CONSUMER BEHAVIOR 2010 - PRACTICE QUESTION SET 2

These are practice questions, not the type of questions that populate the exam. These are more focussed
and some are more difficult as they are precise and targeted at specific types of learning or materials. Do
them individually and discuss your results in study groups. See if you can explain your solutions
convincingly to your classmates, punch holes in their solutions, and defend yours against hole-punchers.

Redo the cases we discussed in class to the point in which you can explain both the business and
marketing problems described therein, the solutions, why alternative solutions wouldn't work, and what
the main general (i.e. applicable beyond the case) points of the case were. Argue with a study group.

Redo the in-class exercises, not just until you get them all right, but rather until you're sure you couldn't
get them wrong. Then see if you can explain the difference (say, by making up an example) between
wrong answers and right answers to each exercise. Ditto for study group.

PROBLEMS

Figure out your firm’s value proposition and revenue model. In detail: what are the segments and needs
that the product serves better than alternative products and what are the core resources that are k.s.f. in
which the firm has a differential advantage?

Choose a product with several product dimensions (that is, essentially, any product).
1. Figure out how different consumption occasions would create different elimination rules for
consideration set formation.
2. Search for information and find a large set of alternatives (your awareness set); then apply, for each
consumption occasion, the elimination rules from the previous question
3. For each consumption occasion, determine how the consumer would value the alternatives in the
consideration set, i.e. come up with weights for the utility function. Then apply them to the
consideration sets and figure out what the choices would be, assuming a winner-take-all decision rule.
4. Instead of a winner-take-all rule, apply the logit share formula to figure out what the predicted shares
would be
5. Repeat for other products and other consumption occasions.

Take the example from the last page of the class 6 handout. For each segment,
1. Assume that the costs are fixed and you require at least a markup of 50% for each element. What
would the coefficients (the Betas) have to be for each variable in each segment so that the markup was
feasible?
2. Assume that the coefficients (Betas) are fixed and you require at least a markup of 50% for each
element. What are the maximum fully loaded costs each part could have so that the markup was
feasible?
3. Assume that with some monetary expenditure you can change one of the coefficients 10% in either
direction. (The expenditure, in this exercise, is the same independent of the coefficient you choose to
change.) Which coefficient would you choose to change and in which direction?

For each of the five biases on page 2 of handout 6 find as many possible marketing applications as you
can think of. These biases are used in almost all marketing decisions, either explicitly – like the decoy
effect, which is an application of the first bias – or implicitly.
For each of the five biases on page 2 of handout 6, find as many possible marketing research problems
that would appear from poorly designed questionnaires or experiments, aka those which didn’t take this
bias into consideration.

Find as many failures in usability as you can in as many products as you can. Identify the source of the
problem, the experience that is decreasing the value proposition (sense, think, or act, and their associated
feel experience). Propose solutions.

Diagram the full experience of interaction of a customer with a firm (your firm, for example). Identify all
the players involved both in the visible layers to the customer and in the support layers which have direct
marketing implications.

What are your firm’s procedures for addressing customer complaints? What about product failures? How
do they compare to those of your competitors? And to the accepted norm for the markets in Portugal? For
international markets and customers?

What metrics do you rely the most in your day-to-day decisions? What are their decision implications (for
example, if sales/transaction go below a certain level, is there an action to be taken)? For each metric,
what is your decision tree?

Can you quickly determine, for a given customer, what his/her lifetime value for the firm is? Do you
know what variables (both under your control and not under your control) are most likely to influence that
value?

Looking at the two pure flows for “bad loyalty/good loyalty” cases in handout 8, analyze your firm’s
position in the continuum that exists between those two extreme cases (i.e., where the dotted horizontal
line in the middle of the page is). What about your competitors? Your marketing partners?

What is your firm’s customer developer plan? (Do you have one?) How well is it communicated to all
members of the firm? How well is it communicated to marketing partners?

DISCUSSION QUESTIONS

How do segmentation and targeting (the division of customers into groups – segments – and the selection
of which segments to serve) work in concert with positioning and targeting (the selection of mental
category inside the consumer mind and the definition of which criteria are used to eliminate options and
which are used to evaluate the options that are not eliminated) to define a firm’s marketing strategy?

What did I mean by the chyron “unlike managers who trust them blindly, computer models do not have a
job to lose?”

Why are marketing skills more (instead of less) important as analytics becomes more common? Wouldn’t
one expect that statistics and computers would trump marketing knowledge? (This is an important
question, since statisticians and computer technicians are typically much cheaper than MBAs – learn to
answer it clearly and succinctly so you can give it in an elevator ride with the executive committee of
your firm.)