Consumer Behavior
Lecture 1: 06-02-2023
Consumer behavior
- We are always consuming something
- We are sometimes planning future consumption
- We are sometimes enjoying the memory of past consumption
Consumer behavior = process involved in selecting, buying, using or disposing of products,
services, ideas and experiences to satisfy needs and wants (Solomon).
Obtaining products & services
Deciding to buy a product
Deciding between brands
Where to buy
How to pay
How you transport it
Consuming products & services
How you use a product
How you store a product
Who uses the product
How much you consume
How a product compares with expectations
Disposing of products & services
How you get rid of remaining product
How much you throw away after use
Reselling products
How you recycle products
Consumer factors (gender, age, feelings,
motivations, attitudes, knowledge, culture,
subculture, social environment) and marketing
factors (brand names and reputations, WOM,
advertising, promotions, price, service, packaging,
store) play a role in consumer behavior.
Why do we study consumer behavior?
Understand consumers
o What do they need?
o How do they decide?
o What makes them happy?
Predict their reaction to marketing strategies
o Changes to your product or service
o Price changes
o Change positioning
, Simply deliver what consumers want
Find out what they care about and provide that
Limitations:
Problem with understanding: not everyone is like you
o False consensus effect: overestimate that your own beliefs are also the beliefs
of others
Problem with predicting: you often don’t even know
o What you would do (affective forecasting)
o Why you do what you do
Intuition trap: problems with common sense
We are often wrong
o Projection bias: the idea that people project their own attitudes and beliefs
onto others
o We are even bad in predicting our partner’s choices
We focus on confirming instances
o Confirmation bias
o Cognitive component: focused attention
o Motivational component: we are resistant to change our prior beliefs
Our preferences are not representative
o Projection bias / false consensus bias
o People tend to overestimate the extent to which their beliefs or opinions are
typical of those of others
Make decision 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
Do consumers know what they want?
Consumers don’t always know what they want
Consumers don’t know what is possible / not sufficiently knowledgeable and creative
Consumers’ preferences are always flexible => very important
Why study consumer behavior: public policy
Regulate behavior: public policy
o How will consumers react to regulations?
Cigarette warning labels
Assumption: if people know how bad something is, they will not do it
o How will consumers react to market changes?
Recession, tax cuts, changes in mortgage subsidies
Change behavior: social marketing
o Encourage / discourage activities
o Effect of advertising on society
,Recap:
What is CB?
Obtaining, consuming, and disposing products and services
Influenced by personal and external factors
o Effect on affect, cognition, and behavior
Why study CB?
Marketers: understanding and predicting behavior of consumer (to influence)
Public policy: to regulate and encourage behavior
How to study CB?
Methods for studying consumer behavior:
Interviews (qualitative)
o In-depth interviews
o Focus groups
Surveys (quantitative)
o Mall intercepts
o Telephone surveys
o Mail questionnaires
o Internet surveys
o Longitudinal survey studies
Experimental research
Best to combine methods
o No single best method: depends on the research question
E.g., survey: only correlations, but lap exp: artificial, qualitative: more
richness and context but also more subjective and expensive
Problems with interviews and surveys
Self-selection
Self-reports
Sensitivity to wording & order
o Usually: qualitative: exploratory / quantitative: test, generalize
, Overall:
o Beware of common sense: intuition trap
o Understand the nature of the relationship
Causal or correlational?
o Consumer research is a social science
Reducing uncertainty rather than establishing certainty
Lecture 2: 06-02-2023
The ‘’wise’’ 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
Endowment effect = owners assign greater value to a product than non-owners
Malleability of preference = preferences are typically constructed, not revealed
Every evaluation is relative (reference dependence)
People don’t know what they want until they see it in context (context dependence)
Preferences change depending on how the alternatives are presented to them
(description dependence)
Rationality in economics:
People take into account the pleasure they obtain from consuming something
The price they pay for it
Consumers want ‘’value for money’’
Although the provision of extensive choices may sometimes still be seen as initially desirable,
it may also prove unexpectedly demotivating in the end. => choice overload
Freedom of choice becomes tyranny of choice (difficult, frustrating).
Why choice might make us unhappy:
Regret and anticipated regret
Opportunity costs
o Value of the next best choice that one gives up when making a decision
o Escalation of expectations
How do economists think about consumers?
People are rational
Are fully aware of all the options they have
Always choose the option they like best
Assumptions:
Lecture 1: 06-02-2023
Consumer behavior
- We are always consuming something
- We are sometimes planning future consumption
- We are sometimes enjoying the memory of past consumption
Consumer behavior = process involved in selecting, buying, using or disposing of products,
services, ideas and experiences to satisfy needs and wants (Solomon).
Obtaining products & services
Deciding to buy a product
Deciding between brands
Where to buy
How to pay
How you transport it
Consuming products & services
How you use a product
How you store a product
Who uses the product
How much you consume
How a product compares with expectations
Disposing of products & services
How you get rid of remaining product
How much you throw away after use
Reselling products
How you recycle products
Consumer factors (gender, age, feelings,
motivations, attitudes, knowledge, culture,
subculture, social environment) and marketing
factors (brand names and reputations, WOM,
advertising, promotions, price, service, packaging,
store) play a role in consumer behavior.
Why do we study consumer behavior?
Understand consumers
o What do they need?
o How do they decide?
o What makes them happy?
Predict their reaction to marketing strategies
o Changes to your product or service
o Price changes
o Change positioning
, Simply deliver what consumers want
Find out what they care about and provide that
Limitations:
Problem with understanding: not everyone is like you
o False consensus effect: overestimate that your own beliefs are also the beliefs
of others
Problem with predicting: you often don’t even know
o What you would do (affective forecasting)
o Why you do what you do
Intuition trap: problems with common sense
We are often wrong
o Projection bias: the idea that people project their own attitudes and beliefs
onto others
o We are even bad in predicting our partner’s choices
We focus on confirming instances
o Confirmation bias
o Cognitive component: focused attention
o Motivational component: we are resistant to change our prior beliefs
Our preferences are not representative
o Projection bias / false consensus bias
o People tend to overestimate the extent to which their beliefs or opinions are
typical of those of others
Make decision 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
Do consumers know what they want?
Consumers don’t always know what they want
Consumers don’t know what is possible / not sufficiently knowledgeable and creative
Consumers’ preferences are always flexible => very important
Why study consumer behavior: public policy
Regulate behavior: public policy
o How will consumers react to regulations?
Cigarette warning labels
Assumption: if people know how bad something is, they will not do it
o How will consumers react to market changes?
Recession, tax cuts, changes in mortgage subsidies
Change behavior: social marketing
o Encourage / discourage activities
o Effect of advertising on society
,Recap:
What is CB?
Obtaining, consuming, and disposing products and services
Influenced by personal and external factors
o Effect on affect, cognition, and behavior
Why study CB?
Marketers: understanding and predicting behavior of consumer (to influence)
Public policy: to regulate and encourage behavior
How to study CB?
Methods for studying consumer behavior:
Interviews (qualitative)
o In-depth interviews
o Focus groups
Surveys (quantitative)
o Mall intercepts
o Telephone surveys
o Mail questionnaires
o Internet surveys
o Longitudinal survey studies
Experimental research
Best to combine methods
o No single best method: depends on the research question
E.g., survey: only correlations, but lap exp: artificial, qualitative: more
richness and context but also more subjective and expensive
Problems with interviews and surveys
Self-selection
Self-reports
Sensitivity to wording & order
o Usually: qualitative: exploratory / quantitative: test, generalize
, Overall:
o Beware of common sense: intuition trap
o Understand the nature of the relationship
Causal or correlational?
o Consumer research is a social science
Reducing uncertainty rather than establishing certainty
Lecture 2: 06-02-2023
The ‘’wise’’ 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
Endowment effect = owners assign greater value to a product than non-owners
Malleability of preference = preferences are typically constructed, not revealed
Every evaluation is relative (reference dependence)
People don’t know what they want until they see it in context (context dependence)
Preferences change depending on how the alternatives are presented to them
(description dependence)
Rationality in economics:
People take into account the pleasure they obtain from consuming something
The price they pay for it
Consumers want ‘’value for money’’
Although the provision of extensive choices may sometimes still be seen as initially desirable,
it may also prove unexpectedly demotivating in the end. => choice overload
Freedom of choice becomes tyranny of choice (difficult, frustrating).
Why choice might make us unhappy:
Regret and anticipated regret
Opportunity costs
o Value of the next best choice that one gives up when making a decision
o Escalation of expectations
How do economists think about consumers?
People are rational
Are fully aware of all the options they have
Always choose the option they like best
Assumptions:
