College aantekeningen
College aantekeningen Decision Making in Marketing
- Instelling
- Tilburg University (UVT)
Lecture notes of 37 pages for the course Decision Making in Marketing at UVT (Lecture notes DMM)
[Meer zien]Voorbeeld 4 van de 37 pagina's
Voorbeeld 4 van de 37 pagina's
In winkelwagengesponsord bericht van onze partner
Voorbeeld van de inhoud
DECISION MAKING IN MARKETINGLECTURE 1 – RELEVANCE OF DECISION MAKING IN MARKETING
HEURISTICS & BIASES
The illusion of decision making: are we in full control?
Default effect
- Countries with low percentage opt-in
o Check the box if you want to participate in the organ donor program
o People don’t check and don’t join
- Countries with high percentage opt-out
o Check the box if you do not want to participate in the organ donor program
o People don’t check and join
Bounded rationality: we are constraint in our decision making
- Decisions are often complex and difficult
- Individuals/consumers are bounded rational, they have to make decisions under several constraints
o Limited knowledge/information
o Limited cognitive resources (time, attention, memory)
o Limited motivation
Use of heuristics
- Heuristics = cognitive shortcuts to make decisions quickly and efficiently
- Example: default effect (people are more likely to accept default options)
- Problem use of heuristics can lead to systematic errors and biases (deviations from the true or
objective value, violation of probability laws)
Decoy effect
- Choices are made in a context
o Relative to other alternative rather than based on absolute preferences
- Decoy effect = the choice of one option over the other changes when a third – asymmetrically
dominated – option is introduced
- Asymmetrically dominated = inferior in all properties to one option, but only inferior in some
properties to the other option (an irrelevant alternative)
- Managerial relevance
o Adding an irrelevant alternative ‘helps’ consumers to decide upselling
o Examples pricing of consumer electronic products (Apple), buying popcorn in the cinema
,FURTHER HEURISTIC EXAMPLES
Anchoring and adjustment
- = making an estimation based on a process of anchoring on a salient number and adjusting up or
down
- Problem adjustments are typically insufficient, estimation is biased towards the anchor
Managerial relevance
- General negotiation (wages, prices, etc.), price expectations
- Specifically sales techniques (prices, product portfolio): furniture, cars, home appliances, etc.
Anchoring and adjustment: the discount
Mental accounting: different pockets matter
- Mental accounting = people keep track of their expenses in different mental accounts (categories);
these mental accounts influence the decision-making process
- ‘A dollar is not always a dollar’
Managerial and policy relevance
- Individuals/consumers spend money differently depending on the ‘account’ they pay from
- Examples tax refunds, birthday money, investments, bonuses at work, lottery winnings
The IKEA effect
- IKEA effect = consumers place more value on products they have (at least) partially created
- Important only if they actually finish the product
Managerial relevance
- Integrating consumers in the production process increase valuation instead of decreasing it
- However too much effort can have adverse effects
- Examples cake instant mix, customization, Build-a-Bear, ‘not invented here’
FRAMING & PROSPECT THEORY
Framing effect: preferences are about framed problems
- Preferences are about framed problems
o Winning > losing
o Winning risk averse
o Losing risk taking
- Framing effect = the frame of a message influences the decision; people react differently depending
on how a message is presented
- Two effects; (i) people prefer positive outcomes over negative outcomes, (ii) people are risk averse
over gains, but risk seeking over losses
Managerial and policy relevance
- Firing vs. saving employees: out of 600, would you rather fire 400 or save 200?
, - Health treatments: would you rather have an 90% chance to live or a 10% chance to die?
Prospect theory (Tversky & Kahneman)
Expected utility theory vs. prospect theory
- Expected utility theory (more than 275 years old)
o Utility as a function of absolute wealth
o Marginal utility decreases a wealth increase
- Prospect theory (since 1979)
o Reference dependence = value is measured in gains and losses relative to a reference point
o Diminishing sensitivity = marginal value of gains and losses decreases with their size
o Loss aversion = ‘losses loom larger than gains’
Managerial and policy relevance
- Loss aversion: potential losses motivate more than potential gains (firing vs. saving jobs, selling
insurances, structure of the tax system)
- Losses make people risk seeking (financial decision making, gambling)
LECTURE 2 – SOCIAL INFLUENCE
SOCIAL INFLUENCES IN DECISION MAKING
Social influence: we influence other and are influenced by other
‘Weapons of Influence’: techniques to persuade people/consumers
- Reciprocity and door-in-the-face
- Commitment and foot-in-the-door
- Social proof
- Scarcity
WEAPONS OF INFLUENCE
Reciprocity: give to receive
Do ut des (‘’I give that you may give’’)
, Reciprocity
- Based on the social norm to repay what another person has given to use
- Across cultures people are taught to live up to this social norm, resulting in distaste for people how
violate the norm
- Problem: exploitation of the rule as it enforces uninvited debt and can trigger unequal exchange (i.e.,
people return more than they have received)
Managerial relevance
- Sales techniques: ‘not-so-free samples’ in supermarkets, ‘gifts’ from sales persons, car tests over the
weekend etc.
- Further examples: dinner invitations, birthday presents
Indirect reciprocity: slamming the door in the face
Rejection-then-retreat
Door-in-the-face technique (DITF)
- Getting compliance to a request by starting with a large (or unreasonable) request. If the large
request is rejected, a concession will be offered (i.e., a smaller/reasonable request)
Managerial and policy relevance
- Examples: social setting (e.g., getting friends to move furniture), sales prices (e.g., bazaar)
- Works best when request is made by the same person and immediately after the first request
Commitment and consistency: stuck with a choice
- Commitment and consistency
o After making a commitment, people are more likely to agree with requests in-line with this
commitment
o Reason: people feel pressure to have consistently with their choices/commitments, as
personal consistency is highly valued by society and facilitates decision making
- Foot-in-the-door technique (FITD)
o Getting compliance to a large request by first getting agreement to a small request
o The agreement to the small request creates commitment and increases the need to be
consistent when faced with the large request
o Important: the two requests need to be similar in nature (i.e., they need to be consistent)
- Managerial relevance
o ‘Grow their own legs’: people add new reasons/justifications to support a prior commitment
o Examples: down payment (cars, holidays, furniture), newsletters, resort fees
Social proof: I do what everybody else does…
- Social proof
o People determine what to do by finding out what other people do in the same situation (i.e.,
‘’when a lot of people are doing something, it is the right thing to do’’)
o Most effective: (i) under uncertainty and (ii) with people that are similar to the decision
maker
- Managerial and policy relevance
o Peer recommendations and peer observations (important: product-in-use)
Voordelen van het kopen van samenvattingen bij Stuvia op een rij:
Verzekerd van kwaliteit door reviews
Stuvia-klanten hebben meer dan 700.000 samenvattingen beoordeeld. Zo weet je zeker dat je de beste documenten koopt!
Snel en makkelijk kopen
Je betaalt supersnel en eenmalig met iDeal, creditcard of Stuvia-tegoed voor de samenvatting. Zonder lidmaatschap.
Focus op de essentie
Samenvattingen worden geschreven voor en door anderen. Daarom zijn de samenvattingen altijd betrouwbaar en actueel. Zo kom je snel tot de kern!
Veelgestelde vragen
Wat krijg ik als ik dit document koop?
Je krijgt een PDF, die direct beschikbaar is na je aankoop. Het gekochte document is altijd, overal en oneindig toegankelijk via je profiel.
Tevredenheidsgarantie: hoe werkt dat?
Onze tevredenheidsgarantie zorgt ervoor dat je altijd een studiedocument vindt dat goed bij je past. Je vult een formulier in en onze klantenservice regelt de rest.
Van wie koop ik deze samenvatting?
Stuvia is een marktplaats, je koop dit document dus niet van ons, maar van verkoper kimbroks26. Stuvia faciliteert de betaling aan de verkoper.
Zit ik meteen vast aan een abonnement?
Nee, je koopt alleen deze samenvatting voor €7,16. Je zit daarna nergens aan vast.
Is Stuvia te vertrouwen?
4,6 sterren op Google & Trustpilot (+1000 reviews)
Afgelopen 30 dagen zijn er 53920 samenvattingen verkocht
Opgericht in 2010, al 14 jaar dé plek om samenvattingen te kopen