Session 2:

Methods of Consumer Behavior

Let’s do a quick review!
 Review of Week 1
• What is Marketing?
• What is Consumer Behavior?
• Why do we study Consumer Behavior?
 What is Marketing?

“Marketing is the activity, set of institutions,

and processes for creating, communicating,
delivering, and exchanging offerings that have
value for customers, clients, partners, and
society at large.”

- American Marketing Association (2013)

 What is Marketing?

“Marketing is a pervasive societal activity that

goes considerably beyond the selling of tooth
paste, soap, and steel.”
- Kotler & Levy (1969)

Profs. Philip Kotler & Sidney Levy

 How is soap marketed?

How are political candidates marketed?

 What is Marketing?
“The set of human activities directed at facilitating and
consummating exchanges…(where) the following three
elements must be present:

(1) Two or more parties potentially interested in exchange

(2) Each possessing things-of-value to the other
(3) Each capable of communication and delivery”

- Kotler (1972)
 What is Marketing?
“The set of human activities directed at facilitating and
consummating exchanges…(where) the following three
elements must be present:

(1) Two or more parties potentially interested in exchange

(2) Each possessing things-of-value to the other
(3) Each capable of communication and delivery”

- Kotler (1972)
 What are “Things-of-Value”?

• “Physical products”
• “Services”
• “Organizations”
• “Ideas”
• “People”

- Kotler & Levy (1969), p. 19

 “Broadened” Concept of Marketing
Using varied means to effect economic, social exchanges
(of intangible products)

“Narrow” Concept of Marketing

Using varied means to effect economic transactions
(of goods and money)

Selling
Face-to-face exchange of goods and money

Bartering
Face-to-face exchange of goods
 What is Marketing?
Demarketing: “Discouraging customers in general
or a certain class of customers in particular on
either a temporary or permanent basis.”
- Kotler & Levy (1971)
 Principles of Demarketing
• Increase the price of the product

• Curtail the number of distribution outlets

• Curtail advertising and sales promotion expenditures for the

product (e.g. point-of-purchase displays, catalog space etc.)

• Add to the time and expense necessary for the buyer to procure
the product or service —"effort and psychological costs"—as a
means of discouraging demand
Example of Demarketing: Tobacco
• Singapore
– SGD $13/pack (www.expatistan.com)
– Age limit: 18 years old
– All tobacco advertising banned on March 1, 1971
– Tobacco ads on foreign magazines banned in 1992
– Graphic warning labels placed in August 2004
– Only Singapore Duty Paid Cigarettes (SDPC)
allowed starting on Jan 1, 2009
 What is Marketing?
Demarketing: “Discouraging customers in general
or a certain class of customers in particular on
either a temporary or permanent basis.”
- Kotler & Levy (1971)
 Example of Demarketing: Hermes
• Pricing: $10,000 ~ $200,000+ (retail)
“Marked by the fact that one could only buy a Birkin after developing a
long, verified financial relationship with the brand, showing
loyalty through spending roughly around $10,000 or $20,000,
some of the notable challenges of landing a Birkin bag include the
multi-year long waiting list and stringent quota that only
allocates even Saudi princesses only two Birkin bags per year. And
with stores being allocated only a very small number of bags
discreetly held in the back, odds are slim for customers to get a
particular color, material, and size upon first try.”
 Example of Demarketing: Hermes
• Pricing: $10,000 ~ $200,000+ (retail)
• Distribution
– Only 307 stores worldwide1 (vs. 3,860 for LVMH2)
– No outlet/off-price stores
• Undisclosed number of inventory and waiting list
• A “stringent quota” (two/yrs even for Saudi princesses)
• Must develop a “long, verified financial relationship”
(i.e. spending $10,000~20,000)

1. http://finance.hermes.com/en/Group-overview/Stores
2. https://www.lvmh.com/investors/
 Consumer Behavior is
The totality of consumers’ decisions with respect
to the acquisition, consumption, and disposition
of goods, services, time, and ideas by (human)
decision-making units (over time).

Hoyer, MacInnis & Pieters (2013)

What Is Consumer Behavior?
Consumer Behavior (as a discipline) is
The study of consumers’ decisions with respect
to the acquisition, consumption, and disposition
of goods, services, time, and ideas by (human)
decision-making units (over time).
• “Acquisition” – how one comes to own something
• “Consumption” – how one uses something
• “Disposition” – how one discards or gets rid of something
Why Study Consumer Behavior?

• To plan effective marketing strategies

– Segmentation, targeting & positioning (e.g., based on
consumer motivation rather than demographics)
– Create and deliver value by identifying and satisfying
consumer needs
* Intuitions/introspections don’t always provide real insights
 Importance of Understanding
Consumer Behavior
“Today, the role of a CEO is to be aware of consumer
behaviour trends, not just how they think and feel, but how
they behave — and then determine how to evolve your
practices and talent base.”

- Troy Ruhanen, President & CEO of TBWA

http://www.thedrum.com/news/2016/09/26/tbwaworldwide-president-and-ceo-
troy-ruhanen-talks-how-survive-and-succeed
 Wal-Mart Finds That Its Formula Doesn’t Fit Every Culture
(New York Times; Aug 2, 2006)

• Success of Walmart
o 8,500+ stores in 15 countries, under 55 different names
o Largest private employer in the US, Mexico (as Walmex), and 3rd largest in Canada
o The biggest private employer in the world w/108 stores in China alone, and
operates another 100 Chinese outlets under the name “Trust-Mart”

• Walmart Exit in Germany

o Set up shop in Germany in 1997, but withdrew from the country in 2006.
o Abandoning Germany’s $370 billion retail market.

• Three Reasons for Exiting Germany

o The “Smiling”: a practice that some male shoppers interpreted as flirting
o The “Chant”: The morning Wal-Mart chant by staff members  “people found
these things strange; Germans just don’t behave that way,”
o The Labor Union: They never established comfortable relations with its German
labor unions  “They didn’t understand that in Germany, companies and unions
are closely connected (and) Bentonville didn’t want to have anything to do with
unions. They thought we were communists.”
http://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html
 Why did Walmart leave Germany?
(Huffington Post; Aug 29, 2011)

• Three Reasons for the Exit

o The “Chant”: Walmart employees were required to start their shifts with a
group chant and stretching exercises, a practice intended to build morale
and instill loyalty. They were to stand in formation and chant,
“WALMART! WALMART! WALMART!” while performing
synchronized group calisthenics.  Reminiscent of Nazism
o The “Smiling”: Germans don’t usually smile at total strangers, as such the
spectacle of Walmart employees grinning not only didn’t impress
consumers, it unnerved them.
o The “Ethics Problem”: Back in 1997, Walmart required employees to spy
on fellow workers (and report any misconduct), and prohibited sexual
intimacy among its employees (a German court struck down Walmart’s
“ethics code” in 2005).

http://www.huffingtonpost.com/david-macaray/why-did-walmart-leave-ger_b_940542.html
Why Study Consumer Behavior?

• To plan effective marketing strategies

– Segmentation, targeting & positioning (e.g., based on
consumer motivation rather than demographics)
– Create and deliver value by identifying and satisfying
consumer needs
* Intuitions/introspections don’t always provide real insights

• To improve public policies and regulations

 Percentage (%) of People Who
Quit at least a Day
41.00%

40.00%

39.00%

38.00%

37.00%

36.00%

35.00%

34.00%

33.00%

32.00%

31.00%
"Quit at least a day"

Text Warning Graphic Warning

 Percentage (%) of People Who did NOT Smoke
During 7 Days Prior to the End of the Study
6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
"Not smoking during 7 days before the end"
Text Warning Graphic Warning
Why Study Consumer Behavior?

• To plan effective marketing strategies

– Segmentation, targeting & positioning (e.g., based on
consumer motivation rather than demographics)
– Create and deliver value by identifying and satisfying
consumer needs
* Intuitions/introspections don’t always provide real insights

• To improve public policies and regulations

• To become better consumers

 Consumer vs. Citizen
6

5.87 5.82

5.44 5.49
5.33
5.21
5

4.69

4 4.08

3
Feeling Responsible Feeling Obligated Trust in Others Others as Partners

Consumer Citizen
 Wrap-Up
• What is Marketing?
– Create, Communicate, Deliver, and Exchange Value
– Identifying and Meeting Needs (“product/offering”)
– Individual, Organizational, Societal level

• What is Consumer Behavior?

– Acquisition, Use, Disposal of Product/Offering

• Why do we study Consumer Behavior?

– For your job (to become good marketers!)
– For the society
– For ourselves
Any Questions?
 Session 2:

Methods of Consumer Research

 Three Parts
• Types of data
– Primary vs. Secondary

• Types of methods
– Qualitative vs. Quantitative

• Types of research orientation

– Causal vs. Correlational
The Marketing Research Process
Define the Problem or Question

Determine the Research Design

Design Data Collection Method and Forms

Sampling and Data Collection

Analysis and Interpretation of Results

Recommendations
 Two Types of Data
• Primary Data
– Data directly collected by the research entity for its own purpose
– Examples
• US Government (e.g. US Census)
• Samsung (e.g. SA 950 3D Monitor)
• Academics (e.g. subject pool, Mturk)
• World Health Organization (e.g. Mental Health Statistics)
• Secondary Data
– Data collected by an entity for one purpose and subsequently used by
another entity for a different purpose
– Examples
• Ad agencies can use US Census zipcode data to target specific segments?
• WHO Mental Health Atlas used by academics to examine the relationship
between cultural values and “openness” to mental health services
Examples of Primary Data
 Original Purpose of the US Census Data
To determine the distribution of Congressional seats to states
• Mandated by the U.S. Constitution
• Used to apportion seats in the U.S. House of Representatives
• Used to define legislature districts, school district assignment areas and other
important functional areas of government

To make planning decisions about community services, such as where to:

• Provide services for the elderly
• Build new roads and schools
• Locate job training centers

To distribute more than $400 billion in federal funds to local, state and tribal
governments each year.
• Neighborhood improvements
• Public health
• Education
• Transportation

To provide Age Search information for:

• Qualifying for Social Security and other retirement benefits
• Passport applications
• Proving relationship in settling estates
 Demonstration

https://datamapper.geo.census.gov/map.html
 Samsung SA950 (3D Monitor)
• “Samsung SA950”
• Target segment: “Tech Savvy”
• Themes: “emersiveness,” “real life,” and “fantasy”
• Methods Used: Focus group & home visits
– Location: San Francisco, CA (early adopters)
– Sample size: 6~7 people
– Sample characteristics Home visits
• Female, tech savvy (Apple)
• Male, tech savvy (Dell)
• Male, tech savvy (Samsung)
Examples of Secondary Data
Cultural Orientation and Mental Health Services
Cultural Orientation and Mental Health Services
Cultural Orientation and Mental Health Services

Our analysis further revealed that COLLECTIVISM was negatively

correlated with the number of psychiatrists (r = -.364, p = .001), psychiatric
nurses (r = -.411, p < .001) and psychiatric beds (r = -.281, p = .009)*.

*After controlling for GDP per capita in 2005 (World Bank, 2005) and the prevalence
of mental illnesses (WHO, 2004).
 Two Types of Data
• Primary Data
– Data directly collected by the research entity for its own purpose
– Examples
• US Government (e.g. US Census)
• Samsung (e.g. SA 950 3D Monitor)
• Academics (e.g. subject pool, Mturk)
• World Health Organization (e.g. Mental Health Statistics)
• Secondary Data
– Data collected by an entity for one purpose and subsequently used by
another entity for a different purpose
– Examples
• Firms can use US Census zipcode data to target specific segments?
• WHO Mental Health Atlas used by academics to examine the relationship
between cultural values and “openness” to mental health services
 Two Types of Methods
• Qualitative
– Focus group
– In-depth interview
– Observation
– Projective techniques

• Quantitative
– Survey
– Experiment
– Analysis of secondary data (AKA “Big Data”)
Qualitative Research
 What is Qualitative Research?
• A process of LESS STRUCTURED interface between
the consumer and the researcher
• Usually EXPLORATORY in nature
– Done when relatively little is known about the problem or
research issue (e.g. product or concept development)
– To generate ideas or help formulate problems for further
research (i.e. guidance for the next step)
Characteristics of Qualitative Research
• Dynamic, Flexible & Interactive
– Open-ended
– Flexible ordering of discussion items
• Probing rather than consciously suggesting answers and
evaluating responses
• Purposive sampling
– Homogeneity on variables relevant to group dynamics
• E.g. “Tech Savvy” individuals
– Heterogeneity on variables to ensure a variety of opinions
• E.g. Usage situations – Dell, Samsung, Apple
Pros and Cons of Qualitative Research

• Provides insights and understanding of complex behavior for

generating well-defined hypotheses
– Open-ended questions
– Dynamic and interactive
– Flexible ordering of questions
• Prerequisite to fruitful quantitative research
– E.g. Frequently used as a pre-cursor to a survey study
• But may lack precision
– Small, focused sample sizes
– More subjective interpretation of data
– Interactions among respondents leads to non-independence of responses
 What are the main techniques?
• Focus group
– Bringing together a small group of consumers to discuss an issue or an
offering
• In-depth interview
– One-on-one discussion in which an interviewer asks a consumer
questions related to consumption behavior and decision
– More appropriate when the topic is sensitive, confidential, or
emotionally charged
• Observation (ethnography)
– Observing consumers at home or in stores to understand behavior and
gain insights in more effective marketing efforts
• Projective techniques
– Unstructured, indirect form of questioning that encourage respondents
to project their underlying beliefs, attitudes, feelings and motivations
in an apparently unrelated or ambiguous scenario
Conducting Interviews and Focus Groups
• Ask good questions!
– Clearly define each question
– No jargons! Be empathetic
– Avoid dichotomous questions
– “What” and “How” vs. “Why” questions
• NOT “Why did you join SMU?”
• “What prompted you to join SMU?
• “What did you particularly like about the SMU BBM program?”
• “What brand of car comes to mind when you think of SMU? How about
NUS? NTU ?”

• Be purposefully flexible and interactive

– Ordering of discussion items
• E.g. Uncued questions first, cued questions later

• Avoid suggesting answers and evaluating responses

https://www.youtube.com/watch?v=j_cUnlQl29Q
Observational Research
 Observational Methods
• Systematic observation studies are distinguished
from casual observations
• a research design guides the sampling and ensures control
in standardizing what is being observed
• An observation study could be
• Descriptive (e.g. what % of “single” consumers at Starbucks are
female?)
• Designed to test specific hypotheses (e.g. are females more likely
to buy hot drinks relative to men?)
• Causal (e.g. will changing the counter display lead to changes in
purchasing behaviour?)
 Sample Observation Sheet
Location: Kinokuniya, Orchard Date: 15.7.2015 Observer: George

Time Gender Age P1 P2 P3 P4

1:30 M 3 1 1 4 6
1:35 F 2 2 3 1 3
1:40 M 3 2 2 2 1

P1: dress code (1: formal, 2: casual)

P2: 1: single 2: with same gender 3: with opposite gender
P3: number of genres browsed
P4: number of books touched
 A design can be embedded to
test hypotheses
• Comparisons
– Gender
– Age groups
– Ethnicity
– Location
– Time of day/week
– Group composition
 Examples of Casual Observation

• Super Bowl
– Water levels in a small city go down in discrete steps,
rather than in the usual continuous pattern

• Shopping with companion

– Woman shopping with female companion takes
longer than with a male companion.
 “Why Do We Buy?” by Paco Underhill
some illustrative findings

• Reflective surfaces slow people down

• Carrying a basket increases chances of some purchase

being made

• 91% of drugstore buyers read the front, 42% read the

back, 8% read the sides
 What could you observe?
• At a coffee shop?
• At a bar?
• At a supermarket in various
aisles
– Coffee? Milk? Detergent?
• At a hairdresser’s?
• At a laptop store
• At Robinsons?
• At a jeans store?
• At a petrol station
• In a food court
• On bus, train
• On a long flight
– Or at the check-in
counter at the airport
 Limitations of Observational
Methods
• Small, possibly non-representative sample size
• Cannot observe motives, attitudes or intentions
• Is this ethical?
– Are you violating the privacy of the observees?
– Without “informed consent”, the participant does not know
what is involved in the research and consents voluntarily to
the request to participate in the research
Projective Techniques
 Projective Techniques
• Role playing
- E.g. “imagine you are a marketing executive at DBS bank. Describe a
typical day at the office.”
• Personification
- E.g. “If Toyota Prius were a human being, what gender would it be? How
old? What would s/he be wearing?”
• Analogies
- E.g. “if Toyota Prius were an actor, which actor would it be?”
• Fantasy solutions
- E.g. “Describe the perfect starting job for you after your BBM.”
• Psychodrawings
- E.g. Draw a picture of a room of a typical user of an iPhone
• Collages
- E.g. Similar to psycho-drawings, except that respondents are asked to
make collages with magazine pictures
Psycho-drawing:
a healthy family
Quantitative Research
 What is Quantitative Research?
• A process of MORE STRUCTURED and
MEASURABLE (numbers and statistics)
• More PRECISE in nature
– Done when there is a very clear idea about the problem or
research issue (i.e. hypothesis testing)
– Construct statistical models to explain what is observed
– Responses more likely to be independent
 Survey
• Most common tool
• Format
– Likert-scale: e.g.) strongly disagree ------- strongly agree
– Bipolar: e.g.) Like ------- Dislike
– Dichotomous: e.g.) Yes or No
– Open-ended: e.g.) What’s your favorite car brand?
• Conducted
– In person, mall intercept, mail, phone, online etc.
• Caveats in Question Wording
– E.g. “In order to prevent terrorism, should airports be allowed to conduct
passenger searches based on race and suspicious behavior?”
• Ambiguity – What qualifies as “suspicious” behavior?
• “Double-barreled” – Asking two questions
• “Social desirability” bias – Pressure to respond in a certain way
 Experiment
• To determine whether certain marketing effort causes
consumer behavior.
– Random assignment
– Independent variable (IV)
• “Treatment” (vs. “Control”)
• “Factor”
• “Manipulation”
– Dependent variable (DV) = “effect,” “outcome”
• E.g. Pictoral warning & smoking
• E.g. Consumer vs. Citizen & Conservation
 Percentage (%) of People Who
Quit at least a Day
41.00%

40.00%

39.00%

38.00%

37.00%

36.00%

35.00%

34.00%

33.00%

32.00%

31.00%
"Quit at least a day"

Text Warning Graphic Warning

 Percentage (%) of People Who did NOT Smoke
During 7 Days Prior to the End of the Study
6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
"Not smoking during 7 days before the end"
Text Warning Graphic Warning
 Consumer vs. Citizen
6

5.87 5.82

5.44 5.49
5.33
5.21
5

4.69

4 4.08

3
Feeling Responsible Feeling Obligated Trust in Others Others as Partners

Consumer Citizen
Qualitative vs Quantitative Research
Qualitative
The aim is a complete, detailed description.
Often unclear what exactly is being looked for in
advance. The researcher needs to determine what data is
important and what isn’t.
The design emerges as the study unfolds.
Data is in the form of words, pictures or objects.
Quantitative
The aim is to count responses and construct statistical
models to explain what is observed.
The researcher has very clear idea what is being
measured. Researcher’s own bias needs to be removed.
All aspects of the study are carefully designed before
data is collected.
Data is in the form of numbers and statistics.
Qualitative vs Quantitative Research
• Types of questions
– Format
– Independence of responses

• Sample
– Size
– Generalizability
 Types of Research Organizations
• In-house
– E.g. Samsung Global Marketing – “Market Intelligence Team”
– E.g. BBDO: conducts research for their clients

• External
– E.g. IRI, Ipsos, Millward Brown, Euromonitor, Gallup, the Pew Research
Center

• Syndicated
– “collect and then sell the information they collect, usually to firms that
market products and services to consumers” (p. 36)
– E.g. Nielson

• Government
– E.g. US Bureau of the Census
Experiments
 Consumer Behavior
• One of the key scientific element of marketing
• Science is about developing an understanding of
causal relationships
– Do marketing efforts
• E.g. A packaging change, a facebook campaign, a
temporary price promotion, distributing through a new
channel
– Have a causal impact on
• Awareness, brand beliefs, brand or product knowledge,
brand preferences, or choice?
 Types of Relationships
Positive Correlation Negative Correlation Zero Correlation

Sales Sales Sales

Advertising Expenditures Advertising Expenditures Advertising Expenditures

• Does advertising cause sales? Can we establish that with this graph?
 Correlation vs. Causation
• Does each of these findings by themselves
establish causality in one specific direction?
– Brands with celebrity endorsers have better sales
– Brands that advertise on TV have better sales
– Male beer drinkers are more price sensitive than
female beer drinkers
 Correlation vs. Causation
• Spurious correlation: Lots of things are
correlated without any causal relationship
 When X, Y are correlated
• X may be causing Y
– Advertising is causing sales

• Y may be causing X
– Sales is causing advertising expenditures to increase

• A third variable Z may be causing both X and Y

– A growing economy is causing both X and Y to increase
 3 Necessary Factors for Causality
• Correlation

• Temporal antecedence

• No third (alternative) factor driving both

 “TV watching causes obesity”?

• “Turn off the tube”, says the American Academy of

Pediatricians. “Watching TV causes obesity.” A study
conducted found that 4th graders who watched more
than 25 hours of television a week weighed, on
average, eleven pounds more than fourth graders who
watched less than 25 hours. The academy advised
parents to severely restrict their children’s television
diets.
 3 Necessary Factors for Causality
• Correlation
– Watching TV and Obesity
• Temporal antecedence
– Watching TV  Obesity?
• No third factor driving both?
– Neglectful parents?
– Lack of self-control?
 Does Living in the South Cause
These Diseases?”
• “Cardiovascular disease death rates were highest
among Franklin, Louisiana; Caldwell, Louisiana;
Gallatin, Kentucky…”

• “Mortality rates due to diabetes and diseases that

affect the urinary tract, genitals, blood, thyroid
or pancreas were particularly high in counties in
Arkansas, Louisiana and Mississippi along the
Mississippi River...”
 3 Necessary Factors for Causality
• Correlation
– Living in Louisiana and Cardiovascular Disease
• Temporal antecedence
– Living in Louisiana  Cardiovascular Disease?
• No third factor driving both?
– Socioeconomic status?
 Group activity
 Two variables?
 Are they correlated?
 One precedes the other?
 No third factors?
 If yes, what are they?
• Correlation
– more TV & more obesity
• Temporal antecedence?
– Does one precede the other?
• No third factor driving both?
– neglectful or busy parents?
 Experiments
• To determine if there is a causal link between one or
more independent variables (marketing mix elements
such as advertising, price cuts etc.) and a dependent
variable (sales, awareness, attitudes etc.)
– IVs also known as “factors,” “treatments,” “manipulations”

• Sample is divided randomly into different groups and

“treatments” are randomly assigned to these groups
– important to ensure that the groups are similar to each other in
all respects other than the treatment
 Percentage (%) of People Who
Quit at least a Day
41.00%

40.00%

39.00%

38.00%

37.00%

36.00%

35.00%

34.00%

33.00%

32.00%

31.00%
"Quit at least a day"

Text Warning Graphic Warning

 Percentage (%) of People Who did NOT Smoke
During 7 Days Prior to the End of the Study
6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
"Not smoking during 7 days before the end"
Text Warning Graphic Warning
 Consumer vs. Citizen
6

5.87 5.82

5.44 5.49
5.33
5.21
5

4.69

4 4.08

3
Feeling Responsible Feeling Obligated Trust in Others Others as Partners

Consumer Citizen
 Wrap-Up
• Types of Data
– Primary vs. Secondary

• Types of Methods
– Qualitative vs. Quantitative

• Types of Research
– Causal vs. Correlational
• Causality
– Correlation
– Temporal antecedent
– No alternative explanation
• Experiments
– Random assignment
– Independent Variable (IV) AKA “treatment,” “factor,” “manipulation”
– Dependent Variable (DV) AKA “effect,” “outcome”