Marketing 330

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Myths about Marketing
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– primary objective is to make people buy things they don’t need – marketing adds little value to the product – marketing leads to higher prices – marketing is propaganda for a materialistic life
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Truths about Marketing
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– centered around building CONSUMER VALUE – the consumer is the reason why marketers exist – you fulfill consumer needs by developing products, pricing, and promoting them – is an academic discipline
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Consumer Behavior
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the science behind marketing and consumption – “The set of value seeking activities that take place as people go about addressing and attempting to address real needs” – Explaining, rather than predicting, consumer behavior – Helping us understand the needs of consumers and how to create value for them
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Marketing stems from different studies
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– Cognitive Psychology – Marketing – Anthropology – Social Psychology – Sociology – Economics
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Who benefits CB
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– Marketing managers – Advocacy and consumer welfare groups – Public policy makers – Consumers
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Segment 1
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General Marketing + Psychology (Internal Influences)
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Segment 2
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External Influences
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Segment 3
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Decision Making Process: Problem Recognition –> Information Search –> Evaluation of Alternatives –> Decision Implementation –> Post-purchase Evaluation
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What is a consumer?
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1. Purchaser 2. User 3. Influencer
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What is consumer behavior?
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“The study of human thought and action involved in consumption” Anne’s definition: 1. CB is more than just buying – acquiring, using, dispensing 2. CB is more than just products and services – offerings and ideas 3. CB involves more than just one person
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Who benefits from CB?
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– Marketing managers – Advocacy and consumer welfare groups – Public policy makers and regulators – Consumers
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Key Questions
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1. Why do people consume – because they have needs and wants 2. How do they decide what/when/where/how to address these needs – value judgements
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Consumption
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the process by which goods, services, or ideas are used and transformed into value
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Consumer behavior is a behavioral science
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behavioral sciences vs. physical sciences: – Dynamic vs Static – Physical is more controllable (behavioral is more uncertain) – Closed system where work is within a particular framework – Revolves around humans and societies
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Why do we marketers need to know consumer behaviors?
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– understand the consumer – “Fit” our products to the needs (and desires) of the consumer – Develop better marketing strategies In sum, create VALUE – personal assessment of the net worth obtained from an activity
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Value
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Personal assessment of the net worth obtained from an activity. Captures how much gratification a consumer receives from consumption.
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What is Value?
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Benefits – Costs
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What influences value?
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Internal – psychology and personality, Cognition and affect External – situation, social
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Consumer Value Framework
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http://i.imgur.com/pwCTokI.png
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Examples of Value
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Can vary depend on the product: – Value of fast food – Value of Walmart – Value of facebook
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Utilitarian Value
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Gratification derived because something helps a consumer solve a problem or accomplish some tasks Consumers provide a rational explanation for their purchases Value is provided because the object or activity allows something good to happen or be accomplished e.g. FRUIT
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Hedonic Value
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Value derived from immediate gratification that comes from some activity. Value is provided by the actual experience and emotions associated with consumption. e.g. CHOCOLATE CAKE
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Differences between Hedonic and Utilitartian
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Hedonic is an end in itself rather than a means to an end. It is emotional in nature.
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Marketing Strategy
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Way a company goes about creating value for customers. Provides an effective way of dealing with competition. Firms that fail to realize how their products provide value develop marketing myopia.
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Marketing Myopia
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condition where a company views itself in a product business rather than in a value or benefits-producing business.
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Marketing Tactics
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Way by which marketing management is implemented (involves price, promotion, product, distribution)
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Marketing Strategy and Consumer Value BOTTOM LINE
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Marketing strategy and tactics should maximize the total value received by customers
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What does value influence
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Value influences the quality of the relationship – switching behaviors – customer loyalty – customer share
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CB Research and Segmenting, Targeting, and Positioning
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Developing a Customer-Oriented strategy – Marketing activities are designed to fulfill customer needs – Consumers can be segmented based on differing needs and wants – CB research identifies segments and helps determine which to select as target market
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Segmenting
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Market segmentation separates a market into groups based on the different demand curves associated with each group. Requires marketing researchers to identify segments and describe its members
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Product Differentiation
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Marketplace condition in which consumers do not view all competing products as identical to one another
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Marketing Mix
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Combination of product, pricing, promotion, and distribution strategies used to implement a marketing strategy
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Target Market
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Identified segment or segments of a market that a company serves
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Perceptual maps
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develops an idea of a new product’s likely success as compared to other competing products
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Customer Lifetime Value CLV
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Calculates long term profitability of a single customer. It is the approximate worth of a customer to a company in economic terms. CLV = npv (sales-costs) + npv (equity)
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Market Research Segmentation Strategies
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4 basic strategies
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Geographic Segmentation
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is based on regional variables, climate, population density, population growth rate
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Demographic Segmentation
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is based on variables such as age, gender, ethnicity, occupation, income, and family status
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Psychographic Segmentation
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is based on variables such as values, attitudes, and lifestyle
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Behavioral Segmentation
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is based on variables such as usage rate and patterns, price sensitivity, brand loyalty, and benefits sought
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The Global Consumer
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Pressure to understand similarities and differences of customers in various countries.
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Intuition Versus Research
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– People are overconfident – We like to have our beliefs and intuitions confirmed (confirmation bias) – Tend to base decisions on intuition/vivid information – Research plays an important role in testing our intuitions
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Qualitative
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Interpretive (phenomenology, ethnography, netnography) Pros: – can help identify patterns of consumer behavior that the researcher was not necessarily aware of beforehand – allows for a richer exploration of consumer experiences Cons: – somewhat subjective – unstructured
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Quantitative
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Numbers driven (experiments, analysis of pre-existing datasets, surveys) Pros: – statistically validated – allows for replication, findings are often generalizable Cons: – answers are restrictive – may suffer from confirmation bias
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Focus Group (Qual)
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Group of people asked about their perceptions, opinions, beliefs, and attitudes
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Consumer Panels (Quant)
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Pre-recruited group of people who agree to participate, selected from a segment of interest Provides generalizable data for companies and researcher
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Observational Research (Qual)
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Draws inferences about the possible effect of a treatment on subject
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Experiments (Quant)
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Investigator has control over assigning subjects to a treatment group and control group
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Market Testing (Both)
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to test multiple marketing scenarios and select the most promising for expansion
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Test Market (Field Experiment)
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Studies the effectiveness of one or more elements of the marketing mix evaluating sales of the product in an actual city
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Primary Data
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– Collected for the current purpose. – Could be internal or external
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Secondary Data
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– Collected for some other purpose
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General Rule of Thumb
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Collect secondary data first, then turn to primary data. Secondary data is cheaper and quicker to get. Disadvantages of Secondary Data – may be out of data or might not be specific enough
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3 Factors Necessary for Causation
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1. Correlation 2. Temporal Antecedence 3. No third factor driving both
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Spurious Correlation
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Spurious = artificial Danger of data mining Lots of things are correlated, but not all are related
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Perception Chart
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http://i.imgur.com/BYrvue6.png
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Learning
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The change in behavior resulting from interaction between a person and a stimulus
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Perception
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Consumer’s awareness and interpretation of reality Value is based on perception, not reality. Learning, intentional or unintentional, depends on perceptions
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Exposure
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Consumer comes into physical contact with a stimulus – possibility of noticing the information
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Ad Competition
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We see over 5000 messages per day. Only a small number are remembered. 30% are remembered negatively
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Selective Exposure
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have to pick a medium to send your messages
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Selective Attention
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have to do something to get your message noticed
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Selective Perception
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have to make sure they understand your message
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Selective Retention
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have to make sure the message makes it to the memory
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Influencing exposure
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Select the correct medium Positioning within a medium – magazine – tv – in store Choose product distribution and placement – selective exposure
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Intentional Exposure
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Consumer Reports
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Intentional Avoidance
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– Junk mail – Fast-forward through commercials – Switching channels during commercials – Blocking senders
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So we are exposed
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Now we have to get consumers to pay attention
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Attention = Gateway to Perception
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Markers need to break through the clutter to get people to pay attention to ads (e.g. orkin ad)
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Ways to Enhance Attention
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– Intensity – Contrast – Movement – Surprise – Size – Involvement
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Selective
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at a party, but you can still hear your name mentioned across a room
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Divided
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Talk on the phone and clean house
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Limited
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Turn down radio when we are looking fora particular address
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Pre-attentive Processing
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Can we attend to something in or peripheral vision even if we are already focusing on something else?
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Hemispheric Lateralization
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Left – numbers, words Right – music, pictures
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Habituation
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Novelty can wear off When a stimulus is too familiar it loses attention-getting ability e.g. aqua pods
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Exposure and Attention Summary
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Exposure is necessary but not sufficient Attention is the gateway – and there are many ways get through the gate BUT once you are in, you must convey something substantive and lasting
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Phases of the Consumer Perceptions Process (Sensing)
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Sensing – immediate response to stimuli that have come into contract with one of the consumer’s five senses
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Phases of the Consumer Perceptions Process (Organizing)
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Organizing – cognitive organization is the process by which the human brain assembles sensory evidence into something recognizable
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Phases of the Consumer Perceptions Process (Reacting)
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Reacting – end of the perceptual process. Occurs as a response to behavior. Includes physical and mental responses to the stimuli encountered
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Perception/Comprehension
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Interpretation or understanding that a consumer develops about some attended stimulus in order to assign meaning. Perception is constructive. People construct interpretations on the fly.
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Perception is crucial in CB
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Perception IS Reality What customers perceive is what affects their actions What is perceived is not necessarily what is “true”.
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Subliminal Messages
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below the sensory threshold. We cannot articulate what we have seen because we are not consciously aware that we have seen it Supraliminal is not paying attention… conscious that something is changing, but can’t put your finger on how or what
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Mere Exposure
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The more we are exposed to a stimulus, the more familiar it becomes and the more we like it.
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What do we perceive? (JND)
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JND (Just Noticeable Difference) – condition in which one stimulus is stronger than another so that one can notice that the two are not the same
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What do we perceive? (Weber’s Law)
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Weber’s Law – consumer’s ability to detect differences between two levels of a stimulus decreases as the intensity of the initial stimulus increases
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What do we perceive? (JMD)
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JMD (Just Meaningful Difference) – smallest amount of change in a stimulus that would influence consumer consumption and choice
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JND Marketing Implications
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– Pricing – Quality – Quantity – Add On Purchases
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Gradual Change
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Campbells soup cans
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Change Takeaway
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– Less change made at a time may be unnoticed by a consumer – Change a lot at once and it will be noticed – Not all noticeable changes may be meaningful and impact choice
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The Perceptual Process
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Interpretation is constructed as needed and is based on: – The ACTUAL stimulus or event – Prior expectations What we see depends on what we expect to see. What we hear depends on what we expect to hear.
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Perceptual Biases
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– Figure and Ground – Proximity – Similarity – Closure – Continuation
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Gestalt Principle
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Seeing things as wholes rather than parts. People desire perceptions that are simple, complete, and meaningful
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Perceptual Constancy
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People strive to perceive the world as relatively unchanging
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Intentional Learning
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Process by which consumers set out to specifically learn information devoted to a certain subject
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Unintentional Learning
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Occurs when behavior is modified through a consumer-stimulus interaction without any effortful allocation of cognitive processing capacity toward that stimulus Consumers in unintentional learning – sense and react to the environment – learn without trying to learn – do not attempt to comprehend the information presented – exposed to stimuli and respond in the same way
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Types of Memory
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– Sensory Memory (registers) – Short term (workbench) Memory – Long term memory
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Sensory Memory
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Information that comes in through our senses – echoic memory – very brief memory of things we hear – iconic memory – very brief memory for things that we see If it is not processed, we lose it.
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Short Term Memory (STM)
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Portion of Memory where incoming information is encoded and interpreted – Limited capacity – increased for higher involvement Short-lived duration – working memory
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Repetition/Rehearsal
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Holding a thought in short-term memory by mentally repeating the thought
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Dual Coding
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Two different sensory “traces” are available to remember something
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Meaningful encoding
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Occurs when preexisting knowledge is used to store new information e.g. phone number with words
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Chunking
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Grouping stimuli by meaning so that multiple stimuli becomes a single memory unit. e.g. SSN
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Long Term Memory
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Permanently stored knowledge – autobiographical memory – semantic memory – knowledge about the world
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Implicit Memory
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Unintentional learning (without conscious recall)
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Explicit Memory
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Intentional learning (with conscious recall)
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Associative Networks Organize Memory
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Network of mental pathways linking knowledge within memory
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Declarative Knowledge
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Cognitive components that represent facts. Nodes – Concepts found in an associative network Paths – Representations of the association between nodes
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Associative Network Influence Retrieval
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– Stronger links are more accessible – marketers try to strengthen links between brands and associations – Spreading activation – explains our seemingly random thoughts – Responsible for false recall – can’t retrieve when link fades – Sleeper effect – source decays faster than message
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Cognitive Schema
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Schema – a type of associative network that works as a cognitive representation of a phenomenon that provides meaning to that entity
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Taxonomic Categorizing
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Similar objects in the same category Objects can have the same features (lots of sharing within, little sharing across) 3 Levels: – Superordinate – Basic – Subordinate
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Feature Identification
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We tend to group things based on common features because that is the way the world is usually organized. When we don’t know how to interpret something new, we look for common features that will help us identify the concept.
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Prototype (Prototypicality)
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Graded structure – some members represent category better than others
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Membership Classification
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Cognitive categories appear to have graded membership. Some objects are better members of the category than others Prototype – compare stimulus in each group ( classify it as belong to the group with the most similar prototype) Exemplar – compare stimulus to all existing brands in each category (classify it as belonging to the group which is it is on average most similar)
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Why does categorization matter
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Determines competition among products and brands. Categorization affects the consideration set. Category structure affects retrieval and evaluation of alternatives Categorization influences inference making and elaboration about alternatives
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First Mover Advantage
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Allows you to be the prototype Easier recall increases sales
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Positioning
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Position close to or away from the prototype Position relevant to the goal Repositioning – can we use placement to change categorization
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Brand Image
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refers to the schematic memory of a brand
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Brand Equity
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the value consumers assign to a brand above and beyond the functional characteristics of the product
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Brand Leverage
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marketers capitalizing on brand equity by using an existing brand name for new products (brand extensions, family branding, umbrella branding)
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Strong Brand
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– make clear promises that are kept over time – have rich unique brand equity – dependable
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Weak Brands
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– make vague promises over time – low brand equity – create doubt
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Objective Comprehension
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– whether the meaning that the consumer extracts from a message is consistent with what the message actually stated
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Subjective Comprehension
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the different or additional meaning consumers attach to the message, whether or not these meanings were intended
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Miscomprehension
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Occurs when consumers inaccurately receive the meaning contained in a message. Greater chance of occurring when messages are complex, only shown for a few seconds, or only scene once or twice.
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Memory Takeaway
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Few consumer decisions are based on just the information in the environment. Almost all consumer decisions include some memory component.
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Motivation
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Driving forces behind human actions that push consumers to address real needs
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Homeostasis
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Maintaining a current acceptable state
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Self Improvement
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Changing from current to ideal
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Drive
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a gap between where you are creates arousal or tension
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Drive Theory
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proposes that consumers seek only to achieve homeostasis, an elimination of biological needs
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Expectancy Theory
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proposes that consumers consider whether their behavior will tend to result in desirable or undesirable outcomes (a cognitive approach). These goals have positive and negative valence, respectively. Goal pursuit can result in change (not just homeostasis).
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Promotion Focus
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Driving towards positive outcomes; pursuing ideals or aspirations
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Prevention Focus
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focus on avoiding negative consequences
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Maslow Hierarchy
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Physiological Needs –> Safety Needs –> Social Needs –> Esteem Needs –> Self Actualization Needs
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Utilitarian Motivations
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usually regard functionality
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Hedonic Motivations
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Usually provide emotional satisfaction, desires
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Motivational Conflict
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consumers have multiple needs/goals/values, which leads to conflict
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Approach-Approach
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a conflict between 2 desirable alternatives
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Approach-Avoidance
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a conflict between the desirable and the undesirable aspects of a single item
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Avoidance-Avoidance
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a conflict in that each alternative is predominantly negative
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Marketing Theory and Strategy
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Consumers do not buy products, they buy the motive satisfaction or problem solutions. Managers must discover the motives their product and brands can satisfy and develop their marketing mixes
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Manifest Motives
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1. known to the individual 2. AND are freely admitted
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Latent Motives
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1. Unknown to the individual 2. OR individual reluctant to admit them
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Measuring Latent Motives
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Requires projective techniques or other indirect approaches – association techniques, completion techniques
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Measuring Manifest Motives
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Can be measured by direct questions
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Is motivation enough?
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NO – to promote ACTION, all three of motivation, ability, and opportunity, must be in place
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Ability to Act
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Depends on: – Knowledge/Experience – Intelligence – Education – Age – Money – Cognitive Style (learning style = visual vs verbal)
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Opportunity
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Marketers must give consumers opportunity to engage in behavior. Determined by: – Time – Distractions – Amount of info – Complexity of info – Repetition of info
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Motivation is enhanced when something is
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1. Consistent with needs 2. Risky 3. Moderately inconsistent with our attitudes 3. Personally relevant (involving)
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Involvement
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the level of perceived importance and interest evoked by a stimulus (such as a product) Based on needs, situations, and personality factors BEWARE: marketers tend to over estimate consumer involvement
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Involvement Examples
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high personal relevance from pursuing a particular consumption category
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Product Involvement
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leads to product enthusiasts
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Shopping Involvement
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leads to higher information processing when shopping
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Emotional Involvement
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deep personal interest, invokes strong feelings associated with some object
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Situational Involvement
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temporarily involved in a category, utilitarian, temporarily involved
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Enduring Involvement
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Personally gratifying, hedonic, ongoing interest in a product or behavior
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Consumer Involvement
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a moderating variable that changes the nature of the relationship between other variables
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Involvement and Segmentation
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Strategic Options – concentrate on high or low involvement segment – attempt to build involvement (how!)
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Emotions
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Provide meaning to a product or brand. Psychobehavioral reactions to appraisals Measured by self report and autonomic measures
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Mood
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General valenced affective state. Influences judgements.
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Autonomic Measures
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Automatically records responses based on automatic reactions or brain activity. Can be intrusive, but is good at assessing emotional activity
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Self Report Measures
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Less obtrusive, but requires consumers to recall their affect state from a recent experience.
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PANAS (self report)
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Positive Affect Negative Affect Scale
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PAD (self report)
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Pleasure Arousal Dominance, represents emotional experience
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Cognitive Appraisal Theory
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Thoughts (Appraisals) elicit emotions. Distinct from positive vs. negative
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Cognitive Appraisals
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Anticipation – thoughts of future Agency – thoughts of responsibility Equity – thoughts of fairness Outcomes – thoughts of outcomes relative to goals
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Flow
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Leads to extremely high emotional involvement e.g. Candy Crush
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Emotional Expressiveness
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extent to which a consumer shows outward behavioral signs and otherwise reacts obviously to emotional experiences
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Emotional Intelligence
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Awareness of the emotions experienced in a given situation and the ability to control reactions to these emotions
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Self Conscious Emotions
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Specific emotions that result from some evaluation or reflection of one’s behavior
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Emotional Contagion
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Extent to which an emotional display by one person influences the emotional state of a bystander
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Mood-Congruent Recall
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Consumer’s mood can be controlled and memories and evaluations can be influenced
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Emotional effect on memory
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Superior recall for information presented with mild affective content compared to similar information presented in an neutral way
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Emotion/Motivation Takeaway
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Advertisers leverage motivation and emotion to involve and engage target customers

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