Summary of the Consumer Behavior lectures 2023

Lecture 1: Introduction of Consumer Behavior
 Consumer behavior: obtaining, consuming and disposing of products/services
o Understanding and explaining why consumers behave that way, conscious and
unconscious decisions, external influences, customer segments, delivery options,
returns
 Consumer & marketing factors are underlying factors that influence factors of obtaining,
consuming, disposing




  Consumer: individual/group/organization  ABC (affect, behavior, cognition
responses)
o Affect: how consumers feel (emotions)
o Behavior: how consumers act
o Cognition: how consumers think (thoughts, opinions)

 Why study consumer behavior?  advertising, understand consumers (needs, decisions,
emotions), predict reaction to marketing strategies (product/price changes, change
positioning)

But..
 Problem with understanding: not everyone likes you (false consensus)
o False consensus effect: overestimate that you own beliefs are also beliefs of
others
 Problem with predicting: you often don’t even know (biases)
o What you would do (affective forecasting: how something makes you feel)
o Why you do what you do

Intuition trap: problems with common sense
 We are often wrong
o Projection bias: idea that people project their own attitudes/beliefs onto others
 We focus on confirming instances: confirmation bias, cognitive component (focused
attention), motivational component (resistant to changing our prior beliefs)
 Our preferences are not representative: projection bias/false consensus bias, people
overestimate extent to which their beliefs are typical of those of others

, Make decisions based on few observations
 Infer causality from correlation
 Overconfidence
 Intuitive ideas are: easy, more vivid, appealing, well-remembered, generic
 Scientific ideas are: complex, careful, situational




Marketing organizations
 Find out what they care about and provide that (Crest toothpaste)
o  Do consumers know what they want?  no (preferences flexible, don’t know
what they prefer, don’t know what is possible)

Public policy
 Regulate behavior: how will consumers react to regulations?
- Assumption: if people know how bad something is, they will not do it
- Does it work?  sometimes they still do it
- How will consumers react to regulations (cigarette warning labels) and to
market changes (recession, tax cuts)?
 Change behavior: social marketing
- Encourage/discourage activities
- Effect of advertising on society

Consumer research
 Problems interviews/survey: self-selection, self-reports, sensitivity to wording/order
 Qualitative: exploratory
 Quantitive: test, generalize


Lecture 2: Irrationality
Consumer assumption
 Preferences are clear and accessible in consumers’ minds
 Consumers make trade-offs between quality and price
 Each product is judged on its merits alone
 Willingness to pay is the result of evaluating the object we are interested in
 Market research instruments accurately tell us what consumers really prefer and how
much they would pay

,Value depends on irrelevant anchors
 Willingness to pay increased, when digits of SSN are higher

Value depends on set of alternatives
 Compromise effect: share of product increases when it is intermediate option but
decreases when it is extreme option

Value changes with ownership
 Endowment effect: owners assign greater value to a product than non-owners

Malleability of preferences
 Preferences are typically constructed, not revealed
o Every evaluation is relative  reference dependence (toaster)
o People don’t know what they want until they see it in context  context
dependence (lamp)
o Preferences change depending on how alternatives are presented to them 
description dependence (cup)

Rational consumers:
 People take into account the pleasure they obtain from consuming something
 Price they pay for it
 Consumers want value for money

 Free products: consumers prefer this, gives a high trigger to consumers!!

 Large assortments & wide product selection: consumers prefer this (desirable)
o More options: more attention + more difficult to make buying decision (choice
overload: demotivating)

 Choice overload / hyperchoice: Freedom of choice becomes tyranny of choice  more
options, is more difficult, frustrating (fear of making wrong choice, FOMO), lower
satisfaction, lower choice
- Why choice might make us unhappy:
 regret and anticipated regret
 opportunity costs: the value of the next best choice that one gives
up when making a decision
 escalation of expectation
- Example: Jam experiment; consumers had to possibility to taste 6 or 30
types of jam. The result -> people were much more likely to buy a jam
when they had to chose between 6 jams (compared to 30 flavors)

Descriptive research strategy (opinion polls, facts, figures)
 Describes individual variables
 Obtains snapshot of specific characteristics of specific group of individuals
 Data is in form of averages/percentages

,  The independent variable causes the effect to a dependent variable, and NEVER the
other way around

Correlational research strategy
 Measures 2 variables for each individual
 Relationship between advertising expenditures and sales




Form of relationships: Linear and Monotonic:




Correlation vs. causation
 Not everything is caused by each other, but can be related
 Independent variables (cause), dependent variable (effect)

Correlation coefficient
 Measures and describes relationship between 2 variables
 Describes direction + consistency or strength

 Both variables are non-numerical: chi-square test

Correlational strategy
 Predictor variable: 1st variable (simple, well defined)
 Criterion variable: 2nd variable (being explained/predicted) (complex, unknown)
 Regression: statistical process for using 1 variable to predict the other
o Goal: to find equation that produces most accurate prediction of Y (criterion) for
each value of X (predictor)

Experimental research strategy: answers cause-and-effect questions about relationship
between 2 variables (random assignment)