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Consumer behavior links together concepts from psychology, sociology, and economic. Stages in the consumer process. Ethical business | Marketing Ethics and Public Policy. ○ Behavioral learning. ○ Cognitive theories. Marketing applications of repetition ● Classical VS. Instrumental conditioning. ● Observational learning. 5 stages of consumer development ● Analytical psychology and marketing. ● Brand Asset Valuator Archetypes. ● Brand personality. ● The power of attitudes. ● Functional theory of attitudes. ● Attitudes commitment. Consistency principle. ● Selfperception theory
FROM LECTURES From Lecture 1: Buying, having, being ● Consumer behavior links together concepts from psychology, sociology, and economics to : ○ Help build successful relationship marketing strategies ○ Better apply consumer behavior theories and practices to build effective marketing strategies such as segmentation, targeting, and positioning (S-T-P) ○ Deepen our gasp of data-driven insights from both qualitative and quantitative primary (versus secondary) research ○ Build effective predictive models derived from established CB theories and propose assessment metrics to measure success or failure of aforementioned marketing strategies ○ Advance CB theories by examining their role in today’s consumer journey and decision-making processes ● Stages in the consumer process: ● Acquirer & user ○ A consumer is generally thought of as a person who identifies a need or desire, makes a purchase, and then disposes of the product during the three stages in the consumption process ■ Consumers may be organizations or groups (in which one person may make the decision for the group) ○ The purchaser and user of a product might not be the same person ■ Example: Parent for kid ○ A separate person might be an influencer Provides recommendations for or against certain products ■ Example: Joint decisions with friends or family members ● Consumer-brand relationships: ○ Consumers may develop relationships with brands over time: ■ Self concept attachment: the product helps to establish the user’s identity ■ Nostalgic attachment: the product serves as a link to the consumer’s past ■ Interdependence: the product is a part of the user’s daily routine ● Motivations ○ Motivation: Refers to the processes that lead people to behave as they it occurs when a need is aroused that the consumer wishes to satisfy ○ Our motivations to consume are complex and varied ○ People often buy products not for what they but for what they mean Products play an extended role in our lives From lecture 2: Consumers and social well-being ● Ethical business | Marketing Ethics and Public Policy ○ Business ethics are rules of conduct that guide actions in the marketplace ○ There are cultural differences in what is considered ethical ○ It can be difficult to avoid ethical conflicts because our thoughts of what is right and wrong vary among people, organizations, and cultures These cultural differences certainly influence whether business practices such as bribery are acceptable Bribing foreigners to gain business has been against the law in the United States since 1977, under the Foreign Corrupt Practices Act The Organization for Economic Cooperation and Development (OECD), to which most industrialized countries belong, also outlaws bribery Still, these practices are common in many countries From lecture 3: Perception ● Peripheral cues - hedonic consumption ○ The design of a product is now a key driver of its success or failure ○ Hedonic consumption includes how consumers interact with the emotional aspects of products → Products are rarely strictly functional, consumers may want hedonic value too ■ Target is a good example of a company that has embraced this insight: they focus on products with great design as well as functionality ■ The Coca-Cola bottle also illustrates an example of how design can facilitate product success ● Sensory systems ○ Vision, scent, sound, touch, taste ● senses - how does a brand deliver emotions? It would be worth feeling ○ Sight, sound, touch, smell, taste ● Perception process ○ Perception: A three-stage process that translates raw stimuli into meaning The three stages are: Exposure Attention Interpretation ● Sensation and perception ○ Perception: The process by which sensations are selected, organized, and interpreted ○ Like computers we undergo stages of information processing in which we input and store stimuli We receive external stimuli or sensory inputs on a number of channels The inputs our five senses detect are the raw data that begin in the perceptional process ○ Perceptual process diagram: ● Sensation and perception: Exposure occurs when a stimulus comes within the range of someone’s sensory receptors What a person is capable of receiving is stimuli within a person’s sensory threshold That threshold is the area within which stimuli can make a conscious impact on the person’s awareness The science of psychophysics focuses on how people integrate the physical environment into their personal worlds The absolute threshold refers to the minimum amount of stimulation a person can detect on a given sensory channel The absolute threshold means that the stimulation used by marketers must be sufficient to register For instance, a highway billboard might have the most entertaining copy ever written, but this genius is wasted if the print is too small for passing motorists to see it The differential threshold refers to the ability of a sensory system to detect changes in or differences between two stimuli The minimum difference we can detect between two stimuli is the j.n.d (just noticeable difference) ● Weber’s law: The amount of change required for the perceiver to notice a change systematically relates to the intensity of the original stimulus The stronger the initial stimulus, the greater a change must be for us to notice it ● Differential threshold: Refers to the ability of a sensory system to detect changes in or differences between two stimuli The minimum difference we can detect between two stimuli is the just noticeable difference (or JND) ● psychophysics is the science that explains how the physical environment is integrated into our personal, subjective world When we define the lowest intensity of a stimulus that our brains can register we are speaking of its threshold The images in the slide illustrate how Pepsi has changed its logo over the years If the difference didn’t pass our sensory threshold, we wouldn’t notice the logo had changed ● Attention ○ Attention is the extent to which processing activity is devoted to a particular stimulus The allocation of processing activity can vary depending on the characteristics of the stimulus and the recipient Although we live in an information society, consumers are often in a state of sensory overload Sensory overload means consumers are exposed to far more information than they can process Much of this comes from commercial sources We are exposed to thousands of advertising messages each day in addition to the other types of stimuli we sense ■ Consumers experience sensory overload ○ Marketers need to break through the clutter ○ How marketers get attention? ■ Personal selection ■ Experience: Thee result of acquiring and processing stimulation over time It helps to determine how much exposure to a particular stimulus a person accepts ■ Perceptual vigilance: Consumers are more likely to be aware of stimuli that relate to their current needs A consumer who rarely notices car ads will become very much aware of them when she or he is in the market for a new car The flip side of perceptual vigilance is perceptual defense ■ Perceptual defense: People see what they want to see—and don’t see what they don’t want to see If a stimulus is threatening to us in some way, we may not process it, or we may distort its meaning so that it’s more acceptable Adaptation can also affect attention ■ Adaptation: The degree to which consumers continue to notice a stimulus over time The process of adaptation occurs when consumers no longer pay attention to a stimulus because it is so familiar A consumer can “habituate” and require increasingly stronger “doses” of a stimulus to notice it Less intense stimuli have less sensory impact Stimuli that require relatively lengthy exposure in order to be processed habituate because they require a long attention span Simple stimuli habituate because they not require attention to detail Frequently encountered stimuli habituate as the rate of exposure increases Stimuli that are irrelevant or unimportant habituate because they fail to attract attention ● factors leading to adaptation: Intensity, duration, discrimination, exposure, relevance ■ Stimulus selection ■ Contrast ■ Size ■ Color ■ Position ■ Novelty ■ In addition to the receiver’s mindset, characteristics of the stimulus itself play an important role in determining what we notice and what we ignore Marketers need to understand these factors so they can create messages and packages that will have a better chance of cutting through the clutter Several characteristics can aid in enhancing the chances of a stimulus for being noticed including size, color, position, and novelty ○ We interpret the stimuli to which we pay attention according to learned patterns and expectations ● Stimulus organization One factor that determines how we will interpret a stimulus is the relationship we assume it has with other events, sensations, or images in memory Our brains tend to relate incoming sensations to others already in memory based on some fundamental organizational principles These principles derive from Gestalt psychology, a school of thought that maintains that people interpret meaning from the totality of a set of stimuli rather than from an individual stimulus The Gestalt perspective provides several principles that relate to the way our brains organize stimuli including the closure principle, the principle of similarity, and the figureground principle ○ Gestalt: The whole is greater than the sum of its parts ○ Closure: People perceive an incomplete picture as complete ○ Similarity: Consumers group together objects that share similar physical characteristics ○ Figure-ground: One part of the stimulus will dominate (the figure) while the other parts recede into the background (ground) ● Interpretation ○ Interpretation: Refers to the meaning we assign to sensory stimuli, which is based on a schema The meaning we assign to a stimulus depends on the schema, or set of beliefs, to which we assign it In a process called priming, certain properties of a stimulus evoke a schema This leads us to compare the stimulus to other similar ones ● Subliminal advertising is a controversial but largely ineffective way to talk to consumers Some research by clinical psychologists suggests that subliminal messages can influence people under very specific conditions, though it is doubtful that these techniques would be of much use in most marketing contexts For this kind of message to have a prayer of working, an advertiser has to tailor it specifically to an individual rather than the mass messages suitable for the general public ○ Subliminal techniques: ■ Embeds: figures that are inserted into magazine advertising by using high-speed photography or airbrushing These hidden figures supposedly exert a strong but unconscious influence on the reader We can something similar for auditory messages However, there is no evidence to support that subliminal stimuli can bring about desired changes in behavior ■ Subliminal auditory perception: Sounds, music, or voice text inserted into advertising ● The field of semiotics helps us to understand how marketers use symbols to create meaning: ○ Semiotics: The the study of correspondence between signs and symbols and their roles in how we assign meanings This figure illustrates the meaning of the three semiotic parts of a marketing message: 1) the object, 2) the sign, and 3) the interpretant ● Brand positioning: When a marketer understands how consumers think about a set of competing brands, it can use these insights to develop a positioning strategy Marketers can use many dimensions to carve out a brand’s position in the market place including lifestyle, price leadership, attributes, product class, competitors, occasions, users, and quality From chapter 4: Learning and memory ● Learning is a relatively permanent change in behavior caused by experience The experience can be direct or it can be observed Learning is an ongoing process ● Incidental learning: We learn even when we don’t try: We recognize many brand names and hum many product jingles, for example, even for products we don’t personally use We call this casual, unintentional acquisition of knowledge incidental learning ● Theories of learning: There are several learning theories which range from those that focus on connections between actions and consequences to those that focus on understanding complex relationships and problem solving ○ Behavioral learning theories focus on stimulus-response connections Behavioral learning theories assume that learning takes place as the result of responses to external events Psychologists who subscribe to this viewpoint not focus on internal thought processes Instead, they approach the mind as a “black box” and emphasize the observable aspects of behavior The observable aspects consist of things that go into the box (the stimuli or events perceived from the outside world) and things that come out of the box (the responses, or reactions to these stimuli) ● Example: Events we experience when we are young often exert a lasting influence on our preferences as we get older Consider for example the lifelong impact on a fan when his team wins the World Series A recent analysis used Facebook data on how many people “liked” and posted about a specific baseball team It found that if a team wins the championship when a boy is years old, this significantly increases the probability he will support the team as an adult regardless of how well the team did every other year of his life (the data doesn’t hold up for females) The pattern persists until age 14 when it starts falling off; a World Series winner when a man is 20 years old is only one-eighth as likely to create an adult fan as when he was years old Thus, overall there are 1.65 Yankees fans for every Mets fan However, the Mets’ popularity spikes among those who were born in the years 1961 and 1978 It turns out that both sets of these fans happened to be years old when the Mets won the World Series ■ Types of behavioral learning theories: ● Classical conditioning: A stimulus that elicits a response is paired with another stimulus that initially does not elicit a response on its own Over time, the second stimulus causes a similar response because we associate it with the first stimulus Conditioning effects are more likely to occur after the conditioned (CS) and unconditioned (UCS) stimuli have been paired a number of times Conditions may also weaken over time especially when a UCS does not follow a stimulus similar to a CS This is called stimulus discrimination ○ Components of conditioning: - Unconditioned stimulus - Conditioned stimulus - Conditioned response ● Conditioning issues: - Repetition - Stimulus generalization - Stimulus discrimination ● Behavioral learning principles apply to many consumer phenomena, such as creating a distinctive brand image or linking a product to an underlying need The transfer of meaning from an unconditioned stimulus to a conditioned stimulus explains why “Made-up” brand names, such as Marlboro, Coca-Cola, or Reebok, exert such powerful effects on consumers The association between the Marlboro man and the cigarette is so strong that in some cases the company no longer even bothers to include the brand name in its ads that feature the cowboy riding off into the sunset ● Instrumental conditioning/Operant conditioning: The individual learns to perform behaviors that produce positive outcomes and to avoid those that yield negative outcomes It means to condition behavior using consequences It refers to voluntary behaviors, while classical conditioning works to condition responses to involuntary behaviors ○ Cognitive theories focus on consumers as problem solvers who learn when they observe relationships ● Marketing applications of repetition: ○ Repetition increases learning ○ More exposures = Increases brand awareness ○ When exposure decreases, extinction occurs ○ Too much exposure leads to advertising wear out Even when associations are established, too much exposure can turn negative In that case, the association may change in terms of whether it is perceived as positive or negative ○ Repeated exposures to the association increase the strength of the associations and prevent decay of these associations in memory Many classic advertising campaigns consist of product slogans repeated often to enhance recall But for this to work, the UCS must repeatedly be paired with the CS Otherwise, extinction occurs Extinction means that the association is forgotten ● Marketing applications of stimulus generalization: ○ Stimulus generalization: Tendency for stimuli similar to a conditioned stimulus to evoke similar, unconditioned responses ■ Family branding: ■ Product line extensions ■ Licensing ■ Look-alike packaging ○ The process of stimulus generalization is critical to branding and packaging decisions that try to capitalize on consumer’s positive associations with an existing brand or company name Marketers can base some strategies on stimulus generalization Family branding enables products to capitalize on the reputation of a company name Marketers can use product line extensions by adding related products to an established brand Licensing allows companies to rent well-known names Distinctive packaging designs create strong associations with a particular brand Companies that make generic or privatelevel brands and want to communicate a quality image often exploit this linkage when they put their products in similar packages to those of popular brands THE PRINCIPLE OF CONSISTENCY People align with their clear commitments → Make their commitments active, public, and voluntary ● For a successful persuasion process, people need not only to like you but to feel committed to what you want them to ○ Example: residents of a large apartment complex were asked to sign a petition favoring the establishment of a recreation center for the handicapped The cause was good and the request was small, so almost everyone who was asked agreed to sign Two weeks later, on National Collection Day for the Handicapped, all residents of the complex were approached at home and asked to give to the cause Half of those who were NOT asked to sign the petition made a contribution But 92% of those who DID sign the petition two weeks before actually donated money → The residents of the apartment complex felt obligated to stick to their commitments because those commitments were active, public, and voluntary ● Active: A choice made actively - one that’s spoken out loud or written down, or otherwise made explicit - is considerably more likely to direct someone’s future conduct than the same choice left unspoken ■ Example: More student would show up to an optional class if they signed for their presence ○ That’s why in a managerial position, it’s important to get everything is writing Not essentially contracts, but have an employee sum up the new engagements he/she has decided to take after a semestrial feedback talk etc… ● Public: Written statements become even more powerful when they’re made public ■ Example: After answering presumably wrong to a question, students who didn’t sign their name on their paper were more likely to discuss their choice and change their answer than students who signed their name on their paper, those were more likely to defend their initial answer ○ This shows how much people wish to appear consistent to others ○ Careful tho, using too much pressure may lead to the reverse result ■ Example: If a boss pressures his employees to donate for a political campaign, some employees may vote for another candidate just to show resentment against their boss for forcing them to vote ■ Example 2: Viviana is such a bad landlord that tries to make me feel like a bad tenant so I would be willing to find new tenants for this apartment that are not good tenants at all just to bother her and show her what a bad tenant really means ○ Too much pressure can easily been seen as a threats or intimidations THE PRINCIPLE OF AUTHORITY: People defer to experts → Application: Expose your expertise, don’t assume it’s self-evident ● ● ● ● ● Experts’ opinions/advices are highly valued and likely to make a huge change in public opinion When an expert’s view is aired on national TV, public opinion shifts even more Some political, scientific, financial, medical or technological questions can sometimes require such specific knowledge to answer, that we have no choice but to rely on experts A well-selected expert offers a valuable and efficient shortcut to good decisions Very often, people mistakenly assume that others recognize and appreciate their experience ○ Example: People recovering from a stroke were more likely to listen to their doctors advice about exercising even once they’re out of the hospital when they saw their doctor’s diplomas and awards on the walls In other words, they gave their doctors more credits and followed their advice more carefully knowing that they really knew what they were talking about ■ Because in some other industries, managers can’t just hand their diplomas on the wall and wait for respect, they might have to use social tactics to let their employees knows that they deserve credits For example, around a coffee break, by telling them about that one time they solved a huge problem for the CEO ● In other words, find an opportunity to touch lightly on your relevant background and experience as a natural part of a sociable exchange It’s a good way to establish expertise early in the game THE PRINCIPLE OF SCARCITY: People want more of what they can have less of → Application: Highlight unique benefits and exclusive information ● Items and opportunities are seen to be more valuable as they become less available ○ Thus, managers can harness the scarcity principle with the organizational equivalents of limited-time, limited-supply, and one-of-a-kind offers ■ Example: Informing a coworker of a closing window of opportunity - the chance to get the boss’s ear before he leaves for a tip - can mobilize action dramatically ● Managers can learn from retailers how to frame their offers not in term of what people would gain but in terms of what they would lose if they don’t get a product ○ The power of “loss language” ■ ■ Example: Some home owners were told the amount of money they would save if they decide to insulate their homes, some other home owners were told the amount of money they would lose if they failed to insulate their homes → As a result, way more people decided to insulate their homes when exposed to the loss language In the business world, potential losses figure far more heavily in managers’ decision making than potential gains ● Exclusive information is more persuasive than widely available data ■ Example: People bought more beef when they were told that the supermarket was about to run low on beef due to suppliers issues, but they bought even more when they were told that no one else had that information yet ○ The persuasive power of exclusivity can be harnessed by managers coming into possession of information that’s not broadly available and that supports an idea or initiative he/she would like the organization to adopt ● Careful, the exclusivity of an information shouldn’t be a lie, otherwise, following the rule of reciprocity (principle n°2), once the audience realized it was a lie, they will be more incline to reciprocate your dishonesty FROM CASE 2: HEDONOMICS IN CB ● In the realm of consumptions, there are general approaches to improving consumer happiness: Enhance the magnitude of a desired external stimuli This approach is most widely embraced by consumers in our society, who generally seek to earn more money to buy more and more goods - Example: The amount of income, size of home or number of shoes Hedonomics approach: Find the optimal relationship between external stimuli and happiness without having to increase the magnitude of the external stimuli → Example: A kid loves wooden blocks and possesses a set He has played with them for a while and becomes bored How can he increase his happiness? Obtain more blocks Find a new and better way to combine the existing pieces and build more enjoyable projects HEDONIC EDITING ● Loss Aversion: The first theory about Hedonomics suggests that individuals’s experiences with an external stimulus depends not on its absolute magnitude, but on the difference between the absolute magnitude and some reference point A positive difference is felt as a “gain” and evokes a positive experience, whereas a negative difference evokes a “loss” and a negative experience The negative experience evoked by a loss is more intense that the positive experience evoked by a gain of the same magnitude ● ● Researchers have proposed a set of strategies to maximize happiness termed Hedonic Editing: ○ Strategy 1: If a consumer has good events to enjoy (example: dining out with a friend and watching his favorite movie), he should enjoy them on separate occasions, because multiple gains will yield greater total happiness if they are experienced separately than if they are experienced as one aggregate gain ○ Strategy 2: If a consumer has to experience two bad events (example: a dentist appointment and spending time with in-laws), it is better to experience them in close proximity , because multiple losse will yield less total pain if they are experienced as one integrated loss than if they are experienced separately ○ Strategy 3: If a consumer has a big/bad event and a small/good event to experience, he should experience them separately ○ Strategy 4: If a consumer has a small/bad event and a big/good event to experience, he should experience them in close proximity Most utility theories assume that more of a desired stimulus is always better However, recent research suggests that whether consumers are sensitive to the magnitude (amount, quantity, duration, probability, mileage…) associated with a stimulus depends on at least factors: Evaluation mode Evaluability of the relevant attribute The evaluation of any stimuli proceeds in one or some combination of two modes: Joint evaluation (JE): Two or more stimuli are juxtaposed and evaluated comparatively - Example: If a passenger receives two sets of bonus miles from two different airlines, he is in JE of these two bonuses Single evaluation (SE): Only one stimulus is present and evaluated in isolation - Example: When a passenger receives only one set of bonus miles at a time → Passengers receiving 3,000 bonus miles are not going to be happier than passengers receiving 2,000 bonus miles if they not compare the awards in JE If passengers are in SE and if they are not familiar with the distribution or range of such promotions (i.e., mileage being an attribute low in evaluability), they will not be happier with the 3,000 miles HEDONIC ADAPTATION ● Hedonic adaptation: If a stimulus we care about suddenly improves, we will first experience a positive feeling, but with the passage of time the elevated feeling will fade It occurs for multiple reasons: ○ Basic psychophysical adaptation: The longer we are exposed to a stimulus, the less sensitive we feel about it ■ Example: when a person first immerses his hand in 50 degree water, he will feel cold After a while he will adapt to the temperature and no longer find the water cold ○ Dilution of attention: For example, after a person moves to large apartment from a smaller space, she will first be overjoyed with the extra size, but before long, her attention will shift away from the house to many other things, such as her crying baby or her nagging husband As a result, the size of her new apartment is just one of the myriads of events that cause the ups and downs of her daily life ○ Ordinization: Once an effective event happens, consumers have a tendency to rationalize it, make it seem ordinary, and thereby dampen its affective impact This can happen to both positive and negative events ■ Example: If a bidder wins an auction for a painting on eBay, he might think to himself, “It’s no surprise I bid a lot for it.” But if he was outbid, he might justify the loss by thinking, “It wasn’t a very good painting anyway” → Hedonic adaptation occurs mostly when the new state remains stable, for example, when a person remains in the new apartment after moving or a person remains paralyzed after an accident However, many events we care about constantly change over time - for example, gas prices, stock prices, body weight… How people react to such changes depends on the direction of the change: positive if the change is in the desirable direction, and negative if the change is in the unwanted direction Our momentary experience also depends on the velocity of change in that we feel happier the faster a positive ● Obstacles to maximizing happiness: types of consumption biases that serve as obstacles for maximizing happiness: ○ Impact bias: When asked to predict the experiential consequence of an event (e.g., moving to a larger apartment), consumers often ignore the power of adaptation and thereby overpredict the duration and the intensity of the experience ○ Distinction bias: arises because consumers are in different evaluation modes during prediction versus consumption and they overestimate the effects of product attributes that can distinguish one option from another Predictions are often made in JE and consumption often takes place in SE ○ Belief bias: Consumers may expect adaptation when it does not exist For example, in one study, students believed that their liking for their favourite ice cream would decrease if they had it every day, but in reality their liking did not decreased as much as predicted ○ Projection bias: Consumers often find themselves in different visceral states When ○ ○ ○ ○ ● individuals in one visceral state predict experiences in another visceral state for themselves or others, they often project their current state into their predictions ■ Example: If a person is full now, she will underestimate much she will enjoy her next meal when she is hungry again; and hungry shoppers at a grocery store may buy more items than they need and have planned to buy, unless they are reminded of their grocery list Rule-based choice: Consumers may base their choices on factors other than predicted experience One such factor is ‘decision rules’, which simplify decisions and sometimes lead to optimal consequences under certain circumstances Once these rules are internalized, people over-apply them to circumstances where they not lead to experientially-optimal choices Lay rationalism: Consumers have a general tendency to resist immediate affective influence and base their choice on factors they consider rational ■ Example: people have a tendency to base decisions on ‘hard’ (objective and quantitative) attributes rather than ‘soft’ (subjective and hard-to-quantify) attributes even though the soft attributes have more impact on their happiness Impulsivity: Consumers sometimes behave impulsively because they mispredict the consequences ■ For example, some people regularly eat fatty foods because they underpredict the negative consequences in the future But more often than not, consumers commit impulsive behaviour even though they are keenly aware of its aversive consequences, but they cannot resist the temptation Impulsive choosers fail to base their choice on what they predict will bring them the best overall experience Medium maximization: When people try to obtain a desired outcome, the immediate reward that they receive is usually not the outcome, but a “medium” - an insturment that they can trade for the desired outcome ■ Example: Points for consumer loyalty programs, mileage for frequent flyer programs… The role of multiple choice ○ Research shows that if consumers have to experience one of several undesirable options, they will feel less unhappy if someone else makes the choice for them than if they have to make the choice themselves ■ For example, a consumer who is on a diet and can only eat meals that are unappealing to her will feel better if someone else chose the meal for her than if she has to make a choice herself, because making a choice among unappealing meals induces negative feelings ○ Furthermore, when people make a choice themselves, they will be less satisfied with that choice if they have many options to choose from than if they have only a few options to choose from ○ Too many options can be de-motivating because they are too complex and involve too many tradeoffs for consumers to manage ■ For example, shoppers would be less happy with the chocolate they chose if they had 30 truffles to choose from than if they had only six options ○ ○ ● Having more than one option can reduce happiness, too That is, if consumers are presented with one good option, they will be happy, but if they are presented with two good options, they will notice the disadvantages of each option relative to the other and will be less happy with either option Finally, research shows that consumers will be less happy with their decision if they closely consider the options available to them than if they not In most cases a consumer can choose only one of the available options and has to forego the other options Close deliberations can prompt consumers to form an emotional attachment to all the options, including those they have to forego Thus, choosing one feels like ‘losing’ the others to which they already have some emotional attachment Cognitive utilities: ○ A person just won a trip to Hawai, what is the utility of this trip to her? Intuitively, one would say that the utility is the happiness she derives from the vacation, which can be referred to as consumption utility But besides that, she experiences three other types of utility: New Utility: The feeling she experiences upon hearing the news that she won the vacation Anticipation utility: The feeling that she experiences when anticipating the trip Memory utility: The feeling she experiences when recalling the trip afterwards → Other example: a study in which students were prompted to report their momentary experiences five times throughout the duration of a class The first time was about 15 minutes into the class (which established the baseline of happiness) The second time was immediately after the instructor announced that he would give each student a KitKat to eat later in the class; it measured news utility The third time was about 10 minutes after the announcement of the news; it measured anticipation utility The fourth time was right after the students had received the chocolate and were eating it; it measured consumption utility The last time was some 10 minutes after the consumption; it measured memory utility Compared with the baseline, the students reported the greatest happiness when they heard the news, followed by when they ate the chocolate, and lastly when they anticipated and recalled the consumption → Conclusion: This study indicates the possibility for news to generate even greater happiness than consumption ● Memory of past events can influence happiness in two ways First, consumers may relive a positive (versus negative) experience from their past and derive positive (versus negative) utility when recalling the past (consumption effect) ○ For example, a person can derive pleasure by recalling the details about her last trip to Hawai ● Second, past experience can create a contrast effect or an assimilation effect on one’s current experience Which effect will dominate depends on the context If the past event is similar to the current event (e.g., a fancy French dinner versus a mediocre French dinner), the past experience will create a contrast effect; if the past event is dissimilar to the present event (e.g., a fancy French dinner versus a mediocre movie), it will create an assimilation effect ● Intuitively, the primary source of happiness that a desirable stimulus (e.g., a chocolate bar or a vacation) brings is the consumption of the stimulus, whereas news, anticipation and memory are all secondary In reality, these cognition utilities may comprise a large portion of the happiness – sometimes even larger than consumption Consumption utility is like a light source, and cognition utility is like its halo: without the light source, there will be no halo But with the light source, the halo may be brighter than the source itself TO CONCLUDE ● ● Hedonomics challenges two commonly-held assumptions in economics: that maximizing a desired external stimuli equals maximizing consumer happiness; and that what consumers choose reflects what makes them happy To achieve happiness, consumers need to accurately predict the affective consequences of their options and make their choices based on these predictions FROM CASE 4: SOCIAL-CAUSE MARKETING INTRODUCTION ● Conjoint analysis: A market research technique that can help managers predict what kind of affinity marketing program is likely to offer the best return on investment for their brand ● How should companies determine the best way to allocate marketing dollars between conventional promotional programs and affinity marketing programs? ○ Conventional promotional programs: Simply stress the benefits of buying a specific brand ○ Affinity marketing programs: Prominently and publicly identify a company’s association with a particular sport, entertainment event, nonprofit organization or social cause ■ Many companies will obtain better returns through creating an affinity with a social cause than through affiliating with other, more clearly commercial ventures THE POTENTIAL RETURNS FROM AFFINITY MARKETING ● Companies are making substantial investments to try to demonstrate an affinity with consumers interested in sports teams, entertainment events and social causes While a company at one time might have sponsored or supported an activity simply because an executive wanted to help a favorite team or cause,companies today are increasingly treating investments in affinity marketing as important strategic moves ● Affinity marketing programs are designed to achieve objectives such as improving overall corporate reputation, differentiating a brand, attracting the interest of targeted consumers, stimulating brand preference and loyalty, attracting loyal employees and,ultimately,increasing profits and stock prices ○ Whether companies are achieving these objectives is only beginning to be understood ■ There is evidence that sports and entertainment sponsorships can be successful, but the available empirical research on this topic is limited ● Considerably more research has been done on the effects of societal marketing programs, which emphasize a brand’s affinity with a social cause ○ Societal marketing programs: Company initiatives involving the provision of money, resources and/or publicity to socially beneficial causes in a way that seeks to create an association in the minds of consumers between the cause and the company or one of its brands ○ The research on societal marketing programs has examined a range of initiatives: ■ Cause-related marketing: Every unit sold of a brand triggers a donation to a cause ■ Green marketing: The environmental friendliness of a company/brand is stressed as a differentiating attribute ■ Cause sponsorship: A brand is clearly identified as a cause supporter ■ Social advertising: A cause is promoted in a brand’s ads ● Many companies have been successful at using these intiatives (eg: Timberland) It means they used these initiatives to differentiate their brands from competitors in consumer’s minds, in turn leading to a range of desirable effects such as greater efficiency for other marketing efforts, an ability to charge higher prices, increased market share, greater brand loyalty and more favorable treatment from stakeholders such as regulators and investors At the same time, societal marketing activities are supposed to have helped many of these firms achieve better scores on ratings of the most admired and socially responsible companies This should have helped them become more efficient in recruiting, retaining and engaging talented employees, since people may have more positive feelings about working for a socially responsible company ○ 84% ofAmericans agreed that they “would be likely to switch brands to one associated with a good cause,if price and quality are similar Managers are more likely to find persuasive evidence about the benefits of societal marketing if they examine the growing body of experimental studies reported in the academic literature These involve controlled laboratory studies that ask consumers to evaluate brands that have an affiliation with a social cause versus those that have no such affiliation The experimental results show that consumers will respond with more favorable ratings and a higher likelihood of choice to brands that have certain social-cause affiliations.7 Feelings of affinity or identification with the social cause often have been found as the drivers of these ratings and choices ○ UNDERSTANDING THE EFFECT ON CONSUMERS ● Exposure to any type of well-conceived promotional initiative for a brand leads to more positive feelings and judgements about the brand in a consumer’s mind ● We suspect that a promotional initiative emphasizing a brand’s affiliation with a team,event or social cause for which a consumer has a high degree of affinity is likely to have a more positive effect on that consumer’s judgments and feelings about the brand than similar initiatives that either emphasize no such affiliations or emphasize affiliations for which that consumer has little affinity ■ For example,an avid college basketball fan will probably respond more positively to messages about a sneaker brand that outfits the fan’s favorite college team than he or she would to messages about a sneaker brand that did not mention any affiliations or that highlighted its sponsorship of something the fan did not care about,such as a marathon ● When a promotional initiative does not mention an affiliation or when the affiliation is one that consumers view as run-of-the-mill or deserving of skepticism,consumers may weight a brand’s style of marketing as an unimportant or possibly even negative attribute ● Substantial segments of consumers may see sports or entertainment affiliations as too “commercial” and opportunistic;these consumers would not weight the style of marketing as positively with these types of affiliations as they would if the affiliation was with a cause like cancer research,environmental protection or disaster relief Moreover, a social-cause affiliation could also have a “halo effect” on how a brand is seen on other attributes,such as trustworthiness or quality ● We suspect that,in general,affinity marketing programs that have a high degree of fit with a brand— that is,those initiatives in which the logic behind the brand’s affiliation can be easily recognized by most consumers— typically produce a more positive effect on consumer brand judgments and feelings than initiatives with weaker fit ■ Hence,a bicycle company sponsoring the Tour de France might produce more positive responses than a bicycle company sponsoring a motor sport rally ● The interactive effects between degree of affinity and degree of fit,however,are less obvious.In particular,it is unclear whether a promotional initiative that highlights affiliation with a social cause will be more or less effective when there is a high versus low degree of fit between the brand and the cause Although a few recent studies suggest that a social cause with high brand fit (for example, a milk company providing milk to poor children) will improve consumers’ judgments and feelings about the brand more than a social cause with low brand fit (for example, a milk company promoting responsible alcohol consumption),10 it is possible that the opposite could occur ● Some causes are already supported by so many companies that supporting them does not lend a clear distinction to a brand anymore COMPARING AFFINITY MARKETING OPTIONS (Conjoint analysis) ● To gain empirical insight into how consumers might respond to different affinity marketing initiatives, conjoint analysis is used It has become a staple in the marketing research field for helping companies predict the most effective configuration of attributes, such as warranty length, price of product size, for new products or services This technique asks consumers to review a set of profiles, each consisting of a combination of various hypothetical attributes of a particular product or services; each consumer ranks the different profiles according to his preferences The profiles are varied systematically so that a range of attribute combinations are considered, with some profiles containing low levels of those attributes Based on how a consumer shows preference for the profiles, statistical techniques can be used to determine which attribute the consumer weights most strongly positively, most strongly negatively and in between ● Importantly, conjoint analysis can help marketers estimate the effects of specific promotional programs using a small subset of target consumers prior to making a financial commitment to a particular program ● Unlike direct survey questions, where a desire to give socially desirable responses may lead to posturing by consumer, conjoint analysis has consumers reveal their preferences for certain attributes indirectly, by making choices and tradeoffs among realistic options ○ However, conjoint analysis has not been used for pretesting societal marketing initiatives or other affinity marketing programs ● Example: Assume that a beer’s brand manager is considering four options for affinity marketing initiatives in the next budget period, and the options vary in terms of the type of sponsorship and the degree of fit with the brand: a high-fit social cause (a designated driver program), a low-fit social cause (a program to help children read), a high-fit sports/entertainment association (a stock car racing team) or a low-fit sports/entertainment association (a network Sunday night movie) Instead of just asking consumers to rate these four options,the brand manager could obtain more reliable predictions of consumer behavior by setting up an experimental study using conjoint analysis ○ In a study we recently conducted, a sample of 135 beer consumers were randomly assigned to one of four parts of the experiment,with each part of the experiment testing reactions to one of the four potential affinity marketing programs described above Random assignment was used to ensure that the participants in each section of the experiment were comparable ○ In each of the four sections of the experiment, there were eight profiles describing various possible attributes of the beer brand Half the profiles described the brand as sponsoring the cause or event being studied in that section of the experiment, and half stated that the brand was host of an amusement park In that way,reactions to two variations of a “style of marketing” attribute (that is, sponsor or host) were obtained In addition, each profile had one of two variations of four other attributes: half packaged in bottles and half in cans; half at a higher price per six-pack and half at a lower price per six-pack;half with 100 calories per serving and half with 150 calories per serving; and half fortified with 1.5 grams of protein per serving and half with grams of protein per serving The resulting brand profiles were put on eight cards that were set up so that each variation of an attribute appeared at least twice with each of the variations of the other four attributes Each study participant ranked the profiles according to preference The ranking process is a way for consumers to reveal the importance to them of different attributes.Thus,if the four bestranked profiles for a consumer all were packaged in bottles, it would be clear that bottles are a very important, positively weighted attribute in evaluating beers for that consumer.Indeed, by running a regression analysis using data about the consumer’s rankings and the brand attributes,it is possible to see how much influence each attribute has on the way that consumer determines rankings ○ In particular, the regression analysis reveals how much a consumer’s ranking of a profile would change if the beer brand sponsored the event or cause being evaluated,rather than just hosting an amusement park The coefficient that measures this can be considered the “weight” or the “part-worth” that the participant gave to the beer brand’s style of marketing Weights or partworths for the brand’s other attributes, such as price, were also calculated Assuming equality in everything else across the four sections of the experiment,the study was able to isolate how much the type of affinity marketing program and its fit with the brand affected the weights consumers gave to the beer’s marketing approach,as well as to its other attributes Participants found it very easy to these ranking exercises and provided provocative information For example, on average, the two groups randomly assigned to the social-cause partners revealed significantly more positive part-worths for marketing style than the two groups randomly assigned to the sports/entertainment partners ■ The numbers can be interpreted as meaning that having the beer brand sponsor a designated driver program or a program to help children read would improve how consumers rank a profile by an average ofabout 10% ofa ranking point on the eight-point ranking scale over how they would rank a profile where the brand only hosted an amusement park.Although this may not seem like a substantial impact,another way of looking at this is to compare how much the price would have to change to get 10% of a ranking point improvement Based on the partworths assigned to price by the participants in this study,achieving a 10% ranking point improvement would require roughly a 50 cent cut in price This does not mean that the sponsorship would allow the beer company to charge 50 cents per six-pack more than if it only hosted an amusement park, or that consumers are willing to pay such a premium for a beer that sponsors social causes It only means that the societal marketing affiliation would have an impact similar to a price cut of that amount EVALUATING SOCIAL MARKETING INITIATIVES ● Affinity marketing, especially societal marketing initiatives,have the potential to improve consumers’ attitudes about a brand in a number of different ways How much a given initiative will help or hurt a given brand will,of course,depend on the characteristics of its target markets Brand managers need to address questions such as the following as to evaluate what degree of commitment to make to affinity marketing: - Are there a sufficient number of consumers in the brand’s desired target market who have a strong affinity for the sport, event or social cause under consideration for affiliation? - Will consumers from desired target markets find it credible that this brand is affiliated with this sport,event or social cause, or will they view such support with suspicion? - Does the brand differentiate itself from its competitors in the eyes of the desired target market through supporting this affiliate or does the brand look like a copycat? - How does the affiliate stack up versus other potential beneficiaries of the brand’s promotional initiatives, in terms of affecting target consumers’ view of the brand’s style of marketing and its image and performance attributes? → Negative answers to any of the first questions suggest that support of the affiliate in question should not be an integral part of a brand’s promotional strategy Indeed, Without a critical mass of consumers possessing an affinity for the affiliate, without credibility in promoting the interests of the affiliate or without gaining differentiation from the affiliation, the brand would be better off using its promotional dollars in other ways, such as simply promoting a brand’s best and differentiating benefits ● Conventional survey research with samples of target consumers could help to find answers to the first three questions above But more sophisticated research,including studies using conjoint analysis,will be needed to address the fourth question.Our experimental results have persuaded us that it would be very feasible for real-world brand managers to test affinity partner ideas using a conjoint analysis In designing conjoint analysis studies, however, managers should pay particular attention to several issues: ○ Have potential customers from highly valued target markets participate in the studies The affinity preferences of the general public,while interesting,are much less important to determine than the affinity preferences of consumers who are prime prospects for becoming long-term,heavy-using customers of the brand ○ Use random assignment to determine the affinity partners that each study participant will evaluate.This is the best way to ensure that the groups are similar and that differences in the responses to the partners are caused by partner differences rather than differences across the evaluating customer groups ○ Make sure that other attributes evaluated in the profiles not vary in different parts ofthe study.Keeping the nature and levels of attributes (such as prices or nutrients) the same in multiple studies done over time also is advisable If these characteristics are not kept constant, they could affect how participants ranking ■ For example, if one study had a small price gap in its profiles while another had a large price gap, participants would weight price more heavily in the latter study, potentially leading them to weight the brand’s style of marketing less heavily ○ Find realistic promotional options to test that are,at a minimum, low on fit,not very poor on fit.As mentioned earlier,low-fit initiatives may actually be responded to more positively by consumers under certain conditions But initiatives with very poor fit are unlikely to anything but hurt a brand and could distort results in conjoint studies,just as having wide gaps in price levels could ○ Select a neutral alternative to the affinity partner to use as a comparison in the brand profiles.In our first study,“host of an amusement park” was used as a comparison to having a social-cause or sports or entertainment partner Having an alternative that is viewed too positively could make it hard to detect the effects of variation in the style of marketing attribute ... simply because an executive wanted to help a favorite team or cause,companies today are increasingly treating investments in affinity marketing as important strategic moves ● Affinity marketing programs... supporting them does not lend a clear distinction to a brand anymore COMPARING AFFINITY MARKETING OPTIONS (Conjoint analysis) ● To gain empirical insight into how consumers might respond to different... is working memory It holds information we are currently processing Our memories can store verbal input acoustically or semantically We store this information by combining small pieces into larger