1 Intro and Consumer Segmentation

Question 1

CH1

Economic psychology

Answer 1

-the science of economic mental life and
behavior
-to provide economics with a realistic and insightful understanding of human rationality in the economic domain

Question 2

Ch1

Defining characteristics of economic psychology

Answer 2

-The science of economic mental life and
behaviour
-A branch of applied psychology (both theory and application = central)
-The study of ‘how individuals affect the
economy and how the economy affects
individuals’ (Lea, Tarpy, & Webley, 1987, p. 2)
-An interdisciplinary field of study

Question 3

Ch1
History
from Adam Smith to George Katona

Answer 3

-Adam Smith: The theory of Moral Sentiments = starting point of economic psych, concept of self-love
-Jeremy Bentham: utility = permanent hedonistic pursuit of pleasure and avoidance of pain
-Stuart Mill: homo economics = a rational individual who makes rational decisions
that maximize utility, is self-interested, capable of learning from experience, and with stable, consistent preferences
-Karl Menger: Austrian Psychological School, or the Marginalist School,
emphasized the importance of subjective elements in the economy.
-1881: Economic psychology as a discipline
-1902, Tarde: Birth of the Discipline
-1916: Association of Economic Psychology
-1950s, George Katona: modern economic psychology
-1952, Katona: Index of Consumer Sentiment (ICS), assesses people´s economic expectations

Question 4

CH1
Herbert Simon and
Economic Decision-Making

Answer 4

Herbert Simon
-CRITICIZED the behavioral assumptions of mainstream economic theory (homo economicus), because they were only assumptions
-found that business people did not seek to maximize their profits, as would be
expected from standard economic theory
-Instead: ‘satisficing’ =
refer to simple decision rules, or heuristics, in which aspiration levels, rather than the goal of maximization, play a major role

Question 5

Ch1

Behavioral Economics and Economic Psychology

Answer 5

-Behavioral economics = branch of economics that uses psychological concepts and theories to better
understand economic behavior
-research showing that economic behavior can violate homo economicus’s (expected) utility maximization principle because people’s evaluation of the same good can
vary, depending on whether they own it or not

= ENDOWMENT EFFECT
of prospect theory’s value function
(1) economic outcomes are evaluated as gains or losses relative to a reference point,
(2) people are loss-averse

Question 6

Ch1

Similarities and Differences between behavioral economics and economic psychology

Answer 6

SIMILARITIES
1. both acknowledge many of the same historical roots, founding father: Herbert Simon
2. both disciplines
are essentially empirical sciences, placing a premium on the validity of theories tested against behavioral evidence
3. both are applied sciences motivated to develop
effective support for individuals and society in the economic domain

DIFFERENCES
-their main differences
concern their ontological and epistemological assumptions and the research
ethics of their parent discipline

Question 7

Ch1

Economic mental representations

Answer 7

• money not only a tool
  -psychologically money is
  not completely interchangeable, since the way people use money depends on how
  they mentally categorize it
• materialism: negatively correlated with subjective well-being, defined as
  both a reflective judgment on satisfaction with one’s life and the balance of positive
  and negative emotions one experiences

Question 8

Ch1

Review Questions

Answer 8

1.What role has the notion ‘homo economicus’ had in the development of economic psychology?
2. Why are mental representations important in understanding economic behaviour?
3. Consider how a person’s time perspective might be both a cause and a consequence of
personal financial decisions.
4. Discuss the insights into economic behaviour arising from a life-span developmental
perspective.

Question 9

Ch2

Consumer Psychology

Answer 9

• why and how individuals and groups engage in consumer activities, as well as how they are affected by them
• cognitive processes and behavior involved when people purchase and use products and services
• interdisciplinary

Question 10

Ch2

How consumption affects people´s life

Answer 10

-consumer activities can impact people’s identities and how individuals convey their social status through the use of certain products and services
-how men and women choose to ‘groom’ themselves
-not a straightforward
relationship between aggressive children and television violence
-how children are affected by mainstream media

Question 11

Ch2

Wilhelm Wundt

Answer 11

Wilhelm Wundt, 1879

1. experimental psychology laboratory in Leipzig

Question 12

CH2

Importance of material possessions

Answer 12

William James´s
“The Principles of Psychology”
-> individuals’ self-concept would partially be dependent upon owning
the right kind of possessions.

Question 13

Ch2

Academics become interested in advertising

Answer 13

Harlow Gale: founder of the psychology of advertising

• consumers were non-rational individuals who were easily influenced
• Walter Dill Scott: sentimentality, emotions and sympathy all made consumers more open to suggestions made by advertisers

Question 14

CH2

The invention of the assembly line

Answer 14

-1913, Henry Ford: assembly line
-1914, Starch: “Advertising: Its Principles, Practice and
Technique”, emphasized the links between attention
and response
-1916, Henry Foster Adam: “Advertising and its Mental Laws”, empirical results

Question 15

Ch2

John B. Watson

Answer 15

-founder of behaviorism
-the first prominent psychologist to apply psychological methods to advertising
-using the systematic application of the principles
of classical conditioning -> to create any kind of human
being that he wished to (not everybody is convinced of his way of advertising)

Question 16

Ch7

Market segments

Answer 16

help identify groups in the

population where environmental communication will have the largest effect

Question 17

Ch7
Moscardo, Pearce, Morrison and
The typology of segmentation approaches

Answer 17

Moscardo, Pearce, Morrison
-typology of segmentation
approaches
-group them into a priori and a posterior approaches, depending on whether available registry data is used or personal data needs to be collected to conduct the segmentation
-Examples a priori approaches: geographical segmentation and demographic
segmentation;
-Examples a posterior approaches: behavioural or psychometric segmentation

-Self-regulation model of behavior change: segments target groups according
to their stage of behavioral change, which can have implications for
the communication interventions assigned to them.

Question 18

Ch7

Demographic segmentation approaches

Answer 18

-use information, such as gender, age, income,
level of education, disabilities, and mobility, to classify target groups
into more homogenous segments
+ data is easily accesible
-not enough by it´s own, needs to be supplemented with psychometrical approaches to give a richer picture of consumer segments

Question 19

Ch7

Geographic segmentation approaches

Answer 19

-groups the population according to where people reside
-The level of analysis
can be countries, regions, cities, neighbourhoods, different climate zones
-underlying assumption is that people who live in close proximity have common
experiences and demographical features
-geographic data + demographic data = geodemograhpic analysis

Question 20

CH7

Behavioral segmentation analysis

Answer 20

-information about people’s
purchase behaviour or product use is utilised to segment the target population
-common approach: analyse what people spend their
money or time on and then form clusters of people with similar patterns
regarding behavioural dimensions

Question 21

Ch7
Sinha
Different types of shoppers

Answer 21

six shopper types:

(1) choice optimisers (individualistic, brand conscious, ask for info, involved in purchase, quality and variety)
(2) economisers (bargains, discounts, conscious of budget and price)
(3) premeditated shoppers (large quantities, in a hurry, had list, made up their minds before)
(4) recreational shoppers (pleasant experience, expressive of their emotional reactions, impulsive)
(5) low-information seekers (familiar with store)
(6) support-seeking shoppers (uncomfortable, asked for help, indecisive)

Question 22

Ch7

Psychometrical segmentation approaches

Answer 22

-segmentation groups people based on their profiles on psychological variables such as attitudes, values, and personality.
-basic idea = psychological variables have been shown
to determine behavior

Examples of psychometrical consumer segmentation: 
1. Value-based
2. Personality-based
3. Lifestyle-based 
(overlap)

Question 23

Ch7

“Green customers”

Answer 23

their psychological profiles:
altruism, political orientation, individualism, collectivism, security
orientation, and fun/engagement orientation have been linked to green
consumerism, but also perceived consumer effectiveness

Question 24

Ch7
Value-based segmentation
and Schwartz

Answer 24

-people are divided based on their basic value orientations

Schwartz´s basic value dimension (Harmony, embeddedness, hierarchy, mastery, affective autonomy, intellectual autonomy, egalitarianism)
-The seven basic values
can be further reduced to two underlying dimensions (a) self-enhancement versus self-transcendence
(b) openness to change versus conservation

Question 25

Ch7
Value-based segmentation
and Inglehart

Answer 25

Inglehart’s work
-based on the
world-value survey and groups value orientations in cultures along two
dimensions:
(a) tradition versus secular-rational
(b) survival versus
self-expression
-one-dimensional version with materialism versus post-materialism is also used
-Materialistic cultures are more traditional
and more oriented towards survival, whereas post-materialistic
cultures are rooted in secular-rationalist worldviews and self-expression values.

Question 26

Ch7
Value-based segmentation
and Sinus milieus

Answer 26

-Based on value orientations, attitudes,
lifestyle, and demographic data, ten distinct segments (milieus) of the German adult population were formed:
the traditional
milieu, the established conservative milieu, the precarious milieu, the
new middle class milieu, the socio-ecological milieu, the liberal intellectual
milieu, the escapist milieu, the adaptive pragmatist milieu, the
high achiever milieu, and the movers and shakers milieu
-further arranged in a two-dimensional space: social status and basic value orientation with three categories (traditional values,
such as order and duty; modernisation including individualisation, selffulfilment,
and hedonism; reorientation including multiple options,
experimenting and living with paradoxes)
-different milieus have strongly different likelihoods
of investing in renewable household heating (different milieus -> different values and behaviors)

Question 27

Ch7
Value-based segmentation
and cars

Answer 27

6 clusters for car users:

• car addicts and die-hard drivers
• malcontented motorists and apiring environmentalists
• non-car users by (no) choice

Question 28

CH7

Personality-based segmentation

Answer 28

-the most widely used personality trait categorizations is known as the “big five”, a five-dimensional system of basic
personality factors
-five dimensions:
neuroticism, extraversion, openness to experiences, agreeableness,
and conscientiousness
-especially openness to experience and agreeableness, but also
conscientiousness = predictors of pro-environmental
behavior

Question 29

Ch7

Lifestyle-based segmentation

Answer 29

“Lifestyle segmentation
research measures people’s activities in terms of
(1) how they spend their
time;
(2) their interests, what they place importance on in their immediate surroundings;
(3) their opinions in terms of their view of themselves
and the world around them; (4) some basic characteristics such
as their stage in life cycle, income, education and where they live”
-covers demographic and geographic information, and also behavioural
preferences and values, and world views
-four distinct consumer
types:
(1) rational consumers, (2) adventurous consumers,
(3) careless consumers,
(4) conservative uninvolved consumers

Question 30

Ch7 
Mobility behavior (by Lanzendorf)

Answer 30

mobility-style categorization: 
FAMOS
MULTIS
CARCULTS
STROLLERS
QUICKFITS
DOMOS
SELFCULTS
-> links travel patterns to leisure activities

Question 31

Ch7

The stage models of behaviour change as segmentation tool

Answer 31

This stage model is also relevant for consumer segmentation because it provides a new angle on attempts to tailor environmental communication activities along the lines of consumer
segments
- 4 distinct stages: predecisional, preactional, actional, and postactional
-Bamberg: A measurement instrument to detect an individual´s stage of change