Consumer behaviour
Lecture 1: Introduction
What is the most important determinant of the obesity crisis?
People consume more calories people burn fewer calories
How long does it take you to burn 500 calories? 30min/1
hour
How long does it take you to eat 500 calories? A few
minutes
It has to be consuming more calories, because it requires a smaller behavioural
change
But why? Is it because people have changed? Is it because the environment has
changed?
- People haven’t changed much, brains are pretty stable
- The environment is VERY different
o Life is more stressful, which makes it harder to overcome the willpower to
ignore sweets, chips, …
o Products with more calories are more accessible – it is available in every
supermarket in different colors, flavors and so on
o Food (and most likely unhealthy food) is advertised much more than a few
years ago
o Portion sizes have increasing significantly over the years, we are not great
at anticipating that effect on people
Takeaways
Learn to think from first principles
- Identify the fundamental drivers of human behaviour
- Deduce predictions and explanations about more complex
consumer phenomena from there
Consumers operate under mental and physical conditions
- They follow the path of least effort – both mentally and physically
- Their sensitivity to magnitude diminished as scale increases
- They make biased judgements about the consequences of consumption
Details matter
- Small causes can have large effects
- Small, repeated behaviors (e.g. daily Twix bar) can explain large-scale outcomes
Context matters
- Psychological principles are stable, but they don’t operatie in isolation
- The PESTEL context shapes how they manifest in practice
Markets with interaction VS markets without interaction (music - new hits)
Where is the correlation the highest?
Correlation between songs is going to be higher in independent markets VS
social markets
In independent markets the only way to become convinced is the song itself,
whereas in social markets you get influenced by the other members in the
market
Where are the hits more popular?
Hits are more popular in the social market, because of the social interaction
,Key takeway = predicting succes of products is difficult and is based on a lot of factors
The idea of many people: if you make a good product, the consumers will come
to you
o Supposidly only based on quality (which is a misconception), it is based on
many more (often hidden) factors, which you can’t as easily predict
Amazon star rating
What is marketing?
- According to critics
o Marketing if fluff
o Marketing is manipulative
o Marketing is wasteful
- Accroding to your professor
o Marketing is not rocket science
o Marketing is behavioral science
Obviously people will be influenced by amazon star reviews, especially touching
reviews like the one from the car accident…
BUT
Does the review actually bring value?
- Is it real?
- We don’t have exact information: how heavy was the car accident? Did they
survive because of the car seat, or because of the crash type
- NO objective value!
To really consider the value of a product, you could do better testing, better
research. You should consider looking at testaankoop, consumentenbond and so on.
In this specific case you could also look if there were crash tests done on the car
seats
Takeaways
Business isn’t rocket science. Business is behavioral science
Predicting the succes of new products is inherently uncertain because it
depends on human behaviour
People often take data at face value
Attribute substition: when confronted with a difficult question, people often
answer an easier one istead, usually without begin aware of the substitution
Value is more than product ingredients
To increase perceived value, it is often more effective to engineer the minds of
consumers than to engineer the ingredients of products
Value is a complex function of the marketing mix
The 4 P’s: Product, promotion, price, place
What is marketing?
Marketing is the activity, set of institutions, and processes for
creating communicating, delivering and exchanging offerings
that have value for customers, clients, partners and society at
large
How do you measure value of customers?
, - Customer acquisition cost (CAC) = the total cost to acquire customers dividend
by the number of customer required
- Customer margin = revenue generated by customers minus the cost to serve
- Retention rate = the percent of customers from the previous period that are still
active in the current period
- Customer lifetime value (CLV) = the aggregated profit a customer brings to a
firm over the entire duration of the relationship between the customer and the
firm
Lecture 2: Managerial thinking traps (part 1)
Knowing with certainty
Experiment: 10 statements True or False. You have to give
your answer and also the percentage of certainty you are (100%
= absolutely sure, 50% = a guess)
- Mostly we see that prediction > reality
- Theory vs practice:
o Theory: if people are well calibrated straight line
o Practice:
If people say they don’t have a clue, you can
trust them that they absolutely don’t know
If people say that they are 100% sure, there is a good chance that
they are wrong
- The mind believes that it knows more than it actually does!
- To learn you have to accept that there are still things that
you don’t know
- There is a correlation, but it is far from perfect
Does negative feedback and searching for contradictory
evidence reduce overconfidence?
1. Contradictory evidence reduces overconfidence.
o For all three feedback types, overconfidence scores
are lower when contradictory evidence is provided
(right side of the graph).
2. Unfavorable feedback produces the lowest overconfidence overall.
o Participants who received unfavorable feedback (bottom line) were
consistently less overconfident than those with neutral or favorable
feedback.
3. Favorable feedback leads to the most overconfidence.
o Even when contradictory evidence is present, those who received
favorable feedback stayed more overconfident than others — though their
overconfidence still dropped somewhat.
Both evaluative feedback and contradictory evidence independently reduce
overconfidence — but the combination of unfavorable feedback and exposure to
contradictory evidence produces the strongest correction effect.
, Does perspective-taking help?
For many moral things we have an opinion this is outed before
justification/reasoning
People arrive at different answers, because of different moral standards
o Harm: do you harm anyone with it?
o Inherently: it’s just disgusting, it gives me the creeps
o Authority: are you respecting authority?
False consensus effect: if you believe it’s unethical, you often will think that
people in general will share your opinion and vice versa
Simpson’s paradox
Example: Vaccine efficiency
- People were looking at vaccine efficiency by using the percentage of
vaccinated/unvaccinated people who are currently in the hospital – however
there’s something missing
- We haven’t taking into account all the factors that have an impact on vaccine
efficiency
o For example: age, underlying diseases, …
Lecture 3: managerial thinking traps (part 2)
“Knowledge illusions undermine effective marketing”
For example:
o Egocentrism: thinking you know more than you know
Underweighing the expectations of the customers and competitors
Overestimating your own company
Sustained economic growth
Real GDP has grown overtime since 1800
This is remarkable, because before 1800 this wasn’t the case.
Then we saw periods of growth, recession, stability, …
Lecture 1: Introduction
What is the most important determinant of the obesity crisis?
People consume more calories people burn fewer calories
How long does it take you to burn 500 calories? 30min/1
hour
How long does it take you to eat 500 calories? A few
minutes
It has to be consuming more calories, because it requires a smaller behavioural
change
But why? Is it because people have changed? Is it because the environment has
changed?
- People haven’t changed much, brains are pretty stable
- The environment is VERY different
o Life is more stressful, which makes it harder to overcome the willpower to
ignore sweets, chips, …
o Products with more calories are more accessible – it is available in every
supermarket in different colors, flavors and so on
o Food (and most likely unhealthy food) is advertised much more than a few
years ago
o Portion sizes have increasing significantly over the years, we are not great
at anticipating that effect on people
Takeaways
Learn to think from first principles
- Identify the fundamental drivers of human behaviour
- Deduce predictions and explanations about more complex
consumer phenomena from there
Consumers operate under mental and physical conditions
- They follow the path of least effort – both mentally and physically
- Their sensitivity to magnitude diminished as scale increases
- They make biased judgements about the consequences of consumption
Details matter
- Small causes can have large effects
- Small, repeated behaviors (e.g. daily Twix bar) can explain large-scale outcomes
Context matters
- Psychological principles are stable, but they don’t operatie in isolation
- The PESTEL context shapes how they manifest in practice
Markets with interaction VS markets without interaction (music - new hits)
Where is the correlation the highest?
Correlation between songs is going to be higher in independent markets VS
social markets
In independent markets the only way to become convinced is the song itself,
whereas in social markets you get influenced by the other members in the
market
Where are the hits more popular?
Hits are more popular in the social market, because of the social interaction
,Key takeway = predicting succes of products is difficult and is based on a lot of factors
The idea of many people: if you make a good product, the consumers will come
to you
o Supposidly only based on quality (which is a misconception), it is based on
many more (often hidden) factors, which you can’t as easily predict
Amazon star rating
What is marketing?
- According to critics
o Marketing if fluff
o Marketing is manipulative
o Marketing is wasteful
- Accroding to your professor
o Marketing is not rocket science
o Marketing is behavioral science
Obviously people will be influenced by amazon star reviews, especially touching
reviews like the one from the car accident…
BUT
Does the review actually bring value?
- Is it real?
- We don’t have exact information: how heavy was the car accident? Did they
survive because of the car seat, or because of the crash type
- NO objective value!
To really consider the value of a product, you could do better testing, better
research. You should consider looking at testaankoop, consumentenbond and so on.
In this specific case you could also look if there were crash tests done on the car
seats
Takeaways
Business isn’t rocket science. Business is behavioral science
Predicting the succes of new products is inherently uncertain because it
depends on human behaviour
People often take data at face value
Attribute substition: when confronted with a difficult question, people often
answer an easier one istead, usually without begin aware of the substitution
Value is more than product ingredients
To increase perceived value, it is often more effective to engineer the minds of
consumers than to engineer the ingredients of products
Value is a complex function of the marketing mix
The 4 P’s: Product, promotion, price, place
What is marketing?
Marketing is the activity, set of institutions, and processes for
creating communicating, delivering and exchanging offerings
that have value for customers, clients, partners and society at
large
How do you measure value of customers?
, - Customer acquisition cost (CAC) = the total cost to acquire customers dividend
by the number of customer required
- Customer margin = revenue generated by customers minus the cost to serve
- Retention rate = the percent of customers from the previous period that are still
active in the current period
- Customer lifetime value (CLV) = the aggregated profit a customer brings to a
firm over the entire duration of the relationship between the customer and the
firm
Lecture 2: Managerial thinking traps (part 1)
Knowing with certainty
Experiment: 10 statements True or False. You have to give
your answer and also the percentage of certainty you are (100%
= absolutely sure, 50% = a guess)
- Mostly we see that prediction > reality
- Theory vs practice:
o Theory: if people are well calibrated straight line
o Practice:
If people say they don’t have a clue, you can
trust them that they absolutely don’t know
If people say that they are 100% sure, there is a good chance that
they are wrong
- The mind believes that it knows more than it actually does!
- To learn you have to accept that there are still things that
you don’t know
- There is a correlation, but it is far from perfect
Does negative feedback and searching for contradictory
evidence reduce overconfidence?
1. Contradictory evidence reduces overconfidence.
o For all three feedback types, overconfidence scores
are lower when contradictory evidence is provided
(right side of the graph).
2. Unfavorable feedback produces the lowest overconfidence overall.
o Participants who received unfavorable feedback (bottom line) were
consistently less overconfident than those with neutral or favorable
feedback.
3. Favorable feedback leads to the most overconfidence.
o Even when contradictory evidence is present, those who received
favorable feedback stayed more overconfident than others — though their
overconfidence still dropped somewhat.
Both evaluative feedback and contradictory evidence independently reduce
overconfidence — but the combination of unfavorable feedback and exposure to
contradictory evidence produces the strongest correction effect.
, Does perspective-taking help?
For many moral things we have an opinion this is outed before
justification/reasoning
People arrive at different answers, because of different moral standards
o Harm: do you harm anyone with it?
o Inherently: it’s just disgusting, it gives me the creeps
o Authority: are you respecting authority?
False consensus effect: if you believe it’s unethical, you often will think that
people in general will share your opinion and vice versa
Simpson’s paradox
Example: Vaccine efficiency
- People were looking at vaccine efficiency by using the percentage of
vaccinated/unvaccinated people who are currently in the hospital – however
there’s something missing
- We haven’t taking into account all the factors that have an impact on vaccine
efficiency
o For example: age, underlying diseases, …
Lecture 3: managerial thinking traps (part 2)
“Knowledge illusions undermine effective marketing”
For example:
o Egocentrism: thinking you know more than you know
Underweighing the expectations of the customers and competitors
Overestimating your own company
Sustained economic growth
Real GDP has grown overtime since 1800
This is remarkable, because before 1800 this wasn’t the case.
Then we saw periods of growth, recession, stability, …
