HC 1: Introduction and the study of consumer behavior
Consumer behavior is about processes involved in selecting, buying, using or disposing of products,
services, ideas and experiences to satisfy needs and wants.
Thus it is about:
1. Obtaining products and services
2. Consuming products and services
3. Disposing of products and services
When studying consumer behavior you should be aware of intuition trap, this is when you use your
intuition as judgment, while your intuition is simply wrong. In that instance you base your judgment
on limited theories, make a decision based on few observations, infer causality from correlation and
you are overconfident. Confirmation bias is related, this is the phenomenon that you focus on
confirming instances for your beliefs instead of disconfirming ones and that we are resistant to
changing our own prior beliefs.
Another thing to keep in mind is that your own preferences are not representative necessarily of
others projection bias/false consensus.
HC 2: Irrationality, research strategies, correlational research and validity
The “wise” consumer assumption assumes that consumers are rational in their preferences, that
they make tradeoffs between quality and price and that each product is judged on its merits alone.
Therefore market research instruments should accurately tell us what they really prefer and how
much they would pay for products.
Compromise effect: When an extreme option is added the share of a product increases when it is the
intermediate option but decreases when it is the extreme option.
Endowment effect: owners assign greater value to a product than non-owners, only because of the
frame of ownership.
What we see with regard to preferences is that they are typically constructed, not revealed:
Every evaluation is relative (reference dependence: e.g. priming effect)
People don’t know what they want until they see it in context (context dependence: e.g.
compromise effect)
Preferences change depending on how the alternatives are presented to them (description
dependence: e.g. endowment effect)
Rationality in economics states that:
People take into account the pleasure they obtain from consuming something and the price
they pay for it.
Consumers want ‘value for money’.
Choice overload: the provision of extensive choices may sometimes initially still be seen as desirable,
however it may also prove unexpectedly demotivating in the end.
,In the Jam study there were two different booths with a small and a large selection of jams. At the
booth with the small selection of jams less people stopped to sample, but more people bought a
jam. And at the booth with a large selection of jams more people stopped but less people bought
jam in the end. This is an example of choice overload.
In addition, when there is a large selection of items, people generally feel that it is more difficult to
choose a product, they are more frustrated and more dissatisfied and therefore they buy less
products. More choices make people miserable because they feel regret for the choices they didn’t
get to make, they feel opportunity costs and there is an escalation of expectations when there is
more choice (the more choice there is the higher the expectations of the consumer).
The standard economic model assumes that people have full external knowledge (consumers act
with full information), full internal knowledge (consumers know their preferences) and that they
maximize their utility (consumers choose the best option available). We often see however that this
is not the case.
Research strategies refer to the general approach and goals of a research study:
Descriptive: this describes individual variables, it gives a snapshot of specific characteristics
of a specific group of individuals, the data is usually in the form of averages or percentages.
Correlational: this type of research strategy examines the strength or consistency (the
numerical value of the correlation) and the direction (the sign +/-) of a relationship between
variables, without being able to make statements about causality. Relationships between
variables may be: linear, curvilinear, positive or negative.
Experimental: making use of a well-designed experiments to investigate cause-and-effect
questions about the relationship between multiple variables.
Quasi-experimental: almost, but not quite, experiments- they can never produce an
unambiguous explanation.
Nonexperimental: comparing two factors without the use of rigorous experiment designs. It
demonstrates a relationship between variables but does not attempt to explain it, it doesn’t
give a cause-and-effect. Both correlational and nonexperimental research are used to
demonstrate that a relationship exists between two variables, however the correlational
research uses data on two variables in one group of participants and the nonexperimental
uses data of two groups of scores, with only one variable per participant.
You can research relationships for non-numerical scores from nominal scales by organizing the data
in a matrix and applying the chi-square test (see below).
The coefficient of determination (r 2) is the squared value of a correlation and it measures the
percentage of variability in one variable, that is predicted by its relationship with another variable.
, External validity: the extent to which the results of a research study can be generalized. A threat to
external validity is any characteristic of the study that limits the ability to generalize the study’s
results. There are different kinds of generalization that can involve threats to external validity:
Generalization from a sample to the general population
Generalization from one research study to another
Generalization from a research study to a real-world situation
Internal validity: concerned with factors in the research study that raise doubts or questions about
the interpretation of the results. A research study with internal validity produces a single,
unambiguous explanation for the relationship between two variables. A threat to internal validity is
any factor that allows an alternative explanation for the results.
Threats to both internal and external validity:
Artifact: an external factor may influence or distort measures:
o Experimenter bias: the experimenter shows behavior that is in line with the goal of
the study and thereby influences the results.
o Demand characteristics: the participant knows what is expected of them to answer
and what the goal is of the study and so they answer in a way they think they are
expected to.
Exaggerated variables: if the experimenter expects something to happen variables in study
are often exaggerated (not a seen in real-life).
The goal of any research study is to maximize internal- and external validity, however there tends to
be a trade-off between internal and external validity. The purpose of a study helps to decide which
type of validity is more important and which threats need to be addressed.
The use of correlational research describes relationships between variables, it is nonintrusive since it
analyzes natural behaviors and it mostly has high external validity. It can however not assess
causality, there may be a third-variable problem, there can be a directionality problem and it often
has low internal validity (don’t know the actual cause).
Third-variable problem: there is a third variable (a confounding variable) that may explain the
relationship between the other variables.
Directionality problem: the cause-and-effect cannot be discerned from another.
Consumer behavior is about processes involved in selecting, buying, using or disposing of products,
services, ideas and experiences to satisfy needs and wants.
Thus it is about:
1. Obtaining products and services
2. Consuming products and services
3. Disposing of products and services
When studying consumer behavior you should be aware of intuition trap, this is when you use your
intuition as judgment, while your intuition is simply wrong. In that instance you base your judgment
on limited theories, make a decision based on few observations, infer causality from correlation and
you are overconfident. Confirmation bias is related, this is the phenomenon that you focus on
confirming instances for your beliefs instead of disconfirming ones and that we are resistant to
changing our own prior beliefs.
Another thing to keep in mind is that your own preferences are not representative necessarily of
others projection bias/false consensus.
HC 2: Irrationality, research strategies, correlational research and validity
The “wise” consumer assumption assumes that consumers are rational in their preferences, that
they make tradeoffs between quality and price and that each product is judged on its merits alone.
Therefore market research instruments should accurately tell us what they really prefer and how
much they would pay for products.
Compromise effect: When an extreme option is added the share of a product increases when it is the
intermediate option but decreases when it is the extreme option.
Endowment effect: owners assign greater value to a product than non-owners, only because of the
frame of ownership.
What we see with regard to preferences is that they are typically constructed, not revealed:
Every evaluation is relative (reference dependence: e.g. priming effect)
People don’t know what they want until they see it in context (context dependence: e.g.
compromise effect)
Preferences change depending on how the alternatives are presented to them (description
dependence: e.g. endowment effect)
Rationality in economics states that:
People take into account the pleasure they obtain from consuming something and the price
they pay for it.
Consumers want ‘value for money’.
Choice overload: the provision of extensive choices may sometimes initially still be seen as desirable,
however it may also prove unexpectedly demotivating in the end.
,In the Jam study there were two different booths with a small and a large selection of jams. At the
booth with the small selection of jams less people stopped to sample, but more people bought a
jam. And at the booth with a large selection of jams more people stopped but less people bought
jam in the end. This is an example of choice overload.
In addition, when there is a large selection of items, people generally feel that it is more difficult to
choose a product, they are more frustrated and more dissatisfied and therefore they buy less
products. More choices make people miserable because they feel regret for the choices they didn’t
get to make, they feel opportunity costs and there is an escalation of expectations when there is
more choice (the more choice there is the higher the expectations of the consumer).
The standard economic model assumes that people have full external knowledge (consumers act
with full information), full internal knowledge (consumers know their preferences) and that they
maximize their utility (consumers choose the best option available). We often see however that this
is not the case.
Research strategies refer to the general approach and goals of a research study:
Descriptive: this describes individual variables, it gives a snapshot of specific characteristics
of a specific group of individuals, the data is usually in the form of averages or percentages.
Correlational: this type of research strategy examines the strength or consistency (the
numerical value of the correlation) and the direction (the sign +/-) of a relationship between
variables, without being able to make statements about causality. Relationships between
variables may be: linear, curvilinear, positive or negative.
Experimental: making use of a well-designed experiments to investigate cause-and-effect
questions about the relationship between multiple variables.
Quasi-experimental: almost, but not quite, experiments- they can never produce an
unambiguous explanation.
Nonexperimental: comparing two factors without the use of rigorous experiment designs. It
demonstrates a relationship between variables but does not attempt to explain it, it doesn’t
give a cause-and-effect. Both correlational and nonexperimental research are used to
demonstrate that a relationship exists between two variables, however the correlational
research uses data on two variables in one group of participants and the nonexperimental
uses data of two groups of scores, with only one variable per participant.
You can research relationships for non-numerical scores from nominal scales by organizing the data
in a matrix and applying the chi-square test (see below).
The coefficient of determination (r 2) is the squared value of a correlation and it measures the
percentage of variability in one variable, that is predicted by its relationship with another variable.
, External validity: the extent to which the results of a research study can be generalized. A threat to
external validity is any characteristic of the study that limits the ability to generalize the study’s
results. There are different kinds of generalization that can involve threats to external validity:
Generalization from a sample to the general population
Generalization from one research study to another
Generalization from a research study to a real-world situation
Internal validity: concerned with factors in the research study that raise doubts or questions about
the interpretation of the results. A research study with internal validity produces a single,
unambiguous explanation for the relationship between two variables. A threat to internal validity is
any factor that allows an alternative explanation for the results.
Threats to both internal and external validity:
Artifact: an external factor may influence or distort measures:
o Experimenter bias: the experimenter shows behavior that is in line with the goal of
the study and thereby influences the results.
o Demand characteristics: the participant knows what is expected of them to answer
and what the goal is of the study and so they answer in a way they think they are
expected to.
Exaggerated variables: if the experimenter expects something to happen variables in study
are often exaggerated (not a seen in real-life).
The goal of any research study is to maximize internal- and external validity, however there tends to
be a trade-off between internal and external validity. The purpose of a study helps to decide which
type of validity is more important and which threats need to be addressed.
The use of correlational research describes relationships between variables, it is nonintrusive since it
analyzes natural behaviors and it mostly has high external validity. It can however not assess
causality, there may be a third-variable problem, there can be a directionality problem and it often
has low internal validity (don’t know the actual cause).
Third-variable problem: there is a third variable (a confounding variable) that may explain the
relationship between the other variables.
Directionality problem: the cause-and-effect cannot be discerned from another.
