1

DecisionBehaviorinMarketing
Dr.MengZhu
WEEK1: DeterminingWhatConsumersWant
1. 2. 3.

CourseOverview&Requirements ObjectivesofConsumerBehavioralDecisionResearch MethodsofConsumerBehavioralDecisionResearch

Administrivia
IamMengZhufacultyinstructorforthiscourse. Email:mengzhu@jhu.edu Phone:410.234.9452 Myoffice:Room1344,100InternationalDrive MyOfficehours
Wed12:302pmorbyappointment *OpenDoorPolicy:OnalldaysoftheweekIobserveanopendoorpolicy

studentsarewelcometoseemewhentheycomebymyoffice(and/or makeanappointment).

ACurtainRaiser
WhatwillIknowbetterafterthiscourse&whyisitimportant?
Marketingbeginsandendswiththeconsumer fromdeterminingtheirneedsto

ensuringtheirsatisfaction.

Inthiscourse,wewillexplorethemostrecentscientificresearchinmarketing,

psychology,andbehavioraleconomicsonconsumerjudgmentanddecision making.Wewilldevelopyourabilitytounderstandandinfluence
whatpeoplewant howpeopledecidewhatandwhentobuy whetherpeoplewillbesatisfiedordissatisfiedwiththeirdecisions

Thesepsychologicalinsightsareusefulformarketingmanagementdecision

making,butalsoyieldinsightintocommondecisionbiasesbeyondmarketing.

Inaddition,wewillexaminethemethodologyofmarketresearchtobuildthetools

youwillneedtointerpretconsumerbehaviorandbasedecisionsonit.

CourseAdministration
Announcementsandupdates,ifany,willbepostedto

Blackboardperiodically.
Thecoursewillbeadministeredusingacombinationof

lectures,casediscussions,andinteractivediscussions.
AsfaraspossibleIwilltrytoadministeradditionalreadingmaterials

electronically.
LectureslidesforanygivenclasswillbepostedonBlackboardimmediately

afterclass.

Pleasebringyournamecardstoclass.

CourseDelivery
Wewilluseacombinationof: Lectures Videoandaudiomaterial CaseStudies&CaseDiscussions InClasspresentationsanddiscussionsinitiatedby students/instructor Webelievethatdiscussion,debate,questioning and

interaction whencombinedofferaneffectivemeans oflearningadvancedconceptsandideas.

Readings
Optional(notrequired)Textbook

ScientificArticles
Blackboard/CourseDocuments

Hoyer&MacInnis(2008).Consumerbehavior, 5thEdition.Mason,OH:SouthWestern

RecommendedSupplementaryBooks

Ariely,D.(2008).PredictablyIrrational:The HiddenForcesThatShapeOurDecisions,New York:HarperCollins. Thaler,R.H.,&Sunstein C.R.(2009).Nudge: ImprovingDecisionsaboutHealth,Wealth,and Happiness.NewYork:Penguin.

RequiredCases

Case1:PluggingIntheConsumer:The AdoptionofElectricallyPoweredVehiclesin theU.S. Case2:PatientslikeMe:AnOnlineCommunity ofPatients Seethesyllabusforthelinktothecoursepack.

Ladderingtheory Tryit,you'lllikeit Mismatchesbetweenintentionand outcome Lexicographicchoicemodel Defaultssavelives Whenismorebetter Decidingadvantageously Yieldingtotemptation Centralandperipheralroutesto advertisingeffectiveness Thescienceofpersuasion Thetyrannyoffreedom

CourseDesign
Date Week1 Week2 Week3 Week4 Week5 Week6 Week7 Week8 Topic ObjectivesandMethods CognitiveArchitecture Judgment&DecisionMaking ConstructingPreferences MotivationandEmotion Forming&ChangingOpinions TermProject ConsumerSatisfaction

SocialandCulturalInfluences

Cognitive Architecture Motivation Emotions Attitudes

Preferences&Decisions

Consumption&Satisfaction

Assignments&Grading
CourseTimeline
W1 W2 W3 W4
Project Proposal

W5
CASE2

W6

W7
Presentation &Writeup

W8
Final Exam

CASE1 Groups &Interview

Attendance&Classparticipation(15%) Interview(10%) CaseAnalysis(2*10%) GroupProjectPresentation&Report(30%) OpenbookFinalExam(25%)

ClassParticipation
ClassParticipation=15%ofyourfinalgrade
Yourinsightfulcommentsinanalyzingcasesand

contributionstoclassdiscussions.
Yourresponsestoquestionsaskedinclassbytheinstructor

oryourclassmates includingyouranalysisofcases.
Materialsofinteresttothecoursethatstudentsidentifyand makeavailabletotheclass
E.g.,articles,pointerstoitemsinthepress,demoofinterestingartifacts,book

excerptsthatyoumakeavailabletotheclasselectronicallyorotherwise.

ClassParticipation Additionalpoints
1.Raiseyourhandbeforetalking. 2.Usebulletpoints(backupyourpointslater). 3.Whycoldcall? Jobinterview Boss Thinkingonyourfeet Synthesize Whenyoudonthaveananswer 4. IfyouarestillnotquitesureaboutCP,comeandtalktome andwewillworkitout.

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IndividualAssignment Interview
ConsumerInterview=10%ofyourfinalgrade

Conductanindepthinterviewwithsomeoneinthisclassaboutarecent purchase. Seethesyllabusforspecificinterviewinstructions.

W1 W2
Consumer Interview

W3

W4

W5

W6

W7

W8

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GroupAssignments GroupProject
GroupProject(groupsof46people)=30%ofyourfinalgrade

Identifyacurrentmarketingproblem&Analyzetheconsumerbehavior Collectdatafromstudentsinthisclass* Developmarketingrecommendationsbasedonyouranalysis ProjectTimeline

W1 W2
Group Formation

W3

W4
Project Proposal

W5

W6

W7
Presentation &Writeup

W8

Seethesyllabusfordetailedinstructionsforthegroupproject.
IMPORTANTNOTE*:FollowingthepoliciessetbytheHomewoodInstitutionalReviewBoard(HIRB),(1)you canONLYintervieworsurveythestudentsinthisclass(2)youcanONLYreportthedatatotheinstructorof thiscourse (3)youcanONLYpresenttheresultstotheinstructorandfellowclassmatesinthisclass. Otherwise,youneedtosubmitanapplicationforHIRBapprovalhttp://web.jhu.edu/Homewood IRB/applications.html andeachmemberinyourgroupmustcompletetrainingintheprotectionofhuman researchparticipantshttp://web.jhu.edu/HomewoodIRB/investigators.html priortosubmissionof applicationforHIRBapproval.

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GroupAssignments CaseAnalysis
CaseAnalysis(thesamegroupsof46people) =20%ofyourfinalgrade
CASE1:PluggingIntheConsumer:TheAdoptionofElectricallyPowered VehiclesintheU.S. CASE2:PatientslikeMe:AnOnlineCommunityofPatients

CasediscussionquestionswillbepostedonBlackboard/Assignments. Thecasewriteupsshouldnotexceed4doublespaced(12 pointfont)pages. A1pageexecutivesummaryofyouranswersisalsorequired.

W2 W3 W4 W5 W6 W7
Presentation &Writeup

W1

W8

Groups Case1 &Interview

Project Case2 ProposalDue

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PeerEvaluationForm

PeerEvaluationisduewiththefinalprojectreport Createyourowncontractandsignthat!

Iwilladjustindividualgradeswhen
1) 2)

Therearerelativelylargediscrepanciesinratings Thediscrepanciesareconsistent(i.e.,aparticularpersonisratedlow byallothers).

FinalExam
FinalExam=25%ofyourfinalgrade
FinalExam:2hour,openbook,inclass. Theexamwillbecomprehensive. Theexamwillbeinshortanswerandessayformats.
W1 W2 W3 W4 W5 W6 W7 W8

Groups Case1 &Interview

Project Case2 ProposalDue

Presentation Final &Writeup Exam

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Expectation
ClassPreparation:Iexpectyoutohavethoroughlyread

anycasesandreadingsassignedforclassdiscussion.
Deadlines:Deadlineswillalwaysbestrictlyenforcedand

noexceptionsofanykindwillbemadewithoutprior approval.
Punctuality:Iexpectyoutobeontimeforclasses.

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Feedback
Pleasedonothesitatetocontactmeforfeedback,

concerns,questions

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TodaysAgenda
1. CourseOverview&Requirements 2. ObjectivesofConsumerBehavioralDecisionResearch 3. MethodsofConsumerBehavioralDecisionResearch

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WhatisMarketing?

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Abriefhistoryofmarketing
ProductionOrientation (18501920) SaleOrientation (19301950) MarketingOrientation (19502010)

Demandoutstripssupply Mostlygenericproducts Littleemphasisonvariation

Supplybeginstooutstrip Companiesbegintofocus demand onconsumerpreferences Focusonsellingwhatwas Whatconsumerswant; produced notwhatismost profitabletomake

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Whatisconsumerbehavioraldecision?
Acquisition
Buying Leasing Trading Sharing Finding

Usage
Whether Why How PostUsage

Disposition
Sell Trade Give Trash Recycle Reuse

DEFINITION: Thetotalityofconsumers decisionswithrespecttotheacquisition, consumption,anddispositionofofferings (goods,services,activities,experiences, people,andideas)overtime.

RelevantDisciplines:
Marketing Psychology(Cognitive,Social,
Developmental)

Neuroscience Sociology Anthropology Demography Economics

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WhyStudyConsumerBehavioralDecision?
NeoclassicalEconomics Preferencesare: discovered transitive timeconsistent Nocapacityconstraints
Thorstein Veblen HerbertSimon

BehavioralDecisionTheory
Preferencesare constructed notnecessarilytransitive canbetimeinconsistent Informationprocessingis constrained

RationalAgentModel
Giventherightinformation,peoplewill maximizealwayschoosetheproductthat bestmatchestheir(stable)preferences

Boundedrationality
Peoplewillsatisficechooseproductsbeyond asufficientthreshold,areinconsistent, ineffective,andoftenrequirehelpmaking choices

RoleofMarketing:
Provideinformationtofacilitate preferencematching Influenceconsumerchoices

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WhyStudyConsumerBehavioralDecision?
RoleofMarketing:
Provideinformationto facilitatepreferencematching
Oneofthesemarketsisabetteruseof advertisingdollars

Segmentation Advertisingeffectivenessin termsofinformation transfer Howtocreateopportunities fordiscoveryofpreferences

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WhyStudyConsumerBehavioralDecision?
RoleofMarketing:
Provideinformationto facilitatepreferencematching
Whatinformationdoconsumersneed,andhowtopresentiteffectively

Segmentation Advertisingeffectivenessin termsofinformation transfer Howtocreateopportunities fordiscoveryofpreferences

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WhyStudyConsumerBehavioralDecision?
RoleofMarketing:
Provideinformationto facilitatepreferencematching Segmentation Advertisingeffectivenessin termsofinformation transfer Howtocreateopportunities fordiscoveryofpreferences Discoverpreferences

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WhyStudyConsumerBehavioralDecision?
RoleofMarketing:
Provideinformationto facilitatepreferencematching Segmentation Advertisingeffectivenessin termsofinformation transfer Howtocreateopportunities fordiscoveryofpreferences Influenceconsumerchoices Discoverfactorsthatinfluence choices,including Perception/Attention Memory Motivation Socialinfluence/Identity BrandImage HeuristicsandDecisionBiases

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Examples:Perception/Attention

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Elongation&JuiceConsumption
ActualVolumePoured&Consumed

8 7 6 5 4 3 2 1 0

PerceivedVolumePoured

Tall,SlenderGlass

Short,WideGlass
Wansink&VanIttersum2003

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Elongation&Professional Bartender
2.5 2 1.5 1 0.5 0
Tall,"Highball"Glass Short,"Tumbler"Glass

<5yearsexperience 5+yearsexperience
Standard Norm

Wansink&VanIttersum2003

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Examples:Memory
How many hours of television do you watch on an average week day? Please choose the category from the list below that best describes your behavior.
A. Uptoanhour B. to1hour C. 1to1hours D. 1to2hours E. Morethan2hours A. Upto2hours B. 2to2hours C. 2to3hours D. 3to3hours E. Morethan3hours

What%ofclasswatchesmorethan2hrs ofTV?

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Examples:Motivation/SocialInfluences

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Examples:BrandImages

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Examples:Heuristics&Biases Whenisdinnerover?
75% Lean

Higherquality Lessgreasy Bettertasting

25% Fat

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ConsumerBehavioralDecision:AnintegratedApproach
SocialandCulturalInfluences Provideinformationto facilitatepreferencematching
Segmentation Advertisingeffectivenessin

InfluenceConsumerChoice Cognitive Architecture Motivation Emotions Attitudes

Discoverwhatfactors

termsofinformationtransfer
Howtocreateopportunities

fordiscoveryofpreferences

influencechoice: Perception/Attention Memory Motivation Socialinfluence identity BrandImage HeuristicsandBiases

Preferences&Decisions

Consumption&Satisfaction

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TodaysAgenda
1. CourseOverview&Requirements 2. ObjectivesofConsumerBehavioralDecisionResearch 3. MethodsofConsumerBehavioralDecisionResearch

Determiningwhatconsumerwants
Developthebestmarketingmixtofulfillconsumers needsanddesires.
consumersandthemethodsandtoolsitselectstoaccomplishthe exchange;comprisedof

Marketingmix:Acompanysserviceand/orproductofferingsto
1. Product
Features,designs,brands,andpackagingofagoodorserviceoffering,alongwith

postpurchasebenefitssuchaswarrantiesandreturnpolicies

2. Price
Listprice,includingdiscounts,allowances,andpaymentmethods

3. Place
Distributionoftheproductorservicethroughspecificstoreandnonstoreoutlets

4. Promotion
Advertising,salespromotion,publicrelations,andpersonalsellingeffortsdesignedto

buildawarenessofanddemandforthegoodsorservice

Productdevelopment
Whatideasdoconsumers

havefornewproducts? Whatattributescanbeadded toorchanged? Whatshouldourofferingbe called? Whatshouldourpackageand logolooklike? Guaranteesorwarranties?

Pricingdecisions
Whatpriceshouldbe charged? Howsensitiveare consumerstopriceand pricechanges? Whenisitokfordynamic pricingtobeused?

Distributiondecisions
Wherearetargetcustomerslikelytoshop? Howshouldstoresbedesigned? Howimportantisittobeclosetothe

consumerorthesourceofyourproduct?
Howdoesshippingspeedinfluence

propensitytopurchase?

Promotiondecisions
Whatareadvertisingobjectives? Whatshouldadvertisinglooklike? Whereshouldadvertisingbeplaced? Whenshouldweadvertise? Hasadvertisingbeeneffective?

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Determiningwhatconsumerswant
Howdofirmsdesignproducts,setprices,determinedistribution (place),andpositionpromotionstobestsatisfytheconsumersneeds anddesires?

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Wheretostart?
HypothesisGeneration
Ahypothesis isatestabletheoreticalrelationship

betweentwoormorevariables(e.g.,xandy).

IndependentVariables(X) Variablesyoumanipulate Allelseisheldconstant

DependentVariables(Y) Variableyoumeasureandrecord PresumablyaffectedbytheIVs

Ahypothesisisonlytestable if

thevariablesaremeasurable therelationbetweenthevariablesispreciselyspecified[xincreasesy]

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Testablehypothesis?
IfStarbucks poststhenumberofcalories

ineachofthefoodsthattheyserve, patronswillbecomehealthier.
IfStarbucks postthenumberofcaloriesin

eachofthefoodsthattheyserve,thetotal numberofcaloriesconsumedbyeach patronpervisitwilldecrease.

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Testablehypothesis?

HasTheMostInterestingManintheWorldcampaignbeeneffective? DoesviewingacommercialfromTheMostInterestingManintheWorld campaignincreasetheperceivedsophisticationofthebrandidentityofDos Equis? DoesviewingacommercialfromTheMostInterestingManintheWorld campaignincreasethelikelihoodthatmenbetweentheagesof21and55will buyDosEquis inbars?

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Testablehypothesis?

Between20062010s,salesofDosEquis increasedby22%atatimewhensaleof otherimportedbeerfell4%intheU.S. Irealizedhowsuccessfulthecampaignhadbeenwhenamancameuptomeina restaurant,tellingmethathehadaskedhisyoungsonwhathewantedtobewhenhe grewup,andtheboyreplied:IwanttobeTheMostInterestingManInTheWorld...

JonathanGoldsmith

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What,exactly,willyoumeasure?
Variable Enjoyment Operational Definition Selfreportedenjoyment Willingness toforgootherdesirable experiences Amountconsumed Value Willingness topay$tobuy Willingnesstoaccept$tosell Sales Numberofunitssold Quarterly incomefromsalesofa product

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TypeofData
PRIMARYDATA Originatedfromresearcherandcollectedtoprovide

relevantinformationtospecificproject
SECONDARYDATA Collectedbyanentityforonepurposeand

subsequentlyusedbyanothersomeotherpurpose

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RuleofThumb:
Collectsecondarydatafirst,thenturntoprimarydata Advantagesofsecondarydata Timesavings,Lowcosts Disadvantagesofsecondarydata Maybeoutofdate Definitionsorcategoriesmightnotbewhatyourelookingfor Mightnotbespecificenoughforyourproject

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Qualitative:ObservationalResearch
Observeconsumersinreal(storeorhome)andsimulated

settings

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Qualitative:FocusGroups

Aformofindepthinterviewinvolving6to12consumers Ledbyamoderatorwhoasksparticipantstodiscussa product,conceptorothermarketingstimulus.

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Qualitative:Interviews

Conductedbyatrainedinterviewer Moreappropriatethanfocusgroupsforsensitive, confidential,orembarrassingtopics Oftenvideotapedsononverbalbehaviorscanbeanalyzed Oftencangetmoredepthofinformation

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Qualitative:laddering

Anindepth,onetooneinterviewingtechniqueusedto developanunderstandingofhowconsumerstranslatethe attributesofproductsintomeaningfulassociationswith respecttoself.

Value
Howdoesconsumptionexperiencehelpme becomewhoIwanttobe?

Consequences
Functionalconsequencesofproduct use/consumption

Attributes
Physicalandsymboliccharacteristics,features

Reynolds,T.J.,&Gutman,J.(1988).Ladderingtheory,method,analysis,andinterpretation. JournalofAdvertisingResearch, February/March, 1131.

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Qualitative:laddering

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QuantitativeResearch
1. NonExperimental Perceptualmaps,Eyetracking 2. Experiments Labstudies,Fieldstudies,Surveys 3. Quasiexperiments Testmarkets

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Quantitative:PerceptualMaps
Ameansofdisplayingorgraphingintwodimensionsthelocationof productsorbrandsinthemindsofconsumers. BrandName Tone Dove Lava Lux Coast Lifebuoy Lever2000 Dial Zest Safeguard DeodorantRating 2 3 3 4 7 8 8.5 9 9 9.5 MoisturizingRating 9 8 2 5.5 6 3 8 3.5 8.8 7

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PerceptualMapofSoaps
10 9 8 MoisturizingRating 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 9 10 DeodorantRating

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PerceptualMapOFAutomobileBrands

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EyeTracking
CAMPARIRedPassion (SalmaHayek) CAMPARIEyeTracking(SalmaHayek)

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Experiments:FundamentalElements
1. Controlvs.TreatmentGroup(s) 2. Lookateffectofindependentvariableondependentvariable
TREAMENTGROUP

ARETHESEAPPROPRIATECONTROLS?

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Experiments:FundamentalElements
1. Controlvs.TreatmentGroup(s) 2. Lookateffectofindependentvariableondependentvariable 3. Randomization

Randomlyassignparticipantstothecontrolandtreatmentgroup(s) WHYISRANDOMIZATIONESSENTIAL?

Wouldbuyanyway.

Wouldneverbuy.

Tooyoungtobuy.

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QuasiExperiments
SimilartoExperiments Alsohavetreatmentsanddependentvariables KeyDifferences Lowerinternalvalidity;norandomassignmentsocausalitycannotbe determined. Higherexternalvalidity;testingadoptionandconsumptionof productinamarketplace.Greaterifyouusearepresentativesample.
TestMarkets
IV:Varyoneormoreelementsofthemarketingmix(i.e.,product,price,place,promotion) DV:Evaluatesalesoftheproductinanactualmarket(e.g.,aspecificcity)

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ConsumerBehavioralDecisionResearchMethods
Qualitative Research
Purpose

Quantitative Research

DiscoverIdeas,Usedinexploratory Testhypotheses orspecificresearch researchwithgeneralresearch questions objects ExploratoryResearchDesigns Observeandinterpret Unstructured,Freeforms Researcherisintimately involved, resultsaresubjective Smallsamplesofteninnatural settings Descriptiveandcausalanalysis Measure andTest Structured responsecategories provided Researcheruninvolved observer. Resultsareobjective Largesamplestoproduce generalizableresults(thatapplyto othersituations)

MostOftenUsed Approach DataCollection Approach Researcher Independence Samples

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TodaysAgenda
CourseOverview&

KeyTakeaways
1. Consumerssatisfice,not

Requirements
Objectivesof

maximize!

2. Westudyconsumer

ConsumerBehavioral DecisionResearch
MethodsofConsumer

behavioraldecisiontolearn whatpeople(includingourselves) want,howpeoplethinkand howtoshapepeoples choices. appropriatetoyourquestion ofinterest;startbroadand getspecific.

BehavioralDecision Research

3. Usethemethodmost

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NextClass:
1. GroupFormation(Createyourowncontractandsignit!) 2. InterviewWriteupDue 3. CognitiveArchitecture:Attention,Knowledge,Memory 4. Case1(PluggingintheConsumer)Out

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InterviewAssignment

Conductanindepthinterviewwithsomeoneintheclassabout arecentpurchase. purchase.

Whatledthisconsumertorealizethatoneneeded/wantedtobuyinthis

Discoverthedecisionmakingprocessthatleduptothe

category? Howmanyalternatives(ifany)didtheconsumerconsider? Howdidthepersondecidetobuythealternativethatheorshechose? Whichproductattributeswereimportanttothisconsumer?(Important: Usethe ladderingtechniquetoprompttheconsumertotellyouthekeybenefits/values thattheyassociatewithproductattributes.)

PleasesubmittheassignmentthroughBlackboardbyclasstime

nextweek.
Writeupshouldnotexceedonepage.