Consumer Behavior

Consumer Behavior Prof. Dr. Nadine Walter Eileen Cols

Consumer Behavior – table of contents

1. Introduction to Consumer Behavior.............................................................................................4

What is consumer behavior?..............................................................................................................4

2.Consumer Pre-Purchase...............................................................................................................6

1. Need recognition............................................................................................................................6

Background.....................................................................................................................................6

What companies can do.................................................................................................................7

2. Information processing/searches...................................................................................................7

1. Exposure.....................................................................................................................................7

2. Attention....................................................................................................................................9

3.Perception.................................................................................................................................10

4. Comprehension........................................................................................................................11

3. Opinion formatting and learning..................................................................................................12

Background...................................................................................................................................12

Learning........................................................................................................................................13

4. Memory........................................................................................................................................16

Background - definitions...............................................................................................................16

Long-term memory......................................................................................................................17

5. Consumer evaluation....................................................................................................................18

Consumer evaluation....................................................................................................................18

Predicting consumer behavior......................................................................................................19

Does behavior influence attitudes?..............................................................................................19

3. Consumer purchase (consumer decision making).......................................................................21

1. Choices and biases........................................................................................................................21

Choices.........................................................................................................................................21

Biases............................................................................................................................................21

2. Purchase.......................................................................................................................................23

Environmental psychology...........................................................................................................23

Experiential marketing.................................................................................................................26

4. Consumer post purchase...........................................................................................................27

1. Consumption and customer satisfaction/dissatisfaction..............................................................27

Customer satisfaction...................................................................................................................27

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Consumer reactions to consumption...........................................................................................28

2. Customer-brand relationship and customer loyalty......................................................................28

Customer-brand relationships......................................................................................................28

Customer loyalty..........................................................................................................................29

5. External influences....................................................................................................................31

1. Individual characteristics..............................................................................................................31

Demographics...............................................................................................................................31

Psychographics.............................................................................................................................32

2. Environmental influences.............................................................................................................33

Modeling......................................................................................................................................33

Word of mouth communication...................................................................................................34

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Consumer Behavior

1. Introduction to Consumer Behavior

What is consumer behavior?

Consumer behavior: is defined as activities people undertake when obtaining, consuming, and disposing of products and services. Simply stated, consumer behavior has traditionally be thought of as the study of ‘why people buy’- with the premise that it becomes easier to develop strategies to influence consumers once a marketer knows the reasons people buy specific products or brands.

A well-developed and tested model of buyer behavior is known as the stimulus-response model, which is summarized in the diagram below:

1. In this model, marketing and other stimuli enter the customers “black box” and produce certain responses. 2. Marketing management must try to work out what goes on the in the mind of the customer – the “black box”.3. The Buyer’s characteristics influence how he or she perceives the stimuli; the decision-making process determines what buying behavior is undertaken.

Characteristics that affect customer behavior: The first stage of understanding buyer behavior is to focus on the factors that determine the “buyer characteristics” in the “black box”. These can be summarized as follows:

Consumer behavior is especially very much interlinked with psychology Psychology tries to evaluate the behavior of individuals, their activities, their feelings/experiences, thinking,… and consumer behavior is looking at individuals as participants in markets, i.e. their purchasing process, their feeling/attitudes of brands… .

Psychology is important in the search of consumer behavior, because consumer behavior is (from an economical perspective) often irrational and illogical (e.g., emotion-driven, uncontrolled, un-reflected). So only the psychological perspective allows us to be able to understand consumers decisions.

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Research suggests that customers go through a five-stage decision-making process in any purchase. This is summarised in the diagram below:

This model is important for anyone making marketing decisions. It forces the marketer to consider the whole buying process rather than just the purchase decision (when it may be too late for a business to influence the choice!)

The model implies that customers pass through all stages in every purchase. However, in more routine purchases, customers often skip or reverse some of the stages.

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2. 2. Consumer Pre-Purchase

1. Need recognition

Background

Problem recognition, or need recognition, is the first of the five steps consumers take when moving through the decision process. In very simple terms, it is only when we recognize that we need something that we consider starting the process to find the product or service that will deliver the benefits to fill the need or solve the problem

Problem recognition is a psychological process through which we evaluate the difference between our actual state and our desired state. This is a comparison of our current need or benefits state with what we would like it to be. The greater the ‘‘perceived distance’’ between these two, the more clearly the consumer recognizes potential need. Remember, however, that need recognition depends on the perception of the individual consumer. Running out of coffee or Pepsi may trigger one consumer to immediately go out and buy some more because the problem is seen as urgent, whereas another person may simply drink a glass of water and put coffee or Pepsi on the shopping list for next Friday.

A need exists if there is a gap between the perceived actual state and a plausible desire state. The gap has to exceed the awareness threshold behavior.

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A variation of problem recognition is opportunity recognition. Suppose you are completely satisfied with your current computer setup. When browsing on the web, you spot an offer for additional computer memory at low cost. You begin to imagine the new programs and games you could run if you upgraded. Further, you have a friend who could help install the new memory. You decide to get the extra ‘‘gigs’’ for your machine. In a situation like this, the consumer does not perceive a problem but, rather, perceives an opportunity that leads to a comparison between actual state and a new desired state.

What companies can do

To trigger the needs of a consumer the company can:

1.Adress unfulfilled needs:

Identifying unfulfilled needs (Ipod)Monitoring changes in needs, when a product isn’t performing properly

2.Influence needs:

Changing desired state, when another product seems superior to the one currently used (Hummer: need is a very subjective word)Changing actual state, when a consumer is running out of a product (Milk: miss milk? Lactaid)

A company can and should develop their products/services based on the need recognition. Products/services are a means to satisfying customer needs, and based on needs recognition companies can change their product/services. (However, often consumers are not yet aware of a need).

2. Information processing/searches

Information processing is the process through which consumers are exposed to information, attend to it, comprehend it, place it in memory, and retrieve it for later use. There are four stages in the process: Exposure, attention, perception and comprehension.

1. Exposure

Exposure occurs when there is a physical proximity to a stimulus that allows one or more of a person’s five senses the opportunity to be activated. Getting exposure essentially means entering the person's sphere of existence (TV commercials that appear only in programs you never watch cannot influence you.)

When do customers detect a stimulus?

During exposure a sensation is transmitted to the brain. This activation happens when a stimulus meets or exceeds the lower threshold. Lower threshold: It is the minimum amount of stimulus intensity necessary for sensation to occur (no activation happens when the stimulus does not exceed it.)

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What about subliminal advertising? Does it exceed the lower threshold?Research shows that some forms of subliminal exposure might influence people, but limits occur: it needs to be in a repertoire of potential behaviors; it may affect general liking for a product or approach/avoid tendencies towards a product; for important decisions, careful processing would probably override any subliminal influence. But despite all, nowadays the ability of subliminal stimuli to affect consumer behavior is highly questionable

When do customers detect a difference?

The Just Noticeable Difference (JND) threshold is the minimal amount of difference in intensity of a stimulus that can be detected 50% of the time. (ex: changing size of package, changing taste, changing the quality of sound, or touch, or smell of product).

Weber's Law (k = ∆l/l)1 states that as the intensity of the stimulus increases, the ability to detect a difference between the two levels of the stimulus decreases = the higher l is, the higher the difference needs to be to be noticed.

Most of the time marketers want to exceed the JND , but sometimes they want to stay below. (see image Betty Crocker)

Selective exposure

Consumers decide what they will be exposed to and also try to avoid exposure (ex: internet : pop-ups, spam filters/ TV: zapping, zipping)

Overexposure

Though exposure is a good thing to have, too much of it may not be so good, this is the “danger of overexposure” and it is reflected in the habituation, which occurs when a stimulus becomes so familiar and ordinary that it loses its attention-getting ability. “Advertising wear-out” is the term used to describe ads that lose their effectiveness because of overexposure. One solution to the wear-out problem involves using ads that differ in their executions but that carry the same basic message (see picture).

1 l = initial stimulus intensity, ∆l = just notable difference, k = 1-2% for light, 10-20% for taste and ~2% for price

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2. Attention

Attention is the amount of cognitive resources or mental activity that we focus towards a particular stimulus. Two things are important when thinking about attention: focus (the direction of attention) and intensity (the degree of attention)

Limits of attention

Before companies can get consumers to pay their product's price, they must first get consumers to pay attention. But attention can only be given to a small proportion of the stimuli encountered. Why? The explanation is found in our mental capacity, which can be explained by our short-term memory, that's being allocated when something catches our attention. Short-term memory is a limited mental resource with limited size and capacity: we can process only a certain amount of information at a time.

Ways to promote attention

Voluntary attention: By connecting to consumers' needs (reminding them of their needs before showing them how the product can satisfy these needs) or by paying consumers to pay attentionselective attention: focus attention on relevant information Involuntary attention:

1.Incomplete stimuli (Zeigarnik effect : where you feel compelled to finish what you’ve started)

2. surprise/schock*

3.Make it bigger, more intense, more colorful, use other senses

4.Be novel, different, creative*

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5.make it funny

6.Choose the right

place / 7.Make I move*

Also: 8.use sex appeal; 9. use important figures (celebrities); 10. Use intensity; …

BUT! - Most of the time the customers are seeing through the game that is playing. - The customers reaction can also be negative: (1)rejection, (2)lack of positive activation (through so called “shock advertising),(3) loss of attention towards the product due to distraction by humor, sex, celebrity, … (Vampire-effect) and (4) disliking of e.g. celebrities (Boomerang-effect)

(1) (2) (3) (4)

!!!The effect of low/high involvement on attention the more a company is involved in attention, the more his ads will be seen and his brand recognized.

3.Perception

Perception is the process of developing an interpretation of a stimulus. It is important to understand how perception works, because what is perceived is not necessarily what is ‘true’, and what customers perceive is what affects their actions.

Each person recognize, selects, organizes and interprets stimuli in his own individual manner based on his needs, values and expectations and this is knows as perception. Since each individual’s need, motives and expectations are unique therefore each individual’s perception is unique.

Perception helps to explain the phenomenon of why different individuals respond differently to the same stimulus under the same condition. As a marketing manager, you are providing stimulus to your consumers through the physical shape, colour, size, fragrance, feel, taste of your product, it’s package, advertisements and commercials.

Your interest is to understand why and what different types of perceptions are associated with each of the stimuli so that you can highlight that particular stimulus or combination of stimuli which evokes the most favorable perception in the maximum number of consumers.

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So, several factors influence perception: -The goals and motives (people see what they want to see) and the expectations (people see what they expect to see).

Why is perception so important?

Because of positioning! Positioning is all about 'perception'. As perception differs from person to person, so do the

results of the positioning map e.g what you perceive as quality, value for money, etc, is different to my perception. However, there will be similarities.

Products or services are 'mapped' together on a ' perceptual map ' . This allows companies to understand the market structure as perceived by the customers (who is your competition? What segments are being served?). It can also plan marketing actions and predict consequences (if you develop a new product, what segment would be best? If you modified a product, who would you take share from?) Moreover, it represents customer’s perceptions and preferences to aid communication and discussion within the organization.

These are the main strengths of this tool. Marketers decide upon a competitive position which enables them to distinguish their own products from the offerings of their competition (hence the term positioning strategy).

4. Comprehension

Comprehension occurs in the consumers mind and the consumer believes a certain message (and might later ‘unbelieve’ the message). Comprehension = belief, it is easier to believe than to unbelieve (unbelieving is effortful).

Beyond trying to get to think about their products, companies also try to get you to think and feel about their products in a certain way. This is the domain of comprehension that involves the interpretation of a stimulus. It is the point at which meaning is attached to the stimulus.

How do people comprehend?

-Comprehension can be increased by repetition: repetition increases familiarity, it’s more familiar, it’s more likely to be true.-Comprehension is influenced by distraction: distraction reduces the ability to identify statements as

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false and increases the recognition of false statements as being true.-Miscomprehension is used in Marketing, but should be carefully considered if really appropriate.

Kinds of miscomprehension

-literal versus figurative meanings (Brand X may relieve your pain)-Comparison omission (Brand X relieves pain better)-Piecemeal comparison (Brand X works faster than Y and longer than Z)-Wrongfully inferring causality (active people take brand X)-Misleading visuals (MilkyWay)-Unclear definitions-demonstrations (Waterproof garbage bag)

3. Opinion formatting and learning

Background

The Elaboration Likelihood Model

There are two ways we make decisions and hence get persuaded:

1. When we are motivated and able to pay attention, we take a logical, conscious thinking a central route to decision-making. Consumers focus here on rational, important, conscious diagnostic information/facts/ evidence/logical reasoning provided by high effort and high elaboration. This can lead to permanent change in our attitude as we adopt and elaborate upon the speaker’s arguments.

2. In other cases, we take the peripheral route. Here we do not pay attention to persuasive arguments but are swayed instead by surface characteristics such as whether we like the speaker. Consumers focus thus on liking, emotions and feelings of an attractive source/expertise by low effort and low elaboration. In this case although we do change, it is only temporary (although it is to a state where we may be susceptible to further change).

Central vs. peripheral route is a choice between facts/emotions, information appeal/entertainment, direct comparisons/drama, functional/image and Ogilvy&Mather/Leo Burnett (=International advertising, marketing and public relations agency).

The moderating role of involvement on central/peripheral route

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The Petty-Cacioppo-Schumann-study has provided support for the view that different features of an advertisement may be more or less effective, depending upon a person’s involvement with it. Under conditions of low involvement, peripheral cues are more important than issue-relevant argumentation, but under high involvement, the opposite is true.

People are more motivated to use the central route when the issue has personal relevance to them. Some people have a higher need for cognition, deliberately thinking about more things than people with a lower need. These people with a higher need for cognition are more likely to choose the central route.

Learning

It is considered that learning is the base of the perception mechanism and of the consumer’s motivation to buy or not buy a certain product or service. The learning is essential for the process of consuming if we take into account the fact that the buying behaviour is a learnt behaviour. Learning may occur in situation of high involvement (when the consumer has reason to learn) or of low involvement (when the consumer is very poorly or not at all motivated to learn).

Learning can represent a noticeable or unnoticeable change in a consumer’s behaviour due to the

consequences of experience and it leads to the increase of the probability that a behavioural act to be repeated.

A.BEHAVIORAL LEARNING: based on observable behaviors that occur as the result of exposure to stimuli.

1.Classical conditioning

= The typical procedure for inducing classical conditioning involves presentations of a neutral stimulus along with a stimulus of some significance. The neutral stimulus could be any event that does not result in an overt behavioral response from the organism under investigation(meat). Pavlov referred to this as an conditioned stimulus (CS). Conversely, presentation of the significant stimulus necessarily evokes an innate, often reflexive, response. Pavlov called these the unconditioned stimulus (UCS) and unconditioned response (UR), respectively. If the CS and the US are repeatedly paired, eventually the two stimuli become associated and the organism begins to produce a behavioral response to the CS. Pavlov called this the conditioned response (CR).

In today’s competitive and dynamic marketing world, where companies are thriving hard to attract maximum number of consumers, it has become very hard to survive for smaller companies, even huge ones, without

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innovation and new developments. Under such circumstances, classical conditioning has now become a major focus of marketing, by large number of companies and brands! Example: UCS = UR women = liking UCS + CS = CR heineken + women = liking CS = CR heineken = liking

How to ensure sucessful classical conditionning? -contiguity of CS and UCS (must be close enough in tame and space)-conditioned stimulus should occur before unconditioned stimulus-the stronger the link between UCS and UCR is, the better-usage of ‘new, neutral’ stiumuli (no associations learned yet)-continious repetition (high pressure marketing)

2. Instrumental conditioning

According to this theory, if a product/service offers a high degree of satisfaction while consuming it, the consumer will have the tendency afterwards to choose again, when the same type of needs will emerge. This reaction is known as operant conditioning and means that the product had a positive sustain and the consumer has become conditioned to buy the product again. If he is satisfied by the result once, the consumer will desire to make his feeling permanent. Instrumental conditioning can be the result of following situations:

Positive reinforcement – is the pleased or desired result of a situation (a woman receiving compliments after using a certain perfume trademark, learns that its use has a positive effect and it will still use it);

Negative reinforcement – means the avoidance or elimination of a unpleasant consequence (a mother misses her daughter performance on a show due to a migraine; solving this problem with a help of a certain medicine will determine the subject to learn how to avoid unpleasant consequences)

Punishment – when the active behaviour determines a negative result, the subject learns not to use that product again (the use of a certain product is unpleasant for a person or determines a negative reaction from relatives and friends)

How to ensure successful instrumental conditionning?-by ensuring product contact or trial through an appealing produt design, or through promotion people, trial samples and samples in magazines.-By ensuring consequent control of customer satisfaction, because only satisfaction leads to repurchase and customer loyalty.

B.COGNITIVE LEARNING: based on mental information processing, in response to problem solving

1. Observational learning

Observational learning (also known as vicarious learning, social learning, or modeling) is a type of learning that occurs as a function of observing, retaining and

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replicating novel behavior executed by others. It is argued that reinforcement has the effect of influencing which responses one will partake in, more than it influences the actual acquisition of the new response.

Imitation is very different from observational learning in that the latter leads to a change in behavior due to observing a model. Observational learning does not require that the behavior exhibited by the model is duplicated. For example, the learner may observe an unwanted behavior and the subsequent consequences, and would therefore learn to refrain from that behavior.

Conclusion: Observational learning is a process in which a person observes another person's behavior and the consequences of the behavior. If the consequences are positive, the person may imitate the behavior.Example 1: Imagine you wish to be a comic. You observe comics at an open mike event. This allows you to gain insight into the statements and behaviors of people who strive to be funny. This is one example of observational learning.Example 2: Imagine you have accepted a job in sales. However, you have no sales experience. Thus, on your first day you observe an experienced salesperson. This allows you to gain knowledge of the statements and behaviors of effective salepeople.

In marketing, observational learning is important since classical advertising can not show direct positive consequences. Only learning by trying out would be very inefficient. Still, the only requirement is, that consumer expects the same positive consequence.

We ensure a successful observational learning through attention, remembrance, motivation and identification.

Decision making is the cognitive process (= the process of thought) of selecting a course of action from among multiple alternatives. Common examples include shopping and deciding what to eat. Decision making is said to be a psychological construct. This means that although we can never "see" a decision, we can infer from observable behaviour that a decision has been. So, cognitive learning processes, that is divided into two categories cognitive (how we know the world), and affect (feelings and emotions) as memory,association, concept formation, language, attention, perception, action, problem solving and mental imagery, do not occur automatically or accidentally, but considered and deliberate. (ex: planned shopping occasions, extensive buying).

The underlying theories include: imagery theory, interference theory of forgetting, mere exposure and generalization of a stimulus.

1.imagery theory: the mental emergence, processing and storage of inner pictures is called “imagery”. Information can indeed be coded verbally but also visually external verbal information can be transformed into inner visual pictures (and vice-versa). Often abstract words are coded verbally, more “tangible” words are coded verbally and viually.

2.Interference theory of forgetting: Generally, something once learned is stored in memory long-term. But forgetting results from problems to retrieve stored information due to the fact that newly stored information overlays previous stored information.

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2. Cognitive processes


3. Mere (simple) exposure: a stimulus which has been processed before, will be processed in a more simply manner, and this leads to the fact that it will be graded more positively than a stimulus appearing for the first time.

4.Generalization of a stimulus: Consumers often apply what they have learned about the association related to one stimulus to another stimulus just because they are similar.This can be used for image transfer (Balea => Nivea) and brand extension (Caterpilar = machines are strong, so their clothes too).

BUT: “unlearning” what was learned before is difficult. There is a difficulty in opinion change. Companies can change the product (new and improved) or the positionning (different segment, more cool/upscale image, like McDonald).

4. Memory

Background - definitions

1.External information reception: (=current experience) what we see, hear, smell, and feel at this moment (logo, packaging,..)2.Internal information reception: (=past experience, remembrance/memory) thoughts, inner pictures, feelings that come to ones mind (remembering a commercial, past experiences with a brand)3.Active information reception: conscious, deliberate search for information (looking for product information on packaging, reading price)4.Passive information reception: unconscious, spontaneous, impulsive, accidental (spotaneous comprehension of packaging)5.Memory: Atkinson-Shiffrin Model or Multi-Memory model:

Step 1: Information enters the human information processing system via a variety of channels associated with the different senses.= sensory memory (1)Step 2: Information that is attended (2) to arrives in another temporary store called short-term or working memory (3).Step 3: Information that enters STM fades away as soon as it is no longer attended to. But information that is being actively attended (rehearsed (4)) to is being stored/transfered (5).Step 4: The information is stored in the long-term memory (6). Storing information in LTM is equivalent to a computer writing information out to its hard drive, or to a tape recorder writing patterns of magnetization onto tape to record music. The recording process is called storage and the "playback" process, retrieval (7).

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Remark: A common idea is that everything we have ever experienced has created a long-term memory, but this is unlikely to be so. Much of what we experience is never attended to, or not attended to beyond a few brief moments, and probably does not result in activation of the storage process.

Long-term memory

1. Categorization: the process in which ideas and objects are recognized, differentiated and understood. It implies that objects are grouped into categories, usually for some specific purpose. (= Fundamental in decision making). A category illuminates a relationship between subjects and objects of knowledge.

2. Prototype (in a category): is an original type, form, or instance of something serving as a typical example, basis, or standard for other things of the same category. It is a category member which is most easily recalled and becomes the standard of comparison for the category. It also has the most associations with other members of the category and very few associations outside the category. (ex: the golden retriever)

3. associative network: An associative network models human memory as the connections among isolated items of stored knowledge (the LTM). Stored ideas are connected by links of meaning, strengthened through rehearsal and elaboration. Multiple links to a given concept in memory make it easier to retrieve because of many alternative routes to locate it.

4. Spreading activation: “Spreading activation” involves the idea of one memory “triggering” another one. For example, one might think of Coke every time one remembers a favorite (and very wise) professor who frequently brought one to class. Coke might also be tied a particular supermarket that always stacked a lot of these beverages by the entrance, and to baseball where this beverage was consumed after the game. It is useful for firms to have their product be activated by as many other stimuli as possible. BUT:

A. the fan effect : As people study more facts about a concept, it takes longer to retrieve a particular fact about that concept. (The term 'fan' refers to the number of facts associated with a particular concept.) The fan effect refers to an increase in response time and/or error rates on a memory test with an increase in the number of competing associations to that memory probe. The associations to a concept were assumed to “fan” out of the concept node, hence the name. Specifically, multiple facts linked to a concept in the probe will interfere with each other during retrieval because of limited cognitive resources allocated to the probe (experts in the probe don’t have that problem). The Fan Effect is Anderson's explanation for the brain's ability to optimize memory retrieval by keeping better access to memories that are more likely to be relevant. The effect is a natural extension of the propositional network Anderson uses to represent concepts in the

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http://ai.eecs.umich.edu/cogarch0/common/prop/network.html

http://ai.eecs.umich.edu/cogarch0/refer.html

http://en.wikipedia.org/wiki/Understanding

http://en.wikipedia.org/wiki/Difference

http://en.wikipedia.org/wiki/Recognition


brain. Concepts with greater probabilistic relevance (probability = association strength / ∑ association strengths) are connected via conceptual links to other concepts, and the more connections (that is, the greater the fan), the more likely the central concept will be activated.

B. Lateral inhibition: In neurobiology, lateral inhibition is the capacity of an excited neuron to reduce the activity of its neighbors. So if we mention a lot of brand names, it will decrease the consumer’s memory performance due to the fan effect (as more facts we give about a concept, as longer it will take to retrieve a particular fact about that concept). And this theory linked with the TOT phenomenon (instance of knowing something that cannot immediately be recalled), helps a company influence the consumer by mentioning unimportant competitors.

5. Consumer evaluation

Consumer evaluation

Attitudes are overall evaluative judgments (about products, people, …). They have directions and strength, they are learned enduring and retieved or contructed on the spot. However, there are situational influences

Consumer attitudes are a composite of a consumer’s (1) opinion about, (2) feelings about, (3) and behavioral intentions toward some brand, product category, or retail store. These components are viewed together since they are highly interdependent and together represent forces that influence how the consumer will react to the object.

1. Opinion: The first component is opinion. A consumer may hold both positive beliefs toward an object (e.g., coffee tastes good) as well as negative beliefs (e.g., coffee is easily spilled and stains papers). In addition, some beliefs may be neutral (coffee is black), and some may be differ in valance depending on the person or the situation (e.g., coffee is hot and stimulates--good on a cold morning, but not good on a hot summer evening when one wants to sleep).

2. Affect: Consumers also hold certain feelings toward brands or other objects. (e.g., a person feels nauseated when thinking about a hamburger because of the tremendous amount of fat it contains).

3. Category-based: The behavioral intention is what the consumer plans to do with respect to the object (e.g., buy or not buy the brand). As with affect, this is sometimes a logical consequence of beliefs (or affect), but may sometimes reflect other circumstances--e.g., although a consumer does not really like a restaurant, he or she will go there because it is a hangout for his or her friends.

If a company wants to change the consumers’ attitudes, they have to change their beliefs, the attribute importance or ideal points.

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http://en.wikipedia.org/wiki/Neuron

http://en.wikipedia.org/wiki/Neurobiology

http://ai.eecs.umich.edu/cogarch0/common/capa/concept.html


Predicting consumer behavior

It is important to forecast consumer behavior (What will people buy? How much will they consume, complain? How will they react to changes?), but it is also very hard (sudden fads and the high new product failure rate).

Do attitudes predict behavior?

In 1969, Wicker reported on a review of 42 experimental studies that assessed attitudes and then included an observation of related behaviors. The average correlation was about .15 (r = .15). Wicker concluded that "taken as a whole, these studies suggest that it is considerably more likely that attitudes will be unrelated or only slightly related to overt behaviors than that attitudes will be closely related to actions". This is because of the external factors and the individual differences (low vs. high self-monitors and external vs. internal locus of control).

How to predict consumer behavior?

1.A company can rely on past behavior through sales trends and buying behavior trends. But there are some problems: situations change, sales trends are sometimes erratic and past behaviors are not available for new products or first-time behaviors. 2.A company can rely on consumers’ reported intentions.But intentions can change, there can be new information/unanticipated circumstances, there can be insights in own motivations or social desirability. Measurements can be tricky depending on when you measure and the type of behavior.

Does behavior influence attitudes?

1. Balance theory= is a motivational theory of attitude change proposed by Fritz Heider = people want a psychological balance. Heider proposed that liking relationships are balanced if the affect valence in a system multiplies out to a positive result.

For example: a Person who likes an Other person will be balanced by the same valence attitude on behalf of the other. Symbolically, P (+) > O and P < (+) O results in psychological balance.BUT: If a person P likes object X but dislikes other person O, what does P feel upon learning that O created X? By multiplying the signs, we can see that the person will perceive imbalance (a negative multiplicative product) in this relationship, and will be motivated to correct the imbalance somehow. The Person can either: Decide that O isn't so bad after all, Decide that X isn't as great as originally thought, or Conclude that O couldn't really have made X. Any of these will result in psychological balance, thus resolving the dilemma and satisfying the drive.

2.cognitive dissonance(pas connaître) the unpleasant state of psychological arousal resulting from an inconsistency between attitudes and behavior. The theory of cognitive dissonance proposes that people have a motivational drive to reduce dissonance. They do this by changing their attitudes or their behavior, or by simply denying and blaming it.

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http://en.wikipedia.org/wiki/Dissonance

http://en.wikipedia.org/wiki/Drive_theory

http://en.wikipedia.org/wiki/Valence_(psychology)

http://en.wikipedia.org/wiki/Fritz_Heider


3.Self-perception theory

=attitude changes result from observing our own behavior and conclude what attitudes must have caused them People decide on their own attitudes and feelings from watching themselves behave in various situations.

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3. Consumer purchase (consumer decision making)

1. Choices and biases

Choices

Creating a consideration set:

Inert set: brands that a buyer is aware of when considering a purchase but has no interest in due to the brands being neither positively nor negatively evaluated. This situation may arise through insufficient information or lack of perceived brand differentiation.

Evoked/consideration set: brands that a buyer is aware of, and thinks well of, when considering a purchase = alternatives which consumers actively consider before making their final purchase decision.

Inept set: brands that a buyer is aware of when considering a purchase, have a negative evaluation of ,but, uses in some way as a source of information and will consequently not be purchased.

First of all, we have the total set of choices, but the consumer isn’t aware of all of them, so that brings us to the consumer awareness set. For further decision making, the consumer will evaluate all the choices and decide which one he’ll actively consider = consideration set. The other ones left behind will find themselves in the inept and the inert set.Finally, in the last stage, internally and externally generated retrieval cues lead to a situation-specific consideration set (choice set) being brought to mind. The brands in this set are compared and one brand is selected for purchase.

Biases

A cognitive bias is a pattern of deviation in judgment that occurs in particular situations.

A. Context effect in choice

Effects on reference points: (pas connaitre)Example: you are on the beach on a hot day. For the last hour you have been thinking about how much you would enjoy a cold beer. Your companion needs to make a phone call and offers to bring back a berr from the only nearby place where beer is sold, which happens to be a fancy resort/run-down grocery store.

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Your companion asks how much you’re willing to pay for the beer and will only buy it if it is below the price you state. How muh do ou state for each of the places? (what is your reservation price?)

A contrast effect is the enhancement or diminishment, relative to normal, of a perception and related performance as a result of immediately previous or simultaneous exposure to a stimulus of lesser or greater value in the same dimension. (In this definition a "normal" perception is one free of immediate related context, greater or lesser, more appealing or less appealing.)

Example: A person appears more appealing than normal when contrasted with a person of less appeal and less appealing than normal when contrasted with one of greater appeal.

The assimilation effect theory focuses on desire to maintain balance between experiences and expectations by selectively accepting information consistent with expectation. Assimilation occurs when the stimulus differences among the parts are sufficiently small. (if the differences are sufficiently large, the opposite phenomenon of contrast tends to occur.)

Choice set effects

The decoy effect: is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated (= it is completely dominated by (i.e., inferior to) one option and only partially dominated by the other).

In the consideration set 1, some consumers will prefer A for its greater storage capacity, while others will prefer B for its lower price.

Now suppose that a new player, C, is added to the market (consideration set 2); it is more expensive than both A and B and has more storage than B but less than A:

The addition of C, causes A, the non-dominated option, to be chosen more often than if only the two choices in Consideration Set 1 existed; C affects consumer preferences by acting as a basis of comparison for A and B. Because A is better than C in both respects, while B is only partially better than C, more consumers will prefer A now than did before. C is therefore a decoy whose sole purpose is to increase sales of A.

The compromise effect: adding a premium product to make the compromise product more attractive! states that a consumer is more likely to choose the middle option of a selection set rather than the extreme options. For example, a car-shopper who is given three options: the low-priced basic model with no extras, a high-priced fully loaded model with all the extras, and a mid-priced model with some extras, will most likely choose the middle option.

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B.decision making under uncertainty

Expected utility theory

states that the decision maker (DM) chooses between risky or uncertain prospects by comparing their expected utility values, i.e., the weighted sums obtained by adding the utility values of outcomes multiplied by their respective probabilities.

example: you want to buy a specific calculator. You know that it costs $247/$47 in the electronics store just around the corner. However, you also know that it only costs $230/$30 in another electronics store. Unfortunately, this store is on the other side of town. What option would be the one with the highest utility?

2. Purchase

Environmental psychology

The Mehrabian-Russel stimulus-response model (environmental psychology)

1. Simple and fundamental model of how people respond to environments (ex: store atmospehrics: sensory inputs, personal interactions, architecture and merchandising):2. Peoples’ conscious and unconscious perceptions and interpretation of the environment influence how they feel in that environment = emotional response3.Feelings, rather than perceptions or thoughts drive behavior => Typical outcome variable is ‘approach’ or ‘avoidance’ of an environment (ex: average expense, time spent in-store, impulse buying, satisfaction/store loyalty)

The Russel model of affect (emotional response)

Emotional responses to environments can be described along two main dimensions, pleasure and arousal.

Pleasure is subjective depending on how much the individual likes or dislikes the environment

Arousal quality of an environment is dependent on its “information load”, i.e., its degree of

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Novelty (unexpected, surprising, new, familiar) and Complexity (number of elements, extent of motion or change) .

Basically, pleasant environments result in approach, and unpleasant environments result in avoidance. Arousal acts are amplifiers of the basic effect of pleasure on behaviour. If the environment is pleasant, increasing arousal can lead to excitement and stronger positive consumer response. If the environment is unpleasant, increasing arousal level will move consumers into the Distressing region. Feelings during the service encounter is also an important driver of customer loyalty

Store atmospherics

Service environments are complex and have many design elements. Key to effective design is how well each individual dimension fits together with everything else. The main dimensions include:

Vision and color -Pictures are emotionally more stimulating than words-Light: natural light gives feeling of security- Colors have different meaning: Red (warmth, energy, fire, aggression),Green (youth, freshness, live, calmness), Yellow (optimism, cheerfulness), Blue (sympathy, trust, harmony)

Smell and fragrances -processed by the limbic system, where immediate emotions are experienced-some responses result from early associations that call up memories (coffee, vanilla, cinnamon)-smell and fragrances are used commercially in - ads, scented products and environmental gragrancing (BA’s outdoorsy smell; Las Vegas; Baby apparel stores)

Music and hearing -Tempo: slow vs. Fast affects pace of people walking through store Affects sales (slower music = more sales)

-Mood: happy vs. Sad Happy mood increases spontaneous purchases Sad mood makes people process more systematically

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-

Phonetic symbols: sounds in words convey meaning

Touch -Moods are influenced by sensations reaching the skin-Possession begins with the shopper’s senses: the sooner/easier an item is touched, the more easily it will change ownership

Personal interactions -presence or absence of co-consumers as product attribute-customer/salesperson relationschip

Waiting lines -10 propositions on the psychology of waiting lines: Unoccupied time feels longer Preprocess/postprocess waiting feel longer than in-

process Anxiety makes waiting seem longer Uncertain waiting is longer than known, finite waiting Unexplained waiting seems longer Unfair waiting is longer than equitable waiting People will wait longer for mor valuable services Waiting alone feels longer than in groups Physically uncomfortable waiting feels longer Waiting seems longer to new or occasional users

-How can we manage time perctions? Mirrors Changing layout Animation

-examples of waiting lines:

Architecture and merchandising -the transition zone is important-Shopping experience should be easy and comfortable

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-Shoppers head rightward and do not use the whole store surface-Shoppers like reflective surfaces-The Butt-Brush Factor: When merchandise is displayed in such a manner that the customer gets bumped into or brushed constantly against, they move away from it even if they want to buy it. This is called the butt-brush factor. Retailers have to ensure that merchandise is placed properly!

They all influence emotional responses and influence buying behaviour!

Experiential marketing

-Traditional marketing

Promotes functional features and benefits Persuasive appeal focus on quality and price Customers are rational and analytical decision-makers

-Experiental marketing

Assumes that consumers are emotional and impulsive Focuses on consumption as a holistic experience Enriches consumer’s sensory, emotional, and intellectual experiences

Apple store dean & deluca Sephora

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4. Consumer post purchase

1. Consumption and customer satisfaction/dissatisfaction

Customer satisfaction

Customer satisfaction, a business term, is a measure of how products and services supplied by a company meet or surpass customer expectation. It is seen as a key performance indicator within business.

If CP < CE dissatisfaction If CP = CE satisfaction

If CP > CE delightCP = customer perceptions of qualityCE = customer expectations of quality

!!! Under-promise and over-deliver?

Under-promise and over-deliver: When someone under promises and over delivers, it means that he or she sets the bar low and then exceeds that bar. In a simple example of a situation in which someone might under promise and over deliver, a delivery company might promise that something will be dropped off by noon, setting the bar, and then tell the driver to make sure that the object is delivered by ten in the morning, thereby exceeding the expectations of the customer. The idea behind this concept is that by keeping customer expectations low and routinely exceeding them, an individual or company will develop a good reputation.

Relation between customer satisfaction and market value added

Numerous studies have shown that satisfied customers are more loyal, more likely to buy your product, more willing to recommend it to others. Satisfied customers directly impact your bottom line. Measured the right way, customer satisfaction is a leading indictor of a company’s financial performance. Managed scientifically using a proven, standard metric, customer satisfaction drives loyalty, profitability and growth. The American Customer Satisfaction Index (ASCI is one of the best-in-breed solutions for customer satisfaction measurement that is tied directly to financial performance. = increase in market value added!

Importance of customer satisfaction?

-influences repeat purchase intention-increase positive word-of-mouth and avoid negative WOM-Minimize complaints/returns-avoid legal actions-increases market value added

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CS = CP -CE


Consumer reactions to consumption

Measures to prevent regret/dissatisfaction – examples

-The thank you study: 23% of life insurance policies are cancelled within 6 months of issuing. How would cancellation rates be affected by thanking purchasers after issuing a new life insurance policy? Would it matter if they were thanked by phone or by letter?Yes! The cancellation rate without thanks is of 22,9%, the cancellation rate with a thank-letter is of 8,6% and the one with a thank phone call is of 11,4%!

-Making return easier: making return easier to encourage buying

-…

Responses to dissatisfaction

1.Fornellernerfelt (1988) : A majority of dissatisfied consumers do not voice their complaint to an organization. When consumers do not voice their complaint, an organization loses the opportunity to recognize and redress the problem leaving both the consumer and organization dissatisfied. Consequently, while seemingly paradoxical, it would seem in the best interest of organizations to encourage consumers to complain, and then to react appropriately to the complaint behavior.(A complaint must be resolved quickly!)

2.Pepsi example:

2. Customer-brand relationship and customer loyalty

Customer-brand relationships

Brands and personal relationships

consumer research indicates, that people tend to think of some corporate brands in terms of personal relationships, like:Microsoft: AppleMcDonalds:

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IBM:Harley Davidson:

Brand personality

Just like people, all brands have a personality. Whether it is shallow and instrumental or deep, emotionally charged and carefully managed. This personality is crucial. Why? To put it boldly: personality is a key issue in our society. Look at politics: the popularity of politicians and government leaders is personality based. It is not about their identity, it is not about their views, which are elements of the overall concept that matter most: their personality.

sincerity: down to earth, honest, wholesome, cheerfull Merci, Campbell’s, VolvoCompetence: Reliable, hard working, intelligent, confident, successful CNN, BBC, IBMSophisticated: upper class, glamourous, good looking, chamring Lexus, Channel, L’OréalExcitement: exciting, spirited, imaginative, up-to-date Mtv, Virgin, BenettonRuggedness: outdoorsy, masculine, tough Adidas, Levi’s, Marlboro

Cult brands – ensuring brand loyalty

Consumers demand more than reliability brand is a form of self-expression. They can ensure it through high involvement, product customization, brand communities, consumer empowerment and word of mouth.

Cult brands are the ultimate level in brand loyalty and can be termed super success in branding.

Customer loyalty

Customer loyalty is used to describe the behavior of repeat customers, as well as those that offer good ratings, reviews, or testimonials.

Components:

Attitudinal Component : a strong liking or preference for a brand over othersBehavioral component: A purchase response expressed over time by consumers with respect to one or more brands.

Measures of customer loyalty

We can measure it through :1.intentions and attitudes2.primary behavior: Defections; repurchase behavior; recency, frequency, and/or quantity of purchase; and longevity of relationship3.secondary behavior: Word-of-Mouth ; customer referrals

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Creating and maintaining loyalty

treat the customer rightcreate switching costsprovide extrasmanage customer satisfaction especially with service experience

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5. External influences

1. Individual characteristics

Demographics

Age groups

Kids -increased spending-kids can already purchase on their own at 4-kids as key target group (Nickelodeon)

Teens -easily switch brand preferences-very susceptible to peer influences-viral marketing

Generation Y (born 1977-89)

-Characteristics Experimentation Belonging (peer pressure, conformity) Independence (rebellion, but rather limited) Approval from others Activities, appearance important Responsible, ambitious Computer literate, marketing literate

-Important, large groupGeneration X (born 1965-76)

-Characteristics Cynical and disillusioned; alienated and resetful Pragmatic and realistic Can’t expect to exceed parents’ standard of living Less desire for show and materialism

-Important, affluent groupBaby Boomers (1946-53, 1954-64)

-Characteristics Largest, most affluent generation Strong sense of freedom and individualism The “Me Generation” “late” parents

Mature -characteristics Perceived vs. chronological age Four groups: older (55-64), Elderly (65-74), Aged (75-84),

Very old (85+) Growing segment with high income Active, mobile and happy Demanding and quality-conscious

Targeting different age groups: = ‘When you date on Friday lasts Saturday’printed ad in “cosmopolitan”

= ‘sooner or later your kids have to sleep ‘ printed ad in “parents”

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Psychographics

Personality

1. Unconscious mechanism (Sigmund Freud)-Id, Ego, Superego: are the three parts of the psychic apparatus defined in Sigmund Freud's structural model of the psyche. The id is the set of uncoordinated instinctual trends; the ego is the organized, realistic part; and the super-ego plays the critical and moralizing role.-suppressed desires may be symbolically experienced through product consumption

sports car= substitute for sexual gratificationbaking bread = substitute for giving birth

-research methodssee in-depth interviews (projective techniques, associative techniques, ZMET, laddering,..)

= they are very effective in giving a human face to research problem. The in-depth interview is a technique designed to elicit a vivid picture of the participant’s perspective on the research topic. During in-depth interviews, the person being interviewed is considered the expert and the interviewer is considered the student. T

2. Trait theory :

= is a major approach to the study of human personality. Trait theorists are primarily interested in the measurement of traits, which can be defined as habitual patterns of behavior, thought, and emotion. According to this perspective, traits are relatively stable over time, differ among individuals (e.g. some people are outgoing whereas others are shy), and influence behavior.

Carl Yung/Myers Briggs (Myers-Briggs type indicator = MBTI)

= psychometric questionnaire designed to measure psychological preferences in how people perceive the world and make decisions. Individuals are either born with, or develop, certain preferred ways of thinking and acting. The MBTI sorts some of these psychological differences into four opposite pairs, or dichotomies, with a resulting 16 possible psychological types. None of these types are better or worse: introversion/extroversion; sensing/intuiting; thinking/feeling; judging/perceiving

Psychographical segmentation

= Psychographic segmentation is sometimes also referred to as behavioural segmentation. This type of segmentation divides the market into groups according to customers’ lifestyles. It’s a tool that

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measures the psychographic variables (lifestyle, attitude, ethnicity, culture, values, personality, approach to risk).

Bein based on consumers’ resources and self-orientations, it is used to identify potential target markets and learn how to communicate with them more effectively.

Various psychographical segmentations exist to measure Germany (Sinus-Mileus (image)), Europe (GfK Euro Socio Styles) and USA (VALS).

2. Environmental influences

Modeling

= when a person imitates the purchase behavior and product use of others

1. Verbal modelingThe consumer is given a description of how similar others or aspirational groups behave in purchase/use situations.

2. Overt modelingConsumer observes and imitates modeled behavior and consequences

Reference groups

= A reference group is a concept referring to a group to which an individual or another group is compared.

Types of groups : -Formal groups (= secondary reference groups: tend to have somewhat less influence—e.g., members of a boating club that one encounters only during week-ends are likely to have their influence limited to consumption during that time period.)-Informal groups (=a great deal of influence—e.g., members of a fraternity/sorority)-Membership (also aspirational) = The aspirational reference group refers to those others against whom one would like to compare oneself. For example, many firms use athletes as spokespeople, and these represent what many people would ideally like to be.

Types of influences-normative influence, conformity through compliance (members influence what is perceived to be "right," "proper," "responsible," or "cool". Ex: wear a symbol even outside the house of worship

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because the religion is a part of the person’s identity)-informational influence, conformity through expertise (influence is based almost entirely on members’ knowledge)-value-expressive influence, conformity through acceptance

Word of mouth communication

Creating word-of-mouth -Methods Encourage WOM in advertising Scarcity principle= When things are scarce we want them. Provide free trials, samples to vanguard and ‘best customerss’ Guerilla marketing(=Guerrilla marketing involves unusual

approaches such as intercept encounters in public places, street giveaways of products, PR stunts, any unconventional marketing intended to get maximum results from minimal resources. )

Viral marketing (marketing techniques that use pre-existing social networks to produce increases in brand awareness)

Sources of word-of-mouth -Opinion leaders High status Involved with the product Outgoing/Gregarious

-Product innovators-Market mavens-Surrogate consumers

Negative word-of-mouth -more than one-third of WOM is negative-Dissatisfied customers more likely to tell other people than satisfied customers-negative WOM has more impact than positive WOM.

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Consumer Behavior

Documents

consumer evaluation

predicting consumer

consumer reactions

consumer behaviorprof

customer loyalty

consumer post purchase

customerbrand relationships

consu u ch s pu ch s