Individual Decision Making Chapter 9 Consumers as Problem

Individual Decision Making Chapter 9

Consumers as Problem Solvers • Consumer purchase = response to problem • Decision-making process – After realization that we want to make a purchase, we go through a series of steps in order to make it – Can seem automatic or like a full-time job – Complicated by consumer hyper choice 9 -2

Decision-making Process Problem Recognition Richard realizes that he dislikes his B&W TV Information Search Richard surfs Web to learn about TVs Evaluation of Alternatives Richard compares models on reputation and features Product Choice Richard chooses a TV with an appealing feature Outcomes Figure 9. 1 (Abridged) Richard brings home and enjoys his TV 9 -3

Decision-making Perspectives • Rational perspective • Behavioral influence perspective • Experiential perspective 9 -4

Types of Consumer Decisions • Continuum of Decision Making Figure 9. 2 9 -5

Extended Problem Solving • Consumer collects extensive information – Internal and external search • Careful evaluation of brand attributes 9 -6

Limited Problem Solving • More straightforward/simple • Simple decision rules to choose among alternatives – Cognitive shortcuts 9 -7

Habitual Decision Making • Automaticity: Choices made with little/no conscious effort – Efficient decisions: minimal time/energy • Challenge for marketers… – Consumers must be convinced to “unfreeze” their former habit and replace it with new one 9 -8

Problem Recognition • Occurs when consumer sees difference between current state and ideal state • Need recognition: actual state moves downward – Running out of a product, buying a deficient product, or creating new needs • Opportunity recognition: ideal state moves upward – Exposed to different/better quality products (standard of comparison) 9 -9

Activity • Develop a list of products that you think are generally associated with habitual, limited and extended problem solving. • How would you activate the problem recognition for the following: – – – Toothbrush Pizza Health Insurance Bikes Exercise 9 -10

Information Search • Consumers need information to solve problem – We survey our environment for appropriate data to make decision • Pre purchase search vs. ongoing search 9 -11

Internal vs. External Search • Internal search – Scanning memory to assemble product alternative information • External search – Obtaining information from ads, retailers, catalogs, friends, family, peoplewatching, Consumer Reports, etc. 9 -12

Deliberate vs. “Accidental” Search Directed learning: Existing product knowledge obtained from previous information search or experience of alternatives • Incidental learning: • Exposure over time to conditioned stimuli and observations of others 9 -13

Do Consumers Always Search Rationally? • Brand switching – We select familiar brands, when decision situation is ambiguous or when there is little information about competing brands 9 -14

Biases in Decision-making Process • Mental accounting: – Framing a problem in terms of gains/losses influences our decisions • Sunk-cost fallacy: We are reluctant to waste something we have paid for – Study: football ticket vs. storm 9 -15

Biases in Decision-making Process (Cont’d) • Loss aversion: We place more emphasis on loss than on gain – Gambling study • Extraneous characteristics of the choice situation can influence our selections – “Beer on the beach” study 9 -16

How Much Search Occurs? • Search activity is greater when… – Purchase is important – There is a need to learn more about purchase – Relevant info is easily obtained/utilized – One is younger, is better-educated, and enjoys shopping/fact-finding – One is female (compared to male) – One places greater value on own style/image 9 -17

Perceived Risk • Belief that product has negative consequences – Expensive, complex, hard- to -understand products – Product choice is visible to others (risk of embarrassment for wrong choice) • Risks can be objective (physical danger) and subjective (social embarrassment) 9 -18

Evaluation of Alternatives • Choosing a brand/product among available alternatives requires much of the effort that goes into a purchase decision – Just think about how many brands or different brand variations there are! – Discussion: Do you agree that having too many choices is a bigger problem than not having enough choices? 9 -19

Identifying Alternatives • Extended problem solving = evaluation of several brands • Habitual decision = consider few/no brand alternatives 9 -20

Identifying Alternatives (Cont’d) • Evoked set vs. consideration set – We usually don’t seriously consider every brand we know about – In fact, we often include only a surprisingly small number of alternatives in our evoked set • Marketers must focus on getting their brands in consumers’ evoked set – We often do not give rejected brands a second chance. Discussion: Why? 9 -21

Product Categorization • We evaluate products in terms of what we already know about a (similar) product • Evoked-set products usually share similar features – When faced with a new product, we refer to existing product category knowledge to form new knowledge • Marketers want to ensure that their products are correctly grouped in knowledge structures – Jell-O gelatin flavors for salads 9 -22

Levels of Categorization Figure 9. 7 Discussion: Diagram the three levels here for a health club! 9 -23

Product Choice • Selecting among alternatives – Once we assemble and evaluate relevant options from a category, we must choose among them – Decision rules for product choice can be very simple or very complicated • Prior experience with (similar) product • Present information at time of purchase • Beliefs about brands (from advertising) 9 -24

Evaluative Criteria • Determinant attributes: features we use to differentiate among our choices – Criteria on which products differ carry more weight – Marketers educate consumers about determinant attributes • Pepsi’s freshness date stamps on cans 9 -25

Heuristics: Mental Shortcuts • Mental rules-of-thumb that lead to a speedy decision – Examples: higher price = higher quality, buying the same brand your mother bought IPARTY. COM 9 -26

Relying on a Product Signal • Observable product attributes that communicate underlying qualities – Clean and shiny car = good mechanical condition 9 -27

Country-of-Origin • Overall, we tend to rate our own country’s products more favorably than do people who live elsewhere • Industrialized countries make better products than developing countries do • Attachment to own vs. other cultures 9 -28

Brand Loyalty • Repeat purchase behavior reflecting a conscious decision to continue buying the same brand – Repeat purchase + positive attitude toward brand – Emotional attachment and commitment often result over time (via self-image and prior experiences) Discussion: How can retailer compete if we believe we can get the same brands everywhere? 9 -29