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Notes from lecture 1 to 6 consumer behavior
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Notes from lecture 1 to lecture 6 Clearly explanation of studies and slides
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Lesson 1: Introduction to Consumer BehaviourWhat is marketing?
according to critics: fluff, manipulative, wasteful
according to professor: not rocket science (more difficult),
it is behavioral science
Rocket science: if your rocket lands on the moon you can look back at the steps you took
which means your process is good
behavioral science: a lot of dumb luck, choose a bad process but with successful outcome
→ it is difficult to predict what consumers will do
Marketing = the activity, set of institutions, and processes for creating, communicating,
delivering and exchanging offerings that have value for customers, clients, partners, and
society at large
→ creating value for consumers
→ value is not only created by the product itself
today everything is different: brands are not so important anymore → rise of the internet,
ratings about quality of product
→ study quality of product and user ratings
example: Britax
price of seat $300 (if you want to be a good parent you should buy this)
not very long ago you only get key pieces of information (what salespeople tell you, price)
→ what is the correlation between the ratings and quality
is the information in the review helpful/useful → you don’t know the counterfactual meaning
(if they were in another car seat)
→ simulate crashes
high correlation: high user ratings, high quality
low correlation: no association
suppose you consider many pairs of products. The two products in each pair are generally
similar, but user ratings on Amazon of one of them are higher on average than the other
→ how often will you find that the product with the higher user ratings performs better in
standardized tests of product quality?
horizontal axe: Amazon star ratings
vertical axe: consumer reports ratings
50% means no correlation
,correlation of 1: if you know the amazon star rating you can perfectly predict the consumer
reports quality score (perfect diagonal line)
correlation of 0.1: you know a bit about the product but not much
if you take 2 products and the correlation is < 0.2 there is a 50% chance the high star rating
product is better
when there is a difference of more than 0.4 between star ratings there is a 70% chance the
high quality product is better
→ what is reflective in user ratings?
perceptions plays a big role (if it’s not the objective performance)
you see a famous person and reviews of a product
→ user ratings reflect promotion
example with wine:
the more people pay, the more satisfied they are
→ putting people in MRI, looking at oxygen in the brain
you taste 5 different wines
wine A and B are the same and wine C and D are the same
no difference in liking between A and B and C and D
another condition: drink the same wines but with information of prices
quality could create some value
value is also created by a bunch of variables (famous person, price, …)
regions in the brain that are active are more a function of price than ingredients of the wine
example with ice cream
→ making an assessment in single evaluation
example songs:
new songs and new artists and look how fast they get famous/more listened to
→ consumers cannot interact with each other (market A&B)
→ listen and observe from each other how often the songs have been listened to (market
C&D)
→ where is the correlation the highest?
which song became the most popular, how similar is popularity?
→ very difficult to predict which songs will become popular
,where is correlation going to be the highest? (in independent market A and B or in social
market A and social market B?)
how similar is demand/popularity in one market compared to the other market
→ answer: in independent markets, it is the intrinsic quality that is going to drive popularity
because they don’t have interaction the popular songs will be more evenly spread out
social markets: also have an indication of how many people listened to it
ex. in social market A song nr 12 will be listened most, in social market B it is the same
random process so song 34 for example will be listened to the most
consumers do not have an influence: best product will give optimal results
consumers have a lot of influence on each other: investing in optimal design will not give
optimal result
in which market are the songs the most popular:
in the social market (more popular hits)
independent market: value = f(product) → consistent/predictable demand
social market: value = f(place) → inconsistent/unpredictable demand
value = f(marketing mix): - product
- promotion
- price
- place
creating value for consumers leads to value for the firm
value for consumers leads to value for yourself (what’s in it for the firm)
2 sides of customer value:
→ the big idea: value consumers see in products depends on more than the objective
performance of products
connection with image of brand is higher than the objective image
society is also a driver of value
, Lesson 2: Managerial thinking traps
how managers can make silly errors when thinking about consumers
value to consumer: perspective of consumer, utility/benefit created for consumer, value
created as consumer (determined by marketing mix)
value of consumer: perspective of company
end: build firms that are valuable, value of consumers, depends on more than objective
performance of the product itself
lifetime value of consumer = acquisition, development, retention
the sum should be the value of the firm
it’s important to do this well, it’s not rocket science
we cannot perfectly predict consumer behavior
drivers of value: packaging, society (what other people are doing)
Peter Drucker: they think about marketing in the way described as above
David Packard
→ they think about marketing in this way
other people think like the model above
8 quizzes:
sum of answers (probabilities) sum1= 2+3+5+6, sum2 = 1+4+7+8
(2+3+5+6) has the highest sum
→ how much do i know about this (i’m going to do better) (we rely on this one)
→ how much will my opponent know about this (i’m going to do worse)
fundamental bias = egocentrism (you look at the world through your eyes, you overweigh
your knowledge, opinions, perspective...insufficiently the knowledge of the opponent)
overlap of circles has a meaning
company: all the things that the company is offering
consumer: all the things that a customer might desire/value
competitor: various offerings
being successful = all about perspective, the ability to weigh the perspective of others
we may not always take into account the capabilities of the other
→ Egocentrism undermines effective marketing
it harms communication within organizations and consumers
you have no clue what is going on and the presenter has the idea he is doing a good job
= consequence of egocentric thinking
you skip steps in your logic
ex. ask how many chores a couple does
you will get a higher number than 100%, both parties overestimate their input
egocentrism can influence and deteriorate, it can destroy teams
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