Lecture 1: Introduction to Consumer Behaviour
WHY STUDY CONSUMER BEHAVIOUR?
→ it helps to take a marketing perspective
misconceptions about marketing:
- marketing = fluff
- marketing = manipulative
- marketing = wasteful
= false and inconsistent, how can it be fluff when it is manipulative
according to your professor:
- marketing =/= rocket science → it’s much harder than that, bc there is a 1-to1
relationship
- marketing = behavioral science → no guarantee, following a good process ⇒ a lot of
uncertainty & it’s probabilistic
What is marketing?
Marketing is the activity, set of institutions, and processes for creating, communicating,
delivering and exchanging offerings that have value for customers, firms, clients, partners,
and society at large.
Where does value to consumers come from?
“Build a better mousetrap, and the world will beat a path to your door.” -- Ralph Waldo
Emerson, late 19th century
⇒ the only thing you need to do as a business to be successful is to invest in engineering
good products and that will make you successful
now: everything is different → brands are not so important anymore
why? the rise of the internet / social media / online ratings / reviews
⇒ give you a lot of information about the quality of products
⇒ don’t need brands, ads, promotions,... to assess the quality of products
,The relation between user ratings and product quality
EX: buy a new car seat for a baby
option 1: well-known brand → expensive → sales person recommends this seat
→ this was the only information 20 years ago, but now look for online ratings
ex. rating: kid is unharmed in a car accident
Is the rating helpful? no, we don’t know what the injury could be without the car seat
What is the correlation between online rating on amazon and ratings from objective product
testers? → collect a variety of products
positive correlation: products with higher user ratings ⇒ have higher quality
correlation = 0: no association
negative correlation: products with higher user ratings ⇒ have a lower quality
How often will you find that the product with the higher user rating (on Amazon) performs
better in standardized tests of product quality? ex. 50%: no association (correlation = 0)
found correlation = 0.15 ⇒ you have some info about the objective performance but really
not much
correlation price and consumer reports quality score
correlation price and objective performance ⇒ 0.3
This graph shows: if you take 2 products
and the difference in star rating is smaller
than 0.4, the likelihood that the one with the
higher star rating does better is 50% ⇒ it’s
a coin flip
what is reflected in user ratings, if it’s not the objective performance?
→ the perception that consumers have about the brands of products play an important role:
celebrity endorsement
the more that people pay ⇒ the more satisfied they are
EX: wine-tasting
need to taste wine A-E
A = B, C = D, E
liking without price: A=B better than C=D better than E
liking with (fake) price: B better than A, D better than C, E better than before
EX: ice cream
value is not determined by the quality of the product but of the packaging
,EX: new music
In which market will popularity be more consistent? independent or social (you can see the
views of the song)?
Independent, bc the only thing you can be influenced by is the song
⇒ difficult to predict in a social world which products will be popular
In which market is the hit more popular?
Social, bc you see what many people listened to
Value = f(marketing mix)
→ product, place, promotion and price
Two sides of customer value:
Take-aways:
- you shouldn’t follow the star-rating on Amazon (customer) ==> value that the cons see in
product depends on more than the objective performance of the product itself
drivers of value to consumer
- online user ratings
- packaging
- society (in general) —> social influence
- preferences
, Lecture 2: Managerial thinking traps
WHAT IS THE SECRET TO SUCCESS?
8 quizzes → estimate your probability that you will outperform your opponent
1. popular / common questions ⇒ higher probability
2. less common questions
Takeaway:
it’s surprising that we believe that we’re going to outperform somebody else on the easy /
familiar quizzes than the less familiar, why should not that be the case?
your assessment of how well you would do compared to an opponent should be based on 2
sub assessments:
1. How much do I know about this?
2. How much do I believe my opponent knows about this?
⇒ we rely only on the first sub assessment
Which bias of human cognition are we thinking about?
= egocentrism; you look at the world through your own eyes, you overweigh your knowledge,
opinions, perspective and insufficiently taking into account other people’s knowledge,...
⇒ egocentrism undermines
effective marketing
⇒ being successful, it’s all about
the perspective:
- of the competitors
- of the customers
- of other employees
egocentrism ⇒ harms communication with the stakeholders
EX: being in a presentation, where you have no clue what’s going on, but the speaker thinks
he is crystal clear (= consequence of egocentric thinking)
⇒ if i assume that the knowledge that I have also resides in your mind, i’m going to
skip steps in my logic, use more abstract terminology, not use a much concrete
examples
⇒ lose the listener
EX: both partners overestimate their input for shares in the household
EX: what is your share of contribution in a group work
⇒ sum > 100%, bc overvalue your contributions and undervalue the other
contributions
⇒ overconfidence
WHY STUDY CONSUMER BEHAVIOUR?
→ it helps to take a marketing perspective
misconceptions about marketing:
- marketing = fluff
- marketing = manipulative
- marketing = wasteful
= false and inconsistent, how can it be fluff when it is manipulative
according to your professor:
- marketing =/= rocket science → it’s much harder than that, bc there is a 1-to1
relationship
- marketing = behavioral science → no guarantee, following a good process ⇒ a lot of
uncertainty & it’s probabilistic
What is marketing?
Marketing is the activity, set of institutions, and processes for creating, communicating,
delivering and exchanging offerings that have value for customers, firms, clients, partners,
and society at large.
Where does value to consumers come from?
“Build a better mousetrap, and the world will beat a path to your door.” -- Ralph Waldo
Emerson, late 19th century
⇒ the only thing you need to do as a business to be successful is to invest in engineering
good products and that will make you successful
now: everything is different → brands are not so important anymore
why? the rise of the internet / social media / online ratings / reviews
⇒ give you a lot of information about the quality of products
⇒ don’t need brands, ads, promotions,... to assess the quality of products
,The relation between user ratings and product quality
EX: buy a new car seat for a baby
option 1: well-known brand → expensive → sales person recommends this seat
→ this was the only information 20 years ago, but now look for online ratings
ex. rating: kid is unharmed in a car accident
Is the rating helpful? no, we don’t know what the injury could be without the car seat
What is the correlation between online rating on amazon and ratings from objective product
testers? → collect a variety of products
positive correlation: products with higher user ratings ⇒ have higher quality
correlation = 0: no association
negative correlation: products with higher user ratings ⇒ have a lower quality
How often will you find that the product with the higher user rating (on Amazon) performs
better in standardized tests of product quality? ex. 50%: no association (correlation = 0)
found correlation = 0.15 ⇒ you have some info about the objective performance but really
not much
correlation price and consumer reports quality score
correlation price and objective performance ⇒ 0.3
This graph shows: if you take 2 products
and the difference in star rating is smaller
than 0.4, the likelihood that the one with the
higher star rating does better is 50% ⇒ it’s
a coin flip
what is reflected in user ratings, if it’s not the objective performance?
→ the perception that consumers have about the brands of products play an important role:
celebrity endorsement
the more that people pay ⇒ the more satisfied they are
EX: wine-tasting
need to taste wine A-E
A = B, C = D, E
liking without price: A=B better than C=D better than E
liking with (fake) price: B better than A, D better than C, E better than before
EX: ice cream
value is not determined by the quality of the product but of the packaging
,EX: new music
In which market will popularity be more consistent? independent or social (you can see the
views of the song)?
Independent, bc the only thing you can be influenced by is the song
⇒ difficult to predict in a social world which products will be popular
In which market is the hit more popular?
Social, bc you see what many people listened to
Value = f(marketing mix)
→ product, place, promotion and price
Two sides of customer value:
Take-aways:
- you shouldn’t follow the star-rating on Amazon (customer) ==> value that the cons see in
product depends on more than the objective performance of the product itself
drivers of value to consumer
- online user ratings
- packaging
- society (in general) —> social influence
- preferences
, Lecture 2: Managerial thinking traps
WHAT IS THE SECRET TO SUCCESS?
8 quizzes → estimate your probability that you will outperform your opponent
1. popular / common questions ⇒ higher probability
2. less common questions
Takeaway:
it’s surprising that we believe that we’re going to outperform somebody else on the easy /
familiar quizzes than the less familiar, why should not that be the case?
your assessment of how well you would do compared to an opponent should be based on 2
sub assessments:
1. How much do I know about this?
2. How much do I believe my opponent knows about this?
⇒ we rely only on the first sub assessment
Which bias of human cognition are we thinking about?
= egocentrism; you look at the world through your own eyes, you overweigh your knowledge,
opinions, perspective and insufficiently taking into account other people’s knowledge,...
⇒ egocentrism undermines
effective marketing
⇒ being successful, it’s all about
the perspective:
- of the competitors
- of the customers
- of other employees
egocentrism ⇒ harms communication with the stakeholders
EX: being in a presentation, where you have no clue what’s going on, but the speaker thinks
he is crystal clear (= consequence of egocentric thinking)
⇒ if i assume that the knowledge that I have also resides in your mind, i’m going to
skip steps in my logic, use more abstract terminology, not use a much concrete
examples
⇒ lose the listener
EX: both partners overestimate their input for shares in the household
EX: what is your share of contribution in a group work
⇒ sum > 100%, bc overvalue your contributions and undervalue the other
contributions
⇒ overconfidence
