MKTG 371 Exam 2 Ehrich

Categorization

occurs when consumers use their prior knowledge to label, identify, and classify something new

- once we have categorized an object, we know what it is, what it's like, and what it's similar to

Why do we categorize?

-too much information

-utter chaos without structure

-helps us learn

-we like to do it

-we're good at it

Taxonomic Categorization

similar objects in the same category (playlist with all the same genre)

-objects in categories have same features

-lots of sharing within categories

-little sharing across categories

3 types:

- superordinate (broadest)

- basic

- subordinate (narrowest)

Aaker's 5 dimensions of brand personality

- sincerity (down to earth, honest, wholesome, cheerful)

- competence (reliable, hard working, intelligent, confident, successful)

- ruggedness (outdoorsy, masculine, tough)

- excitement (exciting, spirited, imaginative, up-to-date)

- sophistication (upper class, glamorous, good looking, charming)

5 Dimensions of Brand personality

Sincerity

-Hallmark, Kodak, and even Coke

Excitement

--Pepsi vs Coke

Competence

-American Express and the Wall Street Journal

Sophistication

-BMW, Mercedes, Lexus vs Mazda Miata or VW Golf

Ruggedness

-Nike (vs Lululemon), Marlboro (vs Virginia Slims)

Experts

people whose prior knowledge is well developed, in part because they have had a lot of experience and familiarity with an object or a task

Level of Expertise

experts vs novices categorize in different ways

- experts' category structure is more developed

- have more categories, associations, and a better understanding

- have more subordinate-level categories

Graded Structure

some members represent category better than others

- dogs: golden retrievers, labs

Prototype

best example of category

- most easily recalled

-standard of comparison for category

-(Forest Gump for Tom Hanks movies)

-(velcro instead of hook and loop)

Goal Derived (Ad Hoc) Categorization

contain things we perceive as relevant to a goal

-We use rules/experience to create these

EX:

- things to do on a friday night

- things you eat on a diet

- things I take on a camping trip

First Mover Advantage

- allows you to be the prototype

- easier recall increases sales

- more likely to be in the consideration set

Positioning

IN HEAD

-position close to prototype

-position away from prototype

-position relevant to goal

Repositioning

changing consumers' perceptions of a brand in relation to competing brands

-Can use placement to change categorization (on shelf)

EX: baking soda in fridge instead of baking with it

Why is understanding memory important for marketers?

-perceptions

-decision making

-effectiveness of marketing actions

EX: top advertising slogans of the century

-Diamonds are forever (Debeers)

-just do it (Nike)

-tastes great, less filling (Miller Lite)

EX: top advertising icons of the 20th century

-Ronald McDonald

-The Green Giant

-Betty Crocker

-Energizer Bunny

Types of Memory

1) Sensory Registry

2) Short term Memory

3) Long term Memory

Sensory Memory

-Information that comes in through our senses

---echoic memory (hear it)

---iconic memory (see it)

-first place memory goes, stored in its sensory form.

-Very short lived (1/4 sec - 2 sec) --If not processed, we lose it

The way it comes in is the way it's stored - "disneyland" - not associations with it, just the word

Short-Term Memory

- portion of memory where incoming information is encoded and interpreted

- limited capacity (increased for higher involvement)

-Short-lived duration (can only store 5-7 things)

Discursive Processing

the processing of information as words

Imagery Processing

the processing of information in sensory form

Long Term Memory

permanently stored knowledge

--autobiographical (episodic) memory (experiences, stories)

--semantic memory (knowledge)

Very large storage capacity

Info is NEVER lost, sometimes we just lose the ability to retrieve it

Effects influencing memory (what do we remember)

-primacy/recency effects

-novelty/incongruency

How do we improve our memory

-rehearsal (actively reviewing info to remember it)

-dual encoding (writing while listening)

-chunking (grouping multiple info items as a single unit)

-recirculation (remember it bc you encounter it a lot - associative learning)

-elaboration (relating info to what we already know/think about)

-no interference

-state dependent learning

How can marketers improve memory?

- simple message, simple story

- repetition

- use relatable characters and contexts

- identifiable situations with twist

- elaboration

- use strong imagery

- engage emotions (sentiment, humor, fear)

Testing your short-term memory

Miller's magic number: 7+/- 2

Short-term vs long-term

Short Term

Capacity: 7 +/- 2

Duration: Appox. 18 seconds

Info Lost: rehearsal failure, elaboration failure

Long Term

Capacity: unlimited

Duration: Permanent

Info lost: retrieval failure

Associative Network (collective memory)

How is memory organized?

Concepts, feelings, and events are stored in "nodes."

• Associative links (of varying strengths) connect the nodes.

--Links in networks created through knowledge and experience

• When one node is activated, this activation spreads along associative links toward related concepts.

How does associative network influence retrieval?

- Stronger links are more accessible (marketers try to strengthen links between brands and associations)

- Spreading activation (explains our seemingly random thoughts)

- Responsible for false recall

- Can't retrieve when link fades

- Sleeper effect (source decays faster than message)

Explicit Memory

memory achieved by active attempts to remember

- recognition

- recall (free vs cued)

Implicit Memory

memory for things without conscious awareness

Retrieval Failures: Forgetting

Decay: the weakening of nodes or links over time

Interference: that which causes us not to remember which features go with which brand or concept due to semantic networks being too closely aligned

Errors: What we do remember is not always accurate or complete; our memory may be subject to distortion or confusion

How Retrieval is enhanced: via the stimulus itself

Salience

--if something stands out from the larger context in which it is placed because it is:

- bright

- big

- complex

- moving

- prominent

Prototypically

--easier to recognize

--likely to be linked to many other concepts in memory

How Retrieval is enhanced: via WHAT the stimulus is linked to

Retrieval Cues

--a stimulus that facilitates a node's activation of memory

EX: brand name/symbol as a retrieval cue

New research in memory

after engaging in morally questionable acts, you are less likely to recall honesty pledge

Memory revisionism

recall strategies that protect self-image after ethically questionable behavior

Willfully ignorant memory

tendency to incorrectly recall attributes that are ethically "poor" or "negative"

Note about memory

Few consumer decisions are based on just the information in the environment. Almost all consumer decisions include some memory component

Consumers as Problem Solvers

Consumer purchase = response to problem

--Actual vs. ideal state

Decision-making process

--After realization that we want to make a purchase, we go through a series of steps in order to make it

--Can seem automatic or like a full-time job

Limited Problem Solving

More straightforward/simple

Lower risk/involvement

Less search

Limited shopping time/venues

- buying a new suit/camera

- not life or death, takes time but not months

Decision Making Process

Problem Recognition

--EX: Richard realizes that he dislikes his b&w TV

Information Search

--EX: Richard surfs web to learn about TVs

Evaluation of Alternatives

--EX: Richard compares models on reputation and features

Purchase Decision

--EX: Richard chooses a TV with an appealing feature

Post-Purchase

--EX: Richard brings home and enjoys his TV

Extended Problem Solving

-Eventual purchase decision is perceived as a risk and/or highly involving (risk of making the wrong decision is HIGH ex: choosing a college, buying a car)

-Consumer collects extensive information (internal & external search)

-Careful evaluation of brand attributes (compares on many criteria)

-Might visit many different outlets

Perceived Risk

extent to which a consumer is uncertain about the consequences of buying, using, or disposing of an offering

--Performance Risk: will the product perform?

--Physical Risk: is it safe?

--Social Risk: will it hurt my social standing?

--Psychological Risk: does it fit with what I think of myself?

--Time Risk: do i have the time to invest in it?

Habitual Decision Making

Automaticity: choices made with little/no conscious effort

--efficient decisions: minimal time/energy

Challenge for marketers

--how do you convince consumers to "unfreeze" their former habits and replace with new ones

- price promotion

- changing layout of store

- influencers

EX: buying toothpaste

Problem Recognition

occurs when consumer detects difference between current and ideal state

-Need recognition: actual state moves downward (ex: running out of a product, buying deficient product, creating new needs)

-Opportunity recognition: ideal state moves upward (ex: exposed to different/better quality products)

*When consumers convince themselves that something is broken, there is BOTH need and opportunity recognition*

How do we create problems?

Change/Establish Ideal

--ideals are not constant (ex: fashion/trends)

Bring Awareness of the Actual

--inform consumers of the way things really are

Create Dissatisfaction with the Actual

Make a New Actual Possible

Information Search

search first in head (memory or knowledge) then external search

-Consumers need information to solve problem (ex: survey environment for appropriate data to make decision)

- Search for: brands (consideration set), attributes, evaluations/attitudes, experiences

Internal Search

Scanning memory to assemble product alternative information

External Search

Obtaining information from ads, retailers, catalogs, friends, family, people-watching, Consumer Reports, etc.

Internal Search: what makes things easier to recall?

- primacy and recency

- prototypicality (ex: tide)

- goals and usage decisions

- accessibility

- diagnosticity

- brand loyalty

- vividness/salience

- retrieval cues

Economics of Information

Consumers will gather as much data as needed to make (somewhat) informed decisions

--We continue to search until costs exceed utility of information search

--We will collect most valuable information first

--Search until we have enough info

*Satisfice: search to the point of satisfaction, look no further

Influence of Consumer's Prior Expertise on Search

-Moderately knowledgeable consumers tend to search more than product experts and novices (BELL CURVE: as amount of search increases, product knowledge increases)

-Experts: selective search

-Novices: often just use others' opinions

For How Much & How Long Do We Search?

Depends on:

Motivation

- importance of task

- involvement

- perceived cost/benefit

- discrepancy of info

Ability

- expertise

Opportunity

- availability of info

- time

Do people search enough?

Generally people under search

-they look at only 1-2 sources before buying a car or major appliance because customers are LAZY, not because of lack of info

When searching is not accurate: Availability Bias

recall information that is more accessible, but not necessarily more diagnostic

- use information that comes to mind quickly more often

When searching is not accurate: Confirmation Bias

find info that is consistent with attitudes

find info that proves, but do not usually try to falsify

- We find the info we WANT to find, regardless of if true

Note about problem recognition

Consumers conduct both internal and external search to find info about how to move from their actual to ideal state

How Fashions Change and Impact Long Term Detriments to Consumer

if you bought into the fashion last season/year and it's no longer the same

- eyebrow trend: thick eyebrows

- people who hate it: those who subscribed to thin eyebrows last year

How do we make decisions when MAO is low?

Motivation Ability Opportunity

heuristics

- don't like to put in cognitive effort

- makes things easier

- consumers are lazy

-consumers Satisfice (settle for the first thing to satisfy you)

availability heuristic

make decisions about probability based on what comes to mind easily

-EX: do hurricanes or lightning strikes kill more people?

---we think hurricanes because we see them in the news more often

availability heuristic example

You are doing consumer research on married couples and how they divide up their lives.

You ask them each how much of the housework they do, what percentage of arguments they start, what percentage of gifts they give, and so on.

No matter what question you ask, good or bad, the husband's and wife's percentages add up to more than 100%.

For instance the wife might say she does 60% of the grocery shopping, and the husband says he does 60% too.

Common marketing implications of Availability Heuristic

-be careful of focus group conclusions

-make your product SEEM the best

-position brands close to the prototype

representativeness heuristic

if it seems like what it would be like if it were true, then it is true (then we assume that it must be true)

-EX: skincare, workout regimens - most of the time the people just look like that

representativeness heuristic example

Your new advertisement for Vitariffic Vitamins is a great success.

In the ad, you show three people before they take the vitamins, sluggish and unhappy.

Then you show them after taking the vitamins, full of energy, thin, and enjoying an active and varied social life.

This ad works much better than the previous one you used in which you gave all of the pre-vitamin and post-vitamin statistics.

Common marketing implications of Representativeness Heuristic

-provide consumers with positive and vivid product experiences

-stimulate positive WOM (sneak previews)

representativeness heuristic example

You are representing a famous sportsperson as their publicist.

They are chosen to be on the cover of 'Sports Illustrated.'

You are very disappointed, because you have noticed that all of the people featured on the cover of Sports Illustrated have worse years the year after they are featured than the year before.

This is the 'Sports Illustrated' curse.

Base Rate Neglect

when irrelevant info is used to make a probability judgement

- asking waitress what's their favorite thing on the menu even though they probably don't have the same taste as you

- you should ask whats the most popular menu item instead to get an accurate opinion

Common marketing implications of Base Rate Neglect

-provide consumers with base-rate info

-EX: "chosen by 4 or 5 consumers"

Sunk Costs

costs that have already been incurred and cannot be recovered

- should ignore

- actual: use them to influence decision behavior on future potential benefits

- EX: painful shoes - not getting money back regardless of how many times you wear them,

- SHOULD weigh benefits rather than costs, meaning, don't put yourself in pain because you feel obligated bc you paid $ for them. Realize that the money is already gone. Putting yourself in pain by wearing them will not get the money back

Sunk Costs example

Pre-ordering a movie ticket: Should you go if you decide at time of movie you don't want to?

--Price of the ticket becomes a sunk cost.

--Even if the ticket-buyer decides that he'd rather not go to the movie, there is no way to get back the money he originally paid.

The ticker-buyer will have:

--Paid the price of the ticket and suffered watching a movie that he does not want to see, or

--Paid the price of the ticket and used the time to do something more fun.

Should we be concerned about the following statistics?

Most dog bites (77%) are by dogs known to the victim

--Not concerning bc people who are around the dog more frequently, are more likely to get bit then by someone who is rarely around the dog

Honda Civics are one of the most commonly stolen cars

--Not concerning bc they are the most commonly bought car, making there be more HCs out there than other brands to steal

Most car accidents take place within 5 minutes of home

--Not concerning bc you mostly drive/go places nearest to your house, making it there be more chances of getting wrecked there than some place you rarely go

How do marketers use the sunk cost effect?

- Get people to make a number of small and easy commitments.

- When they try to pull out, remind them of the total commitment they have already made

How can consumers avoid falling prey to marketers use of the sunken cost effect?

when thinking of pulling out of something, focus on future costs and benefits rather than past investment

Halo Effect

The tendency to assume that if something is good on one attribute then it is good on all others.

-EX: attractive people often seen as nicer, more skilled, etc

-EX: Ipod has positive effect on perceptions of other Apple products

Horns Effect

Just person/brand negatively based on one product/attribute

-opposite of halo effect

-EX: people tend to think that overweight people are lazy

Confirmatory Bias

The tendency to "see what you expect to see." People will interpret information in a way that supports (or confirms) their prior expectations.

- if I want something to be true, I'll find info that supports it and ignore information that disproves it

Self Positivity Bias

thinking bad things happen to other people, but not to us

- why people smoke, bake in sun, drive drunk, speed

- Mktg implication: have to convince people that they are indeed at risk

--calculate population risk, then friend's risk, then your risk

out-group homogeneity

You feel people in the out-group are more like each other than themselves feel they are.

-assume people in out-groups are all the same

- stereotypes: women, college students, millennials, men, anything you are not

out-group homogeneity examples

-You are a man making an ad meant to appeal to women. You put fluffy pillows, kittens, and cleaning products in the ad.

-You are a woman making an ad meant to appeal to men. You put sharp objects, pit bulls, and car wax in the ad

Egocentric Bias

you think people are more like you than they actually are

- can't assume everyone feels/thinks the same as you

Egocentric Bias examples

-I think Politician X is an idiot. I assume most people think the same way and am surprised to learn how many people support Politician X.

-Danger to marketer: "I am a representative for Tito's Vodka...everyone knows Tito's Vodka is the smoothest vodka on the shelf.

Marketing Based Heuristics

Shelf Space

--seeing what brand has more dedicated space and using that to determine what is most popular (ex: tide)

Scarcity = desirability

--if they are not available all the time, people want them when they are (ex: Girl Scout Cookies)

Number of Arguments

--more reasons to buy makes people think it's best (length=strength)

Price-Quality

--people think higher price = higher quality

Family Influence Effect

--tendency to buy the same products that your parents bought

--the "intergenerational effect"

fundamental attribution error

over attribute others' actions to their personality and under attribute to situation (subset of representativeness heuristic)

-you feel peoples actions are based on their personality not the situation

-you do the opposite for your own attributions of negative behavior

-EX: if you behave badly, you attribute to the situation, not your personality

--ex: getting in a car accident or going to class

Performance Based Tactics: for low-effort THOUGHT-based decision making

-"buy the one that works best"

-"buy the detergent that gets clothes cleaner"

-"buy the cookies that tastes the best"

-"go to the hotel with the most comfortable bed"

Price related tactics: for low-effort THOUGHT-based decision making

-"buy the cheapest/on sale"

-"buy the brand on sale"

-"use a coupon"

Brand Loyalty: as a simplifying strategy for low-effort THOUGHT-based decision making

Brand Loyalty: buying the same brand repeatedly because of a strong preference for it

Multi-Brand Loyal: buying 2 or more brands repeatedly

Status Quo Bias

repeatedly buy not because of loyalty, but because costs of changing your mind are high

-Not due to loyalty

-EX: ordering the same thing every time at the restaurant

-EX: always going to cheesecake factory

Normative Influences as a Simplifying Strategy

When other individuals influence our choices

-Direct Influence: others try to manipulate us (ex: "buy the brand of cereal the kids ask for")

-Vicarious Observation: watch what others do to guide our behavior. (ex: "buy the brand of laundry detergent that my mom used")-->Related to intergenerational effect

-Indirect Influence: when we are concerned about the opinions of others (ex: "buy the brand my friends are buying so i'll fit in")

Affect (emotion) related tactics: for low-effort FEELING-based decision making

using how you FEEL

- the "how do you feel about it?" heuristic

- under cognitive load you don't have energy to think of the best option

- just choose the option that evokes positive feelings

-EX: "Heart and Mind in Conflict Study in 1999

--People chose the cake when under cognitive load (stressed)

--People chose the fruit when NOT under cognitive load (not stressed)

choice overload

choices make decision harder

- increases cognitive dissonance and post purchase regret

- you get too overwhelmed with too many options

- Jam study: more selection = more attention, less choice (action)

EX: 6 jams vs 24 jams

Out of all shoppers: Attention

24 jams: 60% of shoppers stopped

6 jams: 40% of shoppers stopped

Of those who stopped: Choice

24 jams: 3% bought

6 jams: 30% bought

What influences consumers' store perceptions?

Availability of favorite:

-care only about their favorite (when they have established preferences)

Number of SKUs (number diff products):

-you can reduce SKUs without consumers noticing it if you stay below JND

Category Space (total number of facings):

-if you keep the overall space constant, you can reduce SKUs, just have more facings of "favorites"

Gambler's Fallacy (Monte Carlo Method)

the belief that the odds of a chance event increase if the event hasn't occurred recently

-EX: flipping a coin, have only had heads so far, guess tails because it's bound to come soon

- You get out of it by guessing without motivation knowing that there is still fair odds for all choices

Hot Hand Fallacy

a person who has experienced success with a random event has a greater chance of further success in additional attempts

- giving the ball to the worse player because they've had success this game rather than the better player who hasn't had success this game

- You get out of it by choosing without motivation knowing the overall statistics

--ex: instead giving the ball to the better player even tho he is not playing as well this game

Illusion of Control

tendency for humans to believe they can control or influence outcomes that they cannot

- blowing on dice, yelling at TV, wearing lucky shirt

- you think if you do those things, it will give you the outcome you want

Willful Ignorance

The tendency to avoid information, that, while useful and important, could cause emotional unease

- ethical elements of products

Notes on Low Effort Decision

Consumers often use heuristics (or simple decision rules) to make low effort decisions

-however, sometimes these heuristics are over-applied leading to bias in decision making

Compensatory Decision Process: for high effort decision making

-cost benefit analysis

-good can make up for the bad

Noncompensatory Decision Process: for high effort decision making

-simple decision models

-bad cannot be compensated

-EX: no matter what, I won't sign up for an 8 am

Self-Control

The ability to focus on long term goals rather than on short term goals.

-conflict between short and long term goals

-We lack self control when short term goals win over long term

Gain self-control by:

- Operant conditioning (reward yourself)

- Change the environment (limit availability)

- Distraction

Variety seeking as a low-effort consumer choice tactic: "try something different"

-"Why do we have a sandwich one day for lunch and a pizza the next?"

-"why do we not buy the same birthday card for everyone?"

-"why don't we buy 5 shirts that are exactly the same?"

Why do we like variety?

-Satiation

-Stimulation

-Preference uncertainty (think we need more variety than we do)

Marketing implications: offer variety. single flavor options fail

Too much variety in...

Our own choices

--yogurt study

Our choices for other people

--party supplies