can choose not to be exposed to marketing messages.
• Exposure is measured through metrics like counting clips and media impressions.
• Counting clips involves counting any mention of a firm in the media, reflecting volume of exposure.
• Media impressions reflect the number of people who may have seen an article or heard a radio show/podcast.

Attention

• Attention indicates the extent of which processing activity is devoted to a particular stimulus.
• Attention determines whether consumers come into contact with a stimulus.
• Attention means the information from exposure is recorded/noticed in some way.
• Attention is limited and selective, related to our goals.
• Endogenous (top-down) factors drive attention, involving higher-order cognitive processes like goals, intentions, and tasks.
• Endogenous factors involve using prior expectations and experiences to make sense of our surroundings.
• Banner blindness is an example of subconsciously ignoring banner ads.
• People overlook ads that are irrelevant/intrusive, influencing browsing experience.
• Exogenous (bottom-up) factors include qualities of the stimulus like position, perceptual contrast, novelty, and surprise.
• Exogenous factors use surroundings to draw conclusions, noticing input, and perceptual contrast.
• Both position and contrast are qualities of attention.

Perception

• Perception is a constructed process of interpretation, referring to how a stimulus is understood/experienced.
• Two major factors influence perception: bottom-up stimulus evaluation and top-down prior expectations.
• Subjective views of the world and external factors affect perception.
• Sensory information is processed sequentially.
• The mind can be tricked into certain interpretations.
• Visual perception involves distinguishing figure (foreground) and ground (background).
• The differentiation between figure and ground varies with individual perception.
• People interpret information differently based on their background/knowledge.
• Top-down factors impact perception.
• The perception of quantity and quality is malleable.
• Putting small amount of food on a small plate is more acceptable.
• Expensive wine is preferred over cheap wine.
• Expectations inform perceptions.

Brand Universe

• The true brand universe includes all existing brands.
• The perceived brand universe includes brands consumers are aware of.

Chunking

• Chunking groups items so they can be processed together as a unit.
• Chunking breaks down components into smaller "chunks" of related information.
• Chunking reduces cognitive load, making information easier to remember.

Cognitive Load

• Cognitive load means the amount of cognitive resources/effort being used by a task or cognitive process.
• Working memory has limited capacity, so using resources for one task leaves fewer/less for others.

Competitive Interference

• Competitive interference causes memory to weakens over time due to competing memories.
• Similarity between products, brands, and ads increases the chance of memory interference.
• Competitive interference occurs when concept activation comes so frequently, other concepts cannot activate.

Compromise Effect

• The Compromise effect shows consumers shift preference toward opinion with a third, asymmetrically dominated option.

Decision Fatigue

• Decision Fatigue is from cognitive overload, resulting in tiredness when making decisions.
• Car customization exemplifies decision fatigue.
• All car customization options use make people tired of making decisions.
• People will make quick decisions when asked about financial aspects to avoid decision fatigue.
• Decision fatigue relates to effort.
• Participants asked to not eat a food item when completing an impossible test.
• IV (avoid eating a food item) used cookies vs radishes.
• Those that consumed cookies gave up on the radishes faster.
• Consumers in highly-digital worlds are operating under overloaded and fatigued conditions.

Digital Divide

• The Digital divide exists, moving beyond access-only.
• First-level digital divide differences access to Internet infrastructure and technology maintenance.
• First-level includes smartphone dependency; e.g. 1 in 5 adults has no broadband at home but does have a smartphone.
• Second-level digital divide relates to skills needed to use the internet and usage differences.
• Second level consists of network effects that include technology acceptance and support.
• Technology acceptance means perceived usefulness + ease of use.
• Those most in-need receive lower quality technology support.
• Third-level digital divide captures benefits and opportunities from being online.

Digital Footprint

• A digital footprint is all of what you do online.
• Digital footprint allows marketers to build psychographic profiles.
• Data like browsing data, Facebook likes, and profile pictures builds up a digital footprint.
• Text posted is analyzed using natural language processing.

Psychographics

• Psychographic data is about consumer preferences.
• It is difficult to find characteristics of consumers.
• Characteristics are not directly observable + are not always known by the consumers themselves.
• To solve this, machine learning is used to determine the psychographic characteristics from publicly observable behaviors.

Elaboration Likelihood Model

• Communication persuades consumers through central and peripheral routes of cognitive processing.
• Central route engages careful consideration of relevant information.
• The central route produces stable attitudes, resistant to change, and predicts behavior more reliably.
• Peripheral route uses simple inferences based on simple cues.
• Peripheral route creates temporary attitudes.
• Peripheral route is less likely to predict behavior.
• Process depends on elaboration likelihood.
• Low elaboration (peripheral route) increases elaboration if arguments are reasonable.
• Involvement and persuasion exist.
• Low involvement (peripheral route) involves products unrelated to end goals.
• Competing brands with no unique attributes are low involvement.
• High involvement (central route) involves brands that have a distinct advantage and products which require careful decision making, like durable categories.
• Associations exist for low involvement.
• Marketers use color theory and packaging design to catch attention and evoke emotions/associations when consumers have low involvement.

Heuristics

• Vibrant colors, sleek packaging, and distinct branding influence quick decisions based on visual cues rather than analysis.
• Heuristics are mental shortcuts that simplify decision-making + problem-solving.
• People favor familiar/recognizable options, assuming well-known brands are superior/safer.
• Use category & schema information to create associations with heuristics.
• Repeat message (length=strength).
• Strong arguments in reasoning for high involvement focus on process, not result.
• Benefits focus on using product, not results because other products satisfy same aim.
• Emotion: affective involvement occurs when stimulus has strong emotional relevance for the consumer.
• Implications have strong message and cue thinking.
• Align message with goals.
• Self-referencing involves powerful tools.

Endowment Effect

• The endowment effect is how people assign value to different objects.
• Someone values something more because they already own already.
• The endowment effect is derived from prospect theory.
• Pleasure from gain will be lower than pain from loss.
• Small numerical changes do not change psychological value very little.
• The endowment effect works with subscription models.
• Pain from losing subscription>paying more.
• The free trial involves more pain from losing after getting service than paying more to keep.
• To resolve this, use old secondary research to understand new effects.

Attitudes

• Explicit attitudes are ones that people can consciously think about/report.
• Explicit attitudes are related to specific beliefs.
• Explicit attitudes can be measured with self-report.
• Explicit attitudes are likely to affect behavior when consumers have time/resources to deliberate.
• Explicit attitudes act as an object of value and predict behavior that we can control.
• Implicit attitudes are positive + negative associations that occur without conscious awareness.
• Spreading activation occurs as thinking of one concept automatically activates related concepts and +/- evaluations.
• Implicit attitudes need to be measured with cognitive tests and responses.
• Lower response rates mean distant associations.
• Implicit attitudes are affect behavior when consumers lack time/cognitive resources.
• Implicit attitudes predict spontaneous and uncontrollable behavior.

Adaptation

• Hedonic adaptation is the human tendency to return to a stable happiness despite major events.
• Expectations and desires rise with additional income.
• Happiness and emotion fall back to stable levels.
• Imagery involves processing information in sensory form.
• Imagery is easy to process and remember.
• Images are easier to process than verbal information.
• Images are easy to evaluate and affect us.
• Imagery can be mistaken for past experiences.
• VR provides recall.
• Participants recalled better info with VR.

Implicit Association Test

• The Implicit Association Test (IAT) quantifies the strengths of associations.
• Quantifies difference in response time for one pairing vs. another pairing;
• Shorter response times equal closer association.
• Longer response times equal distant associations.
• The test is used to uncover bias, strength of associations with brands, different people, and associations.
• Implicit attitudes predict behavior.
• Implicit attitudes can affect behavior when consumers lack time and/or cognitive resources.
• Explicit attitudes affect behavior with consumers have time to deliberate.
• Interaction bias means behavior and decisions of system's users influence output and performance of that system, or an AI system.
• Latent bias involves unobserved/unintentional patterns (ex. historical biases) in training data.
• These can appear in risk scores; they should not be used to determine sentences.
• Widespread algorithm is not based on race, but "more likely" may stem from historical bias.
• Selection bias takes places when selected training sample is not representative of the population.

Memory

• Exposure -> Attention -> Encoding
• Short-Term Memory -> Long-Term Memory

Long-Term Memory (LTM)

• LTM is permanent, but retrieval may vary by time.
• LTM stores data and associations.
• LTM is limitless.
• LTM retains but can be irretrievable.

Short-Term Memory (STM)

• STM is the same as working memory.
• STM has environment info and data retrieved from LTM.
• One is commonly conscious if something is in STM.
• Processed STM can transfer into LTM.
• STM is limited (around 7 +/- 2), 20-30 seconds.
• New information may “bump” old data.
• Consumers buy to fulfil goals.
• Broad aims are pursued.
• Goals are state focused.
• Motivation involves using energy to meet aims.
• Needs determine energy use.
• Discrepancy between present and desired/ideal state generates needs.

Creating Needs

• Marketers work within tension space + change a state/manipulate actual state leading to tension.
• Needs are dynamic (never fully met, always temporarily) in dynamic hierarchy.
• Internal/external events influence them.
• Maslow's hierarchy uses simplifying, but oversimplified.
• The hierarchy exists, but is faulty,
• Solving problems in consumer behavior.
• Solving consumers involves a manipulation perception of the world + offering a chance to meet objectives.
• Shape the ideal state by change shape or emphasize the gap + create tension.

Create Dissatisfaction with Actual

• Marketers show the gap (ex. home security system).

Means-End Theory

• The way people relate to products can be shown a linked chain: product attributes -> consequences of use -> personal values.
• Links "means" to consquences and consequences of the former with values ("ends").
• End-value chains explain driven by linking attribute particular value: attribute (product) -> consequence -> value

Goals

• Goals fill needs.
• Goals are similar.
• Any goal in multiple ways, repeatedly.
• Goal pursuit in dynamic.
• Adaptation involves meeting level of need, then return.
• Consumers show motivation from goal.
• It is necessarily only about goal.
• Clear customer perceptions of time using waiting can change customer perception.

Motivation

• Website loading screen and Uber tracking.
• Requires self-control.
• Exercise and goal motivation can be made difficult by info excess.
• Ability differences include traits: knowledge, cognitive style, intelligence, education, money.
• Opportunity: time and focus.
• Expanded ability is common now.
• Opportunity is expanded now.
• Make consumer opportunity to process data.
• Consumers lack ability to engage, ensure opportunity and ability.

Capacity Consumers

• "Scarcity of attention impacts process".
• This resource involves limited need for attention.

Information Overload

• Cognitive load means resources/effort being used for task/cognitive processing.
• The mind has limited capacity.
• Decision fatigue decreases energy.
• Cars cost attention.
• Fatigue effort results in cookies vs radishes.

Multi-Attribute Model

• consumers have beliefs + the summation and evaluation affects attitudes.
• used in explicit beliefs.
• Limited decision making with formula is:

Psychological Closure

• Relative judgment is here

Repetition and Recirculation

• Use repetition to remember info without active rehearsal.
• Popular marketing by companies to become "top of mind."

Elaboration

• Transfer for long memory.
• Used via story or messages.
• Use unique, novel items with "desirable difficulty."

Retrieval Fatigue

• Decay decreases or weakens connection.
• Events or details forgotten after period.
• Lack off recall or reinforcement decrease.
• Absence of mind decrease.
• Weak or lost.

Self-Endorsement

• Semantic networks are how data is saved.
• Node link in these networks + experience.
• Accessibility to recall by LTM and frequency of activation.

Priming

• Indirect priming influences behavior.
• Trace strength is strength + numbers.
• Priming + network + association affects consumer choice.

Systems 1 and 2

• Efficient is "Optimal"
• 1: rule system
• Suggests suggestions.
• Often taken
• Difficulty activates 2.
• Automate.
• Reduce minimize via heuristic or network.
• Anchoring heuristic is how the first pieces influences.
• Availability heuristic influences preferences.
• Representative heuristic assesses the degree.
• 2 Is logical.
• Attempts utility.
• Involves error.
• Consumers use to make judgement.