MIDTERM EXAM REVIEWER

Economics and Consumer Behavior

CHAPTER 1 • Economics: Study of production and
consumption
Consumer Behavior (CB) • Economists focus on the macro
• Set of value-seeking activities that take perspective of CB bounded by broad
place as people go about addressing assumptions
their real needs • Data is derived from historical
• Involves multiple psychological events sales records
like: • Studies involve:
• Thinking • Commodity consumption of
• Feeling nations over time
• Behaving • Tracking changes in
• Entire process culminates in value consumption with different
price levels
The Basic Consumption Process Consumer Psychology

Consumer Behavior and Marketing

• Marketing: Multitude of value-
producing seller activities that facilitate
exchanges between buyers and sellers,
including:
Consumption • Production
• Process by which consumers use and • Pricing
transform goods, services, or ideas into • Promotion
value • Distribution
• Outcomes affect the consumer’s well- • Retailing
being and quality of life CB and Other Disciplines
• Sociology: Study of groups of people
Consumer Behavior as a Field of Study within a society
• Consumption is affected by
• CB shares strong interdisciplinary bonds group dynamics
with: • Anthropology: Field of study involving
• Economics interpretation of relationships between
• Psychology, particularly social consumers and:
psychology • Things they purchase
• Marketing • Products they own
• Anthropology
 • Activities in which they
participate

Firm Orientations and Consumers

• Competition drives companies toward a
high degree of consumer orientation
• Firm's actions and decision
making prioritize consumer
value and satisfaction above all
other concerns
• Key component of a firm with CB and Marketing Strategy
market orientation
- Culture that embodies • Resource-advantage theory: Prominent
importance of creating theory that explains why companies fail
value for customers or succeed
among all employees • Product: Potentially valuable bundle of
• Stakeholder marketing: Firms recognize benefits
that more than just the buyer and seller • Attribute: Tangible feature of a
are involved in the marketing process product that potentially delivers
• Primary stakeholders a benefit of consumption
- Customers, employees,
owners, suppliers, and Characteristics of Successful Innovations
regulating agencies
• Secondary stakeholders
- Mass media,
communities and trade
organizations

Relationship Marketing
• Activities based on the belief that the
firm’s performance is enhanced through
repeat business Different Ways of Doing Business
• Touchpoints: Direct contacts
between the firm and a
customer
• Channels of making contact
• Phone, email, text messaging,
online social networking, and
face-to-face contact

Importance of CB

Interpretive Research
• Seeks to explain the inner meanings and
motivations associated with specific
consumption experiences
 • Qualitative research tools:
Means for gathering data in a
relatively unstructured way
• Include case analysis,
clinical interviews, and
focus group interviews
Interpretive Research Orientations
Quantitative Consumer Research
• Addresses questions about consumer
behavior using numerical measurement
and analysis tools
• Measurement is structured
• Data are not researcher dependent
• Enables researchers to better test
hypotheses
• Doesn't require deep interpretation
Consumer Behavior Is Dynamic
• Internationalization
• Companies are required to deal
with geographical and cultural
distances
• People from different cultures
interpret products and
behaviors differently
• Consumer perception will
determine the success or failure
of the product
• Technological advances have made
geographical distance a nonissue
Big Data
• Represents massive amounts of data
available to companies that can be used
to predict customer behaviors
• Predictive analytics: Application
of statistical tools in an effort to
discover patterns in data that
allow prediction of consumer
behavior
Changing Economy
• Factors contributing to stagnant income
• Unemployment
• Limited prospects in the
workforce
• Decreased opportunity to work
at an acceptable wage
• Consumers are cautious about expenses
and react favorably to price-cutting
policies
CHAPTER 2
Consumer Value Framework (CVF)
• Consumer behavior theory
• Illustrates factors that:
• Shape consumption-related
behaviors
• Determine the value associated
with consumption
Value
• Personal assessment of the net worth
obtained from an activity
Utilitarian Value
• Gratification derived because
something helps a consumer solve a
problem or accomplish some task
• Consumers provide a rational
explanation for their purchases
• Value is provided because the object or
activity allows something good to
happen or be accomplished
Hedonic Value
• Value derived from immediate
gratification that comes from some
activity
• Provided by the actual experience and
emotions associated with consumption
• End in and of itself rather than a means
to an end
• Emotional and subjective in nature
• Action to obtain hedonic value can be
difficult to explain objectively
Marketing Strategy
• Way a company goes about creating
value for customers
• Effectively developed and implemented
when there is a complete
understanding of the value consumers
seek
• Marketing myopia: Company views
itself in a product business rather than
in a value- or benefits-producing
business
• Corporate strategy: Way a firm is
defined and sets its general goals
• Marketing tactics: Way by which
marketing management is implemented
• Involve price, promotion,
product, and distribution
decisions
Total Value Concept
• Total value proposition - Basic benefits,
the augmented product, and the feel
benefits
• Augmented product: Original
product plus the extra things
needed to increase the value
from consumption
Value Co-Creation
• Realization that a consumer is
necessary and must play a part in order
to produce value
• Consumers add resources in the form of
knowledge and skills to do their own
part in the consumption process
Market Characteristics
• Market segmentation: Separation of a
market into groups based on the
different demand curves associated
with each group
• Requires marketing researchers
to identify segments and
describe its members
• Product differentiation: Consumers do
not view all competing products as
identical to one another
Perceptual Map
• Tool used to depict graphically the
positioning of competing products
• Helps identify competitors and
opportunities for doing more business
• Diagnoses potential problems in the
marketing mix
• Used in every competitive industry,
including in the nonprofit sector
• Blue ocean strategy: Positioning a firm
far away from competitors’ positions so
that it:
• Creates an industry of its own
 • Isolates itself from competitors
• Ideal point
• Combination of product
characteristics that provide the
most value to an individual
consumer or market segment

Customer Lifetime Value (CLV)

• Approximate worth of a customer to a
company in economic terms
• Overall profitability of an individual
consumer
• CLV = npv (sales ─ costs) + npv (equity)
• Npv - Net present value
CHAPTER 3
Learning and Perception
Phases of perceptions
Sensing
• Immediate response to stimuli
that have come into contact
with one of the consumer’s five
senses
• Grounded cognition: Notion
that bodily sensations influence
thoughts and meaning
independent of effortful
thinking
Organizing
• Cognitive organization: Process
by which the human brain
assembles sensory evidence
into something recognizable

Exposure, Attention, and Comprehension Reacting - End of the perceptual process

• Occurs as a response or
• Exposure: Bringing some stimulus behavior
within proximity of a consumer so that
the consumer can sense it
• Attention: Purposeful allocation of
information-processing capacity toward
developing an understanding of a
stimulus
• Comprehension - Consumers attempt to
derive meaning from information they
receive

Sensing, Organizing, and Reacting

Selective Perception
Subliminal Processing
• Strength of certain stimuli is lower than
the absolute threshold of perception
• Absolute threshold: Minimum
strength of a stimulus that can
be perceived
• Subliminal persuasion: Behavior change
induced by subliminal processing
Applying the JND Concept
• JND (just noticeable difference): One
stimulus is stronger than another
• Weber’s law
• Consumer’s ability to detect
differences between two levels
of a stimulus decreases as the
intensity of the initial stimulus
increases
• Marketers need to understand that:
• Little changes made at a time
may be unnoticed by a
consumer
• Major changes made at once
will be noticed
• Implications of JND for marketers who
attempt to provide value for consumers
• Pricing - Consumers do not
perceive small differences in
price as truly different
• Quantity - Small differences are
not perceived as being different
• Quality - Small improvements
may not have any impact on
consumers
• Add-on purchases - Small
additional purchase tacked onto
a large purchase may not create
the perception of increased
spending
• Change in product design -
Small changes tend to go
unnoticed
• Just meaningful difference
(JMD)
• Smallest amount of change in a
stimulus that would influence
consumer consumption and
choice
Types of Memory
• Implicit: Memory for things that a
person did not try to remember
• Creates preattentive effects
• Explicit: Memory that develops when a
person is exposed to, attends, and tries
to remember information
Preattentive effects: Learning that occurs
without attention
Mere Exposure Effect and Mere Association
Effect
• Mere exposure effect
• Consumers will prefer stimuli
they have been previously
exposed to over stimuli they
have not seen before
• Mere association effect
• Transfer of meaning between
objects that are similar only by
accidental association
Involuntary Attention
• Attention that is beyond the conscious
control of the consumer
• Likely to trigger an orientation reflex
Factors That Help Create Attention
Intentional and Unintentional Learning
• Intentional learning
• Process by which consumers set
out to specifically learn
information devoted to a
certain subject
• Unintentional learning
• Occurs when behavior is
modified through a consumer-
stimulus interaction without
any effortful allocation of
cognitive processing capacity
toward that stimulus
Behaviorism and Cognitive Learning Theories
• Behaviorist approach to learning
- Does not place
emphasis on the
cognitive mechanics of
the learning process
• Information processing perspective
• Focuses on the cognitive
processes associated with
comprehension and how these
precipitate behavioral changes
Unintentional Learning: Behavioral Learning
Theory Perspectives
• Classical conditioning
• Change in behavior that occurs
simply through associating
some stimulus with another
stimulus that naturally causes
some reaction
• Behavioral response is already
associated with unconditioned
stimulus
• Unconditioned response occurs
naturally as a result of exposure
to an unconditioned stimulus
• Instrumental conditioning
• Behavioral response can be
conditioned through
reinforcement
- Reinforcements -
Punishments or
rewards
- Positive reinforcers
take form of a reward
Discriminative Stimuli and Shaping
• Discriminative stimuli: Occur solely in
the presence of a reinforcer
• Shaping: Desired behavior is altered
over time, in small increments
• Punishers decrease the likelihood that a
behavior will persist
• Extinction: Process through which
behaviors cease due to lack of
reinforcement
CHAPTER 4
Comprehension
• Way people cognitively assign meaning
to things they encounter
• Influenced by internal factors within the
consumer
• Includes cognitive and affective
elements
• Signal theory
Characteristics of the Message
• Physical characteristics: Tangible
elements or the parts of a message that
can be sensed
• Simplicity
• Message congruity: Extent to which a
message is internally consistent and fits
surrounding information
• Figure-ground distinction: Notion that
each message can be separated into the
focal point (figure) and the background
(ground)
• Type of language
• Figurative language: Use of
expressions that send a
nonliteral meaning
• Used when describing
brands that compete on
hedonic value
• Literal language - Used when
describing brands that compete
on utilitarian value
• Message source - Comprehension varies
based on:
• Likeability
• Attractiveness
• Expertise
 • Trustworthiness
• Congruence

Characteristics of the Message Receiver

• Intelligence or ability
• Prior knowledge
• Involvement
• Familiarity or habituation
• Physical limits
• Expectations
• Brain dominance

Characteristics of the Environment

Sensory Memory
• Information intensity: Amount of
• Iconic storage: Storage of visual
information available for a consumer to
information as an exact representation
process within a given environment
of the scene
• Framing: Meaning of something is
• Echoic storage: Storage of auditory
influenced by the information
information in sensory memory
environment
• Haptic perception: Interpretations
• Prospect theory: Suggests that
created by the way some object feels
a decision can be framed in
different ways and that the
Workbench Memory
framing affects risk assessments
• Encoding
consumers make
• Process by which information is
• Message media
transferred from workbench
• Construal level theory
memory to long-term memory
• Information environment can
for permanent storage
cause individuals to think about
Retrieval
things in different ways
• Process by which information is
• Timing
transferred back into
workbench memory for
Multiple Store Theory of Memory
additional processing when
• Sensory memory: Area where a
needed
consumer stores encounters
Mental Processes That Help Consumers
exposed to one of the five
Remember Things
senses
• REPITITON
• Workbench, or working,
• DUAL CODING
memory: Storage area where
• MEANINGFUL ENCODING
information is stored while
• CHUNGKING
being processed and encoded
for later recall
Long-Term Memory and Learning
• Long-term memory: Repository
• Semantic coding: Type of coding
for all information that a person
wherein something are converted to
has encountered
meaning that can be expressed verbally
• Memory trace: Mental path by which
Multiple Store Approach to Memory
some thought becomes active
 • Spreading activation: Way cognitive
activation spreads from one concept to
another
• Tag: Small piece of coded information
that helps with the retrieval of
knowledge
• Rumination: Unintentional but
recurrent memory of long-ago events
that are spontaneously triggered
• Nostalgia
• Episodic memory: Memory for past
events in one’s life
• Stores brands associated with
positive events, which tend to
be preferred by consumers
• Social schema or social stereotype
• Cognitive representation that
gives a specific type of person
meaning

Elaboration
• Extent to which a consumer continues
processing a message even after an
initial understanding is achieved
• Personal elaboration
• Process by which people
imagine themselves somehow
associating with a stimulus that
is being processed

Schema
• Portion of an associative network that
represents a specific entity and thereby
provides it with meaning
• Brand schema - Smaller part within
one’s total associative network
responsible for defining a marketing
entity
• Product schema - Each time a consumer
encounters a product, the mind
compares all associations in the schema
to see if the thought is correct

Product and Brand Schemas

• Exemplar: Concept within a schema
that is the single best representative of
some category
• Provides consumers with a basis
of comparison for judging
whether something belongs to a
category
• Prototypes: Schema best
representative of some category but
that is not represented by an existing
entity
• Script: Schema representing an event