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Extensive summary of Consumer & Economic Psychology
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Extensive summary for the course Consumer & Economic psychology. Covers all of the important subjects for the exam!
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Consumer and economic psychologyWeek 1: introduction
Consumer part mostly focuses on how people interact with goods and services. Not only going
one direction, it is a dynamic interaction happening over time.
The economic part is more about how people interact with the economy.
Consumer Psychology employs theoretical psychological approaches to understanding
consumers.
Not only how people are made to buy certain goods and services (or how goods and services
are designed to accommodate persons). Also how this develops over time and influences each
other.
Consumer and economic psychology are both relatively new disciplines.
Consumer psychology particularly started to develop when mass production started.
Focuses for example on:
- Product adaption
- Impacts on people
- Product use
Product adoption
- Competition: many people could cheaply develop and produce products, this brought
up competition. Led to the question how can I make sure people buy my products
instead the one of the concurrent.
, - Assisting consumers: Another branch of consumer psychology focuses on assisting
consumers (big supermarkets, how can you assist people making the right choice,
experience in shop). Also where to place certain products, how this influences the
consumers behaviour and experiences, and thereby the evaluation of a brand or a shop.
- Advertisement: relates to competition. A lot of emphasis of where people direct their
attention to.
- Attention, memory: what do people remember when they see something, how long
does it stay in your mind and for how long does it influence your behaviour
- Application (e.g. WW2): stimulate in time of crisis certain behaviour
All very important topics within consumer psychology and are all related to product adoption,
when people are going to purchase, adopt, choose a certain product.
Impact on people
Not only whether people will purchase something, but also when they purchase something or
when they use a certain product, how does this influence them.
- Research by James (1890): ‘’Who you are’’. Products are also part of how you see
yourself, your self concept
- Coca Cola: what impact does it have on people, their health, etc.
Product use
How people in the end use products. How to make sure people will use products by a
- More effective use (not using it wrong, wearing mouth mask not over nose)
- More sustainable use
Economic psychology promotes and discusses research, as well as policy making, on the
interface of psychology and economics.
Interaction with people on the one hand, economy on the other hand, and how they influence
each other.
Focuses for example on
- Decision making
- How this makes people feel
- How this affects the economy
Decision making: how people make decisions, how is this influenced by the larger economy,
but how other factors might influence decisions within the economy.
- (Ir)rational: people are typically not rational
- Value/utility: how much value it has to people is very important
, - Risk/uncertainty: when you make a decision, you don’t know what will happen in the
future. How do people deal with this kind of things
How this makes people feel
- Wellbeing: how does have less or more money affect your wellbeing and for how long
How this affects the economy: how do actions that people take affect the economy
- Consumer sentiment index
Consumer choices also take into account what people find important, not only money. Value
framework. There are way more things people value than money, people strive for way more
other goals than financially.
Comprehensive wellness: are way more aspects people value besides money.
Segmentation
Looking at certain characteristics, preference of people you are interested in. Mostly used to
for instance tailor certain solutions, certain products to certain groups of consumers.
Segmentation is based on the principle one size does not fit all. People are different.
Understand how people differ. Four ways of how people typically segment groups:
1. Geographical: location where people are, based on data you can get some kind of
understanding of what people want/need, etc. App tracks GPS, when you are in a shop
they give you a notification about what to buy in that shop. Also relates to where people
live and what people that live in a specific region want/need.
2. Demographic: religion, income, education, family life cycle, age, gender, socio economic
status. Geographical and demographical segmentation involves a lot of assumption (and
bias). It is not the most detailed way of looking at people.
3. Behavioural: mostly based on what kind of behaviour people undertake. bonuskaart,
Ikea family, track what kind of things you buy, make discounts based on your
preferences. A lot of data mining.
4. Psychometric: personality traits, underlying psychological factors. Difficult to get to
them. Geographical is just GPS data, knowing where people live or work. Demographic
are stored in large databases, also relatively easy to access information about a
population. Behavioural data can be measured with cards, sensors, etc. Psychometric
typically involves questionnaires. Quite costly, gives you most in-depth about people’s
personality, how they think about certain things, openness, extraversion, etc.
, Geographic and demographic are relatively cheap, easy to get access to, but also not too
specific. Psychometric and behavioural are more expensive, but also provide you with a lot of
detail. Depending on situation and what you want to achieve to determine which of these will
be most valuable.
Socio economic status: a way of describing people based on their education, income and type
of job.
Week 2: cognition
How do we make economic judgements?
Using reason and applying logic
- Maximizing the utility
- Systematic thinking
- Applying logic rules
- Understanding interferences
How do we actually make decisions?
Loss aversion: Asymmetry between perceptions of gains or losses. We like gaining things, we
dislike losing thing. But we dislike losing more than we like gaining.
Losing is around 2.25 times stronger than gaining.
Example: pick on of the following options
1. Prefer not to play
2. Toss a coin. If heads, I give you €100. If tails, you give me €100
To get most people to play, we would need to offer more than €225 if the person wins.
Gain or loses reference points
Dilemma Gain:
1. I give you €10
2. We toss a coin, if heads, I will give you €20. If tails, I will give you nothing
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