CHAPTER 6 Consumer Decision Making, Exams of Marketing

Download CHAPTER 6 Consumer Decision Making and more Exams Marketing in PDF only on Docsity! CHAPTER 6 Consumer Decision Making LEARNING OUTCOMES 1 Explain why marketing managers should understand consumer behavior An understanding of consumer behavior reduces marketing managers’ uncertainty when they are defining a target market and designing a marketing mix. 2 Analyze the components of the consumer decision-making process The consumer decision-making process begins with need recognition, when stimuli trigger awareness of an unfulfilled want. If additional information is required to make a purchase decision, the consumer may engage in an internal or external information search. The consumer then evaluates the additional information and establishes purchase guidelines. Finally, a purchase decision is made. 3 Explain the consumer’s postpurchase evaluation process Consumer postpurchase evaluation is influenced by prepurchase expectations, the prepurchase information search, and the consumer’s general level of selfconfidence. When a purchase creates cognitive dissonance, consumers tend to react by seeking positive reinforcement for the purchase decision, avoiding negative information about the purchase decision, or revoking the purchase decision by returning the product. 4 Identify the types of consumer buying decisions and discuss the significance of consumer involvement Consumer decision making falls into three broad categories: routine response behavior, limited decision making, and extensive decision making. High-involvement decisions usually include an extensive information search and a thorough evaluation of alternatives. In contrast, low-involvement decisions are characterized by brand loyalty and a lack of personal identification with the product. The main factors affecting the level of consumer involvement are previous experience, interest, perceived risk of negative consequences (financial, social, and psychological), and social visibility. 5 Identify and understand the cultural factors that affect consumer buying decisions Cultural influences on consumer buying decisions include culture and values, subculture, and social class. Culture is the essential character of a society that distinguishes it from other cultural groups. The underlying elements of every culture are the values, language, myths, customs, rituals, laws, and the artifacts, or products, that are transmitted from one generation to the next. The most defining element of a culture is its values. A culture can be divided into subcultures on the basis of demographic characteristics, geographic regions, national and ethnic background, political beliefs, and religious beliefs. 6 Identify and understand the social factors that affect consumer buying decisions Social factors include such external influences as reference groups, opinion leaders, and family. Consumers seek out others’ opinions for guidance on new products or services and products with image-related attributes or because attribute information is lacking or uninformative. Consumers may use products or brands to identify with or become a member of a reference group, or to follow an opinion leader. Family members also influence purchase decisions; children tend to shop in similar patterns as their parents. 7 Identify and understand the individual factors that affect consumer buying decisions Individual factors that affect consumer buying decisions include gender; age and family life cycle stage; and personality, self-concept, and lifestyle. Beyond obvious physiological differences, men and women differ in their social and economic roles, and that affects consumer buying decisions. A consumer’s age generally indicates what products he or she may be interested in purchasing. Marketers often define their target markets in terms of consumers’ life cycle stage, following changes in consumers’ attitudes and behavioral tendencies as they mature. Finally, certain products and brands reflect consumers’ personality, self-concept, and lifestyle.ADVANCE \u3 CHAPTER 6 Consumer Decision Making 8 Identify and understand the psychological factors that affect consumer buying decisions Psychological factors include perception, motivation, learning, values, beliefs, and attitudes. These factors allow consumers to interact with the world around them, recognize their feelings, gather and analyze information, formulate thoughts and opinions, and take action. Perception allows consumers to recognize their consumption problems. Motivation is what drives consumers to take action to satisfy specific consumption needs. Almost all consumer behavior results from learning, which is the process that creates changes in behavior through experience. Consumers with similar beliefs and attitudes tend to react alike to marketing-related inducements. Learning Outcomes and Topics PowerPoint Slides Explain why marketing managers should understand consumer behavior 1.1 The Importance of Understanding Consumer Behavior 1: Consumer Decision Making 2: Learning Outcomes 3: Learning Outcomes 4: The Importance of Understanding Consumer Behavior 5: Understanding Consumer Behavior Analyze the components of the consumer decision-making process 2.1 The Consumer Decision- Making Process 6: Consumer Decision-Making Process 7: Consumer Decision-Making Process 8: Exh 6.1: Consumer Decision-Making Process 9: Need Recognition 10 Consumers scale back 11:Need Recognition 12:Stimulus 13:Recognition of Unfulfilled Wants 14:Information Search 15:External Information Searches 16:Evoked Set 17:Evaluation of Alternatives 18:Purchase Explain the consumer’s postpurchase evaluation process 3.1 Postpurchase Behavior 19:Postpurchase Behavior 20:Cognitive Dissonance 21:Postpurchase Behavior Identify the types of consumer buying decisions and discuss the significance of consumer involvement 4.1 Types of Consumer Buying Decisions and Consumer Involvement 22:Types of Consumer Buying Decisions and Consumer Involvement 23:Consumer Buying Decisions and Consumer Involvement 24:Involvement 25:Exh 6.2: Continuum of Consumer Buying Decisions 26:Routine Response Behavior 27:Limited Decision Making 28:Extensive Decision Making 29:Factors Determining Level of Involvement 30:Marketing Implications of Involvement CHAPTER 6 Consumer Decision Making Describe the three categories of consumer decision-making behavior. Name typical products for which each type of consumer behavior is used. Although students’ answers will vary, they should address some of the following points. Consumers engage in routine response behavior when making inexpensive, habitual purchases of familiar brands. Items in this category include shampoo, cigarettes, catsup, margarine, and bread. Limited decision making is used for occasional purchases such as compact discs, clothing, and minor household appliances. Limited decision making is also employed for evaluating unfamiliar brands in familiar product categories. Consumers engage in extensive decision making when making infrequent, expensive, or unfamiliar purchases. Such purchases might include stereo components, personal computers, and major household appliances. Describe the level of involvement and the involvement factors likely to be associated with buying a new computer. Do you think Apple’s Web site at http://www.apple.com simplifies or complicates the process for the average consumer? Explain. Answers may vary according to students’ characterizations of the average consumer and personal experience. Generally, consumers making infrequent, expensive, or unfamiliar purchases, such as a computer, engage in extensive decision making. How do beliefs and attitudes influence consumer behavior? How can negative attitudes toward a product be changed? How can marketers alter beliefs about a product? Give some examples of how marketers have changed negative attitudes about a product or added or altered beliefs about a product. Beliefs are organized patterns of knowledge that an individual holds as true about his or her world. Consumers tend to develop a set of beliefs about a product’s attributes and then, through those beliefs, form a brand image—a set of beliefs about a particular brand. An attitude is a learned tendency to respond consistently toward a given object. Beliefs help form the basis for attitudes, as do values. Often, the marketer’s goal is to change attitudes toward a brand. This goal might be accomplished in three ways: changing beliefs about the brand’s attributes, changing the relative importance of those beliefs, and adding new beliefs. For example, Harley Davidson, through strict quality control, has changed the belief about the quality of their product. And by limiting production they have added a new belief that it is an exclusive and sought-after product. From Evans & Berman: OVERVIEW A. The consumer is the central focus of marketing. B. To devise good marketing plans, it is essential to study consumer attributes and needs, lifestyles, and purchase processes, and then make proper marketing-mix decisions. C. Consumer analysis includes the study of who buys, what they buy, why they buy, how they make decisions to buy, when they buy, where they buy, and how often they buy. D. An open-minded, consumer-oriented approach is imperative in today’s diverse global marketplace so a firm can identify and serve its target market, minimize dissatisfaction, and stay ahead of competitors. See Figure 8-1. CHAPTER 6 Consumer Decision Making E. Final consumers purchase for personal, family, or household use. CHAPTER 6 Consumer Decision Making F. Organizational consumers buy goods and services for further production, usage in operating the organization, or resale to other consumers. DEMOGRAPHICS DEFINED AND ENUMERATED A. Consumer demographics are objective and quantifiable population characteristics. They are easy to identify, collect, measure, and analyze. B. In combination, demographics can be used to develop consumer demographic profiles that can pinpoint opportunities and potential problems. See Figure 8-2. C. Several secondary sources offer data on consumer demographics: 1. U.S. Bureau of the Census—provides considerable national, state, and local data via printed reports, computer tapes, microfiche, CDs, and online data bases. Census of Population data are gathered every ten years and must be supplemented by Bureau of the Census estimates. 2. American Demographics—specialized publication dealing mostly with U.S. trends. 3. Survey of Buying Power—current U.S. data and future projections by metropolitan area and states. Other U.S. sources—Editor & Publisher Market Guide, Rand McNally Commercial Atlas & Marketing Guide, Standard Rate & Data Service, local newspapers, and regional planning boards. International demographics—United Nations, Euromonitor, and the Organization for Economic Cooperation and Development. POPULATION SIZE, GENDER, AND AGE A. The world population is expected to go from 6.15 billion people in 2001 to 6.9 billion in 2010, an annual rise of 1.2 percent. B. The U.S. population is expected to rise from 285 million people to 309 million people, an annual rise of less than 1 percent. C. Figure 8-3 shows the world’s population by region for 2001 and 2010. D. In industrialized countries, newborns are less than 2 percent of the population (1.4 percent in the United States)—compared with up to 4 percent or more in nations such as Afghanistan, the Congo, and Saudi Arabia. For the industrialized countries, a large proportion of the births are firstborns. E. Worldwide, males and females comprise equal percentages of the population. Yet, in many industrialized nations, females are over one-half of the population—mostly due to differences in life expectancy. CHAPTER 6 Consumer Decision Making MARITAL STATUS A. About 2.3 million U.S. couples get married each year. Currently, only 52 percent of U.S. households contain married couples. B. The median U.S. age at first marriage is 27 years for males and 25 years for females. C. The average U.S. family size is now 3.1. D. A family is a group of two or more persons residing together who are related by blood, marriage, or adoption. E. A household is a person or group of persons occupying a housing unit, whether related or unrelated. In many nations, average household size has been dropping. (The U.S. average today is 2.6.) Of the 110 million U.S. households, 26 percent are one-person units, while family households represent 68 percent of all households. ETHNICITY/RACE A. Ethnicity/race should be studied to determine the existence of diversity among and within nations in terms of language and country of origin or race. B. Worldwide, there are more than 200 different languages spoken by at least 1 million people each. C. Even within nations, there may be diversity as to the languages spoken. D. One of the issues facing the European Community in its expansion is the multiplicity of languages spoken. E. Most nations consist of people representing different ethnic and racial backgrounds. Sometimes, the people in various groups continue to speak the languages of their countries of origin, even though they may have resided in their current nations for one or two generations. F. In the United States, the population is comprised of people from virtually every ethnic and racial group in the world. The Bureau of the Census uses “Black or African- American,” “White,” “Asian,” “Native Hawaiian and Other Pacific Islander,” and “American Indian and Alaska Native” to delineate racial groups. “Hispanic” is an ethnic term, denoting people of any race. G. The U.S. population is 75 percent White, 13 percent Black/African-American, 4.5 percent Asian/Native Hawaiian/Other Pacific Islander, and 0.9 percent American Indian/Alaska Native, with 4.2 percent defined as “Other Race” and 2.4 percent as “Multiracial.” Hispanics are 13.3 percent of the population. H. In the future, the United States will become even more diverse. See Figure 8-5. USES OF DEMOGRAPHIC DATA CHAPTER 6 Consumer Decision Making A. After studying individual demographics, a firm can form demographic profiles to better focus its marketing efforts. B. Three examples are provided as follows: The single-person U.S. household is changing. a. Most people living alone have been women, but men are catching up. b. Most women living alone are 55 or older, compared with 34 percent of men that age. c. Ten percent of single men and 5 percent of single women have an income of $50,000 or more. d. More than half of single-person householders own a home and nearly 40 percent live in central cities. e. In the future, living alone may be more of a lifestyle choice or a transitory situation. The demographic profile of 21-year-olds is interesting. a. In the United States, 1 million people turn 21 each year. b. More than 40 percent live at home, 70 percent have a job, and 93 percent have a credit card. c. They spend an average of three hours daily surfing the Web, downloading music, and E-mailing friends. d. They will spend an average of $210,000 over their adult lives on cars. 3. The profiles of Australia and Turkey are contrasted. LIMITATIONS OF DEMOGRAPHICS A. Information may be old. B. Data may be limited in some nations, especially less-developed and developing ones. C. Summary data may be too broad and hide opportunities and risks in small markets or specialized product categories. D. Demographic data do not consider psychological or social factors affecting consumers. E. The decision process used in purchasing is not explained. F. Demographics do not explain why consumers make particular decisions. G. Demographic data are unable to answer these questions: 1. Why do consumers act as they do? 2. Why do consumers with similar demographic characteristics act differently? 3. To whom do consumers look for advice prior to purchasing? 4. Under what situations do families (households) use joint decision making? 5. Why does status play a large role in the purchase of some products and a small role in others? 6. How do different motives affect consumer decisions? 7. How does risk affect consumer decisions? 8. Why do some consumers act as innovators and buy products before others? CHAPTER 6 Consumer Decision Making 9. How important are purchase decisions to consumers? 10. What process do consumers use when shopping for various products? 11. How long will it take for consumers to reach purchase decisions? 12. Why do consumers become brand loyal or regularly switch brands? H. Social and psychological factors comprise a consumer’s lifestyle, which represents the way in which a person lives and spends time and money. I. The consumer’s decision process involves the steps a person uses in buying goods and services. CONSUMER LIFESTYLES A. Consumer lifestyles are formed by social and psychological characteristics. SOCIAL CHARACTERISTICS OF CONSUMERS A. The final consumer’s social profile is based on a combination of factors. See Figure 8-6. B. A culture comprises a group of people who share a distinctive heritage. The American culture values achievement and success, activity, efficiency and practicality, progress, material comfort, individualism, freedom, external conformity, humanitarianism, youthfulness, and fitness and health. C. Social class systems reflect a “status hierarchy by which groups and individuals are classified on the basis of esteem and prestige.” Social classes are based on income, occupation, education, and type of dwelling. Each social class may represent a distinct target market. See Table 8-1. D. Social performance is how a person carries out his or her roles as a worker, family member, citizen, and friend. E. A reference group is one that influences a person’s thoughts or actions. Face-to-face groups have the most effect. By pinpointing reference groups that most sway consumers, marketers can better target their strategies. F. Opinion leaders are people to whom other consumers turn for advice and information via face-to-face communication. They tend to be expert about a product category, socially accepted, long-standing community members, gregarious, active, trusted, and tend to seek approval from others. They typically have an impact over a narrow product range, and are perceived as more believable than company-sponsored information. G. The family life cycle describes how a family evolves from bachelorhood to solitary retirement. At each stage, needs, experience, income, family composition, and the use of joint decision making change. Joint decision making is the process whereby two or more people have input into purchases. Table 8-2 shows a traditional family life cycle and its marketing relevance. CHAPTER 6 Consumer Decision Making A. The final consumer’s decision process is the way in which people gather and assess information and choose among alternative goods, services, organizations, people, places, and ideas. It comprises the process itself and the factors affecting it. B. The process has six basic stages (the next six sections). Factors affecting the process are a consumer’s demographic, social, and psychological characteristics. See Figure 8-9. 1. Sometimes, all six stages in the process are used; other times, only a few steps are utilized. 2. At any point in the process, it may be ended. STIMULUS A. A stimulus is a cue or a drive meant to motivate a person to act. B. A stimulus can be any of the following: 1. Social cue. 2. Commercial cue. 3. Noncommercial cue. 4. Physical drive. C. A prospective consumer may be exposed to any or all of these stimuli. If a person is sufficiently stimulated, he or she will proceed to the next stage in the decision process. PROBLEM AWARENESS A. During problem awareness, a consumer recognizes that the good, service, organization, person, place, or idea under consideration may solve a problem of shortage or unfulfilled desire. B. Recognition of shortage occurs when a consumer realizes a repurchase is needed. C. Recognition of unfulfilled desire takes place when a consumer becomes aware of a good, service, organization, person, place, or idea that has not been bought before. D. Many consumers hesitate to act on unfulfilled desires due to greater risks. INFORMATION SEARCH A. Information search requires listing the alternatives that will solve the problem at hand and determining the characteristics of them. B. Search can be internal and/or external. C. As risk increases, more information is sought. CHAPTER 6 Consumer Decision Making D. Once an information search is completed, it must be determined whether the shortage or unfulfilled desire can be satisfied by any alternative. E. The Web has become a major source for consumer shopping information. Six useful sources are provided. EVALUATION OF ALTERNATIVES A. The alternatives are evaluated on the basis of the consumer’s criteria and the relative importance of these criteria. B. They are then ranked and a choice made. C. Decision criteria are the features a person deems relevant, such as price, style, quality, safety, durability, status, and warranty. D. In situations where no alternative is satisfactory, a decision to delay or not make a purchase is made. PURCHASE A. The purchase act involves an exchange of money, a promise to pay, or support in return for ownership of a specific good, the performance of a specific service, and so on. B. Purchase decisions remaining at this stage center on the following: 1. The place of purchase. 2. Purchase terms. 3. Availability. C. If the above elements are acceptable, a consumer will make a purchase. See Figure 8-10. POST-PURCHASE BEHAVIOR A. Frequently, the consumer engages in post-purchase behavior. 1. Buying one item may lead to the purchase of another. 2. Reevaluation of the purchase occurs when the consumer rates the alternative selected against performance standards. B. Cognitive dissonance, doubt that a correct purchase decision has been made, can be reduced by follow-up calls, extended warranties, and post-purchase advertisements. FACTORS AFFECTING THE FINAL CONSUMER’S DECISION PROCESS A. Demographic, social, and psychological factors affect consumer decision making. CHAPTER 6 Consumer Decision Making B. By knowing how these factors influence decisions, a firm can fine-tune its marketing strategies to cater to the target market and its purchase behavior. TYPES OF DECISION PROCESSES A. Each time a person buys a good or service, donates to a charity, and so on, he or she uses the decision process, often subconsciously. B. There are three ways in which the decision process may be used. See Figure 8-11. 1. Extended decision making occurs when a person fully uses the process. It is used for expensive, complex items with which a person has little or no experience. Perceived risk is high and time pressure is low. 2. Limited decision making occurs when a person uses every step in the purchase process but does not spend a great deal of time on some of them. The consumer has some experience. The thoroughness with which the process is used depends on the amount of prior experience, the importance of the purchase, and the time pressure facing the consumer. 3. Routine decision making involves habitual behavior and skips steps in the process. Regularly purchased items are bought in this manner. Information search, evaluation, and post-purchase behavior are normally omitted. C. Nine differences between consumers in industrialized nations and those in less- developed and developing ones are cited in the text. D. With low-involvement purchasing, a consumer minimizes decision making for those goods and services he or she views as unimportant. Table 8-5 compares the traditional high-involvement view of consumer behavior with the newer low- involvement view. E. Brand loyalty is the consistent repurchase of and preference toward a brand. It enables a consumer to reduce time, thought, and risk. F. The text explains how Gateway generates and sustains customer loyalty. MARKETING IMPLICATIONS OF THE FINAL CONSUMER’S DECISION PROCESS A. There have been many studies on the marketing implications of the final consumer’s decision process. 1. U.S. consumers are twice as likely to shop on Saturday and Sunday than at any other time. They also spend more on their weekend shopping trips. Twenty percent of online shopping is between 9:00 P.M. and 9:00 A.M. when most traditional retailers are closed. Two-thirds of North American consumers like to shop around before making purchases. Consumers in India like to bargain and “extract” a right price from the retailer. For several reasons, “substantial time often elapses between the time people recognize the need for a product and the time they actually purchase it.” These may be the reasons for this: a. They don’t think they have enough time to devote to the decision. They may feel shopping is unpleasant.