DO PHARMACISTS BUY BAYER?

INFORMED SHOPPERS
AND THE BRAND PREMIUM
My notes -

- consumers may be willing to pay a premium for brands because they

overestimate the benefits of the brand or are otherwise confused or misled.

- consumer packaged goods (CPG)

- Bayer aspirin might be better for consumers due to inactive ingredients,

reliability, safety, packaging, or psychic utility such as comfort or familiarity
associated with the brand itself

- Our key assumption is that this true utility is the same for informed and
uninformed consumers—in other words, that all consumers would be better off
if they weighed the relative merits of brands and non brands in the same way as
an informed expert. Under this assumption, comparing the choices of in-
formed and uninformed consumers lets us infer the extent to which the latter
misestimate the benefits of brands.

- The model shows that identification requires us to hold constant both the
choice environment and the true preferences of the households when
comparing the behavior of the informed to that of the uninformed.

- We find that the effects of consumer information are largely domain-specific.

Neither knowledge of headache remedy active ingredients nor working in a
health care occupation predicts store brand purchases in pantry staple
categories.

- For health products, we find some suggestive evidence that the effect of
information on the propensity to buy the store brand is greater in categories
with higher advertising intensity and in categories with more agreement among
experts regarding the equivalence of store and national brands.

RESULTS

- Taken together, our estimates suggest that misinformation explains a sizable

portion of the brand premium in many health categories, as well as in certain
 food categories (such as pantry \staples) with little physical variation across
brands.

- Across a range of products, we find strong evidence that more informed

shoppers buy more store brands and fewer national brands. Consumer
information plays a large quantitative role in health categories, where our
estimates imply that expenditures and market shares would change
significantly if all house- holds behaved like expert shoppers. By contrast, the
role of consumer information is smaller in food and drink categories, where our
estimates suggest much smaller gaps between expert and nonexpert shopping
behavior.

Chat PDF summary of the reading

1. Helpful findings from the study for Brand Marketing

The results of the study suggest several implications for brand marketing strategies in
physically homogeneous product categories. Specifically, the findings indicate that more
informed consumers are less likely to purchase national brands and are willing to pay
less for them. This implies that brand marketing strategies should focus on targeting and
engaging with informed consumers by providing them with relevant and accurate
information about the products. Additionally, the study suggests that there may be
opportunities for store brands to capitalize on the preferences of informed consumers by
offering high-quality alternatives to national brands. Overall, the implications point to the
importance of understanding and catering to the preferences of informed consumers in
brand marketing strategies for physically homogeneous product categories

2. Findings and Results

1. Impact of Consumer Information: The study finds that consumer information greatly affects
the distribution of surplus in health categories. More informed consumers are less likely to
purchase national brands and are willing to pay less for them. This effect is particularly
significant in health categories, where informed consumers exhibit a strong preference for
store brands over national brands.

2. Welfare Conclusions: The study quantitatively assesses the effect of consumer

information on welfare and pricing. It estimates that making all consumers as informed as a
pharmacist or physician would lead to a significant reduction in variable profits of national
headache remedy brands, while store brands would experience an increase in profits and
consumer surplus. The effects are smaller in food and drink categories, indicating that the
role of consumer information is smaller in these categories

3. Policy Relevance: The findings are relevant to policy debates about substitution between
branded and generic prescription medications. The study's approach of comparing the
choices of demographically similar households with different levels of product information
parallels previous research in the field of economics.

4. Consumer Behavior: The study provides evidence that more informed shoppers buy more
store brands and fewer national brands. It quantifies the impact of consumer information on
the propensity to purchase store-brand headache remedies and suggests that these findings
are relevant to policy debates about substitution between branded and generic prescription
medications.

5. Methodology: The study employs a structured model of choice to make quantitative

statements about the effect of consumer information on welfare and pricing. It imposes a set
of assumptions on the pricing conduct of retailers and manufacturers and makes functional
form assumptions about the distribution of consumer preferences over brands and retailers
Overall, the study's results and findings emphasize the significant impact of consumer
information and expertise on purchasing behavior and brand premium in physically
homogeneous product categories, particularly in the health category.

3. Food Industry Results

The study finds that the impact of consumer information on purchasing behavior and brand
premium is smaller in food and drink categories compared to health categories. The study's
estimates suggest that the effects of consumer information on profits and consumer surplus
are modest in pantry staples and less than 1% in other food and drink products. The study
also finds that the occupation coefficients for chefs and other food preparers are positively
correlated with the propensity to buy store-brand pantry staples, but the effects are smaller
than those observed in health categories. Overall, the study's results suggest that the role of
consumer information is smaller in food and drink categories compared to health categories
Allianz
Does simplicity make strategic sense?

Simplicity Personalization/complex products

Pros – Customers don’t want

complexity.
Allows easier decision making,
products tend to be repeated, simpler
more retention, easier to explain and
sell products, low cost of selling, easier
to explain products to the buyer
-Resource optimization, Adaptable.
-Execution is easier
-Customer Focus
- Custom plans, consumers get
personal attention, product
differentiation, gives a
competitive edge, target
diverse and multiple target
groups, customer satisfaction.

Cons – Lack of customization and Operational complexity, high costs of

personalization for the consumer, if
from having a complex product range
you go to simple, will lose customers,
in the long run might be fine.
Heterogeneous market, disrupting
customers – Retention?
operations, range of products can be
confusing and complex for the consumer,
high training costs, require most expert
employees

ALLIANZ SUMMARY BY SANDALI AND CHATGPT

SUMMARY

Allianz, a leading global insurer and asset manager, aimed to enhance customer satisfaction and
become a top 25 brand by 2025 through a customer-centric approach.

Despite successful customer-oriented strategies, the company faced the challenge of simplifying
products and processes while maintaining customer focus.

The leadership team, including CEO Oliver Bäte, believed in focusing on simplicity over
hyper-personalization, aiming to reduce complexity and create a unified customer experience.
Allianz's historical journey involved expansions, acquisitions, and diversification into various financial
services, leading to a vast international presence.

Under Bäte's leadership, the company pursued a Renewal Agenda, emphasizing digitalization,
technical excellence, growth, employee motivation, and true customer centricity.

The challenge was to implement a simplified approach without increasing operational costs, and the
company's leaders were exploring strategies to achieve this goal.

Insurance Market Overview:

● Insurance operates on the principle of pooling resources among people with similar risks to
financially protect those who experience losses.
● Insurers guarantee payment for specified losses in exchange for regular premium payments
from the insured.
● Insurance policies cover various risks such as life, home, car, and business.
● The industry is highly regulated, aiming to ensure solvency and fair treatment of consumers.
● Insurance products are sold through various channels, including agents, brokers, and digital
platforms.

Challenges and Dynamics:

● Insurance industry faces low entry barriers and high competition, leading to a commodity-like
market.
● Insurers often struggle with product complexity, leading to customer dissatisfaction.
● Claims management, a critical customer touchpoint, can be cumbersome and
time-consuming for insurers.
● Traditional insurers face competition from insurtech startups disrupting various segments of
the industry.
● Allianz, a global insurance giant, aims for true customer centricity but faces challenges in
product complexity, outdated IT systems, and distribution strategies.

Allianz’s Efforts Towards Customer Centricity:

● Allianz focuses on true customer centricity, aiming for loyal customers and better profits.
● The company uses Net Promoter Score (NPS) and Voice of Customer programs to gather
customer feedback and improve services.
● Allianz is working to simplify its product offerings and eliminate unnecessary complexity.
● The company acknowledges the need to update its outdated IT infrastructure to enhance
digital capabilities.
● Allianz navigates the challenges of a hybrid distribution network, balancing traditional
intermediaries and direct channels for customer interactions.
● Background: Allianz aimed to adapt to changing customer expectations in the digital age.
The company recognized the need to simplify its offerings and enhance customer
satisfaction.
 ● Challenges in the Industry: Technological advancements and a digitally literate audience
changed customer expectations. Allianz realized the need for transparency, easy access, and
prompt service, which traditional insurers were not providing.
● Simplicity Approach: Allianz executives advocated for a simplification, harmonization, and
legacy reduction process. The goal was to create a simple, scalable core product, reducing
complexity and improving efficiency.
● Spanish Subsidiary’s Success: The Spanish subsidiary implemented the simplicity approach
successfully, leading to lower expense ratios and increased efficiency. The model was
replicated in other countries with varying degrees of success.
● Creation of a New Division: Allianz established a new division led by Stutz, focusing on
business transformation. Stutz emphasized inclusivity and collaboration to implement the
simplicity approach.
● Resistance and Concerns: Within Allianz, there was resistance to change. Executives raised
concerns about risking a stable situation, potential negative customer response, and the
complexity of insurance contracts. Power struggles and fear of losing control were also
evident.
● Trade-offs and Challenges: Simplifying products meant managing legacy contracts and
potential loss of trust if existing customers were affected. The organization grappled with
balancing efficiency gains with meeting customer needs.
● Way Forward: Stutz contemplated whether simplicity was the right path forward. He
considered experimenting with a single product in core markets first and sought to convince
skeptics within the organization.
● Pressure and Uncertainty: Stutz faced immense pressure as his unproven initiative was
under scrutiny. He questioned whether simplicity was the right strategy in an industry where
others prioritized hyper-personalization.
● Long Journey Ahead: Regardless of the chosen path, Allianz acknowledged the need to
strengthen its performance to serve customers, employees, and shareholders effectively.
The journey ahead was seen as challenging and uncertain

Additional - Answers from chat gpt about how does a simplistic approach affect the
following?

Having a simplistic approach and product can influence various aspects of a

company:

Distribution Channels - Simplistic products might streamline distribution channels as

there are fewer variations or complexities to manage. This can make logistics and
inventory management more efficient. It could also limit the need for diverse distribution
strategies, making it easier to select and manage appropriate channels for a simpler
product line.
International Markets - Simplistic products might have broader appeal in international
markets due to easier understanding and universal applicability.
However, in some cases, a lack of customization might limit success in markets with
diverse preferences and needs.

Competitors: A simple product might face increased competition from companies

offering similar straightforward solutions. However, if the simplicity offers a unique
selling proposition (USP) or a cost advantage, it might create a niche market that
competitors find challenging to penetrate.

Operational Side / Customer Service - Simplistic products can streamline operations

and customer service, reducing complexities in manufacturing, troubleshooting, and
customer support. However, it's crucial to ensure that simplicity doesn’t lead to
neglecting customer needs. Clear communication and excellent service are still essential.

Company Culture:A focus on simplicity might foster a culture of efficiency, clarity, and
innovation. Employees might align more easily with a straightforward vision and
approach. Conversely, if simplicity leads to a lack of innovation or an aversion to change,
it might hinder a culture of creativity and adaptability.

Overall, a simplistic approach and product line can offer advantages such as ease of
management, clearer communication, and potential cost efficiencies. However, it might
also present challenges, particularly in diverse markets where customization and
complexity might be valued. Balancing simplicity with meeting diverse customer needs is
key to long-term success.

ALLIANZ HOMEWORK - SANDALI

Should Allianz implement a simple strategy?

No, Allianz should not implement a simplicity strategy across all 70 markets
simultaneously. However, a phased approach to implementation could be considered,
taking into account the following points: Selective Implementation: Implementing the
simplicity strategy in markets with a higher proportion of direct insurance writing, such
as France, or where bancassurance is the preferred distribution channel, could be more
effective. These regions might favour simpler options.
Market Diversity: Each market has distinct customer needs, cultural nuances, and
regulatory frameworks. A one-size-fits-all approach may not be suitable for all regions.
Customer Satisfaction Risks: Allianz values customer satisfaction, and removing
complex products could alienate customers who prefer tailored solutions. Changing
existing offerings might lead to dissatisfaction, especially among customers loyal to
specific terms and conditions.

Operational and Financial Caution: Given Allianz's current success, restructuring the
entire product portfolio is a significant risk. A phased implementation allows for
evaluation and adjustment based on market response.

Internal Resistance: The potential internal resistance across different markets should be
carefully managed. A phased approach allows for addressing concerns and resistance in a
more controlled manner.

Regulatory and Legal Considerations: Standardizing products across diverse legal and
regulatory landscapes is complex. A phased approach allows for necessary adjustments in
each market.

Cost and IT Benefits: While simplification could reduce costs related to commissions
and training, and address outdated IT systems, these benefits should be balanced against
potential drawbacks.

Customer Feedback: Implementing the strategy in phases allows for incorporating

customer feedback and making necessary adjustments.

Learning and Adaptation: A phased approach enables learning from initial

implementations, which can inform and improve the strategy in subsequent markets.

WHO BENEFITS THE MOST?

After analysing the different benefits, we conclude that executives benefit the most. Here
is an overview of the different benefits and challenges of simplification strategy for
different stakeholders:

Executives: Benefit from more efficient decision-making, reduced costs, increased

profits, and a differentiated market position. A phased implementation reduces risk and
allows for strategic adjustments.
Decrease in costs as outdated IT infrastructure is updated and commission costs for
agents are reduced. Easy decision making and monitoring due to centralised, similar
products.

Employees: Benefit from reduced complexities and standardised working procedures.

Some jobs might be at risk due to automation of simpler processes. Employees would be
able to dedicate more time towards building relationships with customers.

Customers: Some may appreciate easier-to-understand products and reduced insurance

writing costs. Customers who prefer customized insurance might be dissatisfied and
consider switching providers. Reduction in insurance writing costs as they won't have to
avail services of a third party (broker).

Agents/Brokers: Might find it easier to explain simpler products. Their bargaining power
and relevance could be diminished as more customers opt for direct insurance writing.

Competitors: Simplifying operations could initially give Allianz a competitive edge. If

successful, competitors might adapt similar strategies, potentially eroding Allianz's initial
advantage. Competitors offering varied and customized services/products might initially
benefit from a shift in customer base.

ALLIANZ HOMEWORK - RADHIKA

First, implementing a simplification strategy would allow Allianz to differentiate itself in the complex
insurance industry. As highlighted, Allianz currently has an excessive number of products within Italy,
with 777 products and only 16 actively sold. This product differentiation adds unnecessary complexity
for its customers. Surveys show that many customers already find insurance products challenging to
comprehend (Exhibit 8), with 57% of customers wanting fewer products to choose from. By streamlining
its portfolio into fewer offerings, Allianz would work to adopt a customer- centric approach and can
stand out from competitors such as AXA, who continue to push high customisation and, therefore,
complexity, which alienates customers as opposed to acquiring them. An example is the 11.4% customer
churn in Germany (Exhibit 7). A high turnover indicates instability; simplified products can handle this.
On the other hand, the Spanish subsidiary successfully reduced expenses and improved competitiveness
by having just 1 product per line after simplification (p. 9), a proof point demonstrating that
simplification has financial benefits. From a product marketing standpoint, if Allianz customers better
understand the product because of its simplicity, it could lead to higher retention and potentially
increased margins.
Second, product simplicity is even more critical with digital-first competitors entering the market.
Insurtech startups have found success with fully digital, AI-powered models that use chatbots to guide
customers through purchases and claims within just 3 seconds with no human involvement. (p.5). Allianz
must compete with this level of simplicity to tackle this needless complexity and get ahead of shifting
customer expectations.

Third, a simplified product portfolio will unlock significant efficiency gains for Allianz. The case highlights
a high degree of duplication across markets – for example, 90% similarity in valued product features in
significant markets like France, Germany and Italy (Exhibit 9). If customer sentiment is the same for
Allianz's most important markets, then by simplifying their product range, they have a tremendous
opportunity to streamline their operations and increase their margins – which are already very tight
within the insurance industry. Also, a simplification strategy presents significant opportunities to improve
efficiency elsewhere. For example, Allianz has over 100 legacy IT systems across subsidiaries, making it
an “operational nightmare” to maintain this complexity. The company has outdated IT systems across
subsidiaries, making it hard to coordinate pricing and share data (p. 8).

Not Simplify

On the other hand, implementing a simplified strategy in terms of product may pose significant
challenges for stakeholders like employees, distribution networks and already existing customers. One
may argue that Allianz, an already profitable business with steadily increasing operating margins and a
Net Income of €7.2 billion in 2017, should not change its strategy To start with, a simplified product
portfolio strategy may impact the distribution networks that Allianz have in place, given the many
geographies they operate in. The distribution network might not be a ‘one size fits all’ approach; perhaps
each country should stick to the distribution that works for them given that “The Netherlands a market
where the direct channel was predominant, Italy tended to work with multi-agents, Germany with
captive agents, and the UK with direct channels and brokers. “. This means developing single products for
a single business line may be risky and lead to decreased sales in markets where customers have been
used to greater offerings and an agennt helping them choose a product for them. In addition, Allianz’s
success in these markets is predicated on “bending products to different customer groups” (De La Sota,
Allianz). Thus, simplifying product offerings could mean customers lose coverage they previously had,
potentially breaking company promises. On another note, what is the actual feasibility of simplifying
products and operations across 70 different markets with 103 million existing retail and corporate
customers that are already tied up to some insurance plan? While the simplifying of products may be
feasible in the medium term, the time and resources used to pivot the existing strategy could be diverted
elsewhere. Thus, there is a benefit foregone with a higher payoff. An example that illustrates this is the
Brazilian market, which took two whole years before the rollout of the strategy turned into a success.
Lastly, the industry trend was to tailor products to customer needs in order to create a more
customer-centric experience and to differentiate, given the low differentiation in the insurance industry.
With that said, simplifying products might reduce Customer Lifetime Value as products are not tailored,
and so customers may feel detached and lose trust in the company. Therefore, given Allianz's long track
record and large consumer data pool, they should leverage that to create tailored products, possibly
using AI and capabilities from the insurtech - Lemonade they acquired in 2017.

Evaluation

After evaluating the pros and cons of product simplification for Allianz, they should simplify, albeit in a
balanced way. On one hand, simplification offers Allianz the advantage of standing out in a competitive
market, optimising operational efficiencies, and staying competitive amidst digital-first rivals. Conversely,
a full simplification risks destabilising established stakeholder relationships, jeopardising diverse
distribution channels, and potentially diminishing the trust of a loyal customer base. All in all, it becomes
evident that while Allianz can benefit from some degree of simplification, a complete overhaul might be
excessively risky. Instead, a simplified product strategy in smaller and less revenue-generating markets
such as the Baltics should be introduced initially to test the strategy before rolling out in core markets
such as Netherlands, Spain and Germany.

Question 2: Who benefits the most from simplifying operations? (Please consider all stakeholders,
namely employees, executives, customers, agents/brokers, and competitors

Employees
Benefits:While Allianz had an efficient and effective sales force, the current product catalogue posed a
challenge in the customer journey. As Wengman mentioned that if there is too much choice, nobody will
buy anything, it is fair to assume that driving sales was a challenge for the employees at Allianz.
Customising the plans as per the customer needs, fulfilling as many customers' needs as possible and
gaining business by customising the products as per the individual customer needs must be taking a toll
on the employees, requiring them to have deep knowledge about the wide and vast product portfolio
and personally incorporating every client's requests. By simplifying operations, employees can focus on
one optimized and simple product instead of learning about many complex products. This means that
they need less training and can master product information in a short time to improve work efficiency.
Furthermore, employees can gain a deeper understanding of the technical details of the product, such as
the legal and regulatory framework in addition to the insurance terms.This helps them transparently
introduce product information to customers and meet their needs precisely. Lastly, the application of a
common platform used in all countries helps streamline the sales process and accelerate settlements.
This allows employees to focus on building relationships with customers rather than administrative tasks.
At the same time, it can improve customer loyalty and stimulate sales.

Concerns:Simplifying operations raises concerns about the potential impact on bonuses, reducing
employee freedom and control as they move away from a decentralized approach. Additionally,
streamlining the product selling approach may lead to the fear of a downsized workforce, as Allianz
could require fewer employees.

Executives:

Benefits: Several executives as per the case saw the need for Allianz to go through a simplification
process and become more efficient. By following a simpler approach, Allianz could reduce its costs,
increase efficiency and lower its expense ratio, thus charging lower prices for their policies. Specifically,
simplifying operations can help executives save costs, including R&D expenses, marketing expenses and
administration costs. With fewer products to manage, executives can make decisions more quickly and
advisably. For example, in the allocation of funds, they can mainly invest in improving the product to
enhance competitiveness. Moreover, executives can more accurately predict and manage the risks of
products to ensure that their solvency can meet its commitments in claims. Finally, by using a common
platform, executives can improve operational efficiency and management effectiveness. For example,
executives can effectively evaluate performance indicators and gather customer feedback across regions
to make strategic adjustments.

Concerns:Executives are concerned about the level of uncertainty and the potential unintended
consequences that may arise from the simplification efforts. Specifically considering the company was
well on track and business flourished. Particularly executive tend to worry about straightforward
consequences, such as a loss of trust in the brand, a decline in clients, and financial impacts. Since they
are primarily evaluated based on metrics related to these factors.

Customers:Benefits:As clearly stated in the case study, the current process of identifying the right policy
for a customer although customisable is very tedious and complex. According to the results of the
Spanish subsidiary’s strategy, simplified operations can create a price advantage for products because of
the low cost caused by only one product per business line. As customers pay the most attention to price
when choosing insurance products, they will benefit from the lower price brought by simplifying
operations. In addition, as per the Customer Perceptions data, complexity is a big concern for the
customers. Therefore, simple products will ameliorate this problem, and customers will only need to
choose between three levels of the same product. Similarly, simplified operations allow customers to
benefit from a streamlined purchase process and faster response times, which helps optimize the
customer journey and improve customer satisfaction. Thus, increasing customer lifetime value and
increasing the customer retention rate. Moreover, we would assume that given the simplistic approach
to the policies, this will also positively impact the speed of settlement, increase customer loyalty and
make it easier for customers to get their claims.

Concerns: Simplifying operations which means narrowing down on product range may miss out on their
customer needs and Allianz rolls out a standard that does not start at the customer and is more shaped
towards the benefit of the company in terms of productivity gains.
Agents/brokers:

Benefits:Like a salesperson, agents/brokers will have a deeper understanding of a single product. They
will be able to emphasize the benefits of the product to customers, thereby increasing customer
conversion rates and earning additional commissions.

Concerns:Captive agents, multi-tied agents, and independent advisors and brokers have different
responsibilities. When unified into one product, their roles become homogeneous. As a result,
competition between them will intensify and they may face the risk of being laid off. This may be the
reason why agents/brokers don't like to simplify business models.

Competitors:Benefits:As Allianz simplifies operations and reduces the number of products, its
competitors can differentiate themselves from Allianz by offering personalized products. Its competitors
can benefit from targeting customers who like diversified choices and satisfying their individual needs to
expand the customer base and increase sales volume. Once Allianz implements the simplification
process, there is a possibility that the loyal customer base of Allianz who are used to personalised
insurance packages might look for possible alternatives. This would benefit the competitors as they
might get an opportunity to gain a wider market share.

Concerns:Customers who gravitate towards simple and swift solutions are more likely to choose Allianz.
An overarching competitive advantage for Allianz which competitors might worry about lies in their
lower customer acquisition costs and the time factor, both of which are important metrics in the industry
and crucial for overall performance.
GOYA

Why was there less boycott in real life when there was so much negativity about GOYA
in the media?
There can be several reason why the customers might not boycott a product in real life
even though they may boycott it on social media
1. Substitution cost - the cost of switching to other brands
2. Loyally - consumers might be loyal to the brand regardless of the brands political
beliefs.
3. Alternative Avenues for Activism: Consumers might engage in other forms of
political activism instead of boycotting. This could include petitions, letter-writing
campaigns, or supporting alternative brands or causes.
4. Limited Awareness: If the issue or cause hasn't received significant attention or
visibility, consumers might not be aware of the need for a boycott. Lack of media
coverage or insufficient information dissemination can hinder awareness.
5. Perceived Impact: Consumers might doubt the effectiveness of a boycott in
bringing about the desired change. If they don’t believe their actions will create
meaningful results, they might choose not to participate

Results given in the GOYA case - major takeaways

1. Our analysis of Goya highlights the fact that political consumerism campaigns on
social media and their portrayal in the press are not always mirrored in actual sales
outcomes. In political scenarios and political consumerism, social media might not
be the best metric to analyze and measure the actual demand.
2. It can be said that, in terms of long-term impact, companies do not need to worry
much. In this case, sales even increased for a short duration, but it can be said that
all the significant observations only had a short-term impact, and everything went
back to normal after a while.
3. One important key takeaway for companies facing political consumerism in the
future or planning political campaigns is that there is a beneficial tendency for
small and medium-sized businesses. This is because only existing customers can
effectively boycott and have limited impact, whereas everyone has the power to
buycott.
4. The fact that a brand with a very Democratic customer base did not experience a
longer term boycotting effect after coming out with a pro-Republican message
suggests that other high purchase frequency brands of a similar size whose
 customers are not as skewed towards one end of the political spectrum may be
even less susceptible to negative boycotting effects.
5.

POLITICAL CONSUMERISM (SOME EXTRA INFO FROM CHATGPT)

Political consumerism refers to the phenomenon where consumers make purchasing
decisions based on political or ethical considerations. It involves buying or boycotting
products and brands to express support or opposition to certain social, environmental,
or political causes.

Pros and Cons

Pros
Brand Loyalty: Encouraging brand loyalty among consumers who share the same
values.
Positive Public Perception: Enhanced brand image and reputation among socially
conscious consumers.
Market Differentiation: Standing out in the market by emphasizing ethical or social
responsibility.

Cons
Risk of Backlash:Potential for boycotts or negative publicity if the brand's actions are
seen as contradictory to popular causes.
Alienation of Certain Segments:Actions or statements may alienate segments of the
consumer base who don’t align with the chosen causes.
Authenticity Concerns:Risk of being seen as insincere or engaging in 'cause-washing' if
the brand's commitment to the cause is perceived as superficial.

For brands considering political consumerism, navigating these waters involves a deep
understanding of their audience, authenticity in their actions, and a careful alignment
with causes that genuinely resonate with their values and those of their target market.

SUMMARY BY SANDALI AND CHATGPT-Summary:

​ Introduction:
● Brands are facing increasing pressure to take political stances.
● Limited empirical evidence on the impact of political consumerism on
sales.
 ● Study focuses on Goya's CEO praising Trump, triggering boycott and
buycott movements.
​ Background:
● Brands are becoming more politically engaged publicly.
● Rise in political consumerism where consumers support or boycott brands
based on political views.
● Debate on whether companies should engage in politics.
​ Goya Scandal:
● Goya's CEO praised Trump, leading to boycott (#Goyaway) and buycott
(#BuyGoya) movements.
● Social media dominated by boycott messages, media speculated negative
effects on Goya sales.
​ Research Questions:
● Examines net effect of boycott/buycott on Goya sales.
● Analyzes duration and variation in sales response based on political
affiliations.
● Explores impact on Goya's core customer base (Latinos) and factors
affecting purchase behavior.
​ Insights from Empirical Investigation:
● Goya historically stronger in more Democratic markets.
● Boycott messages dominated social media, but Goya sales increased by
22%.
● Buycott effect temporary, fully dissipating within three weeks.
● Large sales increases (56.4%) in heavily Republican counties.
● Limited evidence of boycotting among experienced Goya customers,
especially Latinos.
​ Factors Influencing Results:
● Asymmetric effects for small and medium-sized brands in boycott/buycott
movements.
● Buycott brought in first-time Goya buyers from heavily Republican areas,
but they did not stay loyal.
● Duration of buycott effect shorter in heavily Democratic counties.
​ Conclusion:
● Results challenge assumptions about the correlation between social
media sentiment and actual sales outcomes.
● Political consumerism campaigns' potency and reach may vary.
● Brand loyalty and switching costs influence limited evidence of boycotting.
​ Data and Summary Statistics:
 ● Uses consumer panel data, voting data, Twitter, and media coverage data
for analysis.
● Highlights Goya's core customer base (Latinos) and first-time buyers
during the scandal.
​ Boycott & Buycott Net Effect:
● Shows a positive net effect on Goya sales post-scandal, contrary to social
media and media coverage.
● Asymmetry in who can effectively boycott or buycott.
● Duration of the sales effect aligns with the spike in social media and
media coverage.
​ Duration of the Net Effect:
● Illustrates the decline in the net effect on sales over time.
● Significant increase in sales for the three weeks following the scandal,
dissipating thereafter.

Overall, the study provides empirical evidence on the real-world sales impact of political
consumerism campaigns and sheds light on the complexities and nuances of consumer
behavior in response to political stances taken by brands.

Summary of "Disentangling the Boycott & Buycott Effects":

​ Introduction:
● Goal: Decompose boycott and buycott effects to reveal extreme changes
in spending across different markets and household segments.
● Data limitation: Individual households' political preferences not available;
analysis based on county-level vote margin.
​ Market-Level Heterogeneity:
● Political Polarization: Goya was the most Democratic brand among the top
300 CPG brands by sales.
● County-Level Response: Goya more popular in Democratic counties;
response to scandal varies across counties, with increased spending in
heavily Republican ones.
​ Duration of Effects by County Voting Profile:
● Short-term Buycott: Initial increase in spending, especially in heavily
Republican counties.
 ● Medium-term Boycott: Heavily Democratic counties show a more
prolonged decrease.
● Long-term: Overall, net sales impact over 20 weeks is slightly positive,
reflecting short-run increase and persistent decrease in purchases.
​ Household-Level Heterogeneity:
● New Buyers: Buycott effect seen in increased spending by new buyers,
especially in heavily Republican counties.
● Experienced Buyers: More loyal buyers show little change; inexperienced
buyers increase purchases post-scandal.
● Switching Costs: Brands more insulated from boycotting when customers
face larger switching costs.
​ Heterogeneity by Race or Ethnicity:
● Latino Consumers: No significant boycotting; potential reasons include
switching costs or diverse political preferences.
● Black Consumers: Significant boycotting, possibly aligned with political
preferences.
​ Robustness:
● Various robustness tests confirm the validity of sales changes; no
significant changes in prices or advertising.
​ Conclusion:
● Despite political polarization, the Goya scandal's impact on sales was
modest and short-lived.
● Buycott movements had a larger potential upside than boycotts, especially
for smaller brands.
● Political stances may not significantly affect a brand's most valuable
customers, and risks/benefits of political discourse may be overstated.
● Generalizability limitations acknowledged; future work should explore the
risks and benefits associated with taking a political stance.
Rejoinder: Spilling More Beans on Political Consumerism:
It’s More of the Same Tune
Summary

The authors examine the generalizability of findings related to political

consumerism, emphasizing the need for access to relevant data for
comprehensive analysis across various brands. They discuss specific case
studies, comparing the impact of boycotts on Spotify and Goya. Despite media
attention and stock fluctuations, the boycott against Spotify due to its
association with a controversial podcast host did not significantly affect
subscriber numbers or revenue, similar to the Goya boycott.

There's an observed discrepancy between the volume of social media

discussions (Twitter chatter) and actual sales outcomes in both cases. This
indicates that online discussions might not always align with real purchase
behavior, suggesting a gap between what people say online and what they
actually do.

The article acknowledges challenges in identifying the effects of political

consumerism separately from other factors like advertising or media attention. It
also explores factors influencing consumer behavior, such as identity signaling,
social preferences, and the visibility of consumption choices.

In conclusion, the authors express gratitude for insightful commentaries and

highlight the importance of continued research in understanding the complexities
of political consumerism, including its generalizability, identification challenges,
and consumer motivations.

The case and reading notes -

- Political consumerism campaign—calls to boycott Spotify due to their rela-

tionship with controversial conservative podcast host Joe Rogan—yielded similar
patterns in consumer be- havior to those documented in Liaukonyte ̇ et al.
(2022)’s investigation of Goya Foods.
- Data - We began our analysis by collecting data on Spotify- boycott related
keywords and hashtags using Twitter’s academic application programming
 interface. We obtained data on Spotify premium weekly subscribers and revenue
from Earnest Research, a lead- ing data analytics company that collects
de-identified credit and debit card transaction data.
- GOYA AND SPOTIFY
- We find that, for both the Spotify and Goya boycotts, the conversation on social
media exhibited similar patterns and was short lived, lasting only one news
cycle. In the case of Spotify, we find no significant impact on subscribers and
revenue even in the short run, whereas for Goya, we see that the counter move-
ment (“buycott”) generated a short-lived boost in sales.
- Twitter chatter (and media coverage in the case of Goya) is not a great proxy for
the sales impact of political consumerism because the sales patterns we
document do not align with the skew in the conversation in the media.

CHAT GPT READING

Existing tools for market research, such as conjoint studies, focus groups, and
proprietary data sets can be expensive. If LLMs can generate responses that
are consistent with existing studies on human subjects, then they may also be
able to serve as a fast and low-cost method of providing the information
typically generated by conjoint studies and other customer surveys.

- In this paper, we investigate how LLMs (in our case, Generative Pre-trained
Transformer 3.5, “GPT-3.5” or “GPT” henceforth) can be used as a tool for
market research

- As major tech companies have begun to combine LLMs with tools for
searching and synthesizing information from the web, one might imagine
using LLMs to develop marketing or pricing strategies prior to the launch of a
new product, and then iteratively querying LLMs over time to evaluate
product-market fit and modify the marketing strategy. In a way, consumers are
surveyed indirectly — through their part in forming the text on which LLMs are
trained.
 - Together, our results suggest that GPT potentially provides an alternative
means for marketers to learn about consumer preferences in a fast, low-cost,
and iterative manner.

SUMMARY BY CHATPDF FOR AI READING:

​ detailed summary in points

Sure, here is a detailed summary of the key points from the PDF file:

1. GPT-3.5, and large language models (LLMs) more broadly, can be used as a powerful tool
for uncovering customer preferences. When prompted as if it were a randomly selected
customer, GPT exhibits behaviors that are consistent with economic theory, including
declining price sensitivity with income and state dependence. 22

2. The demand curves implied by GPT are generally not monotonically downward-sloping,
which may be influenced by context effects, preferences for round numbers, prices as a
signal of quality, and left-digit effects. The shape of demand that GPT generates may be
influenced by these and possibly as yet undiscovered phenomena, in addition to more
familiar predictions from economic theory. 8

3. GPT can generate estimates of willingness-to-pay (WTP) for multiple categories of goods
that are close to existing research, and exhibits substitution patterns that are often expected
from real consumer choice data, including correct signs of own- and cross-price effects and
substitution on non-price attributes. Overall, querying GPT can generate estimates that are
similar to those generated by human-based conjoint studies. 22 20

4. The results from GPT are coherent across different queries and scenarios, and the
relationship between different demand curves is similarly coherent. This is an essential
feature for these types of systems to be used as tools for marketing researchers and
practitioners. 22

​ 5. The potential limitations of using GPT for market research include the lack of control over
the training data, the potential for bias in the data, and the need for careful interpretation of
 the results. These limitations can be addressed by using appropriate training data, validating
the results with human-based studies, and using GPT as a complementary tool rather than a
replacement for human-based research. 8
​ more points

Certainly! Here are some additional key points from the PDF file:

6. GPT's training set contains aspects of both customer surveys and real-world demand data,
as consumers comment online about actual or prospective purchases. However, posted
comments about purchases are neither a representative sample of actual sales data nor
prompted by typical consumer survey questions. This motivates an investigation into the
usefulness of GPT for market research. 3

7. GPT can serve as a realistic simulator of customer choice, allowing researchers to prompt
GPT to generate artificial data before running conjoint studies or working with new datasets.
The results may be more realistic than standard approaches for generating simulated choice
data. 22

8. The results suggest that GPT could be useful for the development of new products. While
GPT may not predict the future any better than humans, it can return preferences in ways
that may allow researchers to forecast demand for new goods using existing methods. This
suggests significant potential for progress in translating GPT’s capabilities into practical
tools for researchers and businesses. 22

9. The authors envision a similar literature evolving for GPT-based surveys as there is for
standard ways to solicit customer preferences for goods. This suggests that there is
potential for progress in translating GPT’s capabilities into practical tools for researchers and
businesses. 22

10. The paper offers preliminary guidelines for how best to query information from GPT-3.5
for marketing purposes and discusses potential limitations. These guidelines can help
researchers and businesses make the most of GPT's capabilities while being aware of its
limitations. 1 22
​ These points provide a comprehensive overview of the potential applications, benefits, and
limitations of using GPT-3.5 for market research as discussed in the PDF file.
​ more points in relevance to product and brand management

Certainly! Here are some additional key points from the PDF file that are relevant to product
and brand management:

11. GPT can be used to extract consumer preferences and provide insights into customer
behavior, which can be valuable for product and brand management. By querying GPT about
brand similarities, marketers can gain valuable information about how consumers perceive
different brands and products. 4

12. GPT can be utilized to simulate customer choice, allowing marketers to generate artificial
data before launching new products or conducting extensive market research. This can
provide valuable insights into potential consumer responses and preferences, aiding in
product development and brand management. 22

13. While GPT may not predict the future any better than humans, it can provide valuable
insights into consumer preferences and behaviors, which can be leveraged by marketers for
product and brand management. The results suggest significant potential for progress in
translating GPT’s capabilities into practical tools for marketers. 22

​ These points highlight the potential applications of GPT-3.5 for product and brand
management, including its ability to provide insights into consumer preferences, simulate
customer choice, and offer valuable information about brand perceptions.

Practical implications of AI and Automation in marketing and management

​ ?

The practical implications of AI and automation in marketing and management are

significant and wide-ranging. Here are some key practical implications:

1. Enhanced Customer Insights: AI and automation enable the analysis of large volumes of
customer data to gain deeper insights into consumer behavior, preferences, and trends. This
allows for more targeted and personalized marketing strategies.
2. Improved Decision Making: AI-powered analytics provide real-time data analysis, enabling
better decision-making in areas such as pricing, product development, and resource
allocation.

3. Personalized Marketing: Automation allows for the delivery of personalized marketing

messages and content at scale, leading to more effective customer engagement and higher
conversion rates.

4. Operational Efficiency: Automation streamlines repetitive tasks such as data entry,

scheduling, and reporting, freeing up time for marketing and management teams to focus on
strategic initiatives.

5. Predictive Analytics: AI enables predictive modeling and forecasting, helping businesses

anticipate market trends, customer behavior, and demand patterns.

6. Customer Service and Support: AI-powered chatbots and virtual assistants can handle
customer inquiries, provide support, and offer personalized recommendations, improving the
overall customer experience.

7. Brand Management: AI can be used to monitor and analyze brand sentiment across
various channels, helping businesses understand public perception and manage their brand
reputation effectively.

8. Product Development: AI and automation can aid in product development by analyzing

market trends, identifying consumer needs, and even generating insights into potential
product features and attributes.

9. Marketing Campaign Optimization: AI can optimize marketing campaigns by analyzing

performance data, identifying trends, and making real-time adjustments to improve
campaign effectiveness.
 10. Resource Allocation: AI and automation can help businesses optimize resource
allocation by identifying areas of opportunity, predicting outcomes, and allocating resources
more effectively.

​ Overall, AI and automation have the potential to revolutionize marketing and management by
providing valuable insights, streamlining processes, and enabling more effective
decision-making. However, it's important to note that while AI and automation offer
numerous benefits, they also require careful implementation and oversight to ensure ethical
use and to mitigate potential risks.
CLV (READING)

1. Rewarding customers

2. Identifying cross selling opportunities

3. Forecasting innovations value

4. “Firing “customers

CLV and Relationship marketing – see reading

First time customers, prospective clients, core customers > can convert them

CLV formulas

1.

- Margin are how much profits a customer generates in a given time period
- Survival probabilities denote the likelihood of still being a customers after a specific
number of years.
- “d” is the discount rate used to discount future streams of income. Given by the
finance department
- 0,1,2,3 in the subscript denote the time perios, ie Current Year(0),Year 1(1) etc.
 R1 * S0 = S1. Or R2 * S1 = S2

3. Margin & retention rates are constant over time