ACP Session 7 PDF

Session7 Numerosity heuristic/bias Session7 1  The Effect of Numerosity: The class is exploring the impact of numbers on consumer behavior. It emphasizes that the way numbers are presented can lead to different perceptions...

Session7 Numerosity heuristic/bias Session7 1  The Effect of Numerosity: The class is exploring the impact of numbers on consumer behavior. It emphasizes that the way numbers are presented can lead to different perceptions among consumers. Ex) In the case of car rental services, there are two expressions: "365 rentals per year" and "7 rentals per week." Both sentences provide the same information, but it is explained that the first expression is more effective. "Bigger is Better" Concept: The reason the first expression is more effective is due to the "Bigger is Better" principle, which shows how people's perceptions can interpret numbers differently. Consumers perceive numbers in varying ways, indicating that they may subjectively derive different meanings from the same information. Discussion of the Paper: Finally, the class will discuss a paper that addresses how these concepts affect consumer behavior. This paper will help us examine how the presentation of numbers can influence our actions. Session7 2  Why ⇒ Mediation explain : why this happen keyword -> When if condition ⇒ Moderation in terms of why condition Session7 3  IV : Hypo scale or framing (type of scale, ‘calorie’ is not an IV, it’s a condition of IV’) Two levels(big scale vs small scale)(⇒ impact on Mediator1(Anticipated guilt) DV : likelihood to eat the pizza slice for lunch Mediator 1: anticipated guilt coding can change everything 15 grams of fat (non contracted) ⇒ small scale(Less Anticipated guilt) : higher coding =1 400 calorie ⇒ baseline : lower coding = 0 → less guilt 15 grams : lower coding =0 400 calor : higher coding = 1 → more guilt (In this case, consumers will be affected they will consume more.) ⇒ If the main topic of the research is that the effect of numerosity can have a negative impact on healthy eating habits, then it is important to assign a higher coding to the small scale in order to emphasize this effect. Main Story: The main topic of the research emphasizes the impact of assigning higher coding on a small scale to consumer behavior. Consumers perceive numbers differently; for example, "90 days of summer vacation" is perceived as larger than "3 months." Differences in Consumer Perception: Generally, consumers interpret numbers differently. While some consumers may Session7 4  be exceptions in specific situations, this is not the case on average. As a result, the effect of numerosity can vary. Cultural Differences: The effect of numerosity may work well in the U.S., but in other regions, such as Southeast Asia, consumers' methods of calculating numbers may differ, leading to a lack of effect. This serves as an example of a moderator at play. Relationship Between Guilt and Numbers: A relationship is emphasized where presenting information on a small scale reduces anticipated guilt. For instance, if "15 grams" feels like a small amount, the guilt associated with it is lower. This explains the relationship when moving from a large scale to a small scale. Correlation Between Variables: In the research, an important aspect is the correlation between the independent variable (IV) and the dependent variable (DV). In other words, how the variables interact with each other is a crucial point. Anticipated guilt and breadth of attention Reverse relationship When the guilt increase, attention to small thing. When the guilt decrease, attention to broad thing anticipated guilt → breadth of attention → DV : likelihood A wider scope of attention makes consumers less reliant on numerosity for judgement. So the higher it is, the higher they will consume because the less they will care about the numerosity. So the relationship correlation between attention and the likelihood of violating and eating gold or eating something is positive. positive effect of small scale Bootstrapping rule(Overall effect) Session7 5  it emphasizes that there is a positive effect of the small scale. This positive effect can be derived through complex modeling, and it is important to remember the bootstrapping rule. That is, multiplying a negative by a negative yields a positive, and multiplying a positive by a positive also yields a positive. Therefore, the overall effect is positive. A serial mediation moderation mediaition distinguisng framing them 10 paragraph 2 frame the moderation hypothesis what does it look like 1. Complex Models and Serial Mediation Serial Mediation: "Serial mediation" refers to a structure where multiple mediators are linked in a sequential manner. For example, if there are 10 serial mediators, each mediator is connected to the next, illustrating a specific effect. Calculating the Sign: If the model is presented correctly, you can obtain the final sign by multiplying the signs of each arrow. If all mediators are significant, this calculation helps derive the results. 1. Significance of the Model Collapse of the Model: If the first mediator is not significant, the entire model fails to function. This means that if there isn’t a significant change in anticipated guilt, mediation does not occur, indicating a failure of the model. 2. Effect of Numbers and Consumer Perception Difference in Numbers: If the difference between two measures (e.g., calories Session7 6  and an ABC measure) is not perceived as significant by consumers, the model may not work. For example, if 15 grams of fat converts to 17 ABC, consumers may not find this difference substantial. Framing: The way the independent variable is framed matters. Presenting nutritional information using a contracted scale (specific numbers) versus a non- contracted scale (more general terms) can lead to different consumer reactions. If the difference between these two scales isn’t significant enough, the effect may not manifest. 1. Mediators and Moderators Moderators and Mediators: The model can include both mediators and moderators. Moderators adjust the relationship between mediators, allowing for complex model construction. However, statistically capturing these complex models can be very challenging. Simple Models: Most research prefers simpler models that use either single mediators or a combination of moderators and mediators. Studies utilizing complex serial mediation models are rarely published. Conclusion This discussion emphasizes the structure and significance of complex mediation models, as well as the importance of consumer perception. To create effective models, it’s crucial to thoroughly understand the relationships and significance of each mediator, while also considering how differences in numbers impact consumer behavior Mediation: Mediation refers to a process where a third variable (the mediator) explains the relationship between an independent variable (IV) and a dependent variable (DV). It helps to understand how or why an effect occurs. For example, if you find that variable A influences variable B through variable C, then C is a mediator. Moderation: Moderation occurs when the relationship between two variables changes depending on the level of a third variable (the moderator). It answers the question of when or under what conditions an effect occurs. For instance, variable A affects variable B more strongly at high levels of variable Session7 7  C than at low levels. Serial Mediation: This concept involves multiple mediators in a sequential chain. It examines whether the effect of an independent variable on a dependent variable operates through a series of mediators. For example, A → C1 → C2 → B, where C1 and C2 are mediators that work in sequence. Distinguishing Between Mediation and Moderation: It’s important to differentiate between these two concepts in your research. While mediation focuses on the pathway of influence, moderation examines how the strength or direction of that influence changes. Framing the Moderation Hypothesis: When you frame a moderation hypothesis, you typically state that the relationship between the independent variable and the dependent variable is contingent upon the level of the moderator variable. For example: "The effect of A on B will be stronger when C is high compared to when C is low." What Does It Look Like?: In visual representations, moderation can often be depicted using interaction plots where the slopes of the relationship between the IV and DV change at different levels of the moderator. For mediation, path diagrams are commonly used to illustrate the direct and indirect effects. Structuring Your Notes into Paragraphs Introduction to Mediation and Moderation: Define mediation and moderation, highlighting their significance in research. Understanding Mediation: Explain how mediation works with examples and its importance in explaining causal relationships. Understanding Moderation: Describe moderation, providing examples of how it alters the relationship between the IV and DV. Serial Mediation: Introduce the concept of serial mediation and how it involves multiple mediators in a sequence. Session7 8  Distinguishing Mediation and Moderation: Discuss how to differentiate between the two concepts, emphasizing their unique roles in research. Framing a Moderation Hypothesis: Outline how to formulate a moderation hypothesis, including the structure and key components. Visual Representations: Describe what moderation and mediation look like in path diagrams and interaction plots. Examples of Application: Provide examples of studies that effectively use mediation and moderation, highlighting their findings. Importance in Research: Discuss why understanding these concepts is crucial for accurately interpreting data and results. Conclusion: Summarize the key points and the relevance of mediation and moderation in understanding complex relationships in research. Overall effect if i follow all the sign? positive effects sign no interaction here mediator Session7 9  Distinction Between Mediators and Moderators: It emphasizes that the same construct cannot function as both a mediator and a moderator on the same connection. In other words, variable X cannot act as an independent variable while simultaneously moderating that same path. This is a principle that does not occur. Example Explanation: For example, in a model where there is one mediator, the independent variable can act as a moderator on a different path. This means that the independent variable can function as a mediator while also serving as a moderator on another connection, but it cannot do so on the same path. — final exam : mock exam in december, methodology moderation mediation describe in words, 2 sentences, how hypothesis one to reverse in describe in When motivation is high: Session7 10  Enduring Involvement: For example, when a consumer has a continuous interest in a specific brand (e.g., a new Samsung phone), they maintain a high level of interest and involvement with that product. Situational Involvement: Interest can arise due to specific situations. For instance, when buying a birthday gift for a friend, the consumer becomes involved in considering the appropriateness of the gift, showing high involvement. However, once the gift is purchased or given, their interest in that category may decrease. Cognitive vs. Affective Involvement: Consumers may desire to learn about new things, which relates to cognitive involvement. For example, if an advertisement resonates emotionally with a consumer, they may develop a heightened interest in that brand and aspire to become a consumer. Session7 11  Object of Involvement: The products or brands that consumers engage with can be categorized in various ways, referring to consumers' interest in specific brands or product types. Product Categories:(product vs. activity(experience)) There has been an increasing amount of research on experiential consumption in modern times. This refers to consuming experiences rather than purchasing material products, such as visiting a museum or engaging in adventure activities. Experiential Consumption: These experiences can also be classified as products, emphasizing that consumers can derive value from experiences rather than just physical products. Importance of Experiential Consumption: Recent research indicates that, in today’s busy modern life, consumers are increasingly engaging in experiential consumption. This reflects a tendency to transform simple products into experiences. Session7 12  Products vs. Experiences: There is a difference between using a single product and participating in experiences or activities. Generally, consumers tend to engage more in activities and experiences. Therefore, marketers should create narratives around their products to help consumers feel more engaged in those experiences. Importance of Storytelling: Even if a product is simple, it is crucial to create experiences during the purchasing process, product usage, or when passing it on to the next generation. This allows consumers to feel more involved with the product. Brand Involvement: Consumers can develop a high level of loyalty to specific brands. For example, if someone thinks, "I love my iPhone," they will have a strong interest in everything related to that brand. They will also show a very high level of involvement in events such as new product launches. Compensatory Consumption: Compensatory consumption refers to the situation where consumers purchase products to fulfill a deficiency or need. This type of consumption is temporary, and after the need is satisfied, the consumer's interest or excitement about the product may decrease. For example, they may stop paying attention to iPhone advertisements. Brand Loyalty: Brand loyalty means that consumers have a continuous attachment to a specific brand and prefer its products. Loyalty to a brand is formed at a deeper level, and even if a consumer owns multiple iPhones, they still maintain their loyalty to that brand. Difference Between the Two Concepts: While compensatory consumption results in a decrease in consumer interest once the need is satisfied, brand loyalty allows consumers to maintain their Session7 13  attachment to the brand, leading to sustained interest. In other words, compensatory consumption is temporary and surface-level engagement, whereas brand loyalty establishes a deeper and more enduring relationship. Advertisements Advertising and Consumer Involvement: Specific advertisements can be very interesting and can deeply engage consumers with a particular brand or product. However, this involvement may not be long-lasting. Mediums Role of Media: Here, "media" refers to the channels used for communication with consumers. The type of media can affect the level of consumer involvement. TV vs. Print Media: TV: Television is considered a low-involvement medium. Often, people watch TV while doing other things, so they do not focus on specific programs or advertisements. Print Media (e.g., magazines): In contrast, magazines are high-involvement media. When consumers intentionally purchase a specific magazine and turn the pages, they are focused, which increases their interest in the advertisements. Cognitive Load: When listening to the radio while driving, the act of driving itself creates cognitive load, which can lower involvement with radio advertisements. This is because attention is divided in order to avoid accidents. Media Involvement: Radio is generally considered a low-involvement medium. While driving, consumers cannot focus heavily on advertisements, which may result in them not fully processing the ad content. Certain decisions and behaviours Importance of Decisions and Price: The level of involvement varies depending on the price and significance of the product being purchased. For example, when buying low-priced and less important items (e.g., small consumer goods), involvement may be low. In Session7 14  contrast, purchasing high-priced products, such as cars, requires a high level of involvement, as failing to make the right choice can lead to significant financial loss. Nature of Decisions: The nature of the decisions being made can also affect the level of involvement, which in turn influences consumer attention and perception. Perceptual Map: Finally, there is a suggestion to use a perceptual map to clarify the concepts further. Nature of involvement Key Points Summary Utility vs. Hedonism: Utility Purpose: Products that serve practical and functional purposes, for example, "100% utility - canned tuna," which fulfills consumers' needs. Hedonistic Purpose: Products that provide emotional and pleasurable experiences, for example, "100% hedonism - gourmet chocolate," which allows Session7 15  consumers to enjoy themselves. Cognitive Involvement of Consumers: High Cognitive Involvement: When consumers are willing to read and understand a lot of information about a product, such as reading magazines filled with product details. In this case, marketing materials should be detailed and informative. Low Cognitive Involvement: When consumers have less interest in the product, simple and easy-to-understand arguments or advertisements are needed. Consumers may tire quickly of complex information, so intuitive messaging is more effective. Emphasizing Product Effectiveness: For example, claims like "This detergent is 2 times more powerful than powder" or "99% of bacteria removed" can help gain consumer trust. Change in Consumer Involvement Post-COVID-19: After the pandemic, consumers have become more engaged with products. They are paying more attention to the quality and safety of products. Marketing Strategies in Crisis Situations: A recent food safety crisis in France is mentioned, where bacteria were found in frozen pizza. In such crisis situations, it’s important to ensure that consumers are not hesitant to purchase your products. Advertising should emphasize the cleanliness and hygiene of the production line. Adjusting Advertising Messages: In response to crisis situations, it is crucial to develop advertising strategies that highlight the safety and cleanliness of the products to regain consumer trust. Conclusion This note discusses the two aspects of consumer behavior: utility and hedonism, emphasizing the need to adjust marketing strategies based on the level of cognitive involvement. It also highlights the increased consumer engagement post-pandemic and the necessity of trust-rebuilding strategies during crises. I Utilitarian Products: For example, the reason for eating lunch is to satisfy hunger. Therefore, it can be primarily classified as a utilitarian product. However, this product also includes some hedonic (pleasure) elements. Session7 16  Hedonic Elements: As a utilitarian product, it also allows consumers to enjoy the taste. Eating lunch is not just about satisfying hunger; it is also an experience of enjoying flavor. Measurability: There are ways to measure how the products and services we encounter daily are perceived as utilitarian or hedonic, which allows us to categorize them. Concept of Scale: However, this classification is not simply divided into one or the other; most products exist somewhere in between utilitarian and hedonic. Conclusion: In summary, it emphasizes that consumers can fulfill utilitarian needs while simultaneously experiencing hedonic pleasure when choosing products. Cognitive Involvement: Cognitive involvement refers to the engagement consumers have with products that serve a functional purpose, specifically utilitarian products. These products are primarily focused on practicality. Affective Involvement: In contrast, affective involvement refers to the engagement that occurs when products are purchased for expressive or hedonic purposes. This involves consumers forming emotional connections or experiencing pleasure. Perceptual Map: There is a suggestion to use a perceptual map to visually represent these two dimensions. One axis represents high cognitive involvement, while the other axis represents high affective involvement. Concept of Involvement: Products can be categorized into low involvement and high involvement. For example, laundry detergent is considered a low involvement product for many consumers. This is primarily because it is functional and practical, and consumers often do not think deeply about the detergent's efficacy or ingredients (e.g., enzymes). Session7 17  Affective Involvement: In contrast, products like cars may be seen as high involvement for consumers. Cars are emotionally engaging products, and consumers tend to have a lot of interest and involvement with them. Financial Services: Financial services can require high cognitive involvement and high involvement overall, as they are very practical and have a significant impact on consumers' lives. This is related to their well-being. Personal Differences: The level of involvement a consumer has with a specific product can vary from person to person. For example, when purchasing chocolate or wine, some consumers may exhibit very high involvement. They carefully choose the chocolate they consume and derive emotional satisfaction from the process. Use of Perceptual Maps: Perceptual maps help understand where consumers stand regarding specific products. When designing advertisements, it is important to consider how high or low the consumers' involvement is with the product. Advertising Design: If consumers have high cognitive involvement with a specific category, detailed advertisements (e.g., magazine ads) can capture their interest. Conversely, for consumers with low cognitive involvement, simple and clear messages should be used, as they may not pay much attention to product details. Concrete Examples: The lecture will provide more specific examples of these concepts through actual advertising cases, emphasizing the importance of adjusting advertising strategies based on consumer involvement levels. Conclusion: This content underscores the need to understand consumer behavior and consider their level of involvement in order to design effective advertisements. By identifying whether consumers have cognitive or affective involvement with a product, advertisers can more effectively convey their messages. Session7 18  Consumer Involvement: If you are a producer of a product, you need to understand that your target market may have no positive involvement with your product. In such cases, the advertisement should consist of very simple claims. For example, an ad that states, "This product is twice as powerful" would fall into this category, using only simple numbers. High Involvement Market: On the other hand, if your target market consists of consumers with high involvement, you need to provide more information and details. An example of a suitable ad would be, "Malaysia's number one detergent, removes 99.9% of viruses and bacteria." This is because consumers have more interest in the product's efficacy. Importance of Market Research: Advertisers must research their target market to understand what aspects consumers care about. For consumers with high cognitive involvement, it is essential to highlight details such as enzymes. Changing Consumer Involvement: Consumer involvement can vary over time. For instance, in specific situations or crises (e.g., food safety issues), consumers may show higher involvement with Session7 19  products. In this case, advertisements should emphasize the product's cleanliness and hygiene to regain consumer trust. Crisis Response Advertising: If a crisis occurs in the fast food industry, such as bacteria being found in frozen pizzas in France, the brand should create advertisements that highlight the cleanliness and hygiene of their production line to prevent consumers from associating them with negative perceptions. Conclusion: This content emphasizes the need to adjust advertising strategies based on consumer involvement and market conditions. By understanding how consumers perceive products and what information they are interested in, advertisers can design more effective advertisements. Crisis Response: It is important to ensure that consumers do not lose trust in the product during a crisis situation. After the crisis has passed, you can return to normal advertising strategies. Emotional Engagement: Session7 20  When marketing utilitarian products (like detergent), it’s crucial to connect with consumers on an emotional level. This involves using advertising that resonates with consumers’ feelings and experiences. Transformational Advertising: Transformational advertising aims to change how consumers perceive a product by creating an emotional connection. This type of advertising goes beyond simply presenting the product's features and benefits; it seeks to evoke feelings and create memorable experiences associated with the product. Layered Advertising: The note suggests that effective advertising involves multiple layers of messaging. By managing these layers expressively, advertisers can connect with consumers on different emotional levels, making the advertisement more impactful. Consumer Loyalty: If a brand successfully engages consumers emotionally, it can lead to brand loyalty. Consumers are more likely to remember the brand, choose it on the shelf, and continue purchasing it in the future. Example of Simple Consumption: The note implies that even with straightforward products, like detergent, effective advertising can transform consumer perception and behavior. By focusing on emotional aspects, brands can create a lasting impression that encourages repeat purchases. Conclusion The note emphasizes the significance of emotional and transformational advertising for utilitarian products. By connecting with consumers on an emotional level and creating layered advertising messages, brands can foster loyalty and enhance their market presence. Category of perfume Session7 21  High Involvement Products like Perfumes: Products such as perfumes allow consumers to form emotional connections. In these cases, there is no need to emphasize mere functionality. Adding Emotional Elements to Low Involvement Products: For low involvement products like laundry detergent, there are ways to add emotional elements even if consumers do not think carefully about them. Adding emotional aspects to the basic concept of washing is very challenging, but doing so can strengthen the connection with consumers. Transformational Advertising: Transformational advertising aims to change the consumption experience and add emotional elements, leaving a deeper impression on consumers. The goal is to create an emotional connection rather than simply focusing on the act of washing clothes. Consumer Loyalty: Consumers who are emotionally connected are more likely to remain loyal to the brand. This approach can help the product stand out on the shelf and be remembered. Thus, even low involvement products can benefit from transformational advertising to enhance the relationship with consumers. Session7 22  Conclusion: This content emphasizes the importance of connecting emotionally with consumers, even for low involvement products. By adding emotional elements, advertisers can create memorable strategies that increase consumer loyalty. Session7 23 Session7 24  Importance of Consumer Bias: As marketers, it is important to understand consumer biases. This understanding is not meant to take advantage of consumers but to help them make informed decisions in a fair environment. Automatic Thinking and Emotion: Many decisions are governed by automatic processes rather than deliberate thinking. In other words, much of what happens in our brains is emotional, which influences our decision-making. Positive and Negative Aspects of Bias: Some biases can assist in decision-making, but they can also lead to poor choices. This phenomenon is referred to as heuristics. Definition of Heuristics: Heuristics are mental shortcuts. They allow individuals to make quick decisions based on pre-existing knowledge or experiences rather than thoroughly contemplating an issue. These shortcuts are shaped by various influences, including education systems, family, and friends. Conclusion: This content explains the impact of consumer biases and heuristics on decision- making. Consumers are often influenced by these biases, and it is essential for marketers to understand them in order to help consumers make better decisions. Session7 25  Quick Decisions and Mental Shortcuts: Consumers often make quick decisions using mental shortcuts, or heuristics. This allows them to simplify complex information and make choices without extensive deliberation. Stereotyping as a Heuristic: A common example of a heuristic is stereotyping, where individuals make generalized assumptions about people based on their nationality or cultural background. This is an oversimplified mental shortcut that can lead to erroneous conclusions about individuals. Avoiding Deep Thinking: People often avoid deep cognitive thinking, which involves evaluating individuals based on their unique merits. Instead, they may rely on superficial characteristics such as skin color or country of origin. Application in Marketing: Heuristics can be observed in marketing practices. Examples include: Country of Origin Effect: Consumers may judge a product's quality based on the country it comes from. Price Effect: Higher prices may lead consumers to believe a product is of better quality. Brand Heuristic: Consumers may trust well-known brands more than unfamiliar Session7 26  ones. Heuristics Are Not Inherently Bad: While heuristics can lead to biases and incorrect decisions, they are not always negative. Consumers face many decisions daily, and heuristics help streamline the decision-making process. Identifying Helpful vs. Harmful Heuristics: It’s important for both consumers and marketers to recognize which heuristics are beneficial and which can lead to poor decision-making. For example, the frequency heuristic suggests that products with more features may be perceived as higher quality, but this is not always true. Need for Debiasing: Understanding heuristics and their potential biases is crucial. Marketers should aim to help consumers become aware of these biases to facilitate better decision- making. Conclusion The content emphasizes the significance of understanding consumer biases and heuristics in marketing. By recognizing how these mental shortcuts influence decision-making, marketers can help consumers make more informed choices. Relationship Between Price and Quality: Session7 27  There is a common belief that if a product is priced higher, it must also be of higher quality. However, this is not necessarily true. For example, a product priced at 69 euros could be of lower quality than one priced at 500 euros. Just because something is expensive does not mean it is luxurious or of high quality. Research Findings: Research sponsored by the U.S. government has shown that there is almost negligible and non-significant correlation between price and quality. In other words, a high price does not necessarily indicate high quality, and consumers should not use price as a signal of quality. Defining Performance: There is a need to define the term "performance." For instance, energy drinks may claim to enhance physical power and performance, or new generations of shoes may advertise that they help users run faster. Conclusion This content informs consumers that price may not be a reliable indicator of quality and lays the groundwork for understanding product performance. It emphasizes the importance of evaluating a product based on its actual performance or effectiveness rather than relying on price alone. Price Perception: The note begins by stating that a higher price (e.g., €69 versus €500) is often assumed to indicate better quality or luxury. However, this assumption is not necessarily true. Research Findings: Studies conducted in the U.S., often sponsored by the government, have shown that there is a negligible and non-significant correlation between price and quality. This means that just because a product has a high price does not mean it is of high quality. Over more than ten years, various products have been analyzed, and the research indicates that consumers’ subjective evaluations of quality do not consistently match the objective price of products. Misleading Quality Signals: Session7 28  The note emphasizes that consumers should not use high price as a reliable signal of quality. Just because something is expensive does not guarantee that it is a superior product. Performance and Offerings: The note introduces the concept of performance offerings. For example, energy drinks are marketed to enhance physical power and performance. Similarly, brands producing new generations of running shoes claim to help users run faster. This suggests that consumers are often influenced by marketing claims about performance rather than actual quality. Implications for Consumers: Consumers should be cautious about equating high prices with high quality and should instead consider other factors, such as performance claims, reviews, and personal experiences when evaluating products. Conclusion The note highlights the disconnect between price and quality perception in consumer goods. It urges consumers to look beyond price as a quality indicator and to consider performance and other factors when making purchasing decisions Performance brand Session7 29  Relationship Between Price and Quality: A high-priced product does not necessarily imply high quality. The key point is that price should not be used as a signal of quality. A high price may accompany low quality, and conversely, a low-priced product could be of high quality. Definition of Performance Brands: Performance brands refer to those that claim their use enhances performance. For example, claims such as "drinking this energy drink will improve your physical abilities" or "wearing these shoes will help you run faster" fall into this category. Examples and Claims: Performance brands can also be found in the education system. For instance, a claim like "reading our books will improve your GMAT score" is an example. Whether these claims are objectively true or false has not been verified, and some have been disproven in court. Role of Marketers: It is emphasized that the primary role of marketers is not to assess the truth of these claims. Instead, marketers should focus on the messages conveyed to consumers and the claims made. Conclusion: This content conveys the message that consumers should not use price as a Session7 30  signal of quality and should approach the claims of performance brands critically. By examining examples of performance brands, consumers are encouraged to think more deeply about the claims made by brands. Public Policymakers and Objective Truth: The author mentions that public policymakers, governments, and health organizations do not play a role in objectively verifying the claims made by performance brands. Research on Performance Brands: Research findings about performance brands indicate that when significant discounts are offered on these brands, consumers tend to think there is something wrong with the brand. Subjective Evaluation of Consumers: Consumers do not simply make a subjective evaluation like "this product seems to be of low quality." In fact, when they purchase and use a product at a lower price, their performance is objectively lower. Comparative Research: It is emphasized that when comparing consumers who purchase the same product without a discount to those who buy it at a discounted price, the latter show lower performance. Conclusion: This content explains the negative perceptions that discounted prices have on consumers regarding performance brands, as well as the actual decline in performance. Consumers who purchase discounted products may experience lower performance, which can adversely affect their trust and perception of the brand. Negative Placebo Effects Session7 31  Unbelievable Effect: The author emphasizes that the impact of discounted products on consumers is not merely a matter of perception. Consumers not only think that there might be something wrong with a performance product because it is discounted, but they also unconsciously use the product in a way that leads to lower performance. This phenomenon is referred to as the negative placebo effect. In other words, even though the price is lower, it shouldn't affect the product's quality or performance, but it ends up having an actual impact. - Example of Red Bull: Red Bull is presented as an example of a performance brand. The packaging of Red Bull claims to enhance physical and mental abilities. Experimental Conditions: The study involves two different conditions: Condition 1: Participants are given 3 euros for their participation and offered the chance to buy Red Bull for 2 euros. Most participants agree to buy it, and after consuming the drink, they are asked to solve puzzles. Session7 32  Condition 2: Similarly, participants receive 3 euros, but the price of Red Bull is significantly discounted to 50 cents. Participants can choose to buy it at this lower price, and those who do are given the drink, after which they also solve puzzles. Puzzle Solving Assessment: The average number of puzzles solved by participants in both conditions is compared. The results show that those who bought Red Bull at the discounted price perform worse, solving fewer puzzles compared to those who bought it at full price. Implications of the Results: The results of this experiment indicate that when consumers experience a discounted product, their trust in the product diminishes simply because of the lower price, and this leads to actual performance decline. This highlights the psychological effects of pricing on consumer behavior and decision-making. Conclusion The content illustrates the psychological effects of price on consumers and the actual decline in performance that can occur. Consumers who purchase discounted products may subconsciously perceive a decrease in performance, leading to a negative experience. These findings have significant implications for understanding pricing strategies and consumer behavior in marketing. Performance Differences: The results indicate that consumers who purchase a product (e.g., Red Bull) at a discounted price perform worse when solving puzzles. In other words, participants who consumed the product at a discount solved fewer puzzles compared to those who bought it at full price. Other Experimental Examples: Similar results have been observed with other products, such as sunglasses with UV protection. Participants who purchased the sunglasses at full price were able to count more fish in a picture than those who bought them at a lower price. This underscores the idea that higher expectations can lead to better performance. Experimental Conditions: The author conducted their own experiment with three conditions: Condition 1: Participants purchased Red Bull at the regular price (3 euros). Session7 33  Condition 2: Participants purchased Red Bull at a 50% discount. Condition 3: Participants received discounts through a game-like scenario. Comparison of Results: When comparing the performance of participants who bought at full price to those who bought at a discounted price, the discounted price group showed lower performance. However, those who received discounts through a game demonstrated improved performance because they felt more confident, which mitigated the negative perception associated with discounts. Negative Placebo Effect: These findings illustrate the concept of the negative placebo effect. When consumers hold negative expectations about discounted products, their actual performance may decline. Conversely, positive experiences, such as playing a game, can enhance self-perception and lead to improved performance. Anchoring Effect: The way consumers evaluate performance in relation to price discounts is related to the anchoring effect. This means that consumers base their performance assessments on their expectations shaped by the price. Conclusion This content explains the complex relationship between price discounts, consumer perceptions, and performance. It highlights the negative impact of discounted prices on consumer performance and suggests that positive experiences can help improve performance. General View on Discounts: The author emphasizes that offering discounts is not always the best strategy. Specifically, the depth and size of the discount matter significantly, especially for food products. The combination of food products and performance claims does not work well with discounts. Food Products and Performance: When it comes to eating products and performance, discounts are not effective. For example, if a pain reliever is purchased at a discounted price, consumers may feel that the product is less effective or possibly expired. Example of OTC (Over-the-Counter) Medications: Session7 34  The author mentions a well-known painkiller in France, "Dolican." If this medication is discounted at a pharmacy, consumers might think it is less effective or that it has expired, leading them to experience headaches again. Sensitive Categories: The research indicates that in sensitive categories like food and OTC medications, price discounts do not help consumers achieve effectiveness from the products. Brand Image and Long-term Effects: Many modern managers who are aware of this literature avoid regular price discounts. While price discounts might boost sales in the short term, they can have negative long-term effects, one of which is damage to the brand image. Consumers may perceive the brand as less effective over time. Internal Reference Price: Price discounts can also affect consumers' internal reference prices, impacting their long-term perception of the brand. Immunity System and Performance: The note begins with a mention of the immune system, though it quickly shifts focus to consumer perceptions of products and their performance, especially those related to health and wellness. Discount Perception: Offering significant discounts on products can lead consumers to question the quality or performance of those products. If a product is priced much lower than expected, consumers may unconsciously associate the discount with poor performance or quality issues. Negative Placebo Effects: The concept of negative placebo effects in marketing is introduced. This refers to the idea that if consumers expect a product to perform poorly (due to discounts or other factors), their actual performance may be negatively impacted, even if the product is objectively effective. Marketing Claims and Experimental Evidence: The note mentions using fMRI (functional Magnetic Resonance Imaging) to study consumer responses to marketing claims. An experiment is described where participants are offered discounts on Red Bull and asked to solve puzzles. Those who purchased discounted Red Bull performed Session7 35  worse than those who bought it at full price, suggesting that discounting affected their perception of the product’s effectiveness. Experimental Design: The experiment involves different conditions: one group pays full price, while another group receives a discount. The results showed that those who bought at a discounted price had lower performance on the puzzles, which highlights the impact of pricing on consumer expectations. Brand Perception: The note suggests that consumers may perceive discounted products as less reliable or effective, which can lead to a negative impact on their actual performance. This is linked to the broader idea that discounts can hurt a brand’s image. Country of Origin: The note hints at a discussion on the "country of origin" effect, which refers to how the origin of a product can influence consumer perceptions and expectations of quality. Consumer Behavior Insights: It emphasizes the importance of understanding consumer behavior regarding pricing strategies, especially in categories like over-the-counter medicines, where consumers are particularly sensitive to effectiveness claims. Conclusion The note highlights how consumer perceptions of discounts can negatively affect their expectations and actual performance when using products, particularly those related to health and performance. It underscores the importance of branding and marketing strategies in shaping consumer beliefs about product quality. Session7 36 Session7 37  COO effect country of origin Country of Origin Effect: Finally, the author transitions to discussing the country of origin effect. This concept is widespread and has been the subject of extensive research. It refers to how consumers evaluate the quality and reliability of products based on their country of origin, which is often influenced by cultural factors. Bias Toward Country of Origin: Products made in certain countries may carry a negative bias, while those made in other countries are automatically associated with higher quality. For example, products made in Switzerland or Germany are often stereotyped as high-quality, whereas products from countries like XYZ are assumed to be of lower quality. This assumption is incorrect. Session7 38  Example: L Nogo Brand: L Nogo is a well-regarded brand of laptops and computers. They face challenges due to negative perceptions consumers have regarding the cultural origin of their products. Methods to Overcome Negative Perceptions: Brands like L Nogo employ two main strategies to combat these negative perceptions: Establishing Factories in Europe: By opening factories in Europe, they can label their products as partially manufactured or assembled in Europe, which helps to mitigate the negative image associated with their original country. Personifying the Producer: This method involves creating a personal connection between consumers and the producer. Experimental Conditions: The author describes their own experiment, which involves three conditions: Condition 1: A control condition where participants are shown a fictional toy product and asked to evaluate their brand attitude on a scale of 1 to 7. Condition 2: Similar to the first condition, but with the country of origin mentioned, which has been pre-tested to have a negative attitude associated with it. Condition 3: This condition includes the same product as in Condition 2, but with an image of a fictitious producer created by AI, along with some personal information about this producer (e.g., name, number of children, hobbies) that is unrelated to production. The goal is to connect consumers to the product through a more personal narrative. Conclusion This content explains strategies used by brands like L Nogo to overcome negative biases associated with their country of origin. By establishing manufacturing in Europe and personalizing the producer, they aim to improve consumer perceptions and strengthen the connection between the product and its producer. Cultural Bias: Products like Vaseline may carry negative biases when manufactured in certain countries. For instance, if Vaseline is produced in a particular country, consumers might doubt its quality based solely on the country of origin. Quality Perception: Session7 39  When Vaseline is made in a specific country, consumers may perceive its quality as inferior. This perception often stems from the negative views associated with manufacturing in that country. Methods to Overcome Negative Perceptions: Brands can overcome these negative perceptions by establishing production or assembly in Europe, which helps build a positive image. Additionally, personalizing the producer can strengthen trust between consumers and the product. Conclusion The mention of Vaseline in this context relates to consumer perceptions and the country of origin effect, explaining how negative biases against products from certain countries can be formed. Negative Effects of Country of Origin Labels: The research observed that when comparing conditions with a country of origin label to a control condition, the presence of a country label had a negative impact on consumer evaluations. This means that when a product is labeled with a specific country's origin, consumers tend to view it negatively. Effect of Personalizing the Producer: In the third condition, where a picture of the producer and some personal information were included, the negative bias related to the country of origin was mitigated. This suggests that when consumers feel a personal connection to the product through the producer, their evaluations return to normal. Example: Wine Brands: For example, in French wine brands, it is common to see the producer's picture and information on the label. This strategy helps differentiate the product from competitors and encourages consumers to connect with the person behind the product rather than judging the product solely based on its origin. Power of Strong Brands: Some strong brands can lessen consumer concerns about country of origin. For instance, Apple is considered a very strong brand that uses the phrase "Designed in California" to overcome negative perceptions associated with production locations. This approach aims to reduce the negative attitude consumers might have towards products not made in the U.S. Real-World Example: Session7 40  In the case of Apple iPhones, the label "Designed in California, Made in China" is an effort to alleviate negative stereotypes about where the product is produced. Consumers tend to have a positive perception of Apple as a brand, which helps mitigate concerns about the manufacturing location. Conclusion This content explains various strategies to overcome the country of origin effect and the changes in consumer perceptions. It highlights the positive impact of personalized approaches and strong brand images on consumer evaluations. Negative Perception of Country of Origin: Consumers still maintain negative perceptions about certain countries, and this is not limited to developing nations. The negative attitude associated with country of origin exists even in developed economies. Example of Tea Production in France: While tea is produced in France, consumers do not generally think of French tea. Instead, when thinking of tea, countries like India, Sri Lanka, and China come to mind. Research has shown that there is a positive attitude toward tea produced in these countries, whereas tea produced in Norway or France faces negative perceptions. Country of Origin Effect in Western Countries: Even in Western countries, there can be negative country of origin effects for certain products, such as tea. Despite potentially good quality and fair pricing, consumers still hold negative attitudes toward products from these countries. Broader Implications: The country of origin effect is not limited to certain countries or economies; rather, any economy can be affected depending on the product category. Conclusion This content emphasizes that the country of origin effect persists even in developed countries, highlighting that consumers may have negative perceptions of specific categories of products, such as tea. This is illustrated through the example of tea production in France. Negative Perceptions of Country of Origin: Session7 41  In some countries, certain brands may face negative perceptions due to their origin. For example, the note mentions that German brands, like Grant Leno, are seen positively, but they still need to combat negative stereotypes associated with their production origins. Branding Strategies: To address negative perceptions, companies are opening factories in Europe and personalizing producers. This means that they might highlight the individuals behind the production process (e.g., a person making toys) rather than just the product itself. This approach can help build a connection with consumers and improve brand image. Consumer Evaluation: The note refers to an experiment that evaluates consumer perceptions of products based on their origin. By presenting the same product with a picture of the producer, the study aims to see how this affects consumer attitudes. Wine Example: An example involving wine branding is mentioned, suggesting that personalizing the brand (e.g., showcasing the winemaker) can distinguish the brand from competitors. Perceptions of Production Locations: The note discusses how products made in certain countries (e.g., China) can carry negative perceptions, while products from countries like France may be viewed more favorably due to quality associations. Prospect Theory: The note shifts to discuss prospect theory, a concept developed by researchers who received a Nobel Prize. This theory explains how people evaluate potential losses and gains. It presents two scenarios regarding potential winnings and losses, emphasizing that consumers are generally more sensitive to losses than to equivalent gains (loss aversion). Decision-Making Scenarios: The scenarios involve choices between potential gains (50% chance of winning €100) and losses (50% chance of losing €150). The discussion highlights how consumers may react differently to these options based on their risk preferences. Loss Aversion: Session7 42  The note concludes with the idea that losses have a greater psychological impact than equivalent gains. For instance, losing €100 may feel significantly worse than the happiness derived from winning the same amount. Conclusion The note highlights how perceptions of country of origin can affect consumer behavior and brand strategy. It also introduces prospect theory, explaining how consumers navigate choices involving potential gains and losses, particularly emphasizing the significance of loss aversion. Session7 43  Prospect Theory: This theory explains how people perceive choices involving risk, particularly how they react to gains and losses. A key element of this theory is loss aversion, which suggests that people are more sensitive to losses than to gains. In other words, the pain of losing is greater than the pleasure of gaining. Session7 44 Session7 45  Experiment Scenario A: In the first scenario, two options are presented: Option 1: A 50% chance of winning 100 euros and a 50% chance of winning nothing. Option 2: A 100% chance of winning 50 euros. Most people tend to choose Option 2, which guarantees them 50 euros. Experiment Scenario B: In the second scenario, the choices are framed in terms of losses: Option 1: A 50% chance of losing 100 euros and a 50% chance of losing nothing. Option 2: A 100% chance of losing 50 euros. In this case, many people choose Option 1, indicating a willingness to take risks to Session7 46  avoid the certain loss of 50 euros. This behavior highlights the tendency to avoid losses. Loss Aversion: People are willing to take on greater risks to avoid losses. For example, the happiness from winning 100 euros might be rated as 8 out of 10, while the pain from losing 100 euros would be rated as 10 out of 10. This illustrates that the pain of loss outweighs the joy of gain. Applications: Prospect Theory can be applied in various fields, including consumer behavior, financial decision-making, and marketing strategies. Understanding how consumers react to different choices can help in predicting behavior in the market. Research and Papers: The research by Kahneman and Tversky was published in an economics journal and clearly demonstrates how consumers evaluate losses and gains. Conclusion This content emphasizes that Prospect Theory plays a crucial role in understanding consumer behavior, highlighting the impact of loss sensitivity on decision-making. The theory serves as a fundamental basis in economics and psychology, aiding in the prediction of real-world consumer behavior. Session7 47 Session7 48  Experiment Scenario: Two programs, A and B, are presented: Program A: 200 people will be saved. Session7 49  Program B: There is a 1/3 probability that all 600 will die and a 2/3 probability that no one will die. In this case, most people prefer Program A, indicating a tendency to avoid risk in a loss context. Framing Change: The same problem is framed differently, focusing on deaths: Program C: 400 people will die. Program D: There is a 1/3 probability that no one will die and a 2/3 probability that 600 people will die. In this scenario, people tend to prefer Program D, showcasing a willingness to take risks when in the loss context. Perception of Loss vs. Gain: When people are in a loss context, they are more likely to take risks, while in a gain context, they tend to avoid risks. This highlights the psychological tendency to avoid losses. Framing Effect in Marketing: An example illustrates that two products can convey the same information but be framed differently: Option 1: 80% fat-free. Option 2: Contains 20% fat. Health-oriented consumers are likely to prefer the "fat-free" label, as it aligns with their desire to avoid perceived negative attributes. Importance of the Framing Effect: The framing effect shows that the way a problem is presented can significantly influence choices. Even when the information is identical, the context—whether it focuses on saving lives or preventing deaths—can change consumer behavior. Descriptive Theory vs. Prescriptive Theory: Prospect Theory is a descriptive theory that explains consumer behavior. It describes how people actually behave rather than prescribing what they should do. Understanding this distinction between descriptive and prescriptive theories is crucial. Conclusion This content emphasizes how choices can vary based on how problems are Session7 50  framed, highlighting the importance of the framing effect and Prospect Theory in understanding consumer behavior. Disease Scenario: The note begins with a hypothetical situation where the U.S. is preparing for a disease expected to kill six people. This scenario sets the stage for discussing how framing affects decision-making. Framing and Risk Perception: Framing refers to how information is presented and how it influences people's perceptions and decisions. In this case, the framing revolves around the risks associated with the disease. There are two options presented: one that highlights the risk of loss (e.g., potential deaths) and another that emphasizes risk-seeking behavior. The way options are framed can lead to different consumer behaviors. Loss Aversion: Loss aversion is a key concept in behavioral economics that suggests people prefer to avoid losses rather than acquiring equivalent gains. This means that the fear of losing something (like health or life) can significantly influence decision- making. Framing Effect: The note mentions a scenario where the same information is presented differently, such as "75% lean" versus "25% fat." This demonstrates the framing effect, where the presentation of information can lead to different interpretations and choices, despite the objective facts being the same. Prospect Theory: Prospect theory explains how people make decisions in uncertain situations, particularly highlighting how they evaluate potential losses and gains. It emphasizes that individuals are generally more sensitive to losses than to gains. Communication of Risks: The note points out that it’s not only about the objective information presented but also about how that information is communicated. For example, communicating Session7 51  the same risks differently can lead to varied consumer responses. Descriptive vs. Prescriptive Theories: Descriptive theories focus on describing how people actually behave in decision- making scenarios, while prescriptive theories suggest how people should behave to make optimal choices. The note suggests that simply telling consumers how to react may not lead to optimal decision-making and that understanding consumer behavior is crucial. Anthropomorphism: The note briefly mentions anthropomorphism, which is attributing human characteristics to non-human entities. This can be problematic in marketing if it leads to misleading interpretations of products or risks. Conclusion The note emphasizes the importance of framing in decision-making, particularly in health-related scenarios, and how it affects perceptions of risk and loss. It highlights the significance of understanding consumer behavior and the nuances of how information is communicated. Session7 52  Mental accounting - Richard H. Thaler Session7 53  Function function Version prospective value function It's an example from the paper Descriptive Theory vs. Prescriptive Theory: Many papers, especially those related to concepts like loss aversion, often provide prescriptive conclusions about what actions to take. In contrast, Prospect Theory Session7 54  is a descriptive theory that simply explains how people behave, not what the optimal behavior is. It describes actual consumer behavior rather than prescribing ideal actions. Foundation of Prospect Theory: Prospect Theory serves as the basis for various subsequent theories, and several researchers who built upon it have won Nobel Prizes. For instance, Richard Thaler won the Nobel Prize in 2017, and his research refers to the value function described in Prospect Theory. Experimental Example: Two scenarios illustrate how people perceive losses: Lost Money Condition: You decide to see a play and pay 10𝑓𝑜𝑟 𝑎 𝑡𝑖𝑐𝑘𝑒𝑡. 𝑈𝑝𝑜𝑛 𝑒𝑛𝑡𝑒𝑟𝑖𝑛𝑔 𝑡ℎ𝑒 𝑡ℎ𝑒𝑎𝑡𝑒𝑟,𝑦𝑜𝑢 𝑑𝑖𝑠𝑐𝑜𝑣𝑒𝑟 𝑦𝑜𝑢’𝑣𝑒 𝑙𝑜𝑠𝑡 a 10 bill. You are then asked if you would still pay $10 for a new ticket. In this scenario, 88% of people say they would still buy the ticket. Lost Ticket Condition: You decide to see a play and pay 10 for a ticket. Upon entering the theater, you discover you’ve lost your ticket, which cannot be recovered. You are then asked if you would pay 10 for another ticket. In this case, more than half of the participants say they would not buy another ticket. Difference in Loss Perception: The difference in responses between the two conditions illustrates how people perceive losses. In the first scenario, even after losing money, the majority still choose to buy a ticket. However, in the second scenario, the loss of the ticket leads to a stronger reluctance to spend more money. Conclusion: This experiment highlights the concept of loss aversion in Prospect Theory. People tend to avoid losses, and this tendency significantly influences their decision-making. Understanding this behavior is crucial for interpreting consumer actions. Conclusion This content emphasizes the importance of Prospect Theory in understanding consumer behavior and how the perception of loss affects decision-making. Session7 55  Mental Accounting Concept of Mental Accounting: Mental accounting refers to the way people categorize and manage their income and expenses in their minds. For example, individuals often allocate specific amounts for entertainment, books, food, etc. They have mental budgets for these categories, even if they don’t explicitly write them down. Separation of Expenditures: When people perceive losses, their response can vary depending on the category of the loss. For instance, losing 10 feels different from losing a ticket worth 10. In the first scenario, the loss is associated with "money," while in the second scenario, it is linked to "tickets." This leads to different psychological reactions in each case. Comparison of Scenarios: In the first scenario, if you lose a $10 bill and then want to buy a ticket, the loss comes from a separate mental account, allowing people to feel comfortable buying the ticket. Session7 56  In the second scenario, if you've already purchased a ticket and then lose it, it feels like you are spending money from the same account again. This perception leads to greater resistance to purchasing another ticket. Economic Perspective vs. Subjective Perspective: From an economic standpoint, the total amount spent in both scenarios is the same. However, subjectively, the first scenario feels less burdensome, while the second scenario feels like a double loss, leading to reluctance to spend again. This is due to how people mentally allocate their budgets and perceive expenditures. Conclusion: Mental accounting is a crucial concept for understanding consumer behavior. It explains how the perception of losses and expenditures affects decision-making. This concept helps in understanding the psychological factors influencing complex financial decisions. Conclusion This content emphasizes the impact of mental accounting on consumer behavior, highlighting how the perception of loss and spending influences decision-making. Perception of Loss: The note highlights that losing the ticket may cause the individual to evaluate the situation differently. They might feel that paying another $10 feels like a double expense, as they have already "lost" the original ticket cost. Budgeting and Spending Decisions: Consumers typically have a mental budget for various categories of spending. For example, they may allocate a certain amount for entertainment each month. This mental budgeting can make it difficult for them to justify spending more in one category if they perceive it as exceeding their planned budget. Emotional Factors: The emotional response to losing money (the cost of the initial ticket) may affect the decision to spend again. The feeling of loss may lead to hesitance in spending more, even if the circumstances warrant it (like wanting to see the play). Conclusion Session7 57  The note emphasizes how mental accounting influences consumer behavior, particularly in how individuals categorize and evaluate their spending. It illustrates that the perception of loss and budgeting can significantly impact decision- making regarding additional expenditures. I Mental Accounting Example Session7 58  Case 1: Comparing Lottery Results: Mr. A won50 in one lottery and 25 in another, totaling $75. Mr. B won $75 in a single larger lottery. Although both have the same financial gain, most people believe Mr. A is happier. This is because Mr. A experiences two positive events (winning two lotteries), which cumulatively create more happiness. Each win contributes to his overall satisfaction. Case 2: Comparing Tax Notices: Mr. A received two tax notices: one for 100 and another for 50. Mr. B received one notice stating he owed $150. In this scenario, Mr. A is perceived to be more upset. The two separate notices create two negative experiences, leading to greater emotional pain, whereas Mr. B only faces one negative experience. Case 3: Winning Lottery and Loss: Mr. A won 100 in a lottery but had to pay 20 due to an accident on the same day. Mr. B won $20 in a lottery. Session7 59  Here, most people believe Mr. B is happier. This is because Mr. A's loss dampens the joy of his win, indicating that the emotional pain from the loss overrides the happiness from winning. Case 4: Mixed Gains and Losses: Mr. A had to spend 200 on car repairs but won 25 on the same day. Mr. B had to spend $175 on car repairs. In this case, people might believe Mr. B is less upset, as Mr. A's larger loss (repair cost) weighs heavily on his emotional response. Principle of Mental Accounting: Each example illustrates how people mentally categorize gains and losses. Positive experiences accumulated through multiple wins lead to greater happiness, whereas multiple negative experiences lead to increased distress. This is influenced by how individuals mentally account for each experience. Each of the cases illustrates how people mentally categorize and perceive losses and gains. When positive experiences occur twice, individuals feel greater happiness, while experiencing negative events twice leads to greater sadness. This is determined by how experiences are separated and combined in people's mental accounting. Implications for Marketing: Understanding these principles of mental accounting can inform marketing strategies. Marketers can aim to provide more positive experiences while minimizing negative ones, thereby enhancing consumer satisfaction. Understanding these principles of mental accounting can be useful in developing marketing strategies. Marketers can approach by providing more positive experiences to consumers while minimizing negative ones. Conclusion This content emphasizes the impact of mental accounting on consumer behavior, Session7 60  highlighting how people perceive and react to gains and losses. It also provides valuable insights for developing effective marketing strategies. Segregation vs. Integration: When there are multiple positive experiences, presenting them separately leads to greater happiness for consumers. For example, highlighting different features of a product individually is more effective. Conversely, when consumers face multiple losses, integrating those losses into one presentation is less painful. Presenting several losses separately can lead to greater psychological burden. Marketing Strategy: In marketing, it’s important to emphasize positive experiences for consumers while integrating negative experiences. This approach can enhance consumer satisfaction and minimize the impact of negative experiences. Emotional Accounting: Emotional accounting suggests that money comes with emotional tags based on its source. For instance, unexpected bonuses have a positive emotional tag, Session7 61  whereas money inherited from a deceased relative may carry a negative emotional tag. Economically, these cases may involve the same amount of money, but the emotional tags influence how consumers behave. For example, money from an inheritance may be spent differently than money received from a positive source. Negative Windfalls: Money that comes from negative sources is more likely to be spent on utilitarian products rather than hedonic products. Marketers should understand the source of the consumer's money and adjust their messaging accordingly. Relationship Between Mental Accounting and Emotional Accounting: Mental accounting and emotional accounting are interconnected, playing important roles in understanding consumer behavior. When developing marketing strategies, it’s essential to consider both theories to effectively address consumer emotions and perceptions. Conclusion This content provides insights into the psychological factors influencing consumer behavior and highlights the importance of understanding how consumers perceive and utilize money. Understanding these dynamics is crucial for developing successful marketing communications This note covers several concepts related to mental accounting, prospect theory, and the emotional impact of financial decisions on consumer behavior. Here’s a detailed breakdown: Key Concepts Explained Scenario Presentation: The discussion begins with a series of hypothetical scenarios involving financial decisions and emotional responses. Participants are asked to consider the implications of losing tickets, receiving tax letters, or dealing with unexpected expenses. Mental Accounting: Mental accounting refers to how individuals categorize and evaluate their financial decisions. People create separate "accounts" in their minds for different types of Session7 62  expenses and income, influencing their emotional reactions and spending behavior. Framing of Losses and Gains: The note emphasizes that the way a situation is framed (as a gain or a loss) significantly affects emotional responses. For example, if Mr. B receives a letter about owing money versus a refund, his emotional reaction will differ based on how he perceives the situation. Emotional Responses to Financial Situations: The scenarios illustrate that consumers tend to react more negatively to losses than positively to equivalent gains (loss aversion). This is a key tenet of prospect theory, which suggests that losses weigh heavier on individuals than gains of the same size. Multiple Gains and Losses: The note discusses how individuals feel happier when they experience multiple small gains rather than a single large gain. The concept of segregation of gains suggests that when gains are experienced separately, the overall satisfaction is higher than if they are combined. Integration of Losses: Conversely, the integration of losses (combining multiple losses into one) can lessen the emotional impact. This means that experiencing a single larger loss may feel better than experiencing several smaller losses. Practical Implications: The note suggests that consumers should be cautious about how they pay for products. For example, if a consumer pays for multiple items separately, they may feel the pain of each payment as a loss, rather than integrating it into one overall expense. The emotional attachment to money also affects spending behavior. Money received unexpectedly (like a reimbursement) may be viewed differently than regular income. Emotional Context of Money: The emotional context surrounding money is crucial. For instance, money received after a negative event (like a family illness) may carry a different emotional weight than money received as a gift. This can influence how people choose to spend Session7 63  that money. Hedonic vs. Utilitarian Spending: The note contrasts spending on hedonic products (which provide pleasure, like a stereo) versus utilitarian products (which serve a practical purpose). Consumers are more likely to spend money on hedonic items when the money has a positive emotional context. Conclusion and Questions: The note concludes by encouraging participants to reflect on the emotional implications of their financial decisions and how these feelings can shape their spending behavior. It invites questions and further discussion on these concepts. Summary Overall, the note emphasizes the importance of mental accounting and emotional context in consumer decision-making. It illustrates how gains and losses are perceived differently and how these perceptions can influence spending habits and emotional responses. Emotional accounting Negative feeling about money Session7 64  Source of Money and Emotional Tags: Understanding the impact of the emotional tag associated with the source of money on consumer behavior is crucial. When money is linked to positive emotions, consumers are more likely to spend it. Three Conditions of the Experiment: Condition 1 (Positive Situation): The consumer receives a $200 cash gift from their uncle for their high school graduation. In this case, there is a positive emotional tag attached to the money. Condition 2 (Negative Situation): The consumer receives the $200 but also gets a phone call informing them that their uncle has been diagnosed with a serious illness. Here, the money has a negative emotional tag attached to it. Condition 3 (Negative News but Unrelated): The consumer receives the $200 from their uncle but also gets a call about a close family friend being diagnosed with an illness. The negative news is not related to the money itself, making this money considered as "positive money." Purpose: Session7 65  Condition 3 is designed to test whether the emotional tag is specifically related to the source of the money rather than just any negative news. The expectation is that the results of Condition 2 and Condition 3 should differ, as the negative news related to the money is expected to have a greater impact on consumer behavior. Measuring Consumer Behavior: After the experiment, participants are asked if they would be willing to spend the money on a hedonic product (like a musical instrument). This helps observe how consumers react based on the emotional context of the money they received. Conclusion This content describes an experiment aimed at understanding the impact of emotional tags related to the source of money on consumer behavior. It analyzes the behavioral differences between receiving money associated with positive emotions versus negative emotions Understanding Condition Three vs. Condition Two: Condition Two involves receiving money (e.g., $200) along with negative news that is directly related to the source of that money (e.g., your uncle is seriously ill). In this case, the money carries a negative emotional tag that is tied to its source. Condition Three also involves receiving money and negative news, but the news is unrelated to the source of the money (e.g., your uncle gives you money, but you learn about a family friend’s illness). The money here is considered to have a "positive emotional tag" because the negative news does not affect the emotional context of the money itself. Conceptual Differences: The key conceptual difference lies in the relationship between the emotional tag and the money: In Condition Two, the negative news is directly tied to the source of the money, which negatively influences the consumer's willingness to spend that money on hedonic (pleasure-related) products. In Condition Three, the negative news is incidental and not related to the money, allowing the consumer to view the money more positively, which may lead to a greater willingness to spend it on hedonic products. Impact of Emotional Tags: Session7 66  The findings suggest that when money comes from a source associated with a negative emotional tag, consumers are less likely to spend it on pleasurable or indulgent items. This aligns with the theory of emotional accounting, which states that feelings about money influence consumer choices. Anthropological Research on "Blood Money": The text references research on "blood money" (compensation received after a tragedy), where individuals tend to spend this money on utilitarian purposes (e.g., charity, scholarships) rather than on leisure activities. This reflects the negative emotional tag associated with the source of the money. The research illustrates that money perceived as compensation for loss is often directed toward practical or socially beneficial uses, reinforcing the idea that emotional context shapes spending behavior. Framing of Services: The paper also discusses how the framing of the same service can influence whether it's perceived as hedonic or utilitarian. For example, a vacation can be marketed as a fun, enjoyable experience (hedonic) or as an opportunity to see cultural sights (utilitarian). The emotional tag associated with the money influences how consumers respond to these different frames. Conclusion The content emphasizes how the emotional context of money—specifically its source—affects consumer spending behavior, distinguishing between hedonic and utilitarian purchases. Understanding these dynamics can help marketers tailor their messaging based on the emotional tags associated with the money consumers are using. How where the money comes from or what attached to that has an impact on consumption thing that we have there is an interesting research anthropology have data African countries people have lost someone close to them and they have some money as some form of compensation for that that Insurance company or someone who in charge of happened they want to see what this money donated scholarship or organization is spent on vacation emotional Source of Money: The note emphasizes that where money comes from (its source) sig