MKT 382_Consumer Behavior_Raghunathan

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MKT 382_Consumer Behavior_Raghunathan

     C O N S U M E R B E H A V I O R (M K T 3 8 2)

    F A L L 2 0 0 7

    T U E S D A Y A N D T H U R S D A Y, 11 : 00 12 : 30 in U T C 1.116

    Professor: Raj Raghunathan

    Web address:

    Office, Phone, Fax: CBA 7.232, 471-2987, 471-1034


    Office Hours: By appointment

    TA: TBA

    TA Office Hours: TBA

    TA Office: TBA

    TA email: TBA


    In early 1991, McDonald‘s introduced a new burger named McLean Deluxe into the US market. Although McLean was lower in fat compared to the regular Big Mac, it was

    deemed tastier in blind taste tests. (McDonald‘s had injected artificial fat flavor into McLean, thus enhancing its taste.) Because of McLean‘s superior taste, and also because

    of the global trend towards healthier lifestyles, McDonald‘s felt confident that McLean

    would be a major hit in the market. However, the brand was an abject failure; indeed,

    McLean‘s sales were so dismal that McDonald‘s had to pull the brand out from the market within the first year of its introduction. Why did McLean fail despite its superior 1taste and healthiness?

This and other such stories of marketplace failures and successes reveal two interesting

    aspects about consumer behavior: (1) consumers are fickle creatures whose preferences

    and behaviors are often susceptible to a variety of apparently subtle and even non-

    relevant influences (in the case of McLean, consumers theories about the relationship between healthiness and tastiness of food may have been responsible for the burger‘s failuresee last page of syllabus), and (2) a product‘s success or failure can depend

    critically on marketers knowledge of consumer behavior.


     1 Check at the end of the syllabus for the answer.


    This brings us to the course objective, which is to: (1) familiarize you with knowledge on how consumers make decisions, with a specific focus on the factors that influence their preferences and behaviors, and (2) help you (working in groups) generate ideas for a new product or service, and develop a marketing plan for it. Both these objectives serve the ultimate goal of any firm, which is to generate value through retaining existing customers and acquiring new ones.


    In general, consumers decide to buy those things that offer the greatest value for them; however, as you will discover, they often exhibit systematic deviations from this general rule. This fundamental aspect of consumer behavior turns out to be a double-edged sword for marketers: on the one hand, it provides them with the power to potentially manipulate consumer behavior; on the other, it makes it more difficult for them to identify and cater to customer needs.

In the first part of the course (Module 1: Sessions 2 11), we will explore the ways in

    which systematic deviations from rational behaviors occur, and discuss the marketing implications that arise from them. In particular, Session 2 will be devoted to the stages in consumer decision making, while Session 3 will focus on the conditions under which rational decisions (those in which consumers procure products that offer the greatest value) are likely to occur. In Sessions 4 10, we will focus on ―biases‖—systematic

    deviations from rationalityand the conditions under which they are most likely to occur. Specifically, we will discuss three categories of factors that serve to bias consumer decision making: perceptual factors (Sessions 4, 5 and 6), motivational factors (Session 7), task variables (Session 8) and situational variables (Sessions 9 and 10). (Session 8 will be devoted to a guest lecture by professor Ramanathan from the University of Chicago‘s Business School on Memory and Learning.)

     thThe concepts covered in Module 1 will be reviewed on October 4 (Session 11), and thtested in the second midterm exam on November 15 (Session 12).

    The second part of the course (Module 2) will focus on generating new insights about consumers. In particular, we will focus on how their needs are structured and how we can develop a marketing plan once we have identified clusters of consumers who have similar needs (Session 13). In Sessions 14 and 15, we will discuss the typical problems that marketers encounter in identifying customer needs and how we can potentially get around these problems. The final two Sessions (16 and 17) of this module will be devoted to an exciting quantitative technique for assessing the relative value (or weight) that consumers place on important attributes within a product/service context: conjoint analysis.

    The third part of the course (Module 3) will be devoted to discussing the ways in which the marketing mix variables (or the 4 PsProduct, Price, Place and Promotions) impact

    consumer behavior. Specifically, I will explore the recent trends in Promotions (Sessions 18 and 19) and Products (Session 20) to discuss novel ways in which marketers cab enhance the appeal of their offerings. In Session 21, Lamar Johnson (Executive Director of CCIMS) will offer a real-world example of how a marketing plan evolves into the market mix variables.


    thThe concepts covered in Modules 2 and 3 will be reviewed on November 13 (Session th22), and tested in the second midterm exam on November 15 (Session 23).

    The final part of the course (Module 4) will cover customer relationship management issues (Session 25), before we end with the final project presentations (Session 27). (Sessions 24 and 26 will be devoted to brainstorming for the final project, and for final project preparation, respectively.)


    There is no required book for the course. There is a required reading packet, which will thbe available at IT Copy on 512 W. MLK Blvd from August 30 (Thursday) onwards.

    The cost of the packet is expected to be around $75.


    There are four components to the grades for this course: a) Class Participation, b) Journal, c) (Individual and Team) Assignments, and d) Mid-term Exam.

    Points Distribution: Overview

Class Participation: 10 points


    Individual: 20 Points

    Team: 45 Points


    Mid-term: 30 Points

TOTAL 105 Points

    Class Participation 10


    The quality of your participation in class is reflective of your interest in the proceedings in class, and also of the amount of your preparedness for the class. I encourage you to speak your mind, even if what you have to say may appear silly or crazy. At the same time, however, I should add that participating simply for ―air time‖ will not be viewed favorably. So, consider what you want to say before speaking, but don‘t hold back because you are afraid you might sound silly. It should be noted that, in general, a

    good participation grade is possible only through consistent attendance and quality participation. To facilitate accurate class participation grading, please choose a seat on the first day of class and keep this seat throughout the semester.

    The TA will grade class participation each day on the following 5-point scale:

Absent or coming late to class: -1 points


Merely being present in class: 1 point

    Good Participation: 2 points

    Excellent Participation: 3 points

    Important Note: Both participation and penalties will double for the following sessions: 1) Student presentations, 2) Brainstorming (Session 24) and 3) Guest lectures (Session 7 and 15).

    Individual and Team Assignments 65


    Here are some general guidelines about the assignments:

    1. Please refer to the ―Do‘s and Don‘t‘s‖ list on page 8 of this syllabus. Also, refer to

    the ―Important Events‖ column of the COURSE SCHEDULE AND READINGS

    at the end of this syllabus (starting on page 9). It is your responsibility to follow

    the instructions and time plan indicated on these pages. It should be noted that the

    time plan is subject to change. Changes (if any) will be mentioned during class.

    2. Detailed instructions for each assignment will be made available on the course

    website on (

    the day you are to being working on it. If you have any questions about any of the

    assignments, read through the instructions on the course website. If questions

    persist, contact TA.

    3. Assignments are due on the due dates at the beginning of class as a hard copy

    (emailing submissions are not allowed). Assignments turned in one day late will

    be penalized 25%. Assignments tuned in more than a day late will not be accepted.

    4. All reports should be double-spaced and single-sided, and should use 12-point

    Times New Roman font, with 1 inch margins on all sides. Please follow this rule

    strictly across all assignments. Failure to follow these rules will result in a lower


     th5. During class on September 6 (Thursday), students will form teams (of 4 thmembers per team) and, on September 11 (Tuesday), choose an ―experience

    context‖ to work in for the rest of the semester. (Details of the experience thcontexts will be provided in class on September 11.)

    6. Each member each team will indicate (through a peer evaluation form) the

    contributions made by the other members of the team for each team assignment.

    This information may impact your grades for the team assignments and,

    ultimately, your final grade. To avoid being penalized, make sure that you

    contribute your fair share in the team assignments.

    (Team) Assignment 1: Experience Audit 10




    In this assignment, you, along with your team mates, will spend about 1 hour in two separate retail establishments (e.g., Walmart and Target) to introspect on your own experiences, and observe other customers‘ experiences in that space. The objective is to help you attune to thinking and feeling critically about retail spaces, with an eye towards improving them.

Note: Detailed instructions for this assignment are available on the course website.

Deliverables: 4 page report. thBeginning date: September 13, 2007. thDue date: September 20, 2007.

    (Individual) Assignment 2: Perceptual/Motivational Biases Exercise 5 Points

    In Sessions 4 6, we will discuss how consumers‘ dispositional characteristics (their perceptions and motivations) bias their judgments and decisions. In this assignment, your task will be to think of two perceptual/motivational biasing influences on your own decisions. For example, you may have discovered that you tend to buy products whose prices have a ―.99‖ ending. Or, you may have found that you tend to be protective of certain brands that you are attached to, even though you shouldn‘t be,

    etc. Your task will be to describe these biasing influences on your decisions and comment on: (1) how marketers can take advantage of them, and (2) how you can correct for them.

Note: Detailed instructions for this assignment are available on the course website.

Deliverables: 2 page report. thBeginning date: September 18, 2007. thDue date: September 25, 2007.

    (Individual) Assignment 3: Demographic Customization Exercise 5 Points

    In Session 9, we will discuss how American retailers have adapted (or failed to adapt) to four different demographics (men, women, kids and senior citizens). Your task in this exercise will be to come up with a set of needs that any two of these four demographic segments (or you can pick another demographic segments, like, e.g., Hispanics) are likely to have in your experience context. Then, develop a product or service idea based on this need.

Note: Detailed instructions for this assignment are available on the course website.

Deliverables: 2 page report. thBeginning date: September 27, 2007. thDue date: October 4, 2007.

(Team) Assignment 4: Segmentation Exercise 10 Points


    The concept of ―Need-based Segmentation,‖ (Session 13) suggests that identifying a group of customers that have similar needs is a good starting point for creating a marketing plan. In this assignment, each team will start with three need based segments within their experience context (Raj will provide these segments, if the team can‘t think of them) and develop a marketing mix (―4 Ps‖) plan for three variations of the same product (one for each need based segment).

Note: Detailed instructions for this assignment are available on the course website.

Deliverables: 2 page report. thBeginning date: October 11, 2007. thDue date: October 18, 2007.

     Points (Individual) Assignment 5: Depth Interview 10


    The objective of this assignment is to identify typical customer needs in the context your team has chosen to work in. Each student will interview at least 3 individuals about the types of needs and problems they typically encounter in the experience context your team has chosen to work in.

Note: Detailed instructions are available on the course website.

Deliverables: 4 page report. thBeginning date: October 18, 2007. rdDue date: October 23, 2007.

(Team) Assignment 6: Conjoint Exercise 10

    Conjoint analysis is a powerful quantitative technique for identifying the relative importance that customers place on various attributes for a product. For example, in the category of cars, some customers may place greater relative emphasis on its fuel efficiency, while others may place greater relative emphasis on powerfulness of the engine. Identifying how important various attributes areespecially across segments

    of consumersis obviously useful for deciding what features and attributes the product should have.

Note: Detailed instructions are available on the course website.

Deliverables: 4 page report. thBeginning date: October 25, 2007. thDue date: November 6, 2007.

(Team) Assignment 7: Final Project Presentation 15




    Presentation: Teams will then make a 10-minute presentation on the new

    product/service idea that they have developed in their experience context, followed by

    a 3-minute Q&A session. The 10 minutes of presentation time should include a video

    component. The duration and content of the video component is left to the discretion

    of the team. (See course website for potential ideas for the video component.)

    Deliverables: A 10-minute presentation, including video-

    component, and Prototype. thBeginning date: November 20, 2007. thDue date: December 4, 2007.

    Important Note: In order to complete the video, you‘ll probably need to borrow

    video equipment from the CBA media lab. It is imperative that you reserve video

    equipment from CBA Media Services as early as possible. Media Services is located

    in the basement of the GSB building. Reservations can be made directly at the Media

    Services office or on the web at: You should

    consider reserving any or all of the following: video camera, tripod, external mic,

    camcorder, mic-cable and desk stand, battery and extension chord.

    Exams 30 Points

    There will be two mid-term exams for this course, which will take place in class on ththOctober 9 and November 15, 2007. The mid-terms will most likely consist of 20

    multiple choice questions (5 points) and 2 short-essay questions, each worth 5 points.

    Any material covered up to the date of the mid-term may be tested in the mid-

    term. A sample mid-term exam (with key) will be posted on the course website about

    2 weeks before the first mid-term exam.


    Since the objective of the course is on understanding how consumers make decisions, and on using

    this knowledge to develop profitable business propositions, it is likely to be of use to anyone getting a business degree. However, it is especially likely to be useful for those getting into Branding (for CPGs such as Proctor & Gamble or Durables such as Whirlpool) or into Market Research (both Suppliers such as Nielsen and Research Users such as General Mills). Many of the concepts we discuss in class will be useful for those who want to get into Consulting (such as Bain or BCG) and Advertising (such as Saatchi & Saatchi) as well. The course will be very helpful for those who are likely to be dealing with (or working for) Retailers (such as Walmart or HEB).

Finally, because we are all consumers, this course will be useful to you at a personal levelit will help

    you understand how you can improve your personal decision making.


    By teaching this course, I have agreed to observe all of the faculty responsibilities described in the Policy Statement on Scholastic Dishonesty for the McCombs School of Business. By enrolling in this class, you have agreed to observe all of the student responsibilities described in that document. If the application of that Policy Statement to this class and its assignments is unclear in any way, it is your responsibility to ask me for clarification. Policy on Scholastic Dishonesty: Students who violate University rules on


    scholastic dishonesty are subject to disciplinary penalties, including the possibility of failure in the course an/or dismissal from the University. Since dishonesty harms the individual, all students, and the integrity of the University, policies on scholastic dishonesty will be strictly enforced. You should refer to the Student Judicial Services website at or the General Information Catalog to

    access the official University policies and procedures on scholastic dishonesty as well as further elaboration on what constitutes scholastic dishonesty.


    The University of Texas at Austin provides upon request appropriate academic accommodations for qualified students with disabilities. For more information, contact the office of the Dean of Students at 471-6259, 471-4641 TTY or visit the website


    Password-protected class sites will be available for all accredited courses taught at The University. Syllabi, handouts, assignments and other resources are types of information that may be available within these sites. Site activities could include exchanging e-mail, engaging in class discussions and chats, and exchanging files. In addition, class e-mail rosters will be a component of the sites. Students who do not want their names included in these electronic class rosters must restrict their directory information in the Office of the Registrar, Main Building, Room 1. For information on restricting directory information see:



    ; Laptops are not allowed to be open in class, as per McCombs policy.

    ; I appreciate your arriving in class on time and being present till it ends. If you

    have to arrive late or leave early, please do so quietly. General ―traffic‖ in and out

    of class is very disruptive and should be avoided.

    ; Complete the individual assignments by yourself (without assistance from others).

    ; Assignments submitted one day late will be penalized 25%, while those more than

    a day late will not be accepted.

    ; Electronic submission of assignments will not be accepted.

    ; The assignments will be graded by the TA. If you have a question regarding the

    assignment, please contact the TA directly.

; Students arrive on time. On time arrival ensures that classes are able to start and finish at

    the scheduled time. On time arrival shows respect for both fellow students and faculty and it

    enhances learning by reducing avoidable distractions.

    ; Students display their name cards. This permits fellow students and faculty to learn names,

    enhancing opportunities for community building and evaluation of in-class contributions. ; Students minimize unscheduled personal breaks. The learning environment improves

    when disruptions are limited.


; Students are fully prepared for each class. Much of the learning in the Texas MBA

    program takes place during classroom discussions. When students are not prepared they

    cannot contribute to the overall learning process. This affects not only the individual, but their

    peers who count on them, as well.

    ; Students attend the class section to which they are registered. Learning is enhanced

    when class sizes are optimized. Limits are set to ensure a quality experience. When section

    hopping takes place some classes become too large and it becomes difficult to contribute.

    When they are too small, the breadth of experience and opinion suffers.

    ; Students respect the views and opinions of their colleagues. Disagreement and debate

    are encouraged. Intolerance for the views of others is unacceptable.

    ; Laptops are closed and put away. When students are surfing the web, responding to e-mail,

    instant messaging each other, and otherwise not devoting their full attention to the topic at

    hand they are doing themselves and their peers a major disservice. Those around them face

    additional distraction. Fellow students cannot benefit from the insights of the students who

    are not engaged. Faculty office hours are spent going over class material with students who

    chose not to pay attention, rather than truly adding value by helping students who want a

    better understanding of the material or want to explore the issues in more depth. Students

    with real needs may not be able to obtain adequate help if faculty time is spent repeating

    what was said in class. There are often cases where learning is enhanced by the use of

    laptops in class. Faculty will let you know when it is appropriate to use them. In such cases,

    professional behavior is exhibited when misuse does not take place.

    ; Phones and wireless devices are turned off. We’ve all heard the annoying ringing in the

    middle of a meeting. Not only is it not professional, it cuts off the flow of discussion when the

    search for the offender begins. When a true need to communicate with someone outside of

    class exists (e.g., for some medical need) please inform the professor prior to class.



    Note: Readings need to be completed before class.


     thSession 1: Introduction and Syllabus Overview Aug. 30 (Th)

; No Readings

Module 1: Consumer Decision Making

     thSession 2: The Five Stages of Consumer Decision Making Sept. 4 (T)

; ―Mind Games,‖ by John Cassidy, The New Yorker, thSept. 18, 2006, 1 - 7.

     thSession 3: Rationality and the Use of Heuristics Sept. 6 (Th) Group Formation

; ―Wrong Turn,‖ by Malcolm Gladwell, The New Yorker,

    Jun. 11, 2001, 50 - 61.

     thSession 4: Perceptual Biases I: Lay Theories Sept. 11 (T) Group finalization; Project Choice

; ―The ‗Unhealthy = Tasty‘ Intuition,‖ by Raghunathan, Naylor

    and Hoyer (2006), Journal of Marketing, Oct. 2006, 170 184.

     thSession 5: Perceptual Biases II: Hard-wired Sept. 13 (Th) Begin Customer Experience Audit

; ―Something out of Nothing: Misperception and Misinterpretation

    of Random Data,‖ Ch. 3 of How We Know What Isn’t So,

    by Thomas Gilovich, 1991, 9 23.

     thSession 6: Motivational Biases Sept. 18 (T)

    ; ―Fundamental Techniques in Handling People,‖ Chapters 1 – 3

    of How to Win Friends and Influence People by Dale Carnegie,

    1936, 3 50.

     thSession 7: Memory and Learning: Prof. Ramanathan Guest Lecture Sept. 20 (Th) Experience Audit Due

    Begin Perceptual/Motivational


    ; ―Brand Knowledge Structures,‖ Ch. 3 of Strategic Brand

    Management by Kevin Lane Keller, 86 129.

     thSession 8: Task Variables Sept. 25 (T)

; ―Walk Like an Egyptian: The Mechanics of Shopping,‖

    from Why We Buy by Paco Underhill, 1999, 11 91.

     thSession 9: Situational Variables: Trends and Culture Sept. 27 (Th) Perceptual/Motivational Exercise


     Begin Task/Situational Exercise ; ―Men are from Sears Hardware, Women are from

    Bloomingdale‘s,‖ from Why We Buy by Paco Underhill,


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