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ConsumerConsumerDecision MakingDecision Making
Chapter 9
Consumer Decision Making
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The Decision Process
Every day we make numerous decisions concerning every aspect of our daily lives
Particularly in American society, we are rarely put in a position where we have no choices
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Rational decision-making In economic theory, consumers are portrayed
as making rational decisions Consumers attempt to maximize their utility
continuously within the constraints of limited resources
Consumers must Be aware of all available product alternatives Be capable of correctly ranking each in terms of
benefits and costs Be able to identify the one best alternative
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Consumers are limited in their skills Consumers are limited by their existing
values and goals Consumers are limited in the extent of their
knowledge Doesn’t take into account the impacts of
advertising and marketing
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Effort Variation in Decision Making The amount of effort a consumer puts into a
decision varies depending on how involved the consumer is with the purchase
In low involvement purchases, consumers view the purchase as unimportant and the outcome of the decision inconsequential
High involvement purchases are those that are important from a financial, social or psychological standpoint
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Programmed decisions
Decisions we make without much thought (habitual)
Brand loyalty is related because it is another method to minimize effort
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Non-programmed decisions Decisions that are new or occur infrequently enough
that consumers have to undertake more of an effort to obtain information
May involve extended problem solving where the consumer has no established criteria for evaluating a product category or specific brands in the category
May involve limited problem solving where the consumer has established the basic criteria but has not yet established preferences among brands
Impulse purchases require little or no cognitive effort on the part of the consumer
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A consumer decision-making model John Dewey identified five stages in the
decision-making process
1. Problem/need recognition
2. Search activity
3. Identifying and evaluating solutions
4. Purchase or commitment
5. Post-purchase considerations
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1. Problem/Need Recognition
Sometimes arises from changes in circumstances
Sometimes arises from marketing Two different need recognition styles
1. Desired state: consumers whose desire for something new triggers the decision process
2. Actual state: consumers who believe they have a problem/need when a product fails
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2. Pre-purchase Search Activity Begins as soon as the problem/need is
identified Extent of search depends on degree of
involvement Nature of search depends on consumer’s
level of experience with the product Two types of searches
1. Internal
2. External
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Internal search Consumer will search his/her memory before
seeking external sources The greater the past experience, the less
external information needed Many decisions are based exclusively or
primarily on internal information Level of risk perceived is a major factor in
determining extent of search
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External search “Shopping” (in a very broad sense) Advertising and promotion
including point of purchase and internet Store visits Objective sources (Consumer Reports, e.g.) Friends and family (word of mouth)
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Interesting facts about shopping In general, women enjoy shopping and men
do not Even for high priced durables, many
consumers do minimal comparison shopping Low-income shoppers, who have more to
lose, search less before making a purchase than do more affluent consumers
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3a. Identifying alternatives
Consumers consider only a limited number of alternatives
Referred to as the evoked set Small number of brands the consumer is
familiar with, remembers, and finds acceptable
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Implication for marketers
They need to make sure their products are Positioned properly Advertised and promoted Readily available Supported by service, financing, etc.
Building customer loyalty is critical
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3b. Evaluating alternatives: Prospect Theory Based on the notion that consumers have to
give up something in order to get something back in the marketplace
Proposes that people’s decisions are based on how they value the potential gains and losses that result from making choices
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Based on the “value function” theory, which reflects consumers’ anticipation of the pleasure or pain associated with a specific decision outcome
Value function explains the difference between the psychological valuation of gains and losses and the actual value of those gains and losses
the value function for losses is different for that for gains
In practical terms, this means that consumers resist giving up things that they already own
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Endowment effect
This phenomenon is referred to as the endowment effect
This means, for example, that when consumers are asked to name a selling price for something they own, they often require more money than they would pay to own the same item
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Framing
Prospect theory predicts that preferences will depend on how a problem is framed
In other words, the same decision can be framed from either a gain or loss perspective
Marketers sometimes make use of consumers’ differing perceptions about gains and losses
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4. Purchase or commitment: consumer decision rules Purchase decision is the outcome of the
search and evaluation process In reaching a decision, consumers use a
number of decision rules Rules reduce the burden of making complex
decisions by providing guidelines or routines
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Rules have been broadly classified into two major categories: Compensatory decision rules Non-compensatory decision rules
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Compensatory decision rules
A consumer evaluates brand options in terms of each relevant attribute of the product and computes a weighted or summated score for each brand
Presumably the consumer chooses the brand with the highest score
Allows a positive score/evaluation on one attribute to cancel a negative score on another
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Table 16.6 Hypothetical Ratings for Security Systems
ST. LOUIS ALARM SYSTEM
CLAYTON SECURITY SERVICES
FEATURE
System Price 10 1
Number of entry doors protected
1 10
Monthly monitoring fee 4 6
Number of keypads included
3 10
MISSOURI BUGLARY
5
5
5
6
Price for each additional keypad
3 10
Number of included smoke detectors wired to system
3 2
6
1
How home is protected
2 10 6
27 56 34
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Non-compensatory decision rules A negative evaluation in one category
eliminates the brand from consideration
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Implication of decision rules for marketers A marketer familiar with these rules will use
promotional messages that highlight product attributes that consumers are most likely to evaluate in deciding on what brand to purchase
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5. Post-purchase evaluation As consumers use a product, they evaluate its
performance in light of their expectations The extent of the evaluation depends on the
importance of the product decision The product may
Meet expectations Exceed expectations Fall short of expectations
Post-purchase evaluation becomes part of the consumer’s experience and may affect future related decisions
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Instrumental vs. expressive performance Product performance is evaluated on a limited
number of product attributes These include: Instrumental performance: the utilitarian
performance of the physical product itself (a means to a set of ends)
Expressive performance: social or psychological attributes of the product (an end in itself)
Which aspect is dominant depends on the nature of the product and its purchase