Lecture 1
What is economic and consumer psychology?
society of consumer psychology: consumer psychology employs theoretical psychological
approaches to understand consumers
international association for research in economic psychology: Economic psychology is
concerned both with the psychological mechanism through which economic behavior comes
about, and with the psychological effects of economic events – international association for
research in economic psychology
Consumer psychology: products ← → person
- Why do people buy and adopt certain products?
- What impact do products have on people?
- What is the psychological function of consumption?
Economic psychology (more macro): person ← → economy
- How do people make economic decisions?
- How do people evaluate risk?
- What is the effect of the economy on people?
What is advertising?:
- Traditionally: any form of paid communication by an identified sponsor aimed to inform
and/or persuade target audiences about an organization, product, service or idea
- Updated: now also unpaid and unidentifiable
Functions of advertising:
Broad: Competition, Inform, Funding, Employer
History: advertising is really old
- In the industrial revolution (1730-1830) it got more popular bc more production
- Brand: label with which to designate an individual product and differentiate it
from competitor
- Unique selling proposition
- Television
- internet
,Approaches of advertising
- Tell approach: telling people what you have to offer
- Hard-sell: actively convincing, telling people to purchase is (car sellers)
- Soft-sell: focus on getting a good feeling about the product, emotional bond
- argument -based appeal: why you should purchase it
- Affect-based appeals: emotions that you might experience from it
Broader impacts
- Normalising
- Idealizing
- Aspiration levels
- Psychological obsolescence
- Materialism
, Week 1 article 1: fossil fuel advertising
The Hague was the first city in the world to enact a law prohibiting advertisements for fossil
fuel products and services. The law prohibits advertisements for petrol, diesel, aviation,
cruiseships, etc, in areas visible from publicly accessible places, such as city streets and bus
stops.
This ban follows calls from organizations, scientists and the UN secretary general: they all
argued that the ubiquitous presence of these ads are a barrier to reducing carbon emissions.
The ban has also faced criticism: it is said to be the prime example of symbolic politics: a
policy implemented more for its attention-grabbing potential than for achieving its stated
objectives
Direct impact takes time and effort
But partly due to advertising, products with high emissions are deeply embedded in social
norms, those norms are unlikely to be quickly abandoned as the result of a ban. But emission
reductions will probably manifest in the long term if a fossil fuel ban is implemented at scale, as
illustrated by the impact of tobacco advertising bans.
- Such comprehensive bans restrain the ability to boost aspiration levels further
- limits opportunities for greenwashing and downplaying fossil fuel impacts
- Reduces the demand for fossil fuels products and services
The power of symbolism
But the impacts are currently limited to the local scale of the ban. The main impact of The
Hagues ban is not its immediate impacts on emissions, but its symbolism and the potential to
spark wider societal debate.
- It challenges the taken-for-granted nature and moral legitimacy of fossil fuel products
and services
- Communicates their harms
- Encourages public scrutiny and debate
- It demonstrates that legislators (wetgevers) have authority and opportunity to challenge
entrenched practises
- Signals The Hagues girl commitment to climate actions: enhances public confidence in
other governmental climate initiatives and inspires individual level pro-environmental
behavior
- Encourages other cities and countries to explore similar measures.
The ban is described as a “niche innovation”, meaning that through further incubation in The
Hague, diffusion to other locales, it can lay the groundwork for societal transformations
Survey data from 13 EU countries shows: Support for fossil fuel ad bans is almost twice as high
as opposition, This suggests little risk of major public backlash
Applications to broader regions
The ban has received widespread global news coverage, and many places are exploring similar
measures. Cities and nations historically rooted in sourcing/processing fossil fuels may be more
resistant to a ban, particularly with the recent successes of right-wing populist parties. But The
hague proves even then it is possible.
There is also no fear of backlash, because it primarily targets consumers information
environment, and does not restrain their freedom to consume the fossil fuel products.
, Week 1 article 2: how well does advertising work
Advertising is a key part of the marketing mix, but there is long-standing disagreement about
how effective it really is. Effectiveness is usually measured using advertising elasticity: the
percentage change in sales or market share caused by a 1% increase in advertising.
Earlier meta-analyses, suggested relatively strong advertising effects. However, since then the
market environment has changed substantially. Competition has increased, advertising clutter
has grown, the internet has become an alternative information source, and consumers can
avoid advertising more easily. At the same time, researchers now use better data and more
advanced econometric methods.
The goal of this article is to update earlier empirical generalizations by conducting a large
meta-analysis and to identify when, where, and under which conditions advertising works better
or worse, both in the short run and the long run.
The authors conduct a meta-analysis of published and unpublished studies. The dataset
includes
● 751 short-term brand-level advertising elasticities
● 402 long-term brand-level advertising elasticities
from 56 studies published between 1960 and 2008.
Only studies that estimate brand-level, direct-to-consumer advertising effects using
econometric models and real market data are included. The authors exclude
● category-level advertising (primary demand)
● experimental studies
● business-to-business advertising
because the focus is on how a brand’s own advertising affects its own sales (selective demand).
Method and procedure
The analysis proceeds in several steps.
1. The authors conduct univariate analyses to examine the average, median, and
distribution of advertising elasticities.
2. Estimate meta-analytic regression models to identify which factors systematically
influence advertising elasticity. These models correct for within-study dependence and
estimation uncertainty.
They examine 22 potential influencing variables, grouped into six categories:
● time trend and recession
● product and geographic factors
● data characteristics
● omitted variables
● model characteristics
● study characteristics
The analyses are conducted separately for short-term and long-term advertising elasticity, and
several robustness checks and interaction effects are tested.
Results: short-term advertising elasticity
Short-term elasticities range widely, but most are small.
● The mean short-term advertising elasticity is 0.12
What is economic and consumer psychology?
society of consumer psychology: consumer psychology employs theoretical psychological
approaches to understand consumers
international association for research in economic psychology: Economic psychology is
concerned both with the psychological mechanism through which economic behavior comes
about, and with the psychological effects of economic events – international association for
research in economic psychology
Consumer psychology: products ← → person
- Why do people buy and adopt certain products?
- What impact do products have on people?
- What is the psychological function of consumption?
Economic psychology (more macro): person ← → economy
- How do people make economic decisions?
- How do people evaluate risk?
- What is the effect of the economy on people?
What is advertising?:
- Traditionally: any form of paid communication by an identified sponsor aimed to inform
and/or persuade target audiences about an organization, product, service or idea
- Updated: now also unpaid and unidentifiable
Functions of advertising:
Broad: Competition, Inform, Funding, Employer
History: advertising is really old
- In the industrial revolution (1730-1830) it got more popular bc more production
- Brand: label with which to designate an individual product and differentiate it
from competitor
- Unique selling proposition
- Television
- internet
,Approaches of advertising
- Tell approach: telling people what you have to offer
- Hard-sell: actively convincing, telling people to purchase is (car sellers)
- Soft-sell: focus on getting a good feeling about the product, emotional bond
- argument -based appeal: why you should purchase it
- Affect-based appeals: emotions that you might experience from it
Broader impacts
- Normalising
- Idealizing
- Aspiration levels
- Psychological obsolescence
- Materialism
, Week 1 article 1: fossil fuel advertising
The Hague was the first city in the world to enact a law prohibiting advertisements for fossil
fuel products and services. The law prohibits advertisements for petrol, diesel, aviation,
cruiseships, etc, in areas visible from publicly accessible places, such as city streets and bus
stops.
This ban follows calls from organizations, scientists and the UN secretary general: they all
argued that the ubiquitous presence of these ads are a barrier to reducing carbon emissions.
The ban has also faced criticism: it is said to be the prime example of symbolic politics: a
policy implemented more for its attention-grabbing potential than for achieving its stated
objectives
Direct impact takes time and effort
But partly due to advertising, products with high emissions are deeply embedded in social
norms, those norms are unlikely to be quickly abandoned as the result of a ban. But emission
reductions will probably manifest in the long term if a fossil fuel ban is implemented at scale, as
illustrated by the impact of tobacco advertising bans.
- Such comprehensive bans restrain the ability to boost aspiration levels further
- limits opportunities for greenwashing and downplaying fossil fuel impacts
- Reduces the demand for fossil fuels products and services
The power of symbolism
But the impacts are currently limited to the local scale of the ban. The main impact of The
Hagues ban is not its immediate impacts on emissions, but its symbolism and the potential to
spark wider societal debate.
- It challenges the taken-for-granted nature and moral legitimacy of fossil fuel products
and services
- Communicates their harms
- Encourages public scrutiny and debate
- It demonstrates that legislators (wetgevers) have authority and opportunity to challenge
entrenched practises
- Signals The Hagues girl commitment to climate actions: enhances public confidence in
other governmental climate initiatives and inspires individual level pro-environmental
behavior
- Encourages other cities and countries to explore similar measures.
The ban is described as a “niche innovation”, meaning that through further incubation in The
Hague, diffusion to other locales, it can lay the groundwork for societal transformations
Survey data from 13 EU countries shows: Support for fossil fuel ad bans is almost twice as high
as opposition, This suggests little risk of major public backlash
Applications to broader regions
The ban has received widespread global news coverage, and many places are exploring similar
measures. Cities and nations historically rooted in sourcing/processing fossil fuels may be more
resistant to a ban, particularly with the recent successes of right-wing populist parties. But The
hague proves even then it is possible.
There is also no fear of backlash, because it primarily targets consumers information
environment, and does not restrain their freedom to consume the fossil fuel products.
, Week 1 article 2: how well does advertising work
Advertising is a key part of the marketing mix, but there is long-standing disagreement about
how effective it really is. Effectiveness is usually measured using advertising elasticity: the
percentage change in sales or market share caused by a 1% increase in advertising.
Earlier meta-analyses, suggested relatively strong advertising effects. However, since then the
market environment has changed substantially. Competition has increased, advertising clutter
has grown, the internet has become an alternative information source, and consumers can
avoid advertising more easily. At the same time, researchers now use better data and more
advanced econometric methods.
The goal of this article is to update earlier empirical generalizations by conducting a large
meta-analysis and to identify when, where, and under which conditions advertising works better
or worse, both in the short run and the long run.
The authors conduct a meta-analysis of published and unpublished studies. The dataset
includes
● 751 short-term brand-level advertising elasticities
● 402 long-term brand-level advertising elasticities
from 56 studies published between 1960 and 2008.
Only studies that estimate brand-level, direct-to-consumer advertising effects using
econometric models and real market data are included. The authors exclude
● category-level advertising (primary demand)
● experimental studies
● business-to-business advertising
because the focus is on how a brand’s own advertising affects its own sales (selective demand).
Method and procedure
The analysis proceeds in several steps.
1. The authors conduct univariate analyses to examine the average, median, and
distribution of advertising elasticities.
2. Estimate meta-analytic regression models to identify which factors systematically
influence advertising elasticity. These models correct for within-study dependence and
estimation uncertainty.
They examine 22 potential influencing variables, grouped into six categories:
● time trend and recession
● product and geographic factors
● data characteristics
● omitted variables
● model characteristics
● study characteristics
The analyses are conducted separately for short-term and long-term advertising elasticity, and
several robustness checks and interaction effects are tested.
Results: short-term advertising elasticity
Short-term elasticities range widely, but most are small.
● The mean short-term advertising elasticity is 0.12
