Consumers’ choices are prey to subtle discrepancies that arise in cognitive acco

Question

Consumers’ choices are prey to subtle discrepancies that arise in cognitive accounting. Learning how and when you are prey to these discrepancies is an important step in improving your decision making.

As the readings for this module demonstrate, people value gains and losses differently under different scenarios. For example, contestants in a game show might choose a guaranteed $10 prize over a 50 percent chance of winning $20 despite the fact that the expected values are the same.

Using the readings for this module, the Argosy University online library resources, and the Internet, address the following:

What is mental accounting and how does it impact consumer decision making?

How might a company take advantage of consumers’ mental accounting? Give examples.

As a marketer, how might you frame certain decisions to benefit from the disparities that arise in one’s cognitive accounting?

As a consumer, how would you avoid the pitfalls posed by the inequalities of one’s cognitive accounting?

Write a 3–5-page paper in Word format. Apply APA standards to citation of sources. Use the following file naming convention: LastnameFirstInitial_M4_A2.doc.

Explanation / Answer

Answer:-
Scenario
Consumers’ choices are prey to subtle discrepancies that arise in cognitive accounting. Learning how and when you are prey to these discrepancies is an important step in improving your decision making.As the readings for this module demonstrate, people value gains and losses differently under different scenarios. For example, contestants in a game show might choose a guaranteed $10 prize over a 50 percent chance of winning $20 despite the fact that the expected values are the same.
What is mental accounting and how does it impact consumer decision making?
Mental accounting influences consumer behavior by determining when a person chooses to move forward or to postpose a purchase, by defining a gain or a loss, and the rationalization of the timing of the choices of the individual. “Marketers especially want to leverage these predilections to frame one’s perceptions and choices in non-rational ways,” (Argosy University, 2015). Mental accounting impacts consumer decision making because it helps them “categorize and quantify economic outcomes,” (Thaler, 1980), and categorize thought processes into different classifications of where they put value in their lives. These classifications are organized by a perceived value of gains and losses.
How might a company take advantage of consumers’ mental accounting? Give examples.
Companies could take advantage of consumer’s mental accounting by giving them the perception of a choice, yet in both scenarios, the company wins. In the example of contestants in the game show where a $10 prize is guaranteed or they could choose the option of a $20 prize with a 50% chance of success, most would take the sure thing. Even though the odds and the expected values are mathematically equivalent, a person could walk away with a better end result than the perceived likelihood of walking away with nothing because the flip of a coin seems too easy to be true. There are too many negative situations these days with regards to rigged games like at the State Fair to where there is trickery present.In the basketball shooting game, from the front it looks like a standard hoop, yet from the side the rim is an oval thus minimizing the depth, not a perfect circle which makes it significantly more difficult.
As a marketer, how might you frame certain decisions to benefit from the disparities that arise in one’s cognitive accounting?
Consumers tend to go to great lengths to save money that is associated with the differences in values as opposed to the value in the differences. A consumer would drive across the city to save $5 off of a $15 dollar product, than to drive close to home to save $5 on a $100 purchase. This proves that perceived value in the bargain creates a disparity of benefit that is directly correlated to one’s cognitive accounting. The marketer could take a $10 product and increase the price to $15, then offer a limited time discount of $5 to artificially inflate the demand.
As a consumer, how would you avoid the pitfalls posed by the inequalities of one’s cognitive accounting?
As a consumer, it is important to perform research and to know the value of an item regardless of the temporary discounts. It is important to not fall for the “buy one, get one,” or the high discount products.Consumer can keep the product which is original or branded.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.