Transcript for:
Chapter 6 - Consumer Behavior

hi everyone welcome to the lecture for chapter six consumer behavior um this consumer behavior is its own class so um so there is so so you have to understand that this uh this particular chapter is just going to be kind of a little bit of everything and it's going to be fast and it's going to be a lot of definitions and it is going to rely a little bit on psychology which you may have taken a class in you know such as with Maslow's hierarchy of needs and things like that but um but really it's going to be fast it's going to be furious it's going to be a lot of definitions and just a lot of understanding of decision processes of habits of instinctive impulse buying those kinds of things um but we're going to actually start off with a quick video and then we're going to jump in to uh the chapter example that we've been given and um that kind of talks about decision making and how to engage customers um hierarchy of needs in that decision and try to overcome the um you know the cognitive dissonance that can sometimes come from um from a buy that's a customer regrets um so we're going to get into all that but we're going to start off first with um with a video so I'm going to try to share the screen please bear with me because it's the same screen that I'm on but I'm going to see if it'll work it's gonna get a little weird here we go delivery kits is growing in American kitchens these kids contain pre-measured ingredients for a variety of recipes they're delivered straight to your door Nestle the world's largest food company just let a 77 million dollar funding ground for the meal delivery startup freshly bad news came amid big developments in the food business meal kit company Blue Apron this week began marketing its initial public offering and the online giant Amazon is buying Whole Foods Daryl Thompson is a senior editor at the Atlantic Derek good to see you good to see you hi this is big business now why yeah it's interesting because for a long time there wasn't really a lot of innovation in food you know for decades you could go to a grocery store you can go to a restaurant that was basically it maybe you could order pizza for delivery right now you really have we're in a bit of a golden age of food Innovation right now where people are realizing that you can take the same principles of e-commerce that work for books that work for clothes and use them to deliver food to people and that's really created this movement where you have some of the biggest companies in the world Nestle the biggest food company in the world now investing in this new level what's the key to it I think one of the keys is convenience I think you have a lot of people who feel harried they want to cook but they don't necessarily have time or the wherewithal to go to Whole Foods and buy this stuff so they order a meal kit that brings it to them but in many ways it continues this sort of long historical line of convenience where with books for example 1990s people said who wants to buy books online bookstores are where it's all at no it turns out that one of my books online yes exactly and now he's taking on Whole Foods yes to say to you I'm interested in the Whole Foods I think that Amazon wants to put itself in Whole Foods and it wants to put Whole Foods in Amazon boxes that means that is to say Amazon wants to get into a brick and mortar retail business they want to use Whole Food stores to experiment with how people move around the store buy their stuff bundle items together but they also maybe want to turn Whole Foods into a delivery service itself so that you're buying a book you're buying some clothes you can maybe order some heirloom tomatoes as well it's great real estate real estate locations in urban and Suburban centers so basically even if Whole Foods didn't sell food at all Amazon could still use those stores that that footprint as warehousing to make sure that it's getting its merchandise as close to its consumers as possible yeah the Realtors say that if there's a Whole Foods in the neighborhood you're living in a really good location but let's talk about those start at those those meal kits because the statistics show that most people give it up within a order and then they don't stick with it so how sustainable is it this is the 1 billion 10 billion dollar question is does the effort that it takes to market the meal kids cost so much that there's no way for any of these companies to make money I even hear it a little bit to the fast casual sector in food that's the Chipotles that's sweet greens fast casual locations have grown nine percent over the last year there's just an enormous boom but as a result steam store sales are down two percent so you have this enormous abundance of food options but as a result no individual is doing well the same thing could happen for meal kids so much competition that each company individually striveless I tried one of these for the first time last year it was like a hybrid well I mean I still I messed it up but it was still better than it would have been if I started from scratch okay so so what that was kind of just kind of broaching the topic of the food kit industry and how that just kind of started and took off um I actually do get a meal delivery service I get um the home chef and I've enjoyed every single week I've gotten it of course I've skipped a lot of weeks that maybe the meal the menu wasn't really to my liking or I didn't find something that I really kind of was you know jiding with me but they make it they make it so you can do that and that that has enabled me to keep up with it and not cancel my membership um but what we're finding here so it obviously there's there's convenience there's um you know we're in in a household where both adults are working and the kids you know maybe the kids are old enough to make something but having something like this with a recipe for them to follow with with pre-measured ingredients and um you know and easy things to process kids can actually step up and make dinner um or I always kind of focus on recipes that might take 25 between 25 and 45 minutes to complete that way I know when I'm done at the end of my day I can go ahead and do that and I'll have dinner on the table in under an hour base you know we'll just say 45 minutes but it really does it's going to take that long to get everything out to read the instructions and do all of that so so it does make it more convenient so in this case sunbasket their promise was um was easy food prep initially and then they decided wait a second I you know the guy who started this was like well I've done meal kits but they're not healthy um and and he was so busy as an entrepreneur he was doing the same thing that I was he was looking for something that that you could still have a nice meal and not give in to like the McDonald's runs and the Chipotle runs and all that kind of stuff so um so he came over sunbasket and it was something where it um it was healthier options you know lower cholesterol you know less less solid less sodium things like that good ingredients but the pictures of the menus items when they were done they don't look they don't look healthy quote unquote so people were like wait a second I can still eat healthy but it's gonna really look like that and it's because they can imagine it tasting so good right so it became very good it became um you know very very successful and then you know considering the ongoing and changing Health trends that are still happening in the United States there are still Rising rates of obesity which and especially after they're opened um well you know the people have joked around that covid-19 even that's stating that the coronavirus started in 2019 some people are referring to it as the covid-19 which are the 19 pounds that they gained over that coveted period so obviously there's some work to do here and having these kids now makes it easier because yeah things are starting to reopen it's not taking you away from the time that you would actually go to a restaurant uh which might be on a Friday or Saturday or a night where you're less busy but it's it's being able to now have something really nice during the week when you are busy um so consumer behavior that all goes into that decision-making process though the picture that looks really good and it makes you want it you know it makes you want to be involved in it and you know I guess I'm one of those who is like either I forgot that I'm supposed to cancel this in a year or or that was never relayed to me because I've actually been enjoying my home Chef subscription for almost two years and like I said I do skip weeks where there's not you know men I do look at the menu every week I decide what I want if it's if there's nothing I want um I'll just skip the week um you know and do my own thing but now I also have all these recipes and I have a few select ones that I keep aside that I know I can easily get those ingredients at the store and I can whip them up in 20 to 30 minutes on my own I don't I do not need their kit anymore I can do it myself so it's so it also teaches you like little shortcuts and tricks on how to cook so if you're ever thinking of it you might want to try it but that's just getting into that decision making process and consumer behavior and what really goes into motivating people to purchase and then maybe not purchase things right so what this comes down to is we're marketers but we're also consumers right um and we do take this status for granted but we're also very complex International creatures as humans right so we can't always explain why we're making the choices that were choices that we're choosing or why we're doing what we're doing um so to understand consumer Behavior we have to ask people why why right I'm just really messing my hair up here uh we have to ask people why we'll buy goods or services and using those principles and theories from sociology psychology uh you know marketers have then been able to kind of determine and decipher many consumer choices and then to develop some basic strategies for dealing with that consumer behavior and and having consumers take steps towards the action that those marketers are encouraging them to take Okay so I'm gonna go back I'm gonna go I'm gonna jump into the slides you know that you know the drill here we go chapter 6 consumer Behavior we have a few learning objectives I am I'm gonna take this lecture a little bit slower just because there's a lot of definitions and a lot of words and a lot of processes and and again consumer behavior is a full 15-week semester one class on its own and I just want to expose you to a little bit of it because it is a big part of marketing uh if you can't determine considered Behavior to sell your products then marketing is non-existent for you um so learning objective one we're going to articulate the steps in the consumer buying process we're going to describe the difference between functional and psychological needs describing factors that affect the information search discuss post-purchase outcomes list the factors that affect the consumer decision process and then describe how involvement influences consumer Behavior so here is our consumer decision process right it looks looks like it should be fairly simple um you know it's it's a model that represents the steps that consumers go through before during and then even after they make their purchase um you know so it's very useful to break down break this down into steps because then this breaks down the activities that marketers need to engage in into little pockets of actions right so first there's the need recognition right consumer decision process will begin when consumers recognize that they have an unsatisfied need and they would like to go from their actual needy State at the time to a different desired state right so that the greater just the greater the discrepancy between the two states than the greater the need recognition will be the best way the best example for this is you're hungry if you're just a little hungry you might say all right forget it I'll eat later it's not convenient right now I'll just wait any later if you're really hungry you're going to want to eat right now and you could eat a salad and you'll no longer be hungry right and so now this is where we're getting into the difference between a need and a want you need to eat something so that you can satisfy your hunger but you want this is something that's not necessarily needed but highly desired but you want ice cream you want ice cream you have a desire for ice cream so regardless of how hungry you are um your desire for ice cream is never going to be satisfied by eating any type of salad right so consumer needs like these can be can then be further classified into functional uh psychological or even both but let's talk about um let's talk about the definition of those so functional needs pertain to the performance of a product or service and just I'm just going to quickly talk about this you can do a little bit more reading on it in the book uh psychological needs pertain to the personal gratification that consumers associate with a product or service like shoes you don't need 1200 a pair of shoes when a 50 pair of sneakers will work great you're just putting something on your feet to protect your feet that's not necessary that's a functional need but the psychological needs might be a little bit different my other status there's different things so so then we move on to the search for information this is the second step right so after a consumer recognizes that there is a need there is a search for information about various options that exist to satisfy that need right the length and the intensity of uh the search are usually based on the degree of perceived risk right so if you're going to buy um you're gonna buy a car you're going to probably have a little bit more of an intensive information search if you just need a haircut a buzz cut you're an athlete you're not going to spend that much time searching for information um so but there are two different there's two key types of information searches the internal search is basically your own memory your knowledge about a product or service that is gathered from past experiences external searches uh the buyer seeks information outside of his or her personal knowledge base to help make the buying decision internet is a great place for this it um just makes sure that the source you're using is reliable um and that way you are getting what you need from that intensive search um so it is so important though for marketers and to understand that there are many factors that will affect consumers search process so some of these are perceived benefits versus perceived costs and um the locus of control and actual versus perceived risk okay so let's start with perceived benefits versus perceived costs of search so this is where you say is it worth the time and effort to even search for information about this product or service the example they give in the book is if you are looking for a house uh and you want to make sure that you're getting into the right neighborhood with the right School District then those perceived benefits of spending more time on that search will you know will obviously override if you're looking for a dollhouse for your daughter you're probably not going to want to spend that much time because time is money and your cost of doing additional research is not going to be work is not going to benefit you in the long run locus of control is a little bit different so people who have an internal locus of control believe that they have some control over the outcomes of their actions in which case they generally engage in more search activities right because they believe that they have an influence over how things will come out those with an external locus of control consumers believe that fate or other external factors will control all of the outcomes right so in that case they believe it doesn't matter how much information they gather if they make a wise decision it isn't to their credit and if they make a bad decision it isn't their fault right so go find that people who believe that they can control their own destiny will spend a lot more time and effort on all aspects of their life foreign so the actual or perceived risk is another area so there are five types of risks associated with purchase decisions that can delay or even discourage a purchase right so the first one is performance risk so the first one is performance risk uh which involves the perceived danger inherent in a poorly performing product or service right so if you're thinking something's not going to work then that's a risk and it's always a risk that something might not work but for something might not taste as good as you expect it to you know that these are all just pursued risks now if it's a very you know low-cost item you're not as worried about it um Financial Risk let's work around the circle Financial Risk is risk associated with a monetary outlay that includes the initial cost of the purchase as well as the cost of using the item or service an example in the book was talking about a woman who was going to an interview and she was looking for a suit to buy so she did all the searching and she found a suit and now the Financial Risk is not just the initial outlay of cash for that suit it's how to maintain it doesn't need dry cleaning the how does it need to be laundered is that going to cost cost more money over time social risk involves the fears that consumers suffer when they worry others may not regard their purchase positively right so if so she wears this suit she's very happy that she got this for her interview but her friends don't like it or it's not quite their style they may relay some sort of social risk back to her physiological risk which is also safety risk right there's uh it's called both things whereas uh performance risk will involve what might happen if a product does not perform as expected as expected a physiological or safety risk refers to fear of actual harm coming to you if a product is not performed properly that could be like you know a car that you know that's been having problems um which this is it's a really extreme example but a car that maybe the brakes aren't going to work they you know have been known that it has braking problems or it leaks brake fluid or something um you know uh so honestly if that's what you're hearing about a car I would never buy that car but that is your safety risk at play and then finally uh psychological risks are those risks associated with the way people will feel if the product or service does not convey the Right image right to their status thank you so from here we're going to go to the evaluation of Alternatives okay so once a consumer is recognized a problem and then explore the possible options here she might sift through those choices and then evaluate their Alternatives right so alternative evaluation often occurs while the consumer is engaged in the process still in the process of information so there are different sort of uh attribute sets that go into this um just but just so you know just an aside consumers are going to forego any sort of alternate evaluations all together when they're buying habitual convenience products right so if you regularly buy coke you're not all of a sudden going to go and figure out if you want to buy Pepsi so if that's that's kind of those um habitual purchases so attribute sets um is how a consumer's mind organizes and then categorizes various alternatives to help in the decision process right so there is something called the universal set which is the biggest set you have and this includes all possible choices for a product category um but because it's a lot it's in very unwieldy for a person to recall all possible Alternatives in this Arena um marketers tend to focus more on subsets right so now there's two subsets there's retrieval and there's evoked um so the retrieval set is the brands or stores that can be readily brought forth from a memory the evoked set comprises the alternative brands or stores that the consumer states that he or she would consider when making a purchase decision so obviously one or two of those alternatives are going to be in all three of those sets um you know but that's just how that works out so how do we now evaluate the attributes we uh we're gonna face the evaluation on a set of the of the most important attributes or we're going to establish evaluative criteria which consists of salient or important attributes about a particular product right so now this through a question up here what are some of the features of a vacation that you would use in your evaluative criteria for your next vacation it's just kind of a fun question to ask yourself um but you know you want it's do you want it warm or cold do you want to be um you want to have clear water do you want to go scuba diving like what are those kinds of evaluation criterias that you're going to use foreign so then of course we're gonna get into those you know there's several shortcuts that are going to simplify the potentially complicated decision process uh determinate attributes and consumer decision rules so determining attributes are products or service features that are important to the buyer um and on which competing brands or stores are perceived to differ right we're going to talk about this chart in a second but let's just get into the consumer decision rules this is a set of criteria that consumers use consciously or subconsciously to quickly and efficiently select from among several alternatives and those rules can either be compensatory or non-compensatory so this is the compensatory multi-atribute model for buying cereal this is a little bit extreme I don't think anybody's going to do this kind of a model just for buying cereal but let's go with it so a compensatory decision rule will assume that the consumer when evaluating the Alternatives trade off one characteristic against another right so maybe uh you're okay with a higher price as long as it tastes better right um so we're gonna use that multi attribute model to uh to evaluate different cereals and I'm going to bet you that this person is going to pick Cheerios as the ultimate buying decision so the non-compensatory decision rule is one in which they choose a product or service on the basis of one characteristic or one subset of a characteristic regardless of the other values because Hannah who put this together may still pick Kashi because she is particularly sensitive to claims about natural or organic contents that is something that not and you know it's on it's on here and it's weighted in but it actually made Kashi fall into number two in the compensatory rules but she was stepping outside of that to say I still want organic cereal so the only one on here that's organic is Kashi which again is why you probably wouldn't do something like this uh for cereal let's talk about Choice architecture Okay this not only impacts um brick and mortar but it also impacts um online and apps okay I'm gonna we're gonna go a little bit into detail there um so consumers decisions when they consider alternative options can be influenced by the choice architecture surrounding the evaluation right so the choice architecture represents an effort to influence consumers through the design of environments in which they make their choices so a notable example would be a choice that encourages consumers to purchase impulse products for products that are purchased without plans such as fragrances or cosmetics in the at the beginning at the front of the department store magazines in a supermarket and in virtual games you usually have in-game upgrades at very very specific times in the game where it is the most um will be the most attractive to you to make that purchase to help you with the game right so the app designers and go go position those impulse purchase critical stage in a game that you're going to want uh your you know that you're gonna want that to help you to move forward faster um there is another another tactic called a nudge and it's uh it's one element of the choice architecture that alters behavior in a predictable way but without forbidding other options or significantly changing any of the economic incentives so this is more like bypassing merchandise at the front of the store um the choice is there but you know whether or not to buy is still up to the customer um I want to show a video on impulse purchases and then we're going to talk about how how defaults actually and actually gets into different different areas um of you know of what of privacy issues and things like that uh because default is kind of like a third a third area that doesn't necessarily fall into brick and mortar and it really is more of an online thing I'm going to stop sharing this and I'm going to go to um I'm going to share this and I'll be right back you've probably noticed that in a lot of stores they make you run through a gauntlet of candy bars nail clippers and phone chargers before you can pay and make your Escape into the outside world maybe you wonder who buys all that stuff or maybe you're already unwrapping a candy bar you had not planned to buy those beans are just one of the tricks retailers use to get you to impulse buy where you purchase something without planning for it in advance that means you are spending more money than you were originally going to so you can see why stores would try so hard to get you to do it but whether their tricks work depends a lot on your personality and how your brain reacts to perceived gains and losses impulse buyers tend to be impulsive in general which isn't too surprising in a 2016 survey of nearly 1500 people those that said they were likely to spend a hypothetical windfall impulsively also reported higher levels of other impulsive behaviors like binge drinking and unprotected sex and a lot of psychologists think these choices come down the same thing a battle between parts of your brain one part called the nucleus accumbens activates in proportion to how excited you'll be to have that new thing you want it's the same region that activates for what are known as primary reward drives things like food and sex another part of the brain the insula has a big reaction to something else the price the bigger the price the more the insula activates psychologists call this reaction the pain of paying because the insula also activates when we expect to be hurt physically and when we're exposed to negative things like horrible smells meanwhile a third region the mesial prefrontal cortex also plays a role it too reacts to the price and activating what you think you found a good deal researchers are able to do a pretty good job predicting whether someone will make a purchase by comparing activation in these three regions but not everyone's brain reacts the same way to the same deal which has led some psychologists to think that we all fall on a spectrum of pain of paying basically how much spending money bothers us on one end are the spend thrifts who just don't really feel that pain they think nothing of spending some extra money that's what it's there for right on the other end are the tight wads who will wait until the last minute to pull out their wallets even for things they definitely need for them the pain of pain is more like the agony of paying and I know this personally I sweat get hot if my armpits go it's like the least comfortable I ever am spend drifts are naturally impulsive buyers and not necessarily because they have more money to spend a 2007 survey of over 9 000 people found those at the spend Thrift into the Spectrum have more credit card events but even though tight wads don't like spending money they're more vulnerable to certain types of Tricks designed to get them spending money they don't intend to that's because I really feel anything that reduces their intense pain of paying since spend thrifts aren't paying to any way poised to reduce pain don't work as well on them for example in one 2007 study researchers asked 538 college students if they were willing to pay a five dollar fee to get overnight delivery on a new purchase but for half the people they called it the small five dollar fee to reduce the pain of paying that one word didn't matter to the spend thrifts at all about the same amount paid the fee either way but just describing the fee as small made the telepods feel much better about paying the price about three times as many thought that it was worth it to get the delivery overnighted me I have to go make some changes to dftba.com other research has found a similar effect with using credit cards which are thought to reduce the pain of paying by keeping the actual physical money out of sight and out of mind and a shopping study on 125 students paying by credit card instead of cash didn't affect the spend trips buying behaviors at all but the tight wads were more willing to spend money on unhealthy stuff they didn't need those candy bar displays don't really reduce the pain of paying in any way so they're probably not the type of trick that look at the sidewalk spending more but sticking a bunch of tempting chocolate in front of the spendthroughs passing through that might get some cash your spending habits may also be influenced by another personality trait whether you're what psychologists call a maximizer or a satisficer for maximizers decision making is never easy if a maximizer needs a new computer for example they might open up a spreadsheet and find all the computers on the market and start listing things like price processor speed hard drive capacity they're going to watch a bunch of YouTube videos on a bunch of different YouTube channels that way everything that might be important before making their final Choice a satisficer is the kind of person who says you know I just need something that I can watch YouTube videos on and they get the first thing that fits that description in other words they go with the first thing that satisfies their requirements it shouldn't come as a shock that satisficers tend to spend money more impulsively because they make purchases more quickly than maximizers so the funny thing is there's lots of research that suggests that maximizers aren't as happy with what they buy and they regret their purchases more it's like they put so much thought into that mental spreadsheet of all their options they have trouble leaving it behind so making your spending decisions quickly might mean you spend more than you intended but it isn't all bad in the end whether you're a spendthrift or a tight wad or a maximizer or satisficer there are some things that you can do if you want to check your impulsive spending if the pain of paying matters to you then you can try ditching the credit cards and paying in cash lots of studies show that using cash slows down spending because it forces you to literally watch the money as it's in your hand and then not anymore or if you see something you think you want consider waiting before you actually buy it understanding that having your hands on something sets off that feel good reward excitement in your brain might help you resist the urge then you can see if you're still thinking about it later on this has been psycho psychology if you want to learn more about how companies tried to your brain to maximize sales you can check out our video on how ads are designed to persuade you well well yes ads are ads are designed to persuade you that we know that but so yeah so impulse of buying either in a lot more definitions in there but impulsive buying is it is a real thing and it is uh intentionally set up structured so that you will spend more um getting going to go back to our PowerPoint so we can keep going now let's talk about defaults right so another element in that choice architecture which we're still talking about is the default which deals with a no action condition by imposing it imposing a choice on a person who fails to make a decision or just not actively opt for a different alternative and this is where we're getting into that opt out opt-in um because consumers especially online very often when you make a purchase you are automatically opted in to sharing information with that company that now there is a way to opt out but they don't make it readily available and you may need to if you really want to protect your information go back later they cannot tell you that you can't opt out but uh you can make a note go back later finds their opt-out process and make sure that you're opting out of that to protect yourself okay so now let's jump into purchasing consumption great because now after evaluating all those Alternatives customers are ready to buy however they don't always patronize the store or purchase for the brand or item that they had originally decided on right they might change their mind so retailers need to turn to conversion rate remember we talked about this even in digital marketing uh conversion rate is is how many sales how many people you're converting into a sale or into that action that you're asking for um so what there's methods of measuring this is the number of real or virtual abandoned carts and um you know it's because virtual carts are easy and very often you're going to get an email if you leave something in a cart and you haven't purchased it after a certain amount of time um you know Best Buy actually did their very best to enhance their customer experience and expand their product line they're matching with Amazon's um pricing so that people aren't standing in their store looking at something and then buying it at Amazon um and then they also changed around their service offerings to include delivery uh like like right right away delivery so that they could also compete with Amazon and that just kind of helped them um help them out a little bit so now just like you mentioned in he kind of alluded to it in the video that there are post purchase um issues sometimes with consumers so let's talk about that there's three components right this is the final step of the consumer decision processes this is the post purchase Behavior um so marketers are particularly interested in post-purchase Behavior because it entails actual rather than potential customers and this is where they need to continue to create a relationship with these customers so satisfied customers who marketers hope to create and become loyal purchase again and spread positive word of mouth are very important so there are three possible post-purchase outcomes first is customer satisfaction setting unrealistic unrealistically High consumer expectations of a product um may lead to higher initial sales but it could eventually result in dissatisfaction If the product fails to achieve those high levels of expectations so marketers need to take several steps to ensure post-purchase satisfaction one of those build realistic expectations right not too high not too low because if you go too low people aren't going to buy it at all yeah you have to have a way to demonstrate correct product use because improper usage will certainly cause dissatisfaction as the product will not work correctly they need to stand behind the product or service by providing money back guarantees and warranties and easy return policies they need to encourage customer feedback which then cuts down on negative word of mouth and it helps marketers to adjust their offerings right if you're making it available for a customer who's dissatisfied to reach directly out to the company to complain they're probably not going to go to Twitter to complain right and then you want to periodically make contact with customers to thank them for their support let's talk about post-purchase cognitive dissonance so this is an internal conflict that's going to arise from an inconsistency between two beliefs or between beliefs and behavior this is the definition in the body post-purchase cognitive dissonance is especially likely for products that are expensive that are infrequently purchased do not work as intended or associated with high levels of risk so this is where how do how do companies overcome this or or alleviate this um they reinforce they help the customer reinforce their decision by saying don't worry if you're not satisfied you can return it uh you can call us for assistance with the product they send thank you letters they send coupons they'll send maybe congratulation letters if it's a bigger purchase um they have the tags and the garments to tell people how to manage or how to take care of the garments um you know they they want to reduce any potential issues with um with this cognitive dissonance because post purchase is the most important time for any company to truly make an impact on their customer so post purchase Customer Loyalty right this is like I said this is when the marketers are attempting to solidify that loyal relationship um you know this is when they want to get they want them to become a high lifetime value customer and to and to create that that CRM system with this customer so this is what firms are going to use the analytics software to acquire and retain the loyal customers so if you're a first-time buyer you may get a coupon immediately for 10 15 off your next purchase this happens on websites a lot too um you know and that because what that's going to do is it's going to bring that customer back more quickly and then you can see what their behaviors are at that point and then keep trying to groom them into um into a higher level of customer so that they can actually really truly benefit from being from the loyalty programs terrible consumer behavior um you know so although firms of course we want satisfied loyal customers but sometimes we're not quite getting them passive customers um are those who like they don't repeat purchase and they don't recommend your product to others they are not the concern the more serious and potentially damaging customers are those that offer negative Behavior such as negative word of mouth or maybe even spreading rumors because they don't have their facts straight so negative word of mouth will occur when consumers spread negative information about a product service or store to others um so because what happens is when customers expectations are met or even exceeded they don't really tell anyone right no news travels as fast as bad news right so when customers believe that they have been treated unfairly they usually want to complain and they want to complain to as many people as possible and this is where social media basically works against us right so companies will use that social listening software to identify negative word of mouth and of course if a customer believes a complaint will result in positive action negative word of mouth is they feel is their fastest way to get it all right so progress check that was a lot of information so hang in there with this we're going to continue on so factors influencing the consumer decision process you can see there are a lot of them but they do fall into four main categories and we're going to get into these in a little bit of detail so the several factors are psychological factors which are influences internal to the customer right these include motives attitudes perceptions learning and memory and lifestyle second are social factors and these are family reference groups and culture third is situational factors such as a specific purchase situation or sensory situation or even a temporal State uh and fourth are the elements of the marketing mix which we're going to discuss throughout this entire book so psychological factors um so of course marketers can influence purchase decisions um but there are a host of psychological factors that can affect the way people are going to receive the marketers messages right what first is motives and a motive is a need or a want they're strong enough to cause a person to seek satisfaction in some way um so what we've figured out is there are several types of motives and the best uh the best thing that ever came out seven years ago is Maslow's hierarchy of needs categorize these five groups of needs or motives that people need to satisfy to get to the next level in their life right so physiological needs so yeah physiological needs uh deal with the basic biological necessities of life food drink breast shelter next level is safety which pertains to protection and physical well-being the next level would be love that relates to our interactions with others then we can get up to esteem which allow people to satisfy their inner desires and of course self-actualization occurs when you feel completely satisfied with your life and how you live okay so another psychological factor is your attitude right all right so we all have attitudes about everything we just do this is just the human it's just the Human Condition um an attitude is a person's enduring evaluation of his or her feelings about and behavioral Tendencies toward an object or an idea one thing attitudes have in common for everyone is their ability to influence our decisions and actions um there are three components in every attitude uh the cognitive component will reflect our belief system or what we believe to be true the effective component involves motions for what we feel about the issue and behavioral component pertains to actions we undertake based on what we know and feel so you know although attitudes are are pervasive and um usually slow to change the important facts from the marketer's point of view is that they can be influenced and perhaps changed through persuasive communication and of course personal experience so there are ways to address this if the marketing communication is successful the cognitive and effective components work in concert to go ahead and affect the behavioral response let's talk about perception right and other psychological factor is perception is the process by which we select organize and interpret information to form a meaningful picture of the world perception and marketing influences our acquisition and consumption of goods and services through our tendency to assign meaning to such things as color symbols taste and packaging foreign and we also have learning and memory right as another psychological Factor learning refers to a change in a person's thought process or behavior that arises from experience and takes place throughout the consumer decision process memory influences influences decision making because it consists of information that has been acquired and stored in the brain to be available and utilize when needed so there's different ways of encoding as far as memory is concerned so in the information encoding stage right there's different stages information encoding stage consumers will transform information that they receive about a product or service into storable information right so there's more like a feeling or a signal next the information storage stage refers to how that knowledge gets integrated and stored in what consumers already know and remember and then the retrieval stage is when is when consumers access that desired information so if learning a memory do affect attitudes as well as perceptions so we need to make sure that uh that what people are able to uh to encode into their memory is is actually something very useful to cause a an action or a response and lifestyle is our last uh psychological Factor um and it refers to the way consumers will spend their time and money to live for many consumers the question of whether the product or service fits into their actual lifestyle or what they perceive they want their lifestyle to be um is is really what influences that right so a person's perceptions and ability to learn um you know are affected by all you know are affected by all of this and then also by social factors which are coming up next so the consumer decision process is influenced from within right by those so by those psychological factors but they're also influenced by external social environment which consists of family reference groups and culture so families affect many purchase decisions because they're made about because they're made based on how the entire family is going to be consuming this product or using this product right um so families actually will often make uh purchase decisions uh as a group but maybe at different stages of the buying process so influencing the group that holds as much spending power is actually vitally important because um all of the um needs of the family members are considered um throughout that process so reference groups is one or more persons whom an individual uses as a basis for comparison regarding beliefs feelings and behaviors right these include family friends co-workers or even famous people or influencers the reference groups can affect buying Decisions by either offering information or enhancing a consumer's self-image about that product and then culture culture is uh the shared meanings beliefs morals values and customs of a group of people right so as the basis of the social factor that affect your buying decisions the culture or cultures in which you participate are not really markedly different from your reference groups um but like your reference groups cultures influence consumer Behavior Uh as far you know influences like some extent on how how somebody spends how they dress and where they shop so there are also situational factors now as the next um so as psychological and social factors will typically influence the consumer decision process the same way each time situational factors or factors specific to the situation override or can at least influence those psychological or social issues right so these situational factors are related to the purchase and sensory situation as well as the temporal States so let's talk about those quickly situation is when customers may be predisposed to purchase certain products or Services because of some underlying psychological trait or social Factor but these factors may change in certain situations um right somebody who's normally very Thrifty about how they spend their money might be looking to buy a birthday present for a very good friend who did a lot for them at some point in their life and they may be looking to spend a little bit more right so this is a purchase situation factor that may well it's going to influence that purchase decision sensory it does include all five of the senses right so when a customer enters the store various sensory aspects will influence his or her decisions right um and the five senses very strongly influence consumer decision behaviors so there's visual right for most people the first sense that it's going to be triggered in a new setting is the visual sense it refers to Colors lighting brightness size shape and setup of the retail space and the products within it the auditory often rely on influences evokes through auditory senses so like this would be like in a music store or something it might have really cool music playing or some instrumental demo and then that's going to kind of intrigue people olfactory is a sense of smell um and is another essential component that can positively influence consumer behavior in retail or service settings like Cinnabon when you walk near Cinnabon if you do love Cinnabon you are going to automatically recognize that scent and you're going to be attracted to that uh the tactile sense is the sense of touch it's the first ones that humans develop so we want to give consumers opportunities to interact with merchandise in kind of this you know innate Manner and taste is the last element that can be influenced by marketers as far as restaurants or for food and beverage retailers so the temporal state is our state of mind at a particular time you can alter our preconceived notions of what we're going to purchase right some people will tend to shop more during a full moon um some people should probably not shop when they're tired you know so it's like this is the temporal State you have to understand your own temporal State and how that will affect your consumer behavior um but that also kind of put that out to okay well when do we want to be sending emails to people when is when is when is their best time to buy um so the factors that affect the consumer decision process as far as the marketing mix um psychological factors social factors and situational factors are all going to be affected by the level of consumer involvement right which we're going to talk about next so we're on our second progress check so moving on two involvement and consumer buying decisions okay so consumers make two types of buying decisions depending on their level of involvement so there is the extended problem solving or a limited problem solving um so involvement is defined as the consumer's degree of interest in the product or service if both types of consumers viewed ads for career clothing right the low and the high high involvement consumer would scrutinize all the information provided and process the key elements of the message more deeply in contrast somebody with low involvement will likely process the same advertisement in a very less than much less thorough Manner and not really take much out of it right the impressions of the low involvement consumer would be likely to be more superficial so let's talk about the um problem solving situations right because there's different buying decisions these are types of buying decisions so extended problem solving is that the buying process begins obviously when consumers recognize they have an unsatisfied need um but the process of an extended problem solving is common when customer perceives that the purchase decision entails a lot of risk um limited would be the opposite of that and it occurs during a purchase decision that calls for it most a moderate amount of effort or very little effort right so obviously that's where impulse buying comes in it's the buying decision made by customers on spot when they say merchandise so there's very little uh problem solving involved there and then of course there are purchases that require even less thoughts and those are the habitual decision making which describes the purchase decision process in which consumers engage in very little conscious effort they walk into a store they walk over and get what they need and they bring it up and pay for it and that is the power of Havoc okay and I'm actually going to show you some show you two more videos because we're just about to end this chapter the first one is about habits and how they influence you so let me get to that and I'll be right back foreign [Music] making because sometimes people think about it's something that you do repeatedly or you know it unfolds over time but really the key thing about a habit is that you're not making a decision you're not deciding whether to brush your teeth you're not deciding whether to use a seat belt you're not deciding whether to go to the gym first thing in the morning you've already decided and the advantage of a habit is that once something's on automatic pilot then the brain doesn't have to use any energy or willpower to make a decision you've already made that decision you're just moving forward and so it happens easily without any thought without any willpower with any without any effort you're just on cruise control and then you can do what you want to get done how it is like the invisible architecture of everyday life research shows that something like 40 of what we do every day we do in pretty much the same way and in the same context so it's easy to see that if you have habits that work for you you're much more likely to be happier healthy and more productive if you have habits that don't work for you it's really going to drag you down because it's a big part of our days is taken up by habits and this gets to sort of the way that habits work which is that there's this thing called The Habit Loop there's three parts to it there's first a cue which is a trigger for behavior and then the behavior itself which we usually refer to as a routine or scientific reproducer routine and then there's the reward and the reward is actually why the Habit happens in the first place it's how your brain sort of decides should I remember this pattern for the future or not and and the cue and the reward become neurologically intertwined until a sense of craving emerges that drives your behavior and and this actually explains so much of our lives and not only like our lives but also how companies function so what happened is that the world around us is designed to Tempest you know one of the principles from behavioral economics is Choice architecture the idea that we when we were placed in an environment we make decisions as a function of the environment we're in think about the environment that we're in what is it about is it about our long-term health or is it about the short-term profits of that environment you walk down the street there's a coffee shop what does this coffee shop want they want you to be healthy from in 30 years from now or do you want them to they they wanted to buy another coffee right now Dunkin Donuts what is their optimization function are they trying to get you to be healthy in 20 years or to buy another donut shop your cell phone what is he trying to do to get you to be a productive citizen in two years or to check your phone a couple of more times today so what happened is that we are in an environment that tempt us all the time these Temptations are only increasing and because of that we sell one of the mysteries of habits is why do we persist in having bad habits when we know they're not good for us when they know they don't make us happy but you know there's usually multiple things going maybe it's what you want right versus what you want on the long term or maybe you want two things that are in Conflict one example of rationality and action just to give you a sense of what it looks like and how it's relevant back in 1985 Intel uh had a large put in the memory chip manufacturing business and they've been losing money on memory chats for years so the two co-founders um Andy Grove and Gordon more met to figure out what to do and at one point Andy asks what do you think a new CEO would do if the board kicked us out and brought in a new CEO and without hesitating Gordon replied oh he would get out of the memory business and and he said well so is there any reason we shouldn't do that if we just walk out the door and come back in um and switch out of the memory business and in fact that's exactly what they decided to do and it was a huge success and this is uh just one example of a cognitive bias that appears in lots of contexts and lots of scales called the commitment effect where we stick with a business plan or a career or a relationship long after it's become quite clear that it's not doing anything for us or that it's actively destructive or self-destructive because we have an irrational commitment to whatever we have been doing for for a while because we don't like the idea of our past Investments having gone to waste or because it's become part of our identity and the technique that Andy and Gordon used to snap themselves out of their commitment effect is also a really generally useful technique called looking at a problem as if you were an outsider an outside party so here's what happens when you think about your own life you're trapped within your own perspective your track within your own emotions and feelings and so on but if you give advice to somebody else all of a sudden you're not trapped within that emotional um combination mishmash complexity and you can give advice that is more forward-looking and not so specific to the emotions so when you have a bad habit it's very helpful to think very clearly what do I really want over the long term what's what's really most important to me and that can help you fight back against the pull like gravitational pull that a bad habit can exert I was probably uh probably over 340 certainly around there and now as I sit here in front of you I'm probably about 232 there's a fluctuation of a couple pounds it goes back and forth it's a lot of weight but I did not lose it for vanity I was pretty happy with myself fat I didn't mind being fat wasn't a big deal to me I didn't mind how I looked um uh but my health was getting bad I didn't even mind how I felt very much in my you know not being energetic and stuff but I started having blood pressure that was stupid high like you know the uh like English voltage like 220 even on blood pressure medicine my daughter was born when I was 50. and now that I'm lighter I feel like and I feel happier and you know um there's a chance my chances of living longer for my children have gone up considerably you know I lost my mom and dad when I was 45. and the year of my life was in deep deep morning you know and there's a very good chance my children like to go through losing their dad and I much rather they do that when they're a little older than having to do that when they're 15. it turns out that being my children is more important to me than chocolate cake if you look at life as a series of goals which the many of us it is it's a period of being unsuccessful in achieving the goal then hitting the goal then feeling like you haven't really got much from that goal going to the next one and goals generally I think are in many ways broken processes I think part of the problem with goals is that um they don't tell you how to get to where you're going a better thing to do is to use a system so the idea behind a system rather than a goal is that a system is saying things like I'm a writer my goal is to finish writing this book but I'm not going to think about it that way eventually I'll have a hundred thousand words but what my my system will be that for an hour every morning I will sit in front of my computer screen and I will type it doesn't matter what that looks like I'm not going to evaluate the number of words I'm not going to set some Benchmark some artificial number or Benchmark that I should reach what I'm going to do is just say here's my system an hour a day in front of the screen we'll do what I can bam and the thing is every time you set a system and you stick to it you're achieving something instead of a goal that you're failing essentially for long periods of time until you reach the goal you're succeeding every day as long as you adhere to your system and you end up getting to the same place but that fraction is so much more effective it gives you the kind of positive feedback you see and the system is is kind of geared towards psychological well-being this is the thing I need to do to feel good about the way I'm moving through the world towards whatever end state I'm looking for goals don't do that they just set signposts that you're supposed to look at from afar and move towards systems are a much more useful way of engaging with the world towards certain ends and certain outcomes you have to kind of build these self-control muscles these habits if you will make it part of your lifestyle so that it's automatic it's not a big effort for you anymore and so you can start small start with small things make them a habit and then build up to bigger things there's also something called Temptation bundling and so we compare a want activity with a should activity no one really wants to do it a should activity all the time it is a muscle and even willpower you have to give it a little bit of a break and so when people do a should activity all the time they get fatigued and they show health care workers they're supposed to wash their hands all day and they they start doing it less at the end of the day and so when they give them longer breaks in between their shift they find that they'll continue to do it they'll wash their hands to the end of the day and so it's important to take the brakes engineering a break into this long-term regimen that you have once a habit exists you can't just quilt it you can't you can't pretend it's not there you have to sort of accommodate this need in your life and so the answer is to give yourself five minutes every hour in fact you can set an alarm at the end of every hour give yourself five minutes to surf the web because if you allow yourself five minutes every hour it won't explode into 45 minutes because we've been trying to suppress it it's very important to know what a treat is a treat is not a reward it's not something that you get because you earned it you don't have to justify it a treat is something that you get because you want it and treats may sound like kind of a selfish self-indulgent strategy to use the treats are very important because the fact is treats help us get self-command they energize us they make us feel comforted and cared for and when we are like that then we can ask more of ourselves in other ways so when we get more to ourselves we can ask more from ourselves and you often hear people when justifying a bad habit with like I need it I've earned it I deserve it so and a lot of times people go for unhealthy treats because they feel like they need to recharge their batteries so they use an unhealthy treat but if you load yourself with healthy treats if you have a large a lot of items to choose from and it's not as easy to come up with a long list of healthy choices you think then you're going to be able to recharge your battery and there are some treats that are often unhealthy food treats technology treats and shopping treats a lot of times these can become unhealthy treats very quickly so they if you use them you have to be very Mindful and use them judiciously and know that they're not going to spiral out of control for you one question is whether you're better off trying to do one habit at a time if you're trying to make change or whether you do many all at once and like many things that have information there's just no magic answer there's no one-size-fits-all solution some people do better when they start small when they keep it very simple and they gain the habit of the Habit they get a feeling of accomplishment and it's very manageable and realistic because it's something very small it's just like one thing but on the other hand there's some people who love to go big that love big Transformations and big challenges and so something to do is to think about yourself and think well what have I succeeded in the past what appeals more to my nature and to think about what works for you because there really isn't one perfect way to change the habit or to change a bunch of habits get smarter faster new videos every week from the world's biggest thinkers the human brain is not a thinking machine that feels it's a feeling machine that thinks humans have this innate desire to see a sense of control driven by our strong emotions we start making rational decisions when it comes to buying we buy products simply because we want to gain a sense of control at the same time our own babies are to seek instant gratification drive us to buy more and more how can we resist being manipulated into spending with your marketing we can understand powering emotions feelings and intuition shape our buying decisions money can betray security extension at the same time money can bring worry jealousy resentment and anxiety and what really drives our need to shop this is [Music] this is Terry Wu he's a neuroscientist and a marketing consultant and he wants people to understand the irrational forces driving their spending habits from The evolutionary perspective the human brain evolved to feel first and think later the emotional brain is called the limbic system it's responsible for our oral emotions like joy happiness anger fear and anxiety the rational brain is called The frontal cortex is heavily involved in reason logic sometimes these two systems conflict with each other and our decisions are the results of a complex interaction at the start of the covid-19 many Americans stockpiled toilet paper but not because it had anything to do with keeping them safe buying toilet paper was a simple coping mechanism for people to deal with their stress well under stress the frontal cortex can stop functioning at full capacity our emotional brain kicks into a higher gear it overpowers our rational thinking we feel like we're losing a sense of control we have difficulty in controlling our impulses and delay our organization we stopped making rational decisions when it comes to buying the miracle of modern abundance means more human beings have near instant access to Affordable products than in any other time in the history of the world with online shopping available 24 7 is very tempting to shop online all the time and to seek that instant gratification is to seek that instant reward we think Amazon is in the retail business but in reality Amazon is in the instant gratification business the human brain was not evolved to interact with a computer screen the human brain was evolved to interact with other humans shopping is often easy and cheap it makes sense that human neuropsychology might not be prepared to effectively navigate the constant values of social media shopping ads and one-click purchase buttons many companies subtly use cloud influence to not just buy products imagine you try to buy a microphone for your computer Amazon helps you make that decision by showing you the best sellers the Amazon's choice and those products that have the highest ratings so Amazon pretty much has made that decision for you before you even went to Amazon we often use credit cards When shopping online between our present self that gets to enjoy the new item and our future self who has to deal with the consequences credit card companies and Loan Companies knows very well they intensely disconnect the present self and the future self when we spend money with cash we can feel that money is leading us that's why spending money with a credit card we tend to spend more simply because we don't feel the pain pain companies want to give us an illusion that we're in control when people have a better shopping experience guess what they buy more it can be difficult to stop spending that's driven by the emotional brain but it's not responsible the important thing is you place on barriers between your visa to shop and shopping in the old days we did not shop every day we shop maybe once or twice a week Thursday a day in the week to shop allow yourself some time if in the moment you think I was buying something and the time you buy something stress reduction can strengthen our ability to resist the shopping impulse Terry is a committed Runner it helps temper his desire to buy too many books one way to lower our stress is physical activity anytime you feel like you're under stress instead of going to shop go outside Move Your Body when your muscles become relaxed your stress level goes down another way to reduce your stress is to seek social support when you're connected with other people you gain a sense of safety that sense of safety can belong to your stress response and make your frontal cortex function better online shopping has become the predominant way for us to buy things in our lives but are we going to adapt this in the bat way or in a good way the answer is not clear yet [Music] [Laughter] [Music] all right so I did sneak another video in there because I think that it's important to understand how powerful our brains can be in purchasing decisions and sometimes we don't have a lot of control over it so as much as in marketers want to have control over it sometimes we don't have it ourselves so uh yeah sorry the overwhelm do his videos today but I think that they were kind of important in making some points and giving you some additional Insight so as of right now we have completed this chapter and I will see you next time bye people