Consumer Behavior Exam 3

WOM

product information transmitted by individuals to individuals

negative > positive

weigh negative WOM more

Why care about post-purchase?

• repeat purchases

• low involvement purchases

• WOM

Consumer Reactions to Consumption

• satisfaction and dissatisfaction

• response to product/ service failures : attribution Theory

• post - decision dissonance

• post decision regret

• satisfaction with process of choice

satisfaction

• repeat purchase intentions

• increased positive WOM

• basis for positive emotional connection to the brand and loyalty

dissatisfaction

• voice response

• private response

• thrid-party response

voice response

• complain to firm

• product returns

private response

complain to friends (negative WOM), boycott firm

third-party response

file officials complain, take legal action

expectancy disconfirmation model of satisfaction

satisfaction = actual performance - product expectations

dissatisfied

actual is below expectations

satisfied

actual is equal to expectations

delighted

actual is above expectations

satisfaction is weighted differently

12 positive experiences = 1 negative experience

two paths to satisfaction

1. manage outcome (actual)

2. manage expectations

manage outcome (actual)

deliver the goods

manage expectations

• set expectations accurately

• communicate consistent messages

• clear, definitive, and simple messages to customers

attribution theory

• people want to blame someone

• fundamental attribution error

• it is perception that matters, not reality

three factors influence dissatisfaction level

1. stability

2. focus

3. controllability

stability

is the cause of temporary and permanent

focus

marketer/ brands fault or my own

controllability

market/ brand control

BAD=

permanent, marketer- related, and marketer- controlled

Dissatisfaction and Attribution Theory

post-decision dissonance examples

• did i buy the right brand?

• should i have searched more?

• could i have found a lower price?

post-decision dissonance

anxiety experienced post-purchase when a consumer wonders whether they made the right choice (even when the choice turns out positive), particularly under approach- approach conflicts

reducing dissonance

make the customer feel good about the purchase, ex. follow up emails or return policies to make them feel confident

post- decision regret

unfavorable comparison between chosen and unchosen alternatives, based on cognitions and affect

regret

regret= unchosen-chosen

in the short run,

we regret our actions more

in the long run

we regret our inactions more: the things we have’nt done in life

post-purchase: disposal

• lots of money in it

• self storage

• donation

• second- hand markets

recycling

• public policy implications of product disposition

what leads to a willingness to dispose of possessions?

• major life events

• moving or role transitions (marriage/divorce)

consumer satisfaction/ dissatisfaction is

based on perceptions

companies need to manage

expectations

product failures are often

attributed to the firm

uncertainty about having made the correct choice leads to

post-decision dissonance

wishing you had bough another option leads to

post-decision regret

deliberation and choice sets

contribute to post-decision

information search

consumers need information to solve problems

two types of search

1. internal search : scanning memory

2. external search: experiential search, interpersonal sources (family and friends)

Typically:

start with internal and continue with external

what do consumers search for?

• brands

• attributes

• evaluations / attributes

• expereinces

what affects brand recall?

• prototypically

• familiarity

• goals/ usage situations

• brand preference

• retrieval cues

what affects attribute recall?

• accessibility/ availability (strong associative links)

• diagnostically (differentiating)

• salience/ prominence

• vividness

• goals

The economics of information

how much consumers search

Do consumers get full information and then optimize their decision?

• gather as much data as needed to make informed decisions, then stop

• we will collect the most valuable information first

• we continue to search until the costs exceed the utility of the information search

Influence of Consumers Prior Expertise on Search

for how much and how long do we search?

depends on motivation, ability, opportunity

motivation

• importance of the task

• involvement

• perceived costs/ benefits

• discrepancy of information

ability

expertise

opportunity

• availability of information

• time

Do people search enough?

• generally, people under-search

• look at only 1-2 sources before buying a car or major appliance

over search

• can lead to less satisfaction

• especially in ordered environments

why horoscopes are always right!! “specially vague”

mood effects on information search

confirmation bias

the tendency to “see what you expect to see”

• people will interpret information in a way that supports or confirms their prior expectations

• we search for evidence that confirms our attitudes

confirmation bias in marketing

• unhealthy = tasty intuition

• confirm hypotheses generated by ads

consumers conduct both

internal and external search to find information about how to move their actual to ideal state

most consumers undersearch

marketers need to find a way to be top of mind (using availability heuristics)

most consumers conduct biased search (confirmation bias)

marketers need to find a way to have an image that fits with target market ideals (using perceptual and preference maps)

Rule 1 of Decision Making

People act differently when something is framed as a loss vs a gain (risk seeking for losses and risk averse for gains)

Rule 2 for decision making

losses bloom larger than gains (loss aversion)

rule 3 of decision making

evaluations are driven by individual events, not total outcomes (seperate gains, aggregate losses)

visual illusions

decision illusions

risk seeking

when the choices are perceived as losses (deaths)

risk averse

when the choices are perceived as gains (lives saved)

loss aversion: status quo bias

• preference for current sate of affairs (status quo) over change

• manifests as resistance to change

• status quo = reference point

• encourages brand loyalty

• risk of loss psychologically outweighs the potential for gains

loss aversion

people tend to be more sensitive to losses than to gains

sunk cost effect

want to avoid calling it a loss

gain framing

same situation framed as a gain is more favorable

Rules of DM into 1 model prospect theory

replaces expected utility (objective) with subjective utility (how we see things) incorporates the human element of evaluations

Prospect theory reference points

determine losses vs gains

prospect theory loss aversion

losses loom larger than gains (PT)

prospect theory diminishing returns to psychological value

diminishing marginal utility/ disutility

Types of reference points

• status quo

• subset: reference prices

• salient numbers in the environment - as in anchoring and adjustment

• the exemplar/ prototype price

mental accounting

• money is not 100% fungible

• although money has an objective value, its subjective value can change based on the situation

• we put money into different “mental accounts” - rent money, car money

• sunk cost effect

• situational factors can change what you’re willing to pay

Managerial Implications: Compromise Effect

especially important for service businesses selling an intangible product that is not easily comparable

what about retail bsuinessses

• give customers three related choices at three different prices

• avoid one of a kind items sitting on shelves isolated form comparable products especially if your product is “average”

Vacation Choice

Attraction Effect

Prospect Theory

the overarching framework for the three rules of decision making

1. loss vs gain framing

2. loss aversion

3. individual events (vs total outcomes) are what matters

People, like organizations do accounting!

money is not “fungible as a result of mental accounting

context is key

1. judgments/ evaluations are not independent

2. compromise and attraction are context effects

Qualitative Methods

• in depth interviews

• projective techniques

• focus groups

Quantitative Methods

• Observation

• Surveys

• Experiments

Sources of Secondary Data

General Simplified Rule

collect secondary data first then turn to primary data

advantages of secondary data

time savings, low costs

disadvantages of secondary data

• may be out of date

• definitions or categories might not be what you’re looking for

• might not be specific enough for your project

tools for primary date

Advantages of survey data

useful for measuring a lot of things

• attitudes

• knowledge

• intentions

• brand awareness

• customer satisfaction

disadvantages of survey data

• subject to sampling bias

• subject to social desirability bias

• can measure correlation but not causation

observational research

• making observations of behavior and recording those observations in an objective manner

• natural (home) vs artificial (lab) settings

• most useful when investigating complex social settings; less useful for studying well- defined hypotheses under specific conditions

Observation Basics- what can be observed

• human behavior or psychical action

• verbal behavior

• etc

how can we observe?

• cameras

• eye tracking

• popilometer

in depth interviews

conducted a face-to-face with one respondent with the objective of exploring the subject matter in detail - laddering (what is that important to you)

projective techniques

when direct questions fail - word association, cartoon test, consumer drawings

when should you resort to projective techniques

• the issue is unimportant to the respondent

• group norms and social pressures are significant

• consumer doesn’t want to appear ignorant

• need for privacy

• respondent may not be fully aware of their “true” motivation

Focus groups

a group of respondents discusses a marketing problem by responding and reacting to each other