MKTG 650 Consumer Behavior Exam 2

What is a conjoint analysis?

What is a conjoint analysis?

Most widely used market research method Based on the premise in which the value assigned to products
is based on the combined value of its attribute levels

Uses of Conjoint Analysis

• Understand the how much consumers value different
  attributes and attribute levels.

• Figure out the optimal combination of features for different consumers.

• Predict market shares for products that have different combinations of features.
  • Identify market potential for concepts not yet available.
  • Quantify brand value

Utility for a Product

Sum of utilities of its attribute levels; The whole is equal to the sum of its parts

Stages in Conjoint Analysis

• Select attributes
• Select levels for these attributes
• Create product profiles
• Collect data
• Estimate partworths
• Derive insights and make predictions

How to Select Attributes

• Do not use too many attributes.
  • Focus on attributes that impact sales (cell service??).
  • Do not use ambiguous descriptors (e.g., $6 to $8).
  • Do not use subjective attributes (e.g., aesthetic
  appeal).
  • Watch out for infeasible combos.
  

How to Select Attribute Levels

• Keep levels similar across attributes

• Keep levels realistic

• Make sure the range of levels is all you want to asses

Calculating Attribute Importance

The bigger the partsworth, the more IMPORTANT

Attribute Importance Formula

Range / (Sum of Ranges)

Willingness to Pay Formula

1) Price Range / Util Range = Price per Utility

2) Multiply partworth by price per utility to get WTP

Loss Aversion

People are more sensitive to losses than gains

Endowment Effect

People value objects they own more than the same object when they do not own it

Psychological Ownership

The feeling that something is yours that results from control, intimate knowledge and self-investment

Foot-In-The-Door Technique

A two-step procedure for enhancing compliance
in which a minor initial request is presented
immediately before a more substantial target
request.

Agreement to the initial request makes people
more likely to agree to the target request than
would have been the case if the latter had been
presented on its own.

Door-In-The-Face Technique

A two-step procedure for enhancing compliance
in which an extreme initial request is presented
immediately before a more moderate target
request.

Rejection of the initial request makes people
more likely to accept the target request than
would have been the case if the latter had been
presented on its own.

The Beauty Premium

Attractive people are treated better than unattractive people (and people are more likely to listen and comply to them)

Principles of Persuasion - Liking - Similarity

Principles of Persuasion - Liking - Praise

Reciprocity

If someone gives us something, we feel the need to give back even if we didn’t want their initial “gift” in the first place

Consistency

People behave consistently with previous “clear
commitments”

What is a clear committment?

• Requires action
• Voluntary
• Public

Consistency - Rule of 3 Yeses

Ask 3 questions you know you will get a yes to and then ask for what you really want

Principal of Persuasion - Social Proof

People follow the lead of others; use social power when applicable (Monkey see, monkey do)

Principle of Persuasion - Authority

People defer to experts

Principles of Persuasion - Scarcity

People want more of what they can’t have

EX: Bernie Madoff Ponzi Scheme

Scarcity = Limited, Urgency, Exclusivity

Nudge

Any aspect of the choice architecture that
alters people’s behavior in a predictable way without
forbidding options or significantly changing their
economic incentives

Choice Architecture

The method by which choices are presented to people to influence their behavior

Psychological Reactance

A phenomenon that involves a hostile motivational reaction to offers, persons, rules, or regulations that are perceived to threaten behavioral agencies and freedoms

What causes Psychological Reactance?

May occur when a individual feels that someone or something is threatening to limit/control their behavior or choice.

This perceived threat can elicit a hostile response due to them feeling their behavioral freedom being infringed on

Nudges must be ____________ to implement?

Relatively costless

Mapping

The choice from choice to outcome (or welfare)

Paradox of Choice

Less is more; too much can be stressful (Choice Paralysis)

Option Attachment

A sense of ownership when consumers select one
option, they feel a sense of loss for the others.

Increases the attractiveness of the forgone options.
Choosing feels like losing.

Escalation of Expectations

The more choices you have, the greater the expectations
for the option that is chosen.

Becomes harder to meet or
exceed expectations. Leads to dissatisfaction.

Choice Paralysis

The more choices you have, the harder it is to make a decision and the more attractive the choice set is.

Makes people less likely to choose (EX: Jams)

How do you deal with too much choice?

Mindfulness

Mindfulness

Being present here and now, paying attention to thoughts, bodily sensations, emotions, and external environment with kindness and not negativity

Satisficing

A decision-making strategy that aims for
a satisfactory or adequate result, rather than the
optimal solution.

Instead of considering all information, consumers
apply a simple rule of thumb to make a decision that
is “good enough.”

Performance Tactic

Make choices by focusing on one attribute that is
important to you and select the best.

Habit Tactic

Made choices that we last made to simplify our decision making process

What leads to habit formation?

Ubiquity

What is ubiquity?

In general, the term ubiquity means being physically present in several places simultaneously, or being omnipresent. In e-commerce and customer service, ubiquity refers to the fact that your visitors and customers can access your services from anywhere, at anytime, and on any device.

Brand Loyalty Tactic

Repeated purchases of a brand because it satisfies your needs more than other brands

System 1

Intuition and Instinct; Automatic pilot, unconscious

System 2

Rational thinking; takes effort, slow, lazy, logical, indecisive