Consumer Behaviour PDF

CONSUMER BEHAVIOUR ================== **Introduction to consumer behaviour** *What is marketing?* To critics marketing is: 1. Fluff 2. Manipulative 3. Wasteful - Not clear what contributes to profitability of a firm (advertising?) To our professor: 1. Marketing is not rocket science...

CONSUMER BEHAVIOUR ================== **Introduction to consumer behaviour** *What is marketing?* To critics marketing is: 1. Fluff 2. Manipulative 3. Wasteful - Not clear what contributes to profitability of a firm (advertising?) To our professor: 1. Marketing is not rocket science - It's much harder, it's a social science - You will not by accident launch a rocket that makes it to the moon and back - One-to-one relationship between quality of relationship between the quality of the process that you followed and the quality of the outcome 2. Marketing is behavioral science - No guarantee that good process will lead to a good outcome or that bad process will lead to a bad outcome (a lot of dumb luck) - Difficult to predict what consumers will do or how to influence them - Increase likelihood: valuable increase, not always recognized *Definition:* Marketing is the activity, set of institutions, and processes for creating,\ communicating, delivering and exchanging [offerings that have value] for customers,\ clients, partners, and society at large. - Marketing is about value creation for customers, stakeholders and firms - Value from engineering: good products - best possible products - In today's day and age, product quality is the most important (immediately observable: you just have to go online) - Value from marketing: everything around the product Not long ago, key pieces of information: - Price - Brand name - Salesman - No social influences Now: - Go online (f.e. Amazon) - Look at comments - Test safety (simulate the crash but with dummies) - Alternate the crash with different products - What's the effect of the product? Correlation rating amazon and rating consumer reports - Collecting data from different categories - There are some measurement instruments that alow you to mesure the objective performance of products - Analysis: - High correlation → higher user ratings → higher quality - 0 correlation: no correlation at all - Negative correlation: higher rating on amazon have lower quality - Example: Correlation (star, performance) = ?  If you take two products and the difference in star ration is smaller than 0.20, the likely hood that the one with higher score is better: 50% (also if its smaller than 0.40) → only if its higher that 0.4: 70% What is effective in user ratings: - Perceptive consumers of head product World has changed: - Persuaded by pretty models - Now: you look up the product and see what people have to say about the product (comments are influenced by celebrity's information/choice) - User ratings are higher (the more you pay, the more satisfied you are), user ratings reflect promotions - How marketing variables influence quality perceptions (but not only by asking people to rate things, but also by experimenting with scans) - Asked to sample wine, while you are in a scanner - You taste 5 wine samples (A and B the same, C and D also the same and E is different), the order in which the wines are presented are different - Liking without price: - No difference in liking A and B - No difference in liking C and D - Liking with price: - Almost perfect correlation between price wine and liking - Other experiment: - What are you willing to pay? - A 10-ounce cup filled up with 8 ounces - Willing to pay \$1.66 - A 5-ounce cup filled up with 7 ounces - Willing to pay \$2.26 (willing to pay more) - Value is not so much determent by the ingredients but the packaging - Important: single evaluation context - Last experiment: - 48 new songs from new artists, make it available for consumers from different markets - Independent market A: 1000 consumers, record how much people listen to a certain song, no interaction with others - Independent market B: 1000 consumers, record how much people listen to a certain song, no interaction with others - Social market A: 1000 consumers, record how much people listen to a certain song, consumers can observe from each other how much a song is listened to - Social market B: 1000 consumers, record how much people listen to a certain song, consumers can observe from each other how much a song is listened to - Rank of each song in each market: looking at the correlation - What market has the highest correlation (consistency of popularity)? - Independent market: in the independent market you can only be influenced by the song (intrinsic quality is going to drive the popularity) - Social market: the random process can be different (market A: first song is 12, market B: first song is 36) → second listener is going to listen to the first song that first listener listened - In which market is the number of the listeners of the most popular song the largest? - Social market: more hoarding effects (increasing the already popular things) Value = f(marketing mix) - Product - Promotion - Price - Place Value for consumers → leads to value for firm itself Afbeelding met tekst, schermopname Automatisch gegenereerde beschrijving LESSON 2 Big idea: value that consumers see depends on more than objectif performance product itself (ther is a correlation, but price is also correlated, names of brandes) Drivers value: - Packaging - Society (social influences: preferences) Value to consumers: taking perspective of consumer (benefits for consumers) - Means to an end Value of consumers: taking perspective of ferm (value from consumer to you: paying more than product cost) Customer acquisition Customer development Customer retention - Customer life time value Insides behavioural science: important for this (a lot of ambiguity) - We can not perfectly influence consumer behaviour - Do not expect perfection Peter Drucker: influencal... David Packard: HD ARTICLES: recommended to study required articles (know everything in article), read articles in selected articles referenced in slides  Company cirkel: all the things that company is offering Consumer cirkel: all the things that a customer might desire Competitor cirkel: all things that the competitor offer Points of parity: points of similarity Acces what your and your competitors ability's are But also perspective of customers, other employees Egocentrism: everywhere - You think you are crystal clear but you communicational partner has no idea what you ar talking about - You assume that your knowledge is the same as others (not concrete enough) - Harms communication with others - Can influence collaborations - You overestimate your input/share of the contribution - Undervalue other's contributions/overvalue yours Company perspective not the same as customer perspective - People who work in business are different than the people they are trying to sell to - Marketing people more online, think everyone uses it that much, put to much money in it - Ad people: advertising in... - If you want to be effective to influence the people you are trying to sell to: ask their expectations, important things that they find important, their believes Take perspective of your... - Personal preferences (rating it 1-11) - Half: perspective taking instructions No! perspective taking does not help - Steepness of line: correlation own evaluation and customer evaluation - They weight their own perspective more Callabrations curves Theoretical line: well calabrated (know what you know, know what you don't know) - Average lower than theoretical line - If people say they don't know, they don't know - 100% sure: you are often times incorrect (metaknowledge gaps lies) - Metaknowledge: knowledge about your knowledge - If you feel that you know: you are not going to engage in further information search (overconfidence: big barrier in learning) Mark Twain: he never said this Diagram: - We often times have to intuively think.... Does negative feedback and searching contradictory evidence reduce over confidence? - telling someone they are bad - if you think something is true: find evidence against it - sample size: 15 participants per condition (too small) - major replication crisis bc of the small sample size three control conditions without generate contradicting evidence: with generate contradicting evidence: - accuracy is higher - thinking badly about yourself: good results - thinking critically: you think a but why not A -\> make you smarter - anything can have an influence on your behaviour - you cant look at every variable vertical axe: known knows: things you know and you know you know them known unknows: things you don't know, but you know you don't know them unknow unknows: things you are not aware of that you don't know EFFECTIVENESS ONLINE ADS John Wanamaker: merger in the 1900 Rise of digital advertising CPM: how much you are paying for 1000 exposures of an ed CTR: proportion of consumers that click through when seeing your ad CPC: how much are you paying per click CR: proportion consumers who make a purchase when seeing your ad CAC: price paid by advertiser to require 1 more customer ROAS: sales, how many dollars consumers are spending ACOS: how much did you spend on advertising/sales by people who saw the ads - because of ability to me sure this (good view of effectiveness advertising) offline impact of online ads!!! - Wrong time: you buy because of the holiday season - Comparing multiple groups (4) - Search ad: most effective (bar higher) - Display ad - Both - None - Magnitude: too large - Search ad: you want to make a purchase in this category - Consumer was going to make a purchase anyway - Not necessarily because of the ad - Display ad: company has collected data about you, predict what your interests are → send it to you - Conclusion incorrect 'boost', 'effective' : wrong - Lift probably not looking at causal effect and only correlations 'LIFT' - R: revenues - LIFT = (R~exposed~ -- R~not\ exposed~) /R~not\ exposed~ For instance: If CR~exposed~... Correlation is not causation - Inconsistence with mental model of how the world works - 3^rd^ variable: wheater (warm → ice cream → beach → swimming → sharks) ROAS = Non-causal metric (an associative metric) - Revising sales by advertising - Campaign 1: - Campaign 2: - Campaign 3: Afbeelding met tekst, schermopname, Lettertype, lijn Automatisch gegenereerde beschrijving Advertising can influence you in the purchase funnel Display ad: directed to top (people who don't know much) Search ad: directed to bottom (people who are already interested) Performance marketing: influence what you can measure Visits: - Blue line to zero - Dotted line goes up and compensation is almost a 100 No evidence about randomized control trial