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Teaching notes · lesson 12 · a 20-minute class

Habit, loyal buyers and switchers

Why share moves slowly, then keeps moving. Tracks: Strategy, Pricing.

Open the lesson

Learning goalsBy the end, students can

  • Tell habitual buyers from switchers and say who reacts to price and deals.
  • Explain state dependence and why share keeps moving after a change.
  • Predict how a market's loyalty changes the speed of share moves.

The 20-minute classMinute by minute, with the lab on the projector

  1. 0:003 min, to 3:00

    Cold open

    Ask: when did you last check the price of your usual toothpaste? Most can't remember.

  2. 3:004 min, to 7:00

    The idea

    Split buyers into loyal and switchers. Define state dependence: having bought it makes buying it again more likely.

  3. 7:005 min, to 12:00

    Lab on the projector

    Cut price 10% and hold it. Set habit low, then high. Watch how far and how fast share moves.

  4. 12:003 min, to 15:00

    Pairs

    Pairs explain why the share line keeps rising after the quarter of the cut.

  5. 15:003 min, to 18:00

    Discussion

    Take the deal question: who gets most of the deal money?

  6. 18:002 min, to 20:00

    Check

    Three lesson questions.

Discussion questionsWith what a strong answer covers

  1. Most deal money goes to buyers who would have bought anyway. Why?

    A strong answer covers
    • Most purchases come from habitual buyers.
    • They pay less on deal without changing what they buy.
    • Switchers are the minority the deal is aimed at.

  2. Why does a plan's full effect show a few quarters later?

    A strong answer covers
    • Part of each quarter's buying carries into the next.
    • So a change keeps building for several quarters.
    • Judging a plan in its own quarter understates it.

  3. How does habit protect a brand when a rival attacks?

    A strong answer covers
    • Habitual buyers barely react to the rival's price.
    • Share moves slowly in both directions.
    • The brand has time to answer.

The lab as homeworkAbout 15 minutes for a student

Use the lab to see how loyalty changes the speed of share moves.

  1. Cut price 10% and hold it with habit set low; note share each quarter.
  2. Repeat with habit set high.
  3. Compare how far and how fast share moved.

They answer: With a 10% price cut held, how did share move in a low-habit market against a high-habit one, and why?

A strong answer covers
  • Quotes the lab's share path for both settings.
  • Shows the high-habit market moves less at first and keeps building.
  • Explains state dependence and the smaller pool of switchers.

Students also answer the lesson's three questions. Their score is worked out on the server from their answers.

Set this lab as homework

Students open a link, do the lab, answer the three questions and write what they found. You see each student's quiz score and finding on your class page.

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