Understanding

Customers’ Preferences and Buying

Behavior
P&G’s Approach
 P&G’s Approach
• These days, employees spend hours with women,
watching them do laundry, clean the floor, apply
makeup and diaper their children. They look for
nuisances that a new product might solve. Then, they
return to the labs determined to address the feature
women care about most.
• "We discovered that women don't care about our
technology and they couldn't care less what machine a
product is made on,”… Mr. Lafley told P&G executives
• “The simple principle in life is to find out what she
wants and give it to her. It's worked in my marriage for
35 years and it works in laundry.” Lafley, P&G CEO,
2005.
Variants of Tide
Variants based on relentless observational
research by P&G across markets
In six months after
launch in Oct 2010,
Guard had market
volume of more than
50%
• Mail Online,
October 2013.
Biggest Marketing Failure (Inspite of MR)
Biggest Marketing Failure (Inspite of MR)
 Biggest Marketing Failure: Lesson

• CONSIDERATION OF THE EFFECTS OF SOCIAL INFLUENCE

SHOULD BECOME STANDARD PART OF NPD PROCESS
• FOCUS GROUP IS AN IMPORTANT QUALITATIVE TECHNIQUE
THAT CAN REVEAL SOCIAL INTERACTION EFFECTS
ChotuKool:
ChotuKool: Low Cost Refrigerator
Based on Godrej’s Ethnography
• ‘Sunderraman and Lonial travelled
for many months, staying in
villages in every quadrant of India,
observing what their customers
needed and how they would use a
fridge. Then, as Godrej’s
engineers came up with
iterations, these were promptly
dispatched to villages in
Maharashtra to be stress-tested in
ground conditions and to elicit
feedback from their users’.
• ChotuKool was awarded the 2012
Edison Award Gold prize for the
Social Impact category.
 ChotuKool: Low Cost Refrigerator
Based on Godrej’s Ethnography

• 43 liter cooler, 10 kgs, for rural and semi-urban

areas in India
• Operates on 12V DC supply - thermoelectric
cooling
• Uses high-end insulation
• Keeps water, milk, vegetables, and fruits fresh
and cool between 5 – 15 deg
• Price range Rs. 3,250 – 3,790 per unit

• www.innosight.com/client_impact_story/godrej/
Sleepy Owl
Tropicana
 Tropicana Failure

Tropicana was so
focused on
reinvigorating their
brand ($35 mn
advertising, 50 mn USD
total), on making new
emotional connections,
they totally lost sight of
the experience their
customers have in the
supermarket.

• Sales plunged 20% in less than 2 months post re-branding

(the overall category sales had not changed)
 Tropicana Re-branding: Lesson

• HIGHLIGHTS THE IMPORTANCE OF OBSERVATION RESEARCH

TO UNDERSTAND HOW PEOPLE ACT IN REAL WORLD
 Influencing
Customers’ Buying Behavior
 Anchoring
• Questionnaire A
A newly hired engineer for a computer firm in Melbourne,
Australia, has four years of experience and good all-round
qualifications.

Do you think that her annual salary is above or below $75,000?

What is your estimate of her salary?

• Questionnaire B
A newly hired engineer for a computer firm in Melbourne,
Australia, has four years of experience and good all-round
qualifications.

Do you think that her annual salary is above or below $145,000?

What is your estimate of her salary?
 Anchoring in Marketing Situations

“Anchoring effect occurs when people consider a

particular value for an unknown quantity before
estimating the quantity or number”

• Regular price vs sale price instead of discount

• Maximum one can buy is 4 units
• Placement of products
• Disney’s strategy to improve customer experience
• Restaurant menu
 Framing effects
“Judgement bias resulting from the way the choice is being
presented”

• Questionnaire A
A 65-year old relative of yours suffers from a serious disease. It
affects her lifestyle significantly. She can go through an operation
that, if successful, will cure her. However, the operation is risky;
50% of the patients undergoing it survive. Would you recommend
that she undergoes it?

• Questionnaire B
A 65 year old relative of yours suffers from a serious disease. It It
affects her lifestyle significantly. She can go through an operation
that, if successful, will cure her. However, the operation is risky;
50% of the patients undergoing it die. Would you recommend
that she undergoes it?
,
 Framing effects in Marketing Situations

• “10 percent fat meat” or “90 percent lean meat”

Framing effects in Marketing Situations

https://www.youtube.com/watch?v=mwQQDWldWYE
 Availability
“Examples that are more easily available to us will have a
higher weight on our decisions/ assigning probability to
occurence of an event”

• Questionnaire A
In four pages of a novel (about 2,000 words) in English, do you
expect to find more than 20 words that have the form
_ _ _ _ _ n _ (seven-letter words that have the letter n in the sixth
position)?

• Questionnaire B
In four pages of a novel (about 2,000 words) in English, do you
expect to find more than 20 words that have the form
_ _ _ _ ing (seven-letter words that end with ing)?
 Representativeness

“Assigning a high probability in categorizing a situation or item

based on how well it fits our preexisting prototypes”

Linda is 31 years old, single, outspoken, and very bright. She

majored in philosophy. As a student, she was deeply concerned
with issues of discrimination and social justice, and she
participated in antinuclear demonstrations.
Rank order the following six descriptions in terms of the
probability (likelihood) that they describe Linda:
a. Linda is a teacher in an elementary school.
b. Linda is active in a feminist movement.
c. Linda is a psychiatric social worker.
d. Linda is a bank teller.
e. Linda is an insurance salesperson.
f. Linda is a bank teller who is active in a feminist movement.
 Adding a dominated alternative

Questionnaire A
Choose between the
alternatives: (higher the rating
on a scale of 1 to 7, better the
quality)
Questionnaire B
Choose between the
alternatives: (higher the rating
on a scale of 1 to 7, better the
quality)

Brand Price Quality Brand Price Quality

X $3.0 5 X $3.0 5
Y $3.8 6 Y $3.8 6
Z $3.4 5
 Adding a dominated alternative

– Adding a dominated alternative

• The tendency to prefer X over Y can be increased by
adding a third alternative that is clearly inferior to X but
not to Y
• Economist offers on subscription:
· Web Subscription – $59
· Web and Print Subscription – $125
• Economist offers on subscription:
· Web Subscription – $59
· Web and Print Subscription – $125

• Web Subscription – $59

· Print Subscription – $125
· Web and Print Subscription – $125
 Situation A
• You have bought a ticket to a concert, which cost you
₹2000. When you arrive at the concert hall, you find
you have lost the ticket. Would you buy another
ticket (assuming you have enough money in your
wallet)?
 Situation B
• You are going to a concert. Tickets cost ₹2000. When
you arrive at the concert hall, you find you have lost
a ₹2000 note. Would you still buy the ticket
(assuming you have enough money in the wallet)?
 Mental Accounting

• You have bought a ticket to a concert, which cost you ₹2000.

When you arrive at the concert hall, you find you have lost the
ticket. Would you buy another one (assuming you have enough
money in your wallet)?
• You are going to a concert. Tickets cost $50. When you arrive at
the concert hall, you find you have lost ₹2000 note. Would you
still buy the ticket (assuming you have enough money in the
wallet)?
• Typically, people respond in the affirmative more in Situation B

• We keep separate mental accounts!!!

• http://www.youtube.com/watch?v=t96LNX6tk0U
Marketers response to Mental Accounting

• How would you reduce the waiting time for baggage

claim in the arrival lounge at the airport?
 To summarize…
• Different approaches guiding decision making
– The standard economic theory versus
– The behavioral economics (bounded rationality)
• Limited information
• Limited cognitive capacity
• Limited time

• “We are ruined by our own biases. What's worse we are often
confident even when we are wrong," writes Daniel
Kahneman, in his book on psychology and economics called
"Thinking, Fast and Slow."
• Heuristics and Biases in decision making
– Anchoring, Availability, Representativeness
– Framing, Mental Accounting