Consumer Decision Making: Perspectives, Types, and Processes, Slides of Economics

Download Consumer Decision Making: Perspectives, Types, and Processes and more Slides Economics in PDF only on Docsity! MKT201 - Week 10 Individual and Organizational Decision Making (Ch. 9 & 12) Consumers As Problem Solvers • A consumer purchase is a response to a problem. • Steps in the decision process: (p.304; 4 steps only; may add one more step) – (1) Problem recognition – (2) Information search – (3) Evaluation of alternatives – (4) Product choice – (5) Outcome - satisfactory or unsatisfactory, repurchase, loyalty, word-of-mouth (Post-purchase behaviour) • Amount of effort put into a purchase decision differs with each purchase. Illustrating the Decision-Making Process • This ad by the U.S. Postal Service presents a problem, illustrates the decision- making process, and offers a solution. Perspectives on Decision Making (1) Rational Perspective: – Consumers integrate as much info as possible, weigh pluses (+) and minuses (-), arrive at a decision How valid is this perspective? Too tedious? Think about impulsively grabbing candies while waiting to pay at counter. – Purchase Momentum: • Initial impulses increase the likelihood of buying more (NOT rational) – Constructive Processing: • Sequence of events by which the consumer evaluates the effort needed to make a choice and then chooses a strategy based on the level of effort required Perspectives on Decision Making (2) Behavioral Influence Perspective: – Buying something on impulse (e.g. “surprise special” in a store) – Concentration on the types of decisions made under low involvement conditions – influenced by store design, packaging, etc. (3) Experiential Perspective: – High involvement – Stresses the totality (Gestalt) of the product or service – Focuses on consumers’ affective responses to products or services Types of Consumer Decisions • Extended Problem Solving: – Corresponds to traditional decision-making perspective • Limited Problem Solving: – People use simple decision rules to choose among alternatives • Habitual Decision Making: – Choices made with little to no conscious effort – Automaticity: Characteristic of choices made with minimal effort and without conscious control A Continuum of Buying Decision Behavior (3 types) ti f i isi i ( t s) Habitual Decision Making Habitual Decision aking Limited Problem Solving Li ited Proble Solving Extensive Problem Solving Extensive Proble Solving Low-Cost ProductsLow-Cost Products Frequent PurchasingFrequent Purchasing Low Consumer Involvement Low Consumer Involvement Familiar Product Class and Brands Familiar Product Class and Brands More Expensive Products More Expensive Products Infrequent PurchasingInfrequent Purchasing High Consumer Involvement High Consumer Involvement Unfamiliar Product Class and Brands Unfamiliar Product Class and Brands Little Thought, Search, or Time Given to Purchase Little Thought, Search, or Time Given to Purchase Extensive Thought, Search, and Time Given to Purchase Extensive Thought, Search, and Time Given to Purchase Limited vs. Extended Problem Solving a7 hea Se Ma ae RUA Limited Problem Solving Extended Problem Solving Motivation Information Search Alternative Evaluation Purchase Low risk and involvement Little search Information processed passively In-store decision likely Weakly held beliefs Only most prominent criteria used Alternatives perceived as basically similar Noncompensatory strategy used Limited shopping time; may prefer self-service Choice often influenced by store displays High risk and involvement Extensive search Information process actively Multiple sources consulted prior to store visits Strongly held beliefs Many criteria used Significant differences perceived among alternatives Compensatory strategy used Many outlets shopped if needed Communication with store personnel often desirable  Problem Recognition: Shifts in Actual or Ideal States Figure 9.3 (2) Information Search • Types of Information Search (a process): Prepurchase Vs Ongoing Search Prepurchase search: Consumer recognizes a need and then searches the marketplace for specific information Ongoing search: Browsing for fun or staying up- to-date on what’s happening in the market Internal Vs External Search Internal search: Scanning our own memory banks for information about product alternatives External search: Obtaining product information from advertisements, friends, or by observing others (Note: Types of Information Sources: Internal and External) Consumer Information Search Framework yh 4 PW aa es he Prepurchase Search Ongoing Search Determinants Involvement in the purchase Involvement with the product Market environment Market environment Situational factors Situational factors Motives Making better purchase decisions Building a bank of information for future use Experiencing fun and pleasure Outcomes Increased product and market knowledge Increased product and market knowledge leading to Better purchase decisions * future buying efficiencies Increased satisfaction with the purchase ® personal influence outcome Increased impulse buying Increased satisfaction from search and other outcomes Source: Peter H. Bloch, Daniel L. Sherrell, and Nancy M. Ridgway, “Consumer Search: An Extended Framework,” Journal of Consumer Research 13 (June 1986): 120. Reprinted with permission of the University of Chicago Press.  Rational Consumer? • This Singaporean beer ad reminds us that not all product decisions are made rationally. Biases in the Decision-Making Processiases i t e ecisio - a i g r cess Loss Aversion People Place More Emphasis on Loss Than They Do Gain. Loss Aversion People Place More Emphasis on Loss Than They Do Gain. Mental Accounting Decisions are Influenced by the Way the Problem is Posed (Framing) ental Accounting Decisions are Influenced by the ay the Problem is Posed (Framing) Sunk-Cost Fallacy Having Paid for Something Makes Us Reluctant to Waste It. Sunk-Cost Fallacy Having Paid for Something Makes Us Reluctant to aste It. e.g. Gain/Loss for a trip to a place with diseases Air ticket paid, must go Prospect theory How Much Search Occurs? s Purchase is Important urchase is I portant Women Shop (Than Men) o en hop (Than en) Need to Learn More About Purchase eed to Learn ore bout urchase Consumers Are Younger, Better-Educated onsu ers re ounger, etter- ducated Information is Easily Obtained Infor ation is asily btained Search Activity is Greater When: earch ctivity is reater hen: Value Style and Image Five Types of Perceived Risk • Purchase decisions that involve extensive search also entail some kind of perceived risk. Figure 9.6 Perceived Risk Undesirable consequences that consumers want to avoid during buying process Examples: • Monetary Risk – Finding that the warranty doesn’t cover fixing your MP3 player; buying new athletic shoes and finding them on sale the next day • Functional Risk – A painkiller doesn’t get rid of headaches very well; a motor oil additive doesn’t really reduce engine wear Perceived Risk • Physical Risk – Side effects of a cold remedy, injury on a bicycle, electric shock from a hair dryer • Social Risk – I don’t feel confident wearing this dress • Psychological Risk – My friends might think these sunglasses look weird on me (sensitive to peer evaluation) Evaluation of Alternatives l ti f lt ti s Evoked Set Actively Considered Evoked Set Actively Considered Inert Set Aware of, But Would Not Buy Inert Set Aware of, But ould Not Buy Inept Set Not Entering Consideration Inept Set Not Entering Consideration All Alternatives All Alternatives Retrieval Set (already in memory) Retrieval Set (already in memory) Prominent Products in Environment Pro inent Products in Environ ent Brands that a consumer is indifferent toward because they are perceived as having no particular advantage. Brands that a consumer excludes from purchase consideration, may be due to unpleasant experience or negative feedback from others Acceptable brands Indifferent brands Unacceptable brands If a consumer has already rejected a product from his/her evoked set, how hard would it be for a marketer to place it back in there and how would they go about it? Levels of Product Categorization ls f t t i ti Fattening Dessert Fattening Dessert Nonfattening Dessert Nonfattening Dessert Ice CreamIce Cream People group things into categories that occur at different levels of specificity. e.g. Ice Cream Cone - ? Apple pie, dessert, sundae, fattening PiePie CakeCake Diet Ice Cream Diet Ice CreamFruitFruit YogurtYogurt Product Positioning • This ad for Sunkist lemon juice attempts to establish a new category for the product by repositioning it as a salt substitute. (4) Product Choice: Selecting Among Alternatives • Evaluative Criteria: – Dimensions used to judge the merits of competing options – Determinant Attributes: Attributes used to differentiate among choices • To recommend a new decision criteria, a communication should: – Point out that there are significant differences among brands on the attribute – Supply the consumer with a decision-making rule – Convey a rule that can be integrated with how the person has made this decision in the past Choosing the Solution • Lava soap lays out the options and invites us to choose the solution. Electronic Recommendation Agents • Intelligent agents and collaborative filtering – Learn from past user behavior to recommend new purchases – “Shopping robots” (or bots) filtering http:// www.mysimon.com/ • Discussion: Will “bots” make our lives too predictable? If so, is this a problem? • Electronic recommendation agents – Asks user to communicate preferences – Recommends list of sorted alternatives – Findings associated with such agents Intelligent Agents Ca ents ens Ele Edit View Favorites Tools Help Oxu- © [x GD seach Pe ravertes @Preds 2) Cy- S "069% Address [4G http: ewewamysimon com! (search ~ Google + AkaVista + AskJeeves AlltheWeb + Look&mart Or All Departments »| Ge » mySimor's Top 190 : ; ; : pe our Departments Apparel & Accessories Women's Clothing, Men's Clething Men's Shoes, Men's Levi's, Juiey Couture, Victoria's Secret, Ski Apparel Home & Garden Kitchen Appliances, Household Appliances, Entedainment Center, Linens, Aquarium Supplies. Jewelry & Watches Rings, Watches, Bravelets, Necklaces, Earrings. Engagement ings, Men's Seika Watches. Autos: New Vehicles, Aurto Loans. Babies & Kids Car Seats, Strollers, Nursing and Feeding, Fisher-Price Little People, Grace Movies Academy Award Winners, Golden Globe Winners, Mast Popular Beauty & Health Music Search for a Product mySimon i Shopping Picks Aeese te Great videos to watch on it W Print great color photos fram Canon's new affordable 560 printer. Most popular printers on rySirnan Hore Theater in a Box for under $500: The Panasonic SC-HT900. Browse our Home Entertainment department » Attention baseball fans: McFarlane makes w incredible MLB action figures. More action figures on mySimon Customize this toolbar > New from Philips: The OVDR8O DVD recarder. af? Hichiioht | @ intemet  Heuristics isti s Common Heuristics Price/ Quality Relationship rice/ uality elationship Brand Loyalty rand Loyalty Product Signal roduct ignal Country of Origin ountry of rigin Market Beliefs arket eliefs Brand Names rand a es Retail Outlets etail utlets Heuristics are Mental Rules-of-Thumb That Lead to a Speedy Decision. Appearance - Quality Specialty shop - better Stereotype, ethnocentrism Heuristics (cont.) • Country-of-Origin as a Product Signal – Roper Starch Worldwide categorization of people’s level of cultural attachment • Nationalists (26% of sample) – attached to own culture • Internationalists (15% of sample) – three or more outside cultures • Disengaged (7% of sample) – no attachment to any culture – Country-of-origin: Can be an important piece of information in the decision-making process – Stereotype: A knowledge structure based on inferences across products – Ethnocentrism: Tendency to prefer products or people of one’s own culture. – Consumer Ethnocentrism Scale (CETSCALE): Measures ethnocentrism • The clothing ad to the right captions, “Authentic American Clothes Since 1949” • Which of the Roper Starch Worldwide segments is this ad designed to appeal to? Is this a product where country of origin is typically important? Discussion Question • The clothing ad to the right captions, “Authentic American Clothes Since 1949” • Which of the Roper Starch Worldwide segments is this ad designed to appeal to? Is this a product where country of origin is typically important? • NATIONALISTS • YES, COO is important here. (importance of ethnocentrism; patriotism) Discussion Question Decision Rules isi l sConsumers Consider Sets of Product Attributes by Using Different Decision Rules, Depending on the Complexity of the Decision and the Importance of the Decision to Them. LexicographicLexicographic Elimination-By-AspectsEli ination-By-Aspects ConjunctiveConjunctive Non-compensatory Decision Rules Non-co pensatory Decision Rules Compensatory Decision Rules Co pensatory Decision Rules Simple AdditiveSi ple Additive Weighted Additiveeighted Additive Lexicographic + elimination-by-aspects the largest no. of +ve attributes brand rating x importance weights Decision Rules isi l sConsumers Consider Sets of Product Attributes by Using Different Decision Rules, Depending on the Complexity of the Decision and the Importance of the Decision to Them. LexicographicLexicographic Elimination-By-AspectsEli ination-By-Aspects ConjunctiveConjunctive Non-compensatory Decision Rules Non-co pensatory Decision Rules Lexicographic + elimination-by-aspects Based on most important attribute, then 2nd most important, and so on. Based on specific “cut-off” attribute, e.g. must have timer function. Hypothetical Alternatives for a TV Set TABLE 9.4 HYPOTHETICAL ALTERNATIVES FOR A TV SET Brand Ratings Importance Attribute Ranking Prime Wave _ Precision Kamashita Size of screen 1 Excellent Excellent Excellent Stereo broadcast capability 2 Poor Excellent Good Brand reputation 3 Excellent Excellent Poor Onscreen programming 4 Excellent Poor Poor Cable-ready capability 5 Good Good Good Sleep timer 6 Excellent Poor Good  Organizational Decision Makers • In the Information Age, organizational decision makers must stay on top of clients’ complex needs. Advertising to Organizational Buyers • Advertisements targeting organizational buyers such as this CDW ad for technology equipment often try to assuage/release the concerns of the risk associated with purchase. • This ad states, “At CDW, we know that every day, you’re asked to do the impossible. From personal account managers to custom configuration, you can count on us for brand name products, the way you need them, when you need them.” Organizational Decision Making Versus Consumer Decision Making • Factors which distinguish organizational and industrial purchase decisions from individual consumer decisions: 1. Purchase decisions frequently involve many people 2. Products are often bought according to precise technical specifications that require a lot of product category knowledge 3. Impulse buying is rare 4. Decisions are often risky 5. The dollar volume of the purchase is substantial 6. More emphasis on personal selling than advertising Organizational Buying Decision Types TABLE 12.1 eS UU AU RU em te ST) Buying Situation Extent of Effort Risk Buyers Involved Straight rebuy Habitual decision making Low Automatic reorder Modified rebuy Limited problem solving Low to moderate One or a few New task Extensive problem solving High Many Source: Adapted from Patrick J. Robinson, Charles W. Faris, and Yoram Wind, Industrial Buying and Creative Marketing [Boston: Allyn & Bacon, 1967].  Decision- Making Unit of a Buying Organizatio n is Called Its Buying Center. Users Influencers Buyers Deciders Gatekeepers Roles Include Participants in Business Buying Process Initiator How Organizational Buyers Operate • Decision Roles: – Initiator: The person who brings up the idea or need. – Gatekeeper: The person who conducts the information search and controls the flow of information available to a group. – Influencer: The person who tries to sway the outcome of the decision. – Buyer: The person who actually makes the purchase. – User: The person who winds up using the product or service. • B2B E-Commerce – Refers to Internet interactions between 2 or more businesses or organizations