CHAPTER 7:

PERIPHERAL ROUTE CENTRAL ROUTE

Attitudes - evaluation of something (object, person, Less motivated and involved in the decision. Make Carefully consider the information presented to them,
issue, ad, product, etc) decisions on superficial cues. because they are highly motivated to be involved and
- vary in direction → favorable vs. unfavorable Influenced by external factors like attractive visuals, informed on the topic.
- vary in strength → Confidence (how sure consumers catchy slogans, endorsements from celebrities Focus on the quality of the arguments, consider the facts,
feel about them) Resistance (how difficult to change) Persuasion happens through emotional appeal or the reasoning, the information about the product
- are enduring and are learned attractiveness rather than logical arguments Persuasion happens when the message is clear, logical,
Relies on heuristics, builds malleable temporary and well-supported by facts
Elaboration Likelihood (EL) Model
attitudes Unique cognitive response, resistant to change
Ex. You are buying pasta sauce → skim through and buy Ex. you are buying pasta sauce → look at the nutritional
the one that has a packaging that stands out, the one with values , calories, expiry date and ingredients, compare
the popular brand the product to others

Category-consistent information - colors, text, consistent Cognitive Components

with what you’re trying to convey Convey that the message is credible
Ex. wine from france = high quality wine - verifiable claims about product’s attributes
Heuristics - ‘rule of thumb’, mental shortcuts used to help - explain process by which product works
make judgements or decisions - comparative messages
Frequency heuristics - # of arguments = strength of - two-sided messages → makes message more drecible,
arguments can be positive and negative information, effective when
consumer is critical and educated on topic
Consistency Tactics
Foot in the door - start by asking something small, once
person accepts small request, ask for a bigger request
Ex. can you sign the petition? Later, can you vote for us?
Principles of Influence definitions Exploitation of Social Val Rule
1. Reciprocity - feel the need to give back, return Putting a few dollars in a tip jar, marketing cues to
gifts/favors/services popularity and scarcity
2. Consistency - behave consistently with prior
beliefs/commitments
Informational/Descriptive Influence Normative Influence/Injunctive Norm
3. Social validation - follow the lead of similar others
Describe what is being done - “everyone else recycles” Suggests what should be done - “You should recycle”
social influence - (informational/normative influence)
4. Liking - accommodate those we know/like
Help Save the Environment. Participants in this initiative Help Save the Environment. You should recycle and
5. Authority - conform to authority
6. Scarcity - seize scarce opportunities reused their towels an average of 2.5 times, significantly conserve water. By joining this initiative, like the 90% of
reducing water consumption during their stay. our guests who reused their towels an average of 2.5 times,
Principles of Influence examples
you can help significantly reduce water consumption
1. Reciprocity - referral programs/discounts/samples
2. Consistency - embarrassing socially, I went through Formation of Attitudes: (ex. Attitudes toward iphones) during your stay.
all that I must really want it, ex. Quitting smoking you
tell everyone, it motivates you to quit
3. Social validation - ask for a request after showing a
list of people who have complied (ex. Over 5 million
copies sold)
4. Liking - halo effects (positive and negative) we like
attractiveness, similarity, contact in cooperation not
competition, association with other good things If we change the belief (b) on importance of the phone being compact →
5. Authority - someone who has ‘years of knowledge people change focus to other factors and less focus on the compactness.
and experience’ ‘9 out of 10 doctors’ → domain, If compact belief changes to 1, what would happen? ( Attitude (A) = 0,
symbolic, uniforms indifferent).
6. Scarcity - sense of urgency, people want things more If we change evaluation (e) of ease of outcome for example -1 → 3, what is
when they are limited edition
the outcome? (Attitude (A) = 48, even more positive and strong as than
before)

CHAPTER 8:

HEURISTICS
methods that use principles of effort reduction and simplification,
allow decision makers to process information in a less effortful
manner than one would expect from an optimal decision rule
- rely on easy of thinking
- rely on similarity over probability
- rely on arbitrary starting points
1. Availability bias Decoy Effect
- judgement of probability → easy of retrieval
Adding an asymmetrically dominated alternative increases the choice share of the dominating option
- rule: if examples to come to mind easily, then they happen
Asymmetrically dominated option - inferior in all respects to one option (bad option C is added → options
frequently (but things can come to mind easily for many reasons)
A/B seem better)
2. Representativeness
→ but for the other option, it is inferior in some respects and superior in others (fully dominated by one
- judgement of probability → similarity
option and only partially dominated by the other)
- rule: it is seems like X, then it must be X (but we ignore how often
X occurs i.e. base rate) Context Effects
- conjunction fallacy: judging conjunction of 2 events to be more Compromise effect - example of how the composition of a set of options affects how consumers evaluate
probable than one of constituent events each of the options
3. Anchoring bias Adding new, intermediate options to the set makes consumers prefer intermediate options. Adding the third
- influences absolute estimate option will take choice share away from the other options toward the intermediary option
- Propose a high and low anchor and people will answer accordingly Consumers tend to choose the option with moderate features → extremeness aversion
- Ex. is the average price of car lower or over $20,000 (40,000)

BIASES
Heuristics often don’t adhere to normative rules (logic, probability),
they produce errors that are systematic and predictable
Overuse heuristics which leads to poor decision → problems happen
with overapplied
CHAPTER 8:
PROSPECT THEORY

1. Non-linear decision weights

When people are thinking of probabilities or utilities, they show 4 types of biases. When we map objective probabilities to people’s subjective
perceptions, we see is a deviation- we get an s-shaped function.
- certainty effect: small differences of probability have large effects when they create possibility/certainty → people tend to favor a sure
outcome over a gamble, even if the gamble has equal or higher expected value.
Ex. smaller emotional reaction to 46% vs. 47% than 99% to 100% (finding a cure no hope→some hope)
- non-linearity: decision weights are not identical to probabilities. People tend to overweight small probabilities and underweight moderate
to large probabilities: similar differences can be perceived very differently depending on where they fall on the curve.
Ex. Same 10% might have very different impact on people’s decisions depending on where it falls on the curve.
In the case of diseases, small shifts in probability that create certainty (100%) or possibility (from 0% to a small percentage) can
dramatically change how people feel and react to treatment options, highlighting how emotionally powerful certainty and possibility
can be in decision-making.
2. Diminishing Marginal Utility
- utility: satisfaction or value derived from consuming a good or service.
- marginal utility: additional utility gained from consuming one more unit of the good
or service
- diminishing marginal utility: each additional unit consumed provides less additional
utility than the previous one
People show a basic kind of linear function but then it flattens out.
Ex. 1st pancake vs. 4th pancake
3. Reference Dependence
People evaluate outcomes (utility) by comparison to the present reference point. Perception of gains and losses is relative: outcome can be
seen as either depending on what it’s compared to.
Ex. If someone expects a $1,000 bonus but only receives $800, they perceive it as a loss of $200, even though they gained $800. LOSSES LOOM LARGER THAN GAINS
4. Loss Aversion
- Gains: increase in wealth/utility relative to one’s current state. Function is concave (diminishing returns to happiness → not as
happy if you win $100 right after winning $1000) (segregate gains → for maximum happiness, you experience the steep part of the
curve again)
- Losses: decrease in wealth/utility relative to one’s current state. Function is convex (steeper) (aggregate losses → if you lump losses
together, it will hurt less)
People are more sensitive to losses than to equivalent gains. The pain of losing is psychologically more impactful than the pleasure of
gaining the same amount. (impact on decision making → avoid taking risks)
People are risk-averse with regard to gains: prefer certainty over uncertainty when it comes to potential positive outcomes →
guarantee provides comfort and security
People are risk-seeking in losses: motivated to avoid or minimize losses if it means taking on additional risk → face with certain
loos vs. risky option that might avoid loss, prefer to gamble hoping to escape the negative outcome

CHAPTER 9:
Framing effect: Option A = C and option B = D, but framing/description of the problem (surcharge, discount, mortality,
survival, free, prepaid for) frames the outcome as a loss or gain. People like the idea of a sure gain, dislike the idea of a sure
loss, this predisposes them to risk aversion in gains and risk-seeking in losses
Patience is important as it has direct implications on marketing and indirect
implications on society

Discount rate: how much you “discount” future benefits in favor of the
present → people should discount the future as it is uncertain (but no
extremes) ENDOWMENT EFFECT
1. Valuation paradigm
MENTAL ACCOUNTING - WTP: willingness to pay (how much buyers value a good)
Richard Thaler: mental accounting describes the process whereby people - WTA: willingness to accept (how much sellers can relinquish)
code, categorize and evaluate economic outcomes → people group their WTA>WTP → people who own a good value it as more than
assets into a number of non-fungible mental accounts people who don’t own it
- fungibility: money has no labels and people don’t associate it with Antecedents to ownership:
Loss aversion: Buyers → goods are gains, sellers → goods are
anything specific (in mental accounting this is FALSE) → people attribute 1. Perceived control
losses, which is why goods are perceived as higher value when
names to their money: ex. Gas money, money for rent 2. Identity expression (ex.
selling
We label it differently because we value, save & use money differently School merch)
Psychological ownership - feeling that something is MINE
- windfall: when not specified for given account, we splurge rather than use 3. Investment in self (ex. ikea)
it on necessities
PAIN OF PAYMENTS
- house money: money won at casinos that people are less attached to
It is easier to track payments the more aversive they become.
- hedonic avoidance: avoid or downplay pleasure (source effects)
People prefer methods of payment that obfuscate payment, and consume more when using those
methods.
CHAPTER 10: - Pain of paying: plays a self control role in consumption but its hedonically costly
Pro-social choices: trade-offs we consider when deciding whether to act in - Prospective accounting: consumption that has been paid for can be enjoyed as if it is free
our own interest or in the interest of others (ex. Donating, helping, sharing, - transaction decoupling: CASH (now is both consumption pleasure and payment pain) vs. CREDIT
going green) (now is consumption pleasure and later is payment pain)
1. Benefits others and society
- encouraging collective good → tackle collective challenges, make a meaningful difference
- creating a ripple effect → can inspire others to do the same (competitors in business)
2. Benefits ourselves
- enhancing well-being and social bonds → create sense of trust and belonging
- positive reputation → for business, CSR can appeal and increases loyalty
- promoting personal satisfaction & fulfillment → intrinsic rewards, sense of purpose
 How to influence pro-social choices? Intangible Benefits:
- inform on benefits: business/marketers (CSR - differentiate through values and not products) + individuals/customers 1. Intrinsic
Ex. cause branding, profit sharing, environmentally friendly features, ethical labor, promote other prosocial practices - warm glow/happiness, makes people
- use strategies to promote decisions: cognitive vs. emotional strategies + normative vs. descriptive strategies happier
2. Extrinsic
Risks of prosocial decisions for businesses/marketers - Halo effect (positive perceptions, trust,
1. motive inferences morals, high status)
- hiding vs. revealing that the company also benefited from the 50% profit.
2. zero-sum inferences Strategies to promote:
- Assumes that resources are fixed 1. Cognitive vs. emotional
- Infers that a gain for one side a loss for another - statistical vs. identifiable victim
- Usually manifests across entities 2. Normative vs. descriptive
- Occasionally also manifests within an entity
With entities, zero-sum inferences suggest that the superiority on one dimension is compensated by inferiority on other dimensions.
CHAPTER 11:
Ex. Making a cleaning product more organic → other features like effectiveness must be compromised
Why things catch on
In other words, if a product is positioned as both socially beneficial (prosocial) and competitively advantageous (profitable or useful for - social currency: you’re in the top 5%,
personal gain), people may believe that one aspect (helping others) might limit or detract from the other (personal or company gain), or how good content makes you look
vice versa. This is especially true when both advantages are seen as drawing from the same resource pool, such as time, money, or - triggers: top-of-mind or
materials. tip-of-the-tongue, the more we’re
triggered to think of product/idea, the
more we’ll talk about it
How to navigate consumer behavior in relation to social media and technology - emotions: when we care we share
- social media: capturing experience (taking photos) and sharing experience - public: people imitate others, easier it
- technology: smartphones is to see what someone is doing, easier it
The researchers rented a double-decker bus, hired a professional tour guide, and took people on tours of Philadelphia. is to imitate
Half the time people had the ability to use cameras, half they did not, and at the end, the researchers checked at the end how much they
enjoyed it, would they recommend this experience.
Result of having a camera makes you more engaged, and that engagement leads you to have a more pleasurable experience.

Taking photos increases enjoyment more when it is for self vs. others

This question is asking you to reflect on your "personal annual discount rate," which is a way of expressing
how much value you place on future rewards compared to immediate ones. Essentially, it gauges how much
you “discount” future benefits in favor of the present.
In simpler terms:
•If you highly prioritize immediate rewards over future ones, you have a high discount rate. This means you
place much less value on future benefits, so you need a much larger future payoff to be willing to wait.
•Conversely, if you're willing to wait for future benefits, you have a low discount rate. This shows you’re
more patient and value future rewards closer to present ones.
 Prospect theory examples (non-linear decision weights) Prospect theory examples (non-linear decision weights)
Certainty effect: imagine you are offered two choices: Non linearity effect: People tend to over-weight unlikely events.
1.Option A: A guaranteed $50. Key Takeaway:
2.Option B: A 50% chance to win $100, and a 50% chance to win nothing. In the case of diseases, small shifts in probability that create certainty (100%) or
Most people would choose Option A, even though the expected value of both options is possibility (from 0% to a small percentage) can dramatically change how people feel and
the same ($50). The Certainty Effect explains this preference: People tend to favor a sure react to treatment options, highlighting how emotionally powerful certainty and
outcome over a gamble, even if the gamble has an equal or higher expected value. possibility can be in decision-making.
how people are sensitive to changes in probabilities, especially when those changes
create a shift from impossibility to possibility or from uncertainty to certainty. . Probability Weighting:
Smaller difference in emotional reaction to 46 vs. 47% than 0% vs. 1% and 99% vs. •People do not perceive probabilities linearly. They tend to overweight small
100%. probabilities and underweight moderate to large probabilities.
Treatment Example: •This means that unlikely events are often given more attention than they deserve, while
Imagine there’s a rare but dangerous disease spreading, and you have two options for highly probable outcomes might be underestimated.
treatment: •Example: People might buy a lottery ticket, overestimating the small chance of winning
1.Treatment A: It provides a guaranteed cure, with a 100% chance of survival. big, while underestimating the risks of common activities like driving.
2.Treatment B: It has a 95% chance of curing the disease and a 5% chance that it won't
work.
Even though Treatment B has a very high success rate (95%), many people would prefer
Treatment A because it offers absolute certainty of survival. The difference between 95%
and 100% seems small in numbers, but psychologically, the shift from almost certain
(95%) to guaranteed (100%) feels much larger.
Similarly:
•If there were no treatments available (0% chance of cure) and a new experimental
Treatment C was developed with just a 5% chance of cure, this small change from 0% to
5% would feel very impactful. Even though it’s only a slight possibility, going from “no
hope” to “some hope” is perceived as significant, making people more likely to consider
Treatment C.