This document discusses how psychology relates to marketing from a two-system perspective. System 1 is the autopilot - it is fast, automatic, and associative. System 2 is the pilot - it is slower, more effortful, and rule-governed. Marketing aims to influence System 1 associations between brands and meanings. Consumers are not always rational and make choices based on active goals and the reward centers of the brain. An effective marketing strategy involves understanding the goals customers want to achieve and positioning brands to offer high goal value.

1. Applications of Psychology
to Marketing 1 Mark Ng 2014

2. Focus of this course
How to do marketing from a psychological
perspective?

3. How psychology relate to
marketing?
• Do you think consumers are rational?

4. Traditional views about
consumers
• Consumers are rational decision makers
• Their decision making process would be
affected by different factors
– Psychological factors
– Personal factors
– Social factors
– Cultural factors

5. Today’s class
Reading:
Kahneman, D.(2012).
Ch.1
Barden, P. (2013). Decoded
Ch. 5, 6

6. Two system perspective
System 1
Autopilot
Implicit
System 2
Pilot
Explicit
Input Decision

7. Characteristics of two systems
System 1 System 2
Perception and Intuition Reflection
Action
Fast
Parallel
Automatic
Effortless
Associative
Slow-learning
Thinking
Slow
Serial
Controlled
Effortful
Rule-governed
Flexible

8. Evidence of two systems:
• Stroop tests
– Automation vs
Manual

9. • Experience of autopilot

10. Auto
pilot
Sense and Autopilot
Pilot
Skin Ear Eye Tongue Nose

11. Two systems in conflict

12. Pepsi Challenge (1980s)
• Why Pepsi prevails
in test, but Coke
takes the market?

13. Coca Cola = Santa Claus?

14. Learning
System 1 Auto pilot
• Associative
learning
– Classical and
operant
conditioning
– Imitation
System 2 Pilot
• Cognitive learning
– Information
processing
– Social cognitive
learning

15. Formation of associated
network
• System 1: all sort of sensory information
linked to the brand

16. Associated meanings types
• Common examples:
Brand-specific – claims
Ad-specific – ad execution, message
Brand identification – logos, trade dress
Product category – occasion
Evaluative reactions – positive/negative
emotions

17. Product and Psychology
• How consumer make their choice?
• Why new product fails?
• Why you pay more for brands?
• Issues of changing package design

18. How consumers make their
choices?
How you choose among them?

19. Traditional views
• Motivation – needs and wants?
• Multi-attribute model?
• I like it, so I buy it?

20. However…
• We have different needs and wants…
• We are not so rational all the time
• We like many things, but we may not buy
them (Berns & Moore, 2012)

21. New perspective:
Goal Value Perspective
• Reward centre of our brain predicts
purchase (Berns & Moore, 2012; Knutson
et al., 2007)
• Activation of reward centre (OFC Ventral
Striatum)  Future sales

22. Goal value perspective
• Reward center determine willingness to
pay
• The more relevant a product to an active
goal, the higher the expected reward and
willing to pay
– Products and brands offer high goal value 
consumers have a high willingness to pay
when they fit their goal

23. • Implications on STP:
– The consumer goal, not the
customer or the category, is
the fundamental unit to
define the market
– E.g. what are the goals for
drinking coffee?

25. – Positioning
• Goal-based category = define competition and
position
– Coffee: Competitors for recharge vs Competitors for relax
• Product with good positioning = products clearly
offer high goal values in a particular category
– When I think about drinking a coffee for relaxation, I
would go to….
• Which goal activate the brand?
– By purchasing this product, out customers want to
be, have, do….

26. • Summary:
– People choose products and brands relevant
to their achievements of goals
– Goals are basic unit of understanding
consumer purchase
– Goals can be activated and pursued on
autopilot