This is an extensive summary of the subject Consumer Psychology and Emerging Technologies at Erasmus University RSM. It includes all notes from class and examples and the summaries from the papers that were dealt with. I got a 9 with this summary.
Lecture 1- Introduction
Classic economic theories
Classic economic theories believe:
• Consumers hold stable preferences and always order them the same way
If you prefer an apple over orange, you always choose an apple over an orange.
• Consumers make choices that maximize their utility (they choose the product that
fits their preferences best)
Context effects
• Framing effect= How you frame a question affects the choice the consumer makes.
If people have to decide between program A where 200 people will be saved (gain
frame) or program B where 1/3 probability is that 600 people will be saved and 2/3
probability that no one will be saved (loss frame), most people will select option A.
• Decoy effect= When you have a bottle of 10 and 30 dollars, the 30 bottle seems
very expensive. But when a 50 dollar bottle is offered too, the 30 dollar doesn’t
seem so expensive anymore and people tend to choose it.
How does technology come into play here? (Paper Melumad et al.)
How does technology come into play in consumer psychology?
• The technologies we use now are becoming a part of the consumer psychology, they
are not a passive side thing anymore. Technology affects our choice processes.
• Primitive choice element= The main consumer behavioural concepts that affect our
choices
• Behavioural outcomes= The outcome of our choices (choice, performance etc)
The 3 M’s of technology that now affect the choice process:
• Medium= The device we use when making a choice.
• Modality= How consumer senses interact with the devices. We can hear
information from our smart speaker or feel the vibration of the phone.
• Modifier= The intelligent agent behind the medium such as search engines,
recommendation systems, search technologies
,Hasn’t technology always affected our choice processes? What’s different now? →
1. Before there was a one size fits all message that we would get from TV or the
library, but now we get personalized messages.
2. It is also always present in our life now.
Medium: Effects of Device Type on Choice
• Smart phones:
- Source of psychological comfort that makes you feel better
- Presence of phone reduces cognitive capacity
- Phones affect the preferences you display: On your phone you tend to choose
more variety, you are more risk-seeking and more innovative.
- When you write of your phone, you tend to write more emotionally (because
you’re more focused as there’s a smaller screen)
- Using your phone enhances self-disclosure (sharing more info about yourself)
• Wearables (smart watches etc):
- You get more data about yourself which can be helpful
- Unintended consequences: quantification might crowd out intrinsic awards and
affect the psychological experience of what we are doing.
EG: When you’re walking a number of steps in order to reach 10,000 steps and
focusing on that instead of the relaxation of going for a walk.
Modality: Effect of New Modalities on Search and Choice
• Haptics (touch):
- Use of touch screen → More focus on tangible attributes compared to when
using just a mouse
- The more playful and easier the gestures are → More likely to add more
customized options when buying something
- Haptic alerts → Increases feelings of presence. When your fitness app vibrates
some may feel very motivated to go to the gym while others may not want such
close presence of such an app.
• Voice technology
- People use more specific terminology when searching through their voice
compared to when typing. With voice searching we first think of what we are
going to say.
• Visual technology
- Ease of mentally simulating product consumption
Modifiers: How Intelligent Agents are altering choice
• Recommendation Systems (systems that can learn from your past choices to make
suggestions tailored to you)
- Decreases amount of effort you need to put into your choices and increases
choice quality
- Risk of misalignment: you might be given bad advice and still follow it because
you think it’s tailored to you
- Do we trust it?
• Search assistants
, - Continuous access blurs distinction what we think we know versus what we
actually know; we think we know more than we really do.
- How do we attribute knowledge and decisions? We might think we know
something or take a decision while actually the search assistant did it.
How does technology come into play?
Back to the framework: The primitive choice elements affect the behavioural outcomes.
→ The technology we use nowadays works together with the choice elements to affect
our behaviours. There is a feedback loop as the recommendations for example are
constantly updated by how we behave.
What is Artificial Intelligence?
It is:
• Doing something humans used to do
• Taking in information, applying calculations and then spitting out output
Experiencing AI (Paper Puntoni et al.)
4 customer-centric AI experiences:
• Data capture
• Classification
• Delegation
• Social experience
Data capture
• Data capture= When data is being collected about you by AI. The experience that
results from AI systems collecting data about consumers and the environment in
which they live.
Psychological tension:
, • Served:
- Access to information, services, entertainment.
- Opportunities for self-improvement
• Exploited:
- Intrusive
- Lacks transparency
- Threatens ownership of data and challenges personal control
Psychological effects of perceived exploitation as a result of data capture:
• Moral outrage: Might arise from data capture, as people may become mad that
companies are collecting data about them and not transparent about it.
• Psychological reactance: Data capture may lead you to actively not want to use a
specific device to protect your privacy.
Managerial recommendations:
• Listen to consumers who have experienced exploitation
• Understand when, how and whether their data capture experiences that play into
the narrative
• Sponsor research and share information with firms, educators and the media
• Algorithm bill of rights (people should know what factors a company’s algorithm is
using)
• Educate consumers about AI data capture
Classification
• Classification= The experience in which consumers perceive AI-enabled
personalized predictions to be the result of being classified as a certain consumer
type. The predictive aspect of AI.
Psychological tension:
• Understood:
- You feel understood: When the system identifies you as a consumer type in
which you recognize yourself or as part of a group which you want to be a part of.
• Misunderstood:
- You feel misunderstood: When the system identifies you as a person in which
you do not recognize yourself and you feel misunderstood.
- Biased predictions
Psychological effects of classification:
• It may feel that your classification is inaccurate which can be negative for your self-
esteem
• Discriminatory use of classification
Sociological consequences of classification:
• When you systematically deny bank loans to people who live in certain
neighbourhoods.
Managerial recommendations:
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