Admin stuff

1
Admin stuff

• Project Topics all chosen?
• Your brand
• Competing brand
• Remember Two parts
• Manager interview
• Questionnaire survey of 20-40 consumers
• Fishbein model questions (ei and bi)
• Also other questions involvement, recall, ad
  reactions, etc.

2
Based on data analysis

• Recommend changing bis and eis appropriately to
  help your brand (e.g., Brand B in the above)
• Simple estimates are fine
• Important also have to say HOW to change each
  number (what tactics to use)
• Price
• Retail location?
• Brand extension?
• BUT MOST OF ALL ADVERTISING-BASED RECCOS

3
Suggest an ad campaign

• Objectives and justification for objectives
• what are you trying to accomplish and why?
• Target market
• How to reach the market (media choice exposure
  issues)
• What objectives may NOT be attained by your
  strategy, and why this is ok
• Note no one campaign fulfils all communications
  goals
• What benefits to emphasize
• Positioning and perception
• A draft of an ad that will be the basis of your
  campaign
• Discussion of whether your product is high/low
  involvement, and how that affects your plan

4
Some overall points to keep in mind regarding
recommendations

• Recommendations should be mutually consistent
• Upmarket image
• Location Sold in expensive malls
• Advertising (celebrity endorser)
• LOW price???
• Realistic
• Budget
• Dont change numbers from -3 to 3!
• Think through implications (changing one number
  can change another)

5
Reccos continued

• Remember dont have to solve all problems!!
• Focus on one or two key ones
• Ad does not have to be a professional job!
• Just a rough draft conveying basic idea
• Recommendations Data Theory
• Apply CB principles when useful (but dont force
  them)
• E.g., you can tell me some low-inv persuasion
  techniques, but to recognize a need for them in
  real life and apply them
• Read book chapters as well
• For the bi/ei model, also show me a final table
  with final numbers and attitudes after your
  recommendations (speculative).

6
Couple of questionnaire tips

• How to ask the ei question?
• When you select a mobile phone, price is
• Very unimportant Very important
• 1 2 3 4 5 6 7

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How to ask the ei question?

• When you select a mobile phone, high price is
• Very undesirable Very desirable
• -3 -2 -1 0 1 2 3

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Calculating Average Ei and Bi

• Right way
• consumer A bi 2, ei -1
• consumer B bi 4, ei -3
• Average bi 3 Average ei -2
• So attitude for this segment ?
• Wrong way
• consumer A bi 2, ei -1
• consumer B bi 4, ei -3
• attitude for consumer A -2
• attitude for consumer B -12
• So average attitude for this segment ?

9
Project Report

• Due by July 6
• Max 10 double-spaced pages
• Not including cover page, executive summary,
  appendices
• But please put Fishbein tables in text!!
• Cover page Group number (1-5) name, student
  ID, email address of each member
• Executive Summary one paragraph summary of key
  problem and your solution
• Attach a blank copy of your questionnaire!!

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Project Presentations

• Next Saturday Project presentations
• Session 2
• Good feedback/learning experience
• even if all data not fully collected/analyzed
  present what you have
• Presentation time 20-22 minutes talk 5-7
  minutes questions
• Dont exceed 25 minutes for your talk!!! Try for
  20 Short presentation good!!!

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Presentations

• During presentation
• lay out the basic issue you are looking at
• What you found (Manager consumer survey)
• Recommendations
• Q/A session very important
• Keep some of your slides for this part!
• Order of presentations1 through 5

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Presentations

• Not formal!
• Group can choose who presents
• Audience participation very very important!
• Feedback to presenting group
• Also, last chance for class participation marks?
• 50 of grade!

13
Next Class (Session 1)

• Topics
• Personality and Lifestyle
• Group Influences
• Cultural Influences
• Book chapters 15, 16
• Case McDonalds in China
• Reading
• Levitt The Globalization of Markets

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Information Processing Model of CB
Individual Consumer Personality/Demogs
Environmental Characteristics Culture
Interpretation/Perception
Attitudes Like/Dislike
Selection Exposure/ attention
Choice
information
beliefs
Stimuli
Memory/Prior Knowledge
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Todays Class Choice and Post-Choice

• What predicts choice?
• Biases in consumer choice decisions
• What happens after choice?
• Satisfaction/dissatisfaction
• Effects of satisfaction repeated purchase
• Brand loyalty
• Case Brand Loyalty

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What predicts ChoiceAttitudes!

• E.g., looking for TV? Want good value at low
  price
• Samsung offers the most utility reliable,
  high-quality, affordable
• In other words Samsung most-liked
  brand(ATTITUDE)
• So rational decision (economist) Choose Samsung
• Dont need to study choice separately
• As long as you measure attitudes/utilities
• Thats why so many surveys measure brand
  attitudes
• Problem consumers dont always behave
  rationally!
• Sometimes, choice decisions go against the simple
  utility rule
• Choose a brand that does not have highest
  intrinsic utility
• Reject a brand that does have highest intrinsic
  utility

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Some strange choice findings

• Williams-Sonoma (retail business in San
  Francisco)
• Sells household goods
• Home bakery unit Price 275
• New model
• very similar,
• slightly larger,
• price 400
• This item did not sell well. What happened to
  sales of old model??

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Some strange choice findings

• Sales figures of old model doubled!
• Why??
• By rational economic theory, consumers should
  value the old option just the same as
  before(nothing has changed about the old option)
• So sales of old model should remain the same!

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Consumers perceive that the value of the old
model has gone up (wow -- great deal!!)

• Even though intrinsic value has not changed
• Choice driven by perceived value, not real value
• And perceived value often driven by context

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Decision Bias 1Influence of context (not just
intrinsic value)

• Presence of a relatively inferior option
  increases the sales of a relatively superior
  option
• So choice is influenced by context
• Would this happen if consumers knew the exact
  utility of the old model?
• I.e., they knew exactly how much it was worth?

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Because they dont know for sure, they have to
guess whether price is ok based on context

• Marketing implications?

22
Decision Bias 1

• Implication sometimes marketers may introduce a
  brand just to make another brand look more
  attractive
• E.g., introduce a high priced Kellogg's
  cornflakes to increase sales of the older cereal
• Another implication usually, old models (TVs,
  printers) are discontinued when new model comes
  along
• Any advantage to keeping the old model?

23
Another choice finding

• Brand A 100, High quality
• Brand B 50, medium quality
• Consumers asked to choose
• A 60
• B 40
• A new option was then introduced
• Brand C 25, low quality
• What happened to choice shares??

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New choice shares

• What happens to choice??
• B 70
• A 20
• C 10
• Why??

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Another choice finding

• Because the compromise option appears safer!
  Either extreme is too dangerous
• Again, choice share of a brand is influenced
• not just by its intrinsic value (which stayed the
  same)
• but also by the context
• consumers dont know exact utilities of the 3
  brands, but the context makes Brand B appear the
  safe choice
• Any culture influence?

26
To sum up Decision Bias 1

• Consumers often use the surrounding context to
  guess at the value of an option

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Decision Bias 2 How Alternatives are Described

• Two identical packets of ground beef were
  described as
• A 75 lean OR
• B 25 fat
• Note actual amount of fat same in both cases
• Which packet of beef chosen more often?
• Consumers also said it tasted better!!
• Why?

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Decision Bias 2 How Alternatives are Described

• Focus on positives rather than negatives
• Another example. If you read
• 90 of consumers happy with this brand
• 10 unhappy with this brand

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Decision Bias 2 How Alternatives are Described

• Framing effect how an option is described has
  an effect on its perceived utility
• Better to describe an option in terms of a
  potential gain (positive) rather than a potential
  loss (negative)
• Again its not just the intrinsic value of an
  option that matters!
• Rather, what matters is the perceived utility

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Decision Bias 3

• Jaideep won 3000 betting on horse-racing. That
  evening, he took his wife out for a celebration,
  and spent all the money
• Jaideep never does this kind of celebratory
  spending when he gets the same amount of gain
  from his stock portfolio
• Why?

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Decision Bias 3 Mental accounting

• Mental Accounting We have separate mental
  accounts for different incomes and expenses
• Jaideeps horse-racing winnings
• luxury income
• Can be spent on luxury expense
• Similar concept with gifts. My wife can spend a
  lot of money if buying a gift, but not if buying
  for herself.
• Different accounts!

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Any examples of how mental accounting can be used
by marketers to encourage certain types of
spending?
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Decision Bias 3 Mental accounting

• Implications
• Travel agents etc. advertise more during
  company bonusesthats when people have luxury
  income
• Expensive chocolates, crockery sets etc. best
  positioned as a gift
• Consumers more likely to pay higher
• Government wants to encourage spending tax
  rebate!
• This would not work if people simply saved the
  rebate amount

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Decision Bias 4 Pains and Pleasures

• What do people prefer?
• winning 10 in one gamble vs.
• Winning 5 each in two successive gambles
• Why??

35
Decision Bias 4 Pains and Pleasures

• What do people dislike more?
• losing 10 in one gamble vs.
• losing 5 each in two successive gambles
• Why??

36
Prospect Theory

• The experience of winning itself carries a
  positive utility
• So two wins of 5 each gt utility than one win
  of 10
• The experience of losing itself carries a
  negative utility
• So two losses of 5 each gt disutility than one
  loss of 10
• Implication Combine pains separate pleasures
• very applicable to service industries e.g.,
  hotels
• Examples?

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Decision Bias 4 Pains and Pleasures

• Implications
• Combining pains for any services billing (e.g.,
  hotel stay), charge one amount instead of many
  separate charges
• Separate the pleasures offer small additional
  items not mentioned earlier (welcome gift on
  check in free breakfast buffet)

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To sum up

• Consumers do often make rational choices and
  decisions
• Choose most-liked brand (most intrinsic value)
• (Book chapter 12 lists several choice rules that
  are based on this principle)
• But not always! Choice also influenced by factors
  like
• The context
• The way the choices are described
• The account from which you spend the money

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Next issue Understanding Post-Choice Behavior

• Consumer Behavior does not end at choice.
• What happens afterwards is also important!

40
After purchase, consumers use and experience the
product

• Major Marketing issue here
• Is the consumer satisfied or not?
• I.e., what is it about the product that leads to
  satisfaction?

41
Consumer satisfaction

• Biggest predictor of satisfaction how well the
  product or service performs on all dimensions.
• E.g., if you go to a bank, the less you have to
  wait for service, the more satisfied
• Waiting time big part of performance in the
  service context

42
Satisfaction experiments

• In a satisfaction experiment, customers waiting
  at one bank branch received a post card which
  listed each branch's busiest and least busy time.
  Waiting customers at another branch (who did not
  get the post card information) were also
  interviewed as a comparison group. The results
  showed that customers at the first branch
  reported significantly more satisfaction with
  overall service, even though waiting time was the
  same at both branches.
• Explain

43
Satisfaction experiments

• In another bank study, it was found that
  customers who perceived that "all visible
  employees were serving customers" reported more
  satisfaction than those who perceived that "some
  visible employees who seemed to be not busy, were
  not serving customers." (total visible employees
  were the same in all branches). Also, actual
  waiting time was again the same in both branches.

44
Disconfirmation Theory of Satisfaction

• Satisfaction Performance Expectation
• E.g., a new car and a second-hand car give you
  the same mpg

45
Disconfirmation Theory Satisfaction/Dissatisfacti
on

• Absolute performance is not the only factor
  driving satisfaction!!
• So what should you do as a Marketer (apart from
  ensuring good performance)?
• Expectation management!
• What do most ads do.? What should they do??
• Good compromise technique.?
• 
  

46
One more satisfaction question
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Satisfaction question

• You are a consulting firm, hired for one month to
  help a bank cut operating costs
• Early on, your team hits upon a great
  cost-cutting technique
• Assume that you will also probably find other
  measures, but not as huge as this one
• Should you tell your client this technique now
  and make a big impression right away, or should
  you wait until the end of the month??
• Which will lead to more client satisfaction?

48
Moral end with a bang!

• Lessons for service industries? (too often, no
  effort at end)
• Hotels
• Airlines

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Satisfaction question 2

• You are a dentist. A patient comes in for a
  general teeth-cleaning, and also one big cavity
• You know that there will be one big painful
  moment during the procedure
• Should you give the patient the bad experience in
  the beginning or the end?

50
Moral If there has to a bad experience, dont
leave it for the end!
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Other Key IssuesDissatisfaction outcomes..?

• Why should companies try hard to prevent consumer
  dissatisfaction?
• What are some consequences of dissatisfaction?

52
Other Key IssuesDissatisfaction outcomes..?

• Dissatisfaction Outcomes???
• Complaining behavior refund/exchange
• Brand Switching
• Negative Word of Mouth
• Negative WOM has a HUGE influence! (and spreads
  very fast)
• Specially now
• Problems with Negative WOM United Airlines

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Satisfaction measurement
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Measuring Satisfaction/Dissatisfaction

• Usual methods
• Set up free phone lines for complaints
• Operate a customer service desk in-store which
  handles complaints
• Etc.
• What does this miss out?

55
Moral Need to be proactive about measuring
satisfaction!

• Consumer surveys

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Next Issuepositive consequence of satisfaction

• Brand Loyalty!

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Brand Loyalty

• Brand loyalty potentially very useful for
  marketers
• Why?? What are the positives of having
  brand-loyal consumers?

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Brand Loyalty

• Brand loyalty potentially very useful for
  marketers
• Steady flow of Revenues
• Safeguard against discounts/price cuts
• Positive Word-of-mouth
• Brand extensions (e.g., Benetton accessories)
• Much less costly to retain old customers than
  acquire new ones!!
• Cost-per-sale is lower for retention
• Illustrate with direct mail example(e.g.,
  magazine subscription wine clubs, etc.)

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Customer retention advantage 2 factors (direct
mail example)

• Cost of getting mailing list you have your own
  mailing list of customers
• E.g., magazine subscription
• Dont have to rent from others (acquiring)
• Response Rate Old customers respond better to
  your direct mail, because greater targeting
• You know what to say to a customer you already
  know well
• I go for wine dinners have bought lots of New
  Zealand wines in the past
• Am likely to respond to mails about NZ wines
• Numerical example

60
Real cost comparison from Forrester Report
Direct Mail

• Customer Acquiring vs.
• Customer Retention Scenarios

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Please calculate cost-per-sale for each scenario
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(No Transcript)
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So to sum up.

• Advantages of brand loyalty
• Steady flow of Revenues
• Safeguard against discounts/price cuts
• Positive Word-of-mouth
• Brand extension possibilities
• Much less costly to retain old customers than
  acquire new ones
• Given its importance
• We need to define and measure brand loyalty

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Definition of brand loyalty

• Definition of brand loyalty a customer is brand
  loyal if she expresses a liking for that brand
  and buys it frequently
• Simplest measurement attitude scale frequency
  of purchase (e.g., more than 80 of the time)
• Features of defn/measurement
• Loyal to only one brand (exclusive commitment)
• Either you are loyal or not (1/0)
• Dont need to know why the customer likes the
  brand
• Liking Purchase Frequency is enough
• AFTER BREAK CASE BRAND LOYALTY!

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BREAK.
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Case Brand Loyalty
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Group Task

• On a sheet of paper, please rank the 7 informants
  in the case in descending order of brand loyalty
  (put most loyal person first).
• For each person, also write down their preferred
  brand
• Note a tie is allowed. That is, it is
  permissible to put more than one person at the
  same rank but please try to minimize the number
  of ties.
• Please be ready to justify for your group
  rankings
• And be prepared to describe how each information
  talks about and acts towards his/her favored
  brand
• Make sure you have a copy of your group rankings
  with you
• (Note Please complete this task WITHOUT relying
  on the raw usage figures presented in the last
  column of exhibit 1 of the case. We want to look
  beyond the numbers to get different perspectives
  on brand loyalty)

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BREAKOUT
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My Ranking

• Pam/Wendy
• Sara
• Frank
• Tom
• Anne/Charles

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Sothe behavioral preference definition needs
correction!

• Loyalty is not just behavioral preference
• Need to look at what drives the liking
• Emotions and Personal Connection (Sara, Pam,
  Wendy)
• Or just convenience, price etc. (Anne, Charles)
• Reebok vs. Colgate for me
• Also, how easy to switch from favored brand?
• Can be loyal to more than one brand (emotionally
  attached to more than one person in your
  family) Tom/Frank
• Does not have to be completely exclusive
• There can be degrees of loyalty (not just 1/0)
• As our ranking showsWendy vs. Tom/Frank?

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So, better definition

• Degree to which customer is tied to a brand
  through emotion and personality connections
• Says its a matter of degree (more vs. less
  loyal)
• Can be loyal to multiple brands
• Goes beyond behavior attitude
• Looks at what makes a customer loyal (emotion,
  personality)
• Note understanding what makes a person loyal
  has important implications for marketing action!

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Key issue people have different reasons for
regular purchase of a brand

• This is important to the manager!!
• Tom and Frank are both pretty brand loyal to the
  same brand (Chock Full O Nuts). Would your
  advertising be the same or different for the two
  of them?

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Which of the 7 would you want as your
customer?
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Which of the 7 would you want?

• Purchase regularity (including buying
  accessories)
• Switchability
• Word-of-mouth
• Intensity of emotion
• Relationship descriptor is a good way to think
  about this

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Relationship Descriptor

• Anne
• Charles
• Frank
• Pamela
• Sara
• Tom
• Wendy

• Work Colleague
• Arranged Marriage
• Friend for the occasion
• Love affair
• Respectful friendship
• Part of family
• Happy, faithful marriage

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The ideal brand loyal customer

• Purchases your brand most of the time
• Deep emotional commitment to your brand
• Low probability of switching
• Good WOM

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Last point

• Value of deep interviews. Capture much richer
  data
• Separated brand loyals from non-loyals (Charles,
  Ann)
• Told you why each person was loyal (e.g., Sara)
• Wont get that from a behavior attitude measure
• Problem with deep interviews??

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Summary for today

• Choices should be based on intrinsic value of
  options
• If so, easy to predict from attitude measurement
• But sometimes, choices are biased by other
  factors (context, framing etc.)
• What happens after choice?
• Satisfaction/dissatisfaction Expectations are
  important!
• Big con of dissatisfaction negative word of
  mouth (esp online)
• Measuring satisfaction need to be proactive!
• Big pro of satisfaction brand loyalty
• Important to know WHY consumers like your brand
• Loyalty requires emotional connection to brand
• And loyalty should not switch too easily

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And thats it for today.