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Types of consumer decision making
Perspective - consumer as a problem solver
Extended problem solving
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• considederable time and effort to analyze alternatives
• High level of risk and uncertainty
• Personal knowledge not enough
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• New product - or a product with high cost or technically
Limited problem solving
• moderate amount of time and effort
• Having some period experience of purchase
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• Reply on personal information and prior experience
Habitual decision making
• little or no conscious efforts
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• Brands and store loyalty play a significant role
Other models of decision making:
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Behavioural influence perspective
• when a person decides to buy something on impulse that is promoted as a “surprise special: in a store
Experiemental perspecitve
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• consumer buy based on totality of product appeal
Stages in consumer decision making - extended problem solving
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Problem recognition
When we experience a significant difference between out current state of affairs and some state we desire.
Problems arise in two ways
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1. Actual state - need recognition
2. Ideal state - opportunity recognition
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Information search
• internal versus external search
• Deliberate versus “accidental” search
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Which one is intern, external, deliberate or accidental?
• obtaining information from ads, retailers, catalogs, friends,etc external
• Scanning memory to assemble product alternative information internal
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• Searching on the internet for information external
• An advertisment ton social media which triggers a purchase accidental
• Noticed an unheard brand/company in the top 10 search result accidental
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Do consumer always search rationally
• external searches are surprisingly low
• Low income shoppers search less
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• Satisficing vs maximizing and bounded rationality
• Personalized product recommendation
• Brand switching
• Variety seeking
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Few important observations
• the mind ignores what it knows and focuses on differences
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• Shoppers want to feel smart when decisions
• Shoppers have difficulty making decisions
Mental accounting: biases in the decisions making process
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Framing a problem in terms of gains/losses influences out decisions
• hyperopia
Reluctant to waste something we have paid for
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Prospect theory:
Risks differ when consumer face options involving gains versus those involving losses
1. Reference point
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2. Risk averse
3. Loss averse
4.
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4. overweight small probabilities
Consumer prior expertise
Moderately knowledgeable consumers tent to search more than product experts and novices
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• experts: selective search
• Novinves: others opinions
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Perceived risk
Belied that product has negative consequences
• expensive, complex, hard to understand
• Product choice is visible to others
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Five types of perceived risks
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Identifying and evaluating alternatives
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• evoked set - a brand for whcih the consume rha sa positive evaluation
• Inept set - a product with a negative evaluation
• Inert set - products for whcih the consumer has made no evaluation
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What is product categorization
• we evaluate products in terms of what we already know about a (similar product)
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Strategic implications of product categorization
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Product positing
• conning consumers that product should be considered within a given category
• Identifying competitions
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• Exemplar products
Which is used to set criteria that to emulate all category memebers
But moderately unusual products stimulate more information processing and positive evaluation
• location product
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•product that do not fit clearly into categories confused consumers
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Producy choice: selecting among alternatives
Decision riles for product choice can be very simple or very complicated
• prior experience with (similar) product
• Present information at time of purchase
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• Beliefs about brands (from advertising)
Procedural learning determinant attributes
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• marketers educate consumers about (or even invent) determinant attributes
A few new terms
Neoromarketing
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• is the stufy of how peoples brains responded to advertising and other brand-related messages by scientifically monitoring
brainwave activity, eye tracking and skin response
Cybermediaries
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• this term describes a website or app that helps to filter and organize online market information so that customer can
identify and emulate alternatives more effienctly
Decision rules
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Noncompensatory: shortcuts via basic standards
• lexicographie rile
• Elimination
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• Conjunctive rule
Compensatory
• simple additive rile
• Weighted additive rule
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Decision rile - compensatory model of choice
• consumer rank products based on the total of their characteristics
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Decision rule - non compensatory models of choice
In the evaluation stage, the consumer takes mental shortcuts also called as ‘heuristics’ in the decision making process.
• Conjunctive: minimum acceptable cut-off levels for each attributes
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• Lexicographic: Best brand for the perceived most important attribute
• Elimination-by-aspects: eliminate brands that do not meet the cut-off levels
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Post purchase evaluation
- post purchase evaluation closes the loop
This occurs when we consume the product or service we selected and decide whether it meets or even exceeds our
expectations
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• this process called social scoring, both customers and service providers increasingly rate one another performance
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Market beliefs
• consumer assumptions about companies products and stores that become shortcuts for decisions
• Prince waking relationship: we tend to get what we pay for
• Other common marketing beliefs
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all brands are basically the same
Larger stores offer better prices than smaller stores
Items tied to “give aways” are not a good value
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Country of orgin as heuristic
• we rate our own country’s products more favourably than do people who live elsewhere
• Industrialized countries make better products than developing countries
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• We strongly associate certain items with specific countries
• Attachment to own versus other cultures
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Choosing familiar brand na,mes : loyalty or habit
• Zipf’s Law: Our tendency to prefer a higher ranked brand to the competition
• Brands that dominate the market are sometimes 50% more profitable than their nearest competitors
• Consumer inertia: Tendency to buy a brand out of habit merely because it requires less effort
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• Brand loyalty: Repeat purchase behaviour reflecting a conscious decision to continue buying the same brand
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What is attitude?
• a point of view
• A frame of mind
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• A position/ posture
• A feeling
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