Friday, September 26, 2014

Consumers' decision-making is easy, if they only recognize one option

Consumers have various alternative ways to do their decisions. Some people try to be rational and consider all possible options, some want to do easy decisions and some want to minimize risks. It would be beneficial for the marketers to know which system their customers use, because optimal marketing strategy is different for each system. I shall introduce various decision making strategies in this blog (in near future) and ponder the optimal marketing actions. The decision making is very simple when one recognizes only one item and that item is good enough.

When recognition heuristic is used 

Recognition heuristic can only be used in a situation when we recognize one alternative, but not the other ones. We need to have an understanding, if the fact that we recognize the alternative is correlated positively or negatively with our aim. Recognition is a binary feeling, we either recognize or not. Recognition heuristic (REC) was introduced by Goldstein & Gigerenzer (1999)[i]. REC is very simple to use, if we recognize one alternative, we can stop searching. REC might be used when a person is choosing a book to read or a movie to watch. For example, I might choose a film by Jennifer Aniston, because she is so entertaining, but avoid choosing a film with Arnold Schwarzenegger, because he has been starring in violent and in my opinion dull films.  Recognition system can be successfully used when we recognize only one item and that recognition itself is relevant for the choice. For example:
  • What is the biggest city? (Probably the one we have heard of)
  • What is the deadliest disease? (Probably the one we have heard of)

How can marketers benefit from the knowledge of recognition system?

From marketers point of view it would be ideal to be a brand, everybody knows. This is costly and not generally a relevant option. Marketers can benefit from recognition system by optimizing their marketing and product:
-       keeping product packages and marketing similar in colors and style helps consumers connect marketing and the product even with a slightest recognition
-       using cues to help customers to recognize quality or values (for example house brands or Fair Trade)
-       copying famous brand by making the product or marketing remind it (this method has to be used very carefully, since it easily slips into illegal or unethical practices).

Recognition can be manipulated. People remember if they have seen or heard about a brand before, but they do not remember where. In other words they might not notice if a person or brand is made popular by the advertiser or if they knew it earlier. In an “Overnight fame”- experiment by Jacoby, Kelley, Brown & Jasechko 1989 showed that people did not know if they had run across a name yesterday in the test or if they knew that earlier.

About 20% of consumers use recognition system

According to several my studies[ii] women use recognition system more than men. Interestingly, the usage of REC seems to be connected with age, middle-aged people use more than younger or older ones. Education correlated clearly with usage of REC, the more educated people the more they used it. More information about recognition system is found in Wikipedia article.

[i] Goldstein, Daniel & Gigerenzer, Gerd. (1999): ”The recognition heuristic: How ignorance makes us smart”, chapter in book ”Simple heuristics that make us smart”, edited by Gigerenzer, Gerd & Todd, Peter M. & ABC Research Group, Oxford University Press, p. 37-58

[ii] The choice of print media 2014, The choice of electronic media 2014, The voter’s choice in European Parliament election 2014

Friday, September 19, 2014

Influencing consumer habits - how to create habitual behavior

What are habits?

Form marketing perspective consumers have good and bad habits. To put it simply the habits are good if a consumer is buying from us and bad if they buy from the competitor. But what exactly are habits? Repetitive behavior is sometimes confused with habits, but there is a major difference: While repetitive behavior can easily be changed, the habits are difficult to break.

Habits are nearly automatic behaviors that occur repeatedly in consisted circumstances. Habits are strongly dependent on environmental cues, such as places, times of day, presence of particular people, preceding actions, state of mind et cetera. Habits are triggered by the clues we see in our surroundings (Verplanken & Wood 2006)[i], Verplanken & Faes (1999)[ii], Verplanken & Orbell (2003)[iii], Wood & Neal (2009)[iv], Holland et al. (2006)[v]. For example many people eat breakfast at home and read the newspaper at the same time. If they skip breakfast they will most likely skip the morning paper also.

Nearly automatic behavior means that consumers act without conscious awareness. Difference between repetitive behavior and habits is that repetitive behavior is deliberated each time, whereas habit is a nearly automatic response to situational cues. This is why habits are more difficult to change than just repetitive behavior.

Habits are formed when an action is repeated so many times in consistent circumstances that it becomes automatic behavioral response to situation. The combination of repetitive behavior, certain situations and nearly automatic response create habitual behavior:

The benefits and costs of habits from consumer’s point of view

Habits are beneficial for us because we can save time, energy and effort by acting habitually. Habits give also structure to our lives and thus give a feeling of safety and comfort. Furthermore, a habit can be part of self-image. I gathered the benefits of habits in a list below.

Habits are an economical way to avoid doing our previous choices all over again. In the morning we could consider all the possible meal choices and the ways to entertain ourselves while eating - or we could just take a cup of coffee and read the morning paper as usual. Forming habits and doing things as usual, minimizes the decision-making costs. When we act habitually our choices are nearly automatic and when decision-making is nearly automatized, a lot of time and effort is saved.

Benefits of habits

1. Saves time and energy in decision-making
2. Gives structure and comfort
3. Part of identity

Some habits are “bad” (unwanted negative behavior patterns) and we would like to get rid of them. For example smoking, over-spending, over-eating etc. These kinds of habits are widely discussed in the society, but there are also much more harmless habits that we would like to get rid of. When we act habitually, we miss the change to try something new. For example, if I always buy Sacher-cake at cafeteria, I will never find out if there are other products I might like even more. Some habits are socially unacceptable and some habits might be harmful in the long run. For example eating a whole chocolate box occasionally is socially acceptable (I think) and quite harmless, but eating it weekly is both socially suspicious and harmful for one’s health. If we are not satisfied with our habits and want to change them (but do not have enough energy) they cause psychological costs. Some possible costs of habits are listed below. When the costs of habits exceed the benefits we feel the urge to break down the habits, and adopt a new behavior.

 Costs of habits:

1.     Missing the other options (alternative uses for recourses)
2.     Accumulation of the harmful effects (if any)
3.     Social costs (if socially unacceptable)
4.     Psychological costs (if not satisfied with the habit)

How to help customers to form habits

What does this all have to do with marketing? Everything that has been mentioned above can be used in marketing. It would be ideal to find out what kind of habits doo your customers already have and in which situations they use your products. Then you would not have to recreate already existing behavioral models. But even without investigation many things can be done. First of all, can you product be positioned into a relevant usage situation? Is your product available in these situations? Somehow you need to create repetition, this can be done by discounts, samples etc.  The benefits of habits (orange box above) can be used in marketing. Can your product be attached to one’s identity? Does repetitive usage of your product create safety and structure? In short you can help your customers to create habits, if you provide them opportunities for repetition, attaching a product to a certain situation and as a part of their personality.

[i] Verplanken, Bas & Wood, Wendy (2006): “Interventions to Break and Create Consumer Habits”, in Journal of Public Policy & Marketing, Vol. 25 (1) Spring 2006, 90–103, © 2006, American Marketing Association, ISSN: 0743-9156 (print), 1547-7207 (electronic)

[ii] Verplanken, Bas &  Faes, Suzanne (1999): “Good intentions, bad habits, and effects of forming implementation intentions on healthy eating”, European Journal of Social Psychology Aug1999, Vol. 29 Issue 5/6, p591-604

[iii] Verplanken, Bas & Orbell, Sheina (2003): Reflections on Past Behavior: A Self-Report Index of Habit Strength”; Journal of Applied Social Psychology Jun2003, Vol. 33 Issue 6, p1313-1330

[iv] Wood, Wendy & Neal, David T. (2009): “The habitual consumer”, Journal of Consumer Psychology (Elsevier Science) Oct2009, Vol. 19 Issue 4, p579-592

[v] Holland, Rob W. & Aarts, Henk & Langendama, Daan (2006): “Breaking and creating habits on the working floor: A field-experiment on the power of implementation intentions”, Journal of Experimental Social Psychology, Volume 42, Issue 6, November 2006, Pages 776-783

Friday, September 12, 2014

Sell your future focused customers tools and present focused customers comfort

Some people are more oriented to the future, some to the past. Some are oriented to the present moment. Temporal focus time style describes the amount of the attention an individual devotes to thinking about the past, present, and future

This is important, because it affects how people think about past experiences, current situations, and future expectations. Furthermore, these different orientations have been found to affect motives, behavior and choices. For example if I tried to sell fact content I’d be most interested in past group, and I would sell infotainment the present and future groups would be most appealing (see figure below). 

According to Shipp & Edwards & Lambert (2009)[i] study about temporal focus and job satisfaction reveled that past-focused individuals tended to be more negative. Present focus individuals had more positive attitude towards everything and future focused had higher perceptions of future job characteristics and more positive attitudes towards the future. Job satisfaction and commitment depended upon the level of future focus. According to my Euro election 2014 research the future focused were most eager to vote and the present focused voted most seldomly.

Shipp & Edwards & Lambert (2009)  have developed a 12-statement scale (Temporal Focus Scale (TFS)) to measure consumers’ time focus. They have tested the TFS through four independent studies and found it useful in separating consumers and predicting their attitudes. According to Shipp & Edwards & Lambert (2009) the most illustrative variables were: ‘‘I replay memories of the past in my mind” for past temporal focus, ‘‘My mind is on the here and now” for current temporal focus, and ‘‘I focus on my future” for future temporal focus. I have decided to use these statements instead the whole scale, due to need to keep my questionnaires short.

Some people have argued that young people are only interested about present enjoyment and that elder people think about the past all the time. This is not exactly true. There are future, present and past focused people in all age groups. Although, there seems to be less future focused people in elderly than young people and elderly people do seem to replay memories more than others. The figure presents people who “fully agree” with statements listed above.

Women are more future focused than men, who seem to think their past quit a lot. Future focus seems to be related to educational level. I divided the consumers into past, present and future focused, based on their agreement/disagreement with statements above. For example agreeing with statement ‘‘I replay memories of the past in my mind” or disagreeing with ‘‘I focus on my future” was coded as past focus and vice versa for future focus This turned out to be slightly problematic since some people agreed with more than one statement. The controversies were excluded.

Something to consider: What kind of time styles do your customers have? Could you adjust your marketing message to fit better to prevailing time styles? What kind of time focus do you have personally and does it affect your consumption patters?

[i] Shipp, Abbie J. & Edwards Jeffrey R. & Lambert, Lisa Schurer (2009): “Conceptualization and measurement of temporal focus: The subjective experience of the past, present, and future”, Organizational Behavior and Human Decision Processes 110 (2009) 1–22