Foundations of Value Management (Lecture) - LMU PDF

INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Foundations of Value Management – Value management for customers Lecture Winter term 2024/25 Prof. Dr. Manfred Schwaiger...

INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Foundations of Value Management – Value management for customers Lecture Winter term 2024/25 Prof. Dr. Manfred Schwaiger Dr. Simone Eulitz Institute for Market-based Management Institute of Strategic Management Prof. Dr. Dr. h.c. Marko Sarstedt Prof. Dr. Jelena Spanjol Institute for Marketing Institute for Innovation Management  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT The aim of our lecture is for you to understand the… …stages in the consumption process and their importance for managerial decision-making …concept of market segmentation …relevance of consumer-brand relationships …attitude-behavior gap …role of preferences and their construction for consumer behavior …importance of choice set composition, choice framing, and the decision environment …fundamentals of context effects …role of sensory stimuli for consumer behavior 2  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Agenda Part 1 Introduction Consumers as stakeholders, consumer brand relationship Part 2 Preferences and preference construction Context factors on consumer decision making Choice set composition Choice framing Decision environment 3  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT What is consumer behavior? Consumer behavior is “the study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires.” (Solomon, 2019, p. 28) Implications:  “Consumers” may take the form of groups and organizations  Consumer behavior is not limited to the point of purchase  The purchaser and the consumer of a product might be not the same person 4  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Stages in the consumption process: Prepurchase, purchase, and post-purchase issues Successful marketers need to understand all three stages! Solomon (2018, p. 29) 5  > - musculin/feminis factors can make product more a INSTITUTE FOR MARKETING fourible for men/women (e g scent of cedarwood/roses).. FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer behavior is influenced by a multitude of internal und external factors Product-specific factors  Consumer-brand relationships  Anthropomorphism Consumer-specific factors  Brand image Context factors  Consumer‘s needs and wants  Choice set composition  Demographics (e.g., income)  Choice framing  Lifestyle  Decision environment  Personality Compromise · effects : > - we choose the middle product (between expensive and cheap 6  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Marketers have to understand the wants and needs of different consumer segments Consumers may have a need for different products and services. Moreover, products in the same category have to fulfill different consumers needs. 7  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Marketers have to understand the wants and needs of different consumer segments Market segmentation involves viewing a heterogeneous market as a number of smaller markets, in response to differing preferences, attributable to the desires of consumers for more precise satisfaction of their varying wants. Market Segmentation Market Targeting Market Positioning  Choose clustering  Choose segments  Position the brand variables in the segment  Develop marketing  Develop segment strategy  Develop profiles communication  Validate segment strategy structure Rationale: Overcome the trade-off between economies of scale and satisfaction of individual needs. Buzzwords: Segment of one, mass customization Sarstedt & Mooi (2019) 8  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Marketers have to understand the wants and needs of different consumer segments „Any color you like …“ 9  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Marketers have to understand the wants and needs of different consumer segments Segment of one 10  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Marketers have to understand the wants and needs of different consumer segments Sociodemographic Behavioral Psychographic Choice of retail Demographic Personality outlets Product and Socioeconomic Lifestyle service use Purchase Perceptions Geographic behavior and intentions Sarstedt & Mooi (2019) + easy message + good to identify purchasing reasons - bad to identify purchasing reasons with - bud to measure 11  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Marketers have to understand the wants and needs of different consumer segments Two gentlemen who share lots of characteristics … … born in 1948, … wealthy, … married second time, … two children and … like international travel, dogs and sports cars. 12  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Marketers have to understand the wants and needs of different consumer segments Charles III. Ozzy Osbourne King of the United Kingdom Prince of darkness and other Commonwealth realms https://commons.wikimedia.org/wiki/File:Charles,_Prince_of_Wales_at_COP21.jpg; https://commons.wikimedia.org/wiki/File:Ozzy_Osbourne-2010.jpg 13  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Marketers have to understand the wants and needs of different consumer segments Example 1: Social class targeting by Patek Philippe https://www.patek.com/en/company/news/generations-campaign 14  INSTITUTE FOR MARKETING CONVINCING STAKEHOLDERS (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Marketers have to understand the wants and needs of different consumer segments Example 1: Social class targeting by Patek Philippe https://www.patek.com/en/company/news/generations-campaign 15  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Marketers have to understand the wants and needs of different consumer segments Example 2: Social class targeting by Dacia „It‘s almost cheaper to reach the top of the mountain in St. Moritz by buying this car than taking the local lift.“ 16  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer-brand relationships Throughout our lives we are accompanied by relationships to brands. Core conditions for (interpersonal) relationships that can be generalized to other entities (brands): (1) reciprocal exchange between active and interdependent relationship partners (2) relationships are purposive (3) relationships are multiplex phenomena (several dimensions, forms, and possible benefits) (4) relationships are process phenomena Marketers have to understand consumer-brand relationships to maintain them. Fournier (1998) 17  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer-brand relationships Love/Passion Emotional bonds of warmth, passion or other strong emotion  Feelings of love also encourage a biased, positive perception of the brand.  Brand is characterized as irreplaceable and unique. > - When you buy it they tell : you, YOU are upholding the baranian tradition 18  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer-brand relationships > they don't - tell you, who you are , but represent how you would like to be seen Self-connection (self-concept attachment) Brand helps to establish the user’s identity  Brand delivers important identity concerns, tasks or themes.  Spanning past (nostalgic) to current and future (possible or desired) selves.  Encourages relationship maintenance. 19  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer-brand relationships Interdependence Part of consumer’s daily routine  Frequent brand interactions.  Increased scope and diversity of brand-related activities.  High intensity of individual interaction events. 20  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer-brand relationships Commitment Intention to build and continue a long-lasting relationship  High brand loyalty.  Intention to continue relationship despite barriers.  Not necessarily high personal dedication or strong emotional bond. 21  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer-brand relationships Intimacy Intimate knowledge structures developed around the brands  Brand information is personalized and stored in memory.  Establishment of performance myths and belief of superior product performance.  More durable relationship bonds. 22  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer-brand relationships Brand partner quality an active partner -as Brand's performance in its partnership role  Positive orientation toward the consumer.  High dependability, reliability and predictability.  Brand fulfils a relationship contract.  Brand delivers what is desired (vs. what is feared).  Brand is accountable for actions. still is kown as THE BEST kitchen aid (but it's not ? ↑ 23  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer-brand relationship model Brand relationship quality evolves through meaningful brand and consumer interactions. Consumer/brand actions can enhance or dilute brand relationship quality. Brand relationship quality affecting consumers behavior towards the brand and its competitors. Fournier (1998) 24  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT References d’Astous, A., Maltais, J., & Roberge, C. (1990). Compulsive buying tendencies of adolescent consumers. NA-Advances in Consumer Research, 17, 306–312. Fournier, S. (1998). Consumers and Their Brands: Developing Relationship Theory in Consumer Research. Journal of Consumer Research, 24(4), 343–353. https://doi.org/10.1086/209515 Freeman, R. E. (2010). Strategic Management: A Stakeholder Approach. Cambridge University Press. https://doi.org/10.1017/CBO9781139192675 Girard, A., Lichters, M., Sarstedt, M., & Biswas, D. (2019). Short- and Long-Term Effects of Nonconsciously Processed Ambient Scents in a Servicescape: Findings From Two Field Experiments. Journal of Service Research, 22(4), 440-455. https://doi.org/10.1177/1094670519842333 Hutchinson, J. W., Kamakura, W. A., & Lynch, J. G. (2000). Unobserved heterogeneity as an alternative explanation for “reversal” effects in behavioral research. Journal of Consumer Research, 27(3), 324–344. https://doi.org/10.1086/317588 Lichters, M., Brunnlieb, C., Nave, G., Sarstedt, M., & Vogt, B. (2016). The Influence of Serotonin Deficiency on Choice Deferral and the Compromise Effect. Journal of Marketing Research, 53(2), 183–198. https://doi.org/10.1509/jmr.14.0482 Sarstedt, M., & Mooi, E. A. (2019). A concise guide to market research. The process, data, and methods using IBM SPSS Statistics (3rd edition). Heidelberg: Springer. Solomon, M. R. (2019). Consumer behavior: Buying, having, and being (13th ed). Pearson. 25  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Agenda Part 1 Introduction Consumers as stakeholders, consumer brand relationship Part 2 Preferences and preference construction Context factors on consumer decision making Choice set composition Choice framing Decision environment 26  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Attitudes are important but not deterministic for behavior Attitude: „a person’s evaluation of an object on a favorable to unfavorable continuum.“ (Albarracin and Shavitt, 2018, p. 300)  Attitudes are relatively stable over time.  Most likely, attitudes are partly memory based and partly constructed on the fly. Attitudes are important drivers of behavior. Albarracin and Shavitt (2018); Bechler et al. (2021) 27 TIME FOR ACTION… …REALLY?  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Rhetoric vs. reality However… 60 Percentage of respondents who have bought the following products second-hand in the last 12 months (in %) 53 50 45 40 30 38% of German consumers 20 20 22 16 17 13 13 13 consider it important to buy 10 7 10 12 9 11 7 10 8 9 second-hand clothing (Zalando 2021) 0 (Statista 2023) 2021 2023 31  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Rhetoric vs. reality However, sustainable fashion in Germany needs to catch up … Proportion of respondents who buy sustainable fashion (in %) 90 81 80 87% of German consumers 70 60 69 consider it important that the clothes 50 49 41 they buy have been produced in an 40 39 environmentally friendly or fair way 30 20 (TextilWirtschaft 2024) 10 0 India China USA Germany UK (Statista 2021) 32  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Rhetoric vs. reality 80 71 70 64 68 59 60 57 53 53 53 52 How important is the following criterion 51 50 56 Gap (Ø -14) to you when buying food? (Scale 0-100) 41 40 39 40 36 46 43 40 41 37 30 33 31 29 How often do you do the following when 20 25 25 21 buying food? (Scale 0-100) 10 0 (DHBW 2021) 33  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Attitude behavior gap Attitude vs. Behavior 34  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Reasons Psychological distance Locus of control vs. Distrust Spatial, temporal, and social Consumers believe that their Green claims are viewed distance trigger abstract thinking own actions have no significant critically (greenwashing) Concrete product and service impact attributes dominant for the actual decision 35  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Remedies Education and awareness Easy access vs. Incentives Use nudges (e.g., green defaults) and offer monetary incentives Recommended reading: 36  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Sometimes, consumers don‘t have stable preferences and rely on context factors https://www.youtube. com/watch?v=mlg3 H1StHpQ 37  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer decision-making is a constructive process While making a choice:  Often consumers do not have well-defined existing (a priori) preferences.  Consumers face a multitude of options and information (individual preferences, situational demands, choice options and attributes,...) during decision making.  Consumers have only limited resources to process information. Therefore, consumer engage in preference construction:  A constructed preference is “generated on the fly while making a decision, rather than being pulled from a master list in memory.” (Dhar & Gorlin, 2013, p. 528) Bettman et al. (1998), Dhar & Gorlin (2013) 38  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Consumer decision-making is a constructive process Major findings from research (Bettmann et al., 1998, p. 188): (1) Choice among options depends critically on the goals of the decision maker. (2) Choice among options depends on the complexity of the decision task. (3) Choice among options is context dependent. (4) Choice among options depends on how one is asked. (5) Choice among options depends on how the choice set is represented (framed) or displayed. 39  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Choice among options is context dependent 40  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Classification of context factors in consumers’ decision-making Sensory stimuli Social stimuli Decision environment Choice set Influence of external composition cues on consumers‘ Influence of actual preferences choice set composition on consumers‘ preferences Choice framing Attraction effect Influence of framing of Compromise effect choice problems on consumers‘ Message framing preferences Common attribute effect Single option aversion Phantom decoy effect 41  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Basic principles of context effects 1.19 € 1.69 € 55 % 45 % 42  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Basic principles of context effects 1.19 € 1.69 € 2.29 € 35 % 60 % 5% 43  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Basic principles of context effects Context effects: “The proportion of subjects choosing a particular product from a set is influenced by set composition in a manner apparently inconsistent with stable preferences.” (Prelec et al., 1997, p. 118).  i.e., a consumer‘s preference for a product (or service) depends on alternative products that are placed in relation to the target product.  Consumers show instable preferences and preference shifts between choice tasks. Adler et al. (2024) 44  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Basic principles of context effects General experimental approach: Adding an additional option (decoy) to an initial set of the target option and a competitor option shifts consumers’ preferences in favor of the target product.  The initial (binary) choice set contains the target product (choice shares should be increased) and a competitor product.  In the extended (trinary) choice set, the decoy‘s only raison d'être is to divert choice shares to the target product. Initial (binary) choice set Extended (trinary) choice set 1 Choice shares 0,8 0,6 0,4 0,2 0 1.19 € 1.69 € 1.19 € 1.69 € 2.29 € Target Target Competitor Competitor Decoy product product Adler et al. (2024) 45  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Compromise effect (general principle) The addition of an extreme decoy option increases the target’s Low Price + choice shares.  Decoy option puts the target option in a compromise position Competitor  Consumer favor the target option over the alternative options (competitor and decoy) due to extremeness aversion and justifyability Target Decoy High Price - Low Quality High Quality + Adler et al. (2024); Simonson (1989); Simonson and Tversky (1992) 46  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Compromise effect (empirical example) deliberate, complex, demanding decision process fast and intuitive decision-making compromise effect less pronounced under time pressure compromise effect distractor tasks reduce the as an easy to justify compromise effect solution Lichters et al. (2016) 47  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Compromise effect (empirical example) Serotonin modulates the exchange of information between cerebral regions Consequences of serotonin reduction:  Cognitive impairments  Strong reaction to emotional stimuli  Impulsive decisions Influencing factors of serotonin levels  Nutrition  Weather  Seasons ... Lichters et al. (2016) 48  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Compromise effect (empirical example) Manipulation of serotonin brain levels by means of Acute Tryptophan Depletion (ATD) 4x2x2 mixed factorial design  Between-subjects factor: Experimental condition (ATD vs. placebo)  Within-subjects factors: Product categories (hazelnut spread, headphones, ketchup, mulled wine) Choice stages (CSbinary, CStrinary) 48 decisions per subject: 4 products x 6 price scenarios x 2 choice stages Sample  47 students (nATD = 23, nPlacebo = 24)  Only males  Screened for psychiatric and neurological disorders Lab-based paper & pen questionnaire Show-up fee (8 EUR) Lichters et al. (2016) 49  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT PLACEBO: 200 ml of cold water, L-Alanin (5.5 g), L-Arginin (4.9 g), L- Effects of choice set composition on consumer choice Cystein (2.7 g), Glycin (3.2 g), L-Histidin (3.2 g), L-Isoleucin (8.0 g), L- Leucin (13.5 g), L-Lysin Monohydrochlorid (8.9 g), L-Methionin (3.0 g), Compromise effect (empirical example) L-Phenylalanin (5.7 g), L-Prolin (12.2 g), L-Serin (6.9 g), L-Threonin (6.5 g), L-Tyrosin (6.9 g), and L-Valin (8.9 g), tryptophan (2.3 g). Protein Mood state Mood state shake: 5-hour resting START questionnaire questionnaire PLACEBO or period (MDMQ) (MDMQ) ATD RPM and 24 choices 30 minutes 24 choices FINISH purchase of from CStrinary distraction from CSbinary products Lichters et al. (2016) 50  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Compromise effect (empirical example) PLACEBO L  M: p = 0.008* ATD L  M: p = 0.500* Lichters et al. (2016) 51  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Attraction effect and asymmetric dominance effect (general principle) The addition of an asymmetrically dominated or relatively inferior + Low Price option increases the target’s choice shares.  Decoy option performes worse than the target option. Competitor  Consumer favor the target option over the decoy option because it is easier to justify (Simonson, 1989).  Including the decoy option decreases the choice share of competitor option and increases the target‘s choice share. Target Decoy High Price - Low Quality High Quality + Adler et al. (2024), Lichters et al. (2015) 52  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Attraction effect (example) 59 US$ 125 US$ 59 US$ 125 US$ 125 US$ 68% 32% 84% 16% 0% Online only Online + Online only Online + Print only print print Adler et al. (2024) 53  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Attraction effect (empirical example) Aim: Analyze the impact of caffeine consumption on the attraction effect Hypothesis: Caffeine consumption (vs. consumption of a placebo) increases the attraction effect Study design Within-subjects design Treatment group (n=26): Decaf coffee + 200mg pure caffeine Control group (n=25): Decaf coffee Binding choices: Purchase of spiced cookies Variations Between-subjects Free-choice formats Lower caffeine intake (125mg) Canty et al. (2024) 54  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Attraction effect (empirical example) Canty et al. (2024) 55  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice set composition on consumer choice Attraction effect (empirical example) Placebo Trinary Exact McNemar test n = 25 Binary L M D L 40 (95.24%) 2 (4.76%) 5 pdirected = 0.813 No attraction effect in the placebo M 3 (4.69%) 61 (95.31%) 14 group, but a significant effect in the Treatment treatment group Trinary n = 26  Increased attention triggers the Binary L M D attraction effect L 29 (67.44%) 14 (32.56%) 4 pdirected = 0.002 M 2 (3.39%) 57 (96.61%) 24 Canty et al. (2024) ^ 56  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice framing on consumer choice Example: Classical framing paradigm and empirical example Imagine that the United States is pre-paring for the outbreak of an unusual disease, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the programs are as follows: Condition 1 „lives saved“ (n = 152) Condition 2 „deaths“ (n = 155) If Program A is adopted, 200 If Program A' is adopted, 400 people will be saved. [72 %*] people will die. [22 %*] If Program B is adopted, there is a If Program B' is adopted, there is a one-third probability that 600 one-third probability that people will be saved and a two- nobody will die and a two-thirds thirds probability that no people probability that 600 people will will be saved. [28 %*] die. [78 %*] Tversky and Kahnemann (1981) * Participants choosing this option 57  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice framing on consumer choice https://thebehavioursagency.com/framing/ 58  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice framing on consumer choice Basic principles of choice framing effects Choice framing effects: The proportion of subjects choosing a particular option is influenced by the display of information.  A consumer‘s preference for a product (or service) depends on inconsequential variations in the description of outcomes  Resulting in consumers‘ showing instable preferences and preference shifts between choice tasks  In contrast to context effects, the choice set itself is not manipulated Kahnemann (2003, 2012) 59  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of choice framing on consumer choice Choice framing effects Condition 1 Condition 2 2 Products available 1 Product sold out Phantom decoy effect (e.g., Lichters et al., 2015; Trueblood & A B A B C Pettibone, 2017)  Phantom alternative (= “option that (…) is unavailable at the time a decision is made.” (Farquhar & Pratkanis, 1993, p. 1214), e.g., out-of- Cooking grate ∅: 28 cm 37 cm 28 cm 37 cm 58 cm stocks, upcoming new products) can operate similarly to attraction or weight: 1.7 kg 4 kg 1.7 kg 4 kg 12 kg compromise effects Single option aversion (Mochon, 2013)  Preference to search for additional options if only one product is displayed (single option) Show more  Product are chosen more often when competing alternatives are included in the choice set ( consumers do not engage in additional search behavior) Common attribute effect (e.g., Evangelidis and van Osselaer, 2018)  Preferences depend on the presence of common attribute information: An inferior option profits if it is accompanied by information on common attributes to other options (vs. if such information is absent) 60  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Agenda Part 1 Introduction Consumers as stakeholders, consumer brand relationship Part 2 Preferences and preference construction Context factors on consumer decision making Choice set composition Choice framing Decision environment 61  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Required reading Sarstedt, M., Imschloss, M., & Adler, S. (2024). Multisensory Design of Retail Environments: Vision, Sound, and Scent. Science meets Practice. 2nd ed., Springer Gabler. 62  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Effects of decision environment on consumer choice Influences of stimuli in the world to which a consumer is exposed:  Sensory stimuli (sensory systems) Decision environment Vision Sound Scent Touch Taste Influence of external cues on consumers‘ preferences  Social stimuli (social influence) Utilitarian influence Value-expressive Informational influence influence Argo (2020), Krishna (2012) 63  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Sensory marketing Sensory marketing: „Marketing that engages the consumers' senses and affects their perception, judgment and behavior.“ (Krishna, 2012, p. 332) Marketing activities targeting sensory attributes can affect...  Consumers’ perceptions of product associations (e.g., its sophistication, quality, elegance, innovativeness, modernity, interactivity)  Perceived quality of an attribute such as color, taste, smell or shape. leg Motel. One Hotels Abercrombie, ,... ) 64  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Foundations of sensory marketing: Sensation and perception Sensation: Response of sensory receptors to basic stimuli (biochemical process). Perception: Process by which consumers select, organize, and interpret these sensations. Perception is a three-stage process that translates raw stimuli into meaning: Exposure Attention Interpretation 65  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Foundations of sensory marketing: A conceptual framework for sensory marketing Krishna (2012) 66  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Haptics Basic principles of touch Touch is also the first sense to develop in the womb and the last sense one loses with age. Touch enhances attachment between babies and their parents and enhance the baby's emotional and physiological health (Montagu, 1986). People differ in terms of how important touch is for them in two ways (personality traits).  General need for touch/need for tactile input  Need for/comfort with interpersonal touch Krishna (2012) 67  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Haptics Interindividual differences: People differ in how important touch is for them in two ways Problem solving/ instrumental reduction in uncertainty, NFT purchase decisions General need for touch/need for tactile input: (utilitarian function).  Chronic motivation and ability to use haptic NFT information during the decision-making process. Pleasure/stimulation autotelic NFT due to haptic sensations (hedonic function). Comfort with Need for/comfort with interpersonal touch initiating touch  Degree to which an individual is comfortable with CIT intentional interpersonal touch from or to another person. Comfort with receiving touch NFT: Citrin et al. (2003), Nuszbaum et al., (2010); Peck and Childers (2003) 68 CIT: Nuszbaum et al. (2014), Webb & Peck (2015)  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Haptics Touch and consumer behavior Touch faciliates recognition  Coke bottles were designed to be recognizable even in the dark ( reduction of uncertainty). Touch triggers a feeling of ownership (mere-touch effect) and enhances willingness to buy and willingness to pay  Touching a product for 30 seconds or less creates a greater level of attachment to the product, i.e., psychological ownership (= feeling of ownership of an object without actually owning it, Pierce et al., 2001).  Enhances product evaluations, valuation and willingness to pay.  Applications: Texture samples in furniture stores, sales personel that encourages customers to try products such as cloths. Morewedge et al. (2009), Peck and Shu (2009) 69 Scent Marketers utilize scent in many ways 70  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Olfaction Marketers use scent in many ways Ambient scent in stores or service environments Scented products Scented advertising materials ↳ small of dog foods > Smell that makes the - flight passes by quickes Bradford and Desrochers (2009), Krishna (2012) 71  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Olfaction Scent can influence consumer behavior subconsciously Olfactory processing happens automatically.  Scents are processed directly via the human central nervous arousal system without prior cognitive interpretation.  Physical and neural proximity of the systems associated with olfaction and memory (e.g., limbic system).  Scent recognition persists over long time periods (months or even years). Scent affects consumer behavior even it is not processed consciously. ↳ people stay larger in the store if small is good ↳ Scents can evoke memories and can take us but in time ↳ Ley. Capt tersmalhome one perceive the room namer (e 8 milla; wolder seets.. makes Binder et al. (2009), Girard et al. (2019), Madzharov et al. (2015), Pfaff (2006) contrary (e g win ↳ the.. also consumption behaviour for the moment changes and 72  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Olfaction Long-term effect of ambient scents Girard et al. (2016) 73  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Olfaction Long-term effect of ambient scents Test frame: Scent intensity none low medium high Sample n=132 n=86 n=50 n=62 Field experiment with 330 actual customers in a train: between-subjects design, four levels. Dependent variables:  Perceived overall air quality  Unaided scent awareness  aided scent awareness Girard et al. (2016) 74  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Olfaction Long-term effect of ambient scents Overall detection rate: 27 % p the higher the scent intensity, the better the air quality was perceieved by the passengers 0.84 0.72 p=.010 0.19 none low medium high Girard et al. (2016) scent condition 75  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Olfaction Long-term effect of ambient scents Track section I Same participants Experimental Scent panel (scent) 9 waves t1 t2 t3 t4 t5 t6 t7 t8 t9 Time n = 35 at wave 9 (started with n=100) n = 100 n = 35 Control panel* Same participants Track section II (no scent) 3 waves t1 t2 t3 Time n = 25 Control groups for Independent t2 t3 Control panel participants n = 39 n = 10 (no scent) 76  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Olfaction => people did not just got used to the smell, as the service Long-term effect of ambient scents experience evaluation stayed up from the start onwards over all 9 waves Introduction of scent Removal of scent 1,00 0,75 Service Experience 0,50 Service Quality Service Value 0,25 0,00 Wave 1 2 3 4 5 6 7 8 9 Girard et al. (2016) 77  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Auditory Basic principles and aims of sound design Auditory stimuli are „always on“ (e.g., background sounds, conversations, music,...). Sound design can foster distinctiveness from other brands, products or services.  Marketers use jingles, sounds, or songs to enhance memorability or to provide a pleasant product experience.  Music played in stores fits to its customers preferences. ↳> differnt Spins and volume according to store/restaurant) Sounds can guide consumer behavior.  Sounds can trigger specific behaviors, e.g., consumers in a supermarket buy more French wine when French music is played, while German wine is sold more when typical German background music is played (North et al., 1999). Krishna (2012) peoples' moral high patched music evole - can 78  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Auditory Auditory sub-areas of research Sound symbolism  Attached meaning to a sound (e.g., abstract or physical features) Example for auditory stimuli in  Sound the food makes when bitten plays a key role in taste perceptions advertisement: Magnum for certain food items (e.g., potato chips, celery, crackers) Language and voice  Often, reading a word triggers its sound in the mind.  Language can trigger associations, e.g., social stereotype when using English in ads: Modernity, progress, sophistication, cosmopolitan identity  Voice characteristics trigger associations, e.g., deep voice  authority, competence; French accents and husky-voiced females  sexy, seducing Ambient music  Ambient sound influences consumer mood, time spent in a location, perception of time spent, and spending. Krishna (2012) 79  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Auditory Sound design example: BMW Krishna (2012) https://www.youtube.com/watch? v=tqZcSPXPhcc&list=PL7470479 D05639FFE 80  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Taste Basic principles of taste Sensory Taste is a combination of all five senses (bottom-up,  Actual taste (sweet, sour, salty, bitter, umami) intrinsic) cues  Smell (orthonasal and retronasal olfaction) that influence  Touch (e.g., temperature, fattiness, painfulness from hot spices) taste  Vision (e.g., aesthetic appeal, color)  Audition (e.g., crunch sound of potato chips) Cognitive Taste is susceptible to external factors (top-down,  Marketer influence (e.g., ads, packaging) extrinsic) cues  Ambient sensory stimuli (e.g., scent, light or sound) that influence taste  Social context 81 Elder and Krishna (2021), Krishna (2012)  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Taste Taste and consumer behavior Taste is susceptible to a multitude of factors  Food coloring dominates taste for orange juice sweetness (Hoegg & Alba, 2007).  Beef is evaluated more favorably if 75 % lean vs 25 % fat (Levin & Gaeth, 1988).  Ads emphasizing multiple sensations (e.g., taste, touch and smell) result in better taste perception than emphasizing taste alone (Elder & Krishna, 2010). Taste triggers (re-)purchase  Taste experiences gathered prior to purchase decisions can dramatically change product preferences.  Taste is a predictor of repurchase behavior and brand loyalty  long-term success. Biswas et al. (2014), Elder and Krishna (2021), Krishna (2012), McConnell (1968) 82  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Vision Marketers rely heavily on visual elements in advertising, store design and packaging. Marketers communicate meaning on a visual channel using, for example, a product’s color, size and styling. Vision is one of the most powerful and cheapest ways to differentiate one’s products from competitors. restruct lights pretty bright to stor it is all clear (differees cultures in as : wo in , in Europe "love light to male it feel more intimate for customers) 83  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Vision Consumers appreciate good designs Reimann et al. (2010): fMRI-based study (functional magnetic resonance imaging) on evaluation of products with different designs. Results:  Aesthetic increase preference: Products in aesthetic packaging are chosen more frequently (vs. products in standardized packaging).  Increased affective processing for aesthetic products: Longer reaction times to products in aesthetic packaging.  Aesthetics unfold a stronger impact than brands: Choice for products with an aesthetic package, unknown brand and low price significantly higher than for a standardized package, well-known brand and low price. 84  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Relations between sensory stimuli Crossmodal correspondences Usually, consumers are exposed to a multitude of different sensory stimuli that co-exist and influence each other. Crossmodal correspondences: “nonarbitrary associations that […] exist between different basic physical stimulus attributes, or features, in different sensory modalities.” (Spence, 2011, p. 972)  E.g., scents being perceived as warm (e.g., cedarwood) or cold (e.g., peppermint, Adams & Doucé, 2017)  E.g., positive effects of multisensory congruent retail environments, e.g., soft music combined with soft flooring (congruent) enhances purchase-related self-confidence and product evaluations (Imschloss & Kühnl, 2017). 85 86  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT Relations between sensory stimuli Multisensory (in)congruence Marketers frequently use (in)congruity between sensory modalities.  Congruity = Different sensory modalities encode the same concept or meaning Example: Package design (juice or jam package) that encodes its content  Incongruity = Different sensory modalities encode different concepts or meanings Examples: Vision-audio incongruity in Haribo ad, incongrent color to expectation (pepsy crystal or green Heinz ketchup) 87  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT You did it! linktr.ee/markosarstedt 88  INSTITUTE FOR MARKETING FOUNDATIONS OF VALUE MANAGEMENT (LECTURE) PROF. DR. DR. H.C. MARKO SARSTEDT References (1/5) Adams, C., & Doucé, L. (2017). What's in a scent? Meaning, shape, and sensorial concepts elicited by scents. Journal of Sensory Studies, 32(2), e12256. https://doi.org/10.1111/joss.12256 Adler, S. J., Schöniger, M. 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