1. Overview of Lecture Revisit Prospect Theory Endowment Effect results "Anchoring" Marketing Channels Discuss Group Projects (& form groups)

2. Prospect Theory

3. losses exhibit diminishing sensitivity

4. What would you think about having 50 TV channels?

5. The endowment effect

6. The "Endowment Effect", the"Status Quo Bias" & reference-dependent valuation

7. How many murders in Wisconsin?

8. How many home runs did Mark McGuire hit in his rookie season?

9. Anchoring in market research Would you pay $25 ? YES NO How much would you pay? ________ Would you pay $200 ? YES NO How much would you pay? ________

10. Estimate the product 1 X 2 X 3 X 4 X 5 X 6 X 7 X 8 = ????? 8 X 7 X 6 X 5 X 4 X 3 X 2 X 1 = ?????

11. Anchoring on initial impressions Intelligent – Industrious – Impulsive – Critical – Stubborn – Envious Envious – Stubborn – Critical – Impulsive – Industrious – Intelligent

12. Marketing Channels "Push" : getting channels to carry your product "Pull" : getting consumers to ask for your product by name Firm ChannelsCustomer retail stores wholesalers telemarketing mail order catalogs web sites

13. Marketing Channels "Captive Channels" : channels owned by firm "Non-Captive Channels" : channels not owned by firm "When do retailers have "channel power"? firm's product is not well differentiated from competitors threat of backward integration (e.g. Shaw's cola) Firm ChannelsCustomer

14. Channel Conflict: Examples Firm: Your retail prices are too high, and are driving down demand Retailer: With your wholesale prices, it’s the only way we can make money Firm: You carry too many lines, our product isn't even noticed on shelves Retailer: Customers come first. BTW, why don't you prune your line. Firm RetailerCustomer

15. Channel Conflict: the Internet "free – riding" by internet channel customers who use more than one channel get confused return policies origin of merchandise different prices Firm Website Customer Retail stores