Instructor Morteza Maleki Ph D 1 What Influences

Instructor Morteza Maleki, Ph. D 1

What Influences Consumer Behavior �Consumer behavior is the study of how individuals, groups, & organizations select, buy, use, & dispose of goods, services, ideas, or experiences to satisfy their needs and wants. �A consumer’s behavior is influenced by cultural, social, & personal factors. 3

What Influences Consumer Behavior 1. Cultural Factors � Culture is the fundamental determinant of a person's want & behavior; culture, subculture, & social classes are particularly important influences on consumer buying behavior. � The growing child acquires a set of values, perceptions, preferences, and behaviors through his/her family & other key institutions. 4

What Influences Consumer Behavior Subculture � Each culture consists of smaller subcultures that provide more specific identification &socialization for their members. � Subcultures include nationalities, religions, racial groups, & geographic regions. � When subcultures grow large & affluent enough, companies often design specialized marketing program to serve them. 5

What Influences Consumer Behavior Social Classes � Virtually, all human societies exhibit social stratifications. � Stratification sometimes takes the form of a caste system where the members of different castes are reared to certain roles & can not change their caste membership. � Social classes are relatively homogeneous & enduring divisions in a society, which are hierarchically ordered & whose members share similar values, interests & behavior. 6

What Influences Consumer Behavior Social Classes Have Several Characteristics; 1. 2. 3. 4. Those within each class tend to behave more alike than persons from two different social classes. Persons are perceived as occupying inferior or superior positions according to social class. Social class in indicated by a cluster of variables, like occupation, income, wealth, education, and value orientation rather than by any single variable. Individuals can move up or down the social class ladder during their life times. The extent of this mobility varies according to how rigid the social stratification is in a given society. 7

What Influences Consumer Behavior Social Classes Have Several Characteristics (con…) �Social classes show distinct product & brand preferences in many areas, including clothing, home furnishings, leisure activities, & automobiles, �They differ in medial preferences, with upper-class consumers often preferring magazines & books, & lower-class consumers often preferring television. 8

What Influences Consumer Behavior 2. Social Factors Social factors can be classified into 1. 2. 3. Reference Groups Families Roles & Status 9

What Influences Consumer Behavior REFERENCE GROUPS � A person reference groups are all the groups that have a direct (face-to- face) or indirect influence on their attitudes or behavior. � Groups having a direct influence are called membership groups. Some of these are primary groups with whom the person interacts fairly continuously & informally, like family, friends, neighbors, & coworkers. � People also belong to secondary groups, such as religious, professional, & trade-union groups, which tend to be more formal & require less continuous interaction. 10

What Influences Consumer Behavior Reference groups influence members in three ways; 1. They expose an individual to new behaviors and lifestyles. 2. They influence attitudes and self-concept, & 3. They create pressures for conformity that may affect product & brand choices. 11

What Influences Consumer Behavior People are also influenced by groups to which they do not belong; 1. Aspirational Groups are those a person hopes to join. 2. Dissociative Groups are those whose values or behavior an individual rejects. 12

What Influences Consumer Behavior �Where reference group influence is strong, marketers must determine how to reach and influence the group’s opinion leaders. It is the person who offers informal advice or info about a specific product or product category. 13

What Influences Consumer Behavior FAMILY We can distinguish between two families in the buyers’ life; 1. FAMILY OF ORIENTATION; it consists of parents and siblings. From parents a person acquires an orientation towards religion, politics, & economics, & a sense of personal ambition, self-worth, & love. 2. A more direct influence on everyday buying behavior is the FAMILY OF PROCREATION—one’s spouse & children. The family is the most important consumer buying organization in society, & family members constitute the most influential primary reference groups 14

What Influences Consumer Behavior ROLES & STATUS � A person participates in many groups; we can define a person’s position in each group to which he belongs in terms of role & status. � A ROLE consists of the activities a person is expected to performs; each role carries a STATUS. � People choose products that reflect & communicate their role & actual or desired status in society; marketers must be aware of the statussymbol potential of products & brands. 15

What Influences Consumer Behavior 3. Personal Factors A buyer’s decisions are influenced by personal characteristics, including, 1. 2. 3. 4. The buyer’s age & stage in the life cycle, Occupation & economic circumstances, Personality & self-concept, & Lifestyles & values 16

What Influences Consumer Behavior AGE & STAGE IN THE LIFE CYCLE �People buy different goods & services over a life time; taste in food, clothes, furniture, & recreation is often life related. �Marketers should also consider critical life events or transitions—marriage, childbirth, relocation, divorce, career change, widowhood—as giving rise to new needs. 17

What Influences Consumer Behavior OCCUPATION & ECONOMIC CIRCUMSTANCE � Blue-collar worker will buy work clothes, work shoes, & lunchboxes; a company president will buy dress suits, air travel, & country club memberships. �Marketers try to identify the occupational groups that have above-average interest in their products & services, & even tailor products for certain occupational groups. � Computer software companies design different products for brand managers, engineers, lawyers, & physicians. 18

What Influences Consumer Behavior Product choice is affected by economic circumstances. 1. 2. 3. 4. 5. Spendable income—level, stability, & time-pattern Savings & assets—including the percentage that is liquid Debts Borrowing power Attitudes towards spending & saving 19

What Influences Consumer Behavior PERSONALITY & SELF-CONCEPT � Each person has personality characteristics that influence his/her buying behavior. �Personality is a set of distinguishing human psychological traits that lead to relative consistent & enduring responses to environmental stimuli—including buying behavior � Traits like self confidence, dominance, autonomy, deference, sociability, defensiveness, & adaptability are some types of the personality. 20

What Influences Consumer Behavior �Personality can be a useful variable in analyzing consumer brand choice. � Brands also have personalities; consumers are likely to choose brands whose personalities match their own. �Brand Personality is the specific mix of human traits that we can attribute to a particular brand. 21

What Influences Consumer Behavior �Consumers often choose & use brands that have a brand personality that is consistent with their own actual self-concept —how we view ourselves. � Yet, such match may instead be based on the consumers ideal selfconcept—how we would like to view ourselves—or even on others’ self-concept—how we think others see us. These effects may also be more pronounced for publicly consumed products than for privately consumed products. 22

What Influences Consumer Behavior �Consumers that are high self-monitors—sensitive to how others see them—are more likely to choose brands whose personalities fit the consumption situation. �Often consumers have multiple aspects of self—serious professional, caring family member, active fun-lover—that may be evoked differently in different situations or around different types of people. 23

What Influences Consumer Behavior LIFESTYLES & VALUES v A lifestyle is a person’s pattern of living in the world as expressed in activities, interests, & opinions; it portrays the “whole person” interacting with his environment. 24

What Influences Consumer Behavior Lifestyles are shaped partly by whether consumers are money-constrained or time-constrained. � � Companies aiming to serve money-constrained consumers will create lower cost products & services. Consumers who experience time famine are prone to multitasking, doing two or more things at the same time; they will also pay others to perform tasks because time is more important than money. � Companies aiming to serve them will create convenient products & services for this group. 25

What Influences Consumer Behavior �Consumer decisions are also influenced by core values, the belief systems that underlie attitudes & behaviors. � Marketers who target consumers on the basis of their values believe that with appeals to people’s inner selves, it is possible to influence their outer selves—their purchase behavior. 26

Stimuli – Response Model �In this model, marketing & environmental stimuli enter the consumer’s consciousness, & a set of psychological process combine with certain consumer characteristic to result in decision process & purchase decisions. �The marketer’s task is to understand what happens in the consumer’s consciousness between the arrival of the outside marketing stimuli & the ultimate purchase decisions. 27

Stimuli – Response Model 28

Key Psychological Processes Four key psychological process fundamentally influence consumer responses; 1. 2. 3. 4. Motivation, Perception, Learning, & Memory 29

Key Psychological Processes MOTIVATION �We all have many needs at any given time. � Some needs are biogenetic—they arise from physiological states of tensions, such as hunger, thirst, discomfort. � Others are psychogenetic; they arise from psychological states of tensions, such as the need for recognition, esteem, or belongings. 30

Key Psychological Processes �A need becomes a motive when it is aroused to a sufficient level of intensity to drive us to act. � Motivation has direction—we select one goal over another. � Motivation has intensity—the vigor with which we pursue the goal. �Three of the best known human motivation are Sigmund Freud, Abraham Maslow, & Fredrick Herzberg. 31

Key Psychological Processes Sigmund Freud’s Theory �He assumed that the psychological forces shaping people’s behavior are largely unconscious, & that a person can not fully understand his/her own motivations. � When a person examines specific brands, she will react not only to their stated capabilities, but also to other, less conscious cues such as shape, size, weight, material, color, & brand name. 32

Key Psychological Processes �A technique called laddering lets us trace a person’s motivations from the stated instrumental ones to the more terminal ones; then the marketer can decide at what level to develop a message & appeal. �Motivation researchers often collect information from consumers using “in-depth interviews” and “projective techniques” to uncover deeper motives triggered by a product. 33

Key Psychological Processes Abraham Maslow’s Theory � He proposed that human needs are arranged in a hierarchy from most to least pressing—physiological needs, safety needs, social needs, esteem needs, & self-actualization needs. � People will try to satisfy their most important needs first, then they will try to satisfy the next most important need. 34

Key Psychological Processes Fredrick Herzberg Theory �He developed a two-factor theory that distinguishes dissatisfiers—factors that cause dissatisfaction—from satisfiers—factors that cause satisfaction. � The absence of dissatisfiers is not enough to motivate a purchase; satisfiers must be present. � For instance, a computer that does not come with a warranty would be a dissatisfier. Yet, the presence of product warranty would not act as a satisfier of motivator of a purchase because it is not a source of intrinsic satisfaction. Ease of use would be a satisfier. 35

Key Psychological Processes Herzberg theory has two implications; 1. 2. Sellers should do their best to avoid dissatisfiers—poor training manual, or poor service policy; although these things will not sell a product, they might easily unsell it. The seller should identify the major satisfiers or motivators of purchase in the market and then supply them. 36

Key Psychological Processes PERCEPTION �Perception is the process by which we select, organize, & interpret information inputs to create a meaningful picture of the world. � The key point is that it depends not only on the physical stimuli, but also on the stimuli’s relationship to the surrounding field & on conditions within each of us. �In marketing, perception is more important than reality, as it is perceptions that will affect consumers’ actual behavior. 37

Key Psychological Processes People can emerge with different perceptions of the same object because of three perceptual process; 1. 2. 3. Selective Attention, Selective Distortion, & Selective Retention 38

Key Psychological Processes 1. Selective attention �Attention is the allocation of processing capacity to some stimuli. � The average person may be exposed to thousands of ads or brands communications per day; because we can not possibly attend to all these, we screen most stimuli out—a process called selective attention. 39

Key Psychological Processes Selective attention means that marketers must work hard to attract consumers’ notice; the real challenge is to explain which stimuli people will notice; 1. 2. 3. People are more likely to notice stimuli that relate to a current need. People are more likely to notice stimuli they anticipate. People are more likely to notice stimuli whose deviations are large in relationship to the normal size of the stimuli. 40

Key Psychological Processes 2. Selective Distortion �It is the tendency to interpret information in a way that fits our preconceptions. � Consumers will often distort info to be consistent with prior brand & product beliefs & expectations. 41

Key Psychological Processes �Selective distortion can work to the advantage of marketers with strong brands when consumers distort neutral or ambiguous brand information to make it more positive. � For instance, beer may seem to taste better, a car may seem to drive more smoothly, the wait in a bank line may seem shorter, depending on a particular brands involved. 42

Key Psychological Processes 3. Selective Retention �Most of us don’t remember much of the info to which we’re exposed, but we do retain info that supports our attitudes and beliefs—selective retention. �Selective retention works to the advantage of strong brands. � It explains why marketers needs to use repetition—to make sure their message is not overlooked. 43

Key Psychological Processes Subliminal Perception �Marketers embed covert, subliminal messages in ads. � Consumers are not consciously aware of them, yet they affect behavior. 44

Key Psychological Processes LEARNING �Learning induces changes in our behavior arising from experience. � Learning theorists believe that learning is produced through the interplay of drives, stimuli, cues, responses, & reinforcement. � DRIVE is a strong internal stimulus impelling action. � CUES are minor stimuli that determine when, where & how a person responds. � If we have rewarding experience out our action, our response to our action will be REINFORCED. � DISCRIMINATION means we have learned to recognize differences in sets of similar stimuli & can adjust our responses accordingly. 45

Key Psychological Processes �Learning theory teaches marketers that they can build demand for a product by associating with strong drives, using motivating cues, & providing positive reinforcement. �Hedonic Bias says people have a general tendency attribute success to themselves & failure to external causes. � Consumers are thus more likely to blame a product than themselves, putting pressures on marketers to carefully explicate product functions in welldesigned packaging & labels, instructive ads & websites, & so on. 46

Key Psychological Processes MEMORY �All the information & experiences we encounter as we go through life can end up in our long-term memory. � Cognitive Psychologists distinguish between short-term memory (STM)—a temporary & limited repository of information—and longterm memory (LTM)—a more permanent, essentially unlimited memory. 47

Key Psychological Processes The Associative Network Memory Model � It views long-term memory as a set of nodes and links; nodes are stored info connected by links that vary in strength. � Any type of info can be stored in the memory network, including verbal, visual, abstract, & contextual; a spreading activation process from node to node determines how much we retrieve & what info we can usually recall in any given situation. � When a node becomes activated because we’re encoding external info —when we read or hear a word or phrase—or retrieve internal info from LTM—when we think about some concept—other nodes are also activated if they’re strongly enough associated with that node. 48

Key Psychological Processes �In this model, we can think of consumer brand knowledge as a node in memory with a variety of linked associations. � The strength & organization of these associations will be important determinants of the info we can recall about the brand. �Brand Associations consist of all brand-related thoughts, feelings, perceptions, images, experiences, beliefs, attitudes, & so on that become linked to the brand node. �we can think of marketing as a way of making sure consumers have the right types of product & service experiences to create the right brand knowledge structures & maintain them in memory. 49

Key Psychological Processes Memory Process �Memory is a very constructive process, because we don’t remember info & events completely & accurately; often we remember bits & pieces & fill in the rest based upon whatever else we know. �Memory encoding describes how & where info gets into memory. � The strength of the resulting association depends on how much we process the info at encoding—how much we think about it, for instance—& in what way. 50

Key Psychological Processes �In general, the more attention we pay to the meaning of info during encoding, the stronger the resulting associations in memory will be. � When a consumer actively thinks about & “elaborates” on the significance of product or service info, stronger associations are created in memory. � It is also easier for consumers to create an association to new info when extensive, relevant knowledge structures already exist in memory. 51

Key Psychological Processes �One reason personal experiences create such strong brand associations is that information about the product is likely to be related to existing knowledge. �The ease with which we can integrate new info into established knowledge structures depends on its simplicity, vividness, & concreteness. � Repeated exposure to info provide greater opportunity for processing & thus the potential for stronger associations. 52

Key Psychological Processes Memory Retrieval 1. It is the way info gets out of memory. 2. According to the Associative Network Memory Model, a stronger brand association is both more accessible & more easily recalled by “spreading activation”. 53

Key Psychological Processes Successful recall of brand info depends on; 1. 2. 3. First, the presence of other product info in memory can produce interference effects & cause us to either overlook or confuse new data. Second, the time between exposure to info & encoding matters—the longer the time delay, the weaker the association. Third, info may be available in memory but not be accessible—able to be recalled—without the proper retrieval cues or reminders. Memory can often be reconstructive & consumers may remember an experience with a brand differently after the fact due to intervening factors or other events. 54

Key Psychological Processes The Buying Decision Process; the Five Stage Model 55

The Buying Decision Process: The Five Stage Model �Marketing scholars developed a “five stage model” of the buying decision process. � They don’t always pass through all five stages in buying the product— when he/she wants to buy a regular brand of a particular product. 56

The Buying Decision Process: The Five Stage Model Stage One; Problem Recognition �The buying process starts when a buyer recognizes a problem or need triggered by internal or external stimuli. With an internal stimuli, one of the person’s normal needs—hunger, thirst, sex—rises to a threshold level & becomes a drive. � A need can be aroused by an external stimulus—a person may admire the neighbor’s new car or see a TV ad for a Hawaiian vacation, which triggers thoughts about the possibility of making a purchase. � 57

The Buying Decision Process: The Five Stage Model Stage One; Problem Recognition (con…) �Marketers need to identify the circumstances triggering a particular need by gathering info from a number of consumers. � They then can develop marketing strategies that trigger consumer interests. 58

The Buying Decision Process: The Five Stage Model Stage Two; Information Search �Consumers often search for limited amounts of info; we can distinguish between two levels of involvement with search; 1. 2. Milder search state is called heightened attention; a person simply becomes more receptive to info about a product. At the next level, the person may enter an active info search; looking for reading material, phoning friends, going online, & visiting stores to learn about the product. 59

The Buying Decision Process: The Five Stage Model INFORMATION SOURCES Major info sources to which consumers will turn fall into four groups; 1. 2. 3. 4. PERSONAL; family, friends, neighbors, acquaintances COMMERCIAL; advertising, websites, salespersons, dealers, packaging, displays PUBLIC; mass media, consumer-rating organizations EXPERIENTIAL; handling, examining, using the product �Each info source performs a different function in influencing the buying decision; Commercial sources normally perform an info function, whereas personal sources perform a legitimizing or evaluating function. 60

The Buying Decision Process: The Five Stage Model SEARCH DYNAMICS Through gathering info, the consumer learns about competing brands and their features. 61

The Buying Decision Process: The Five Stage Model �Individual consumer will come to know only a subset of total set of brands—the awareness set. Some brands, the consideration set, will meet initial buying criteria. As the consumer gathers more info, only a few, choice set, will remain strong contenders. The consumer makes the final choice from this set. 62

The Buying Decision Process: The Five Stage Model �Marketers need to identify the hierarchy of attributes that guides consumer decision making in order to understand different competitive forces & how these various sets get formed, the process called positioning. 63

The Buying Decision Process: The Five Stage Model Stage Three; Evaluation of Alternatives �How does the consumer process competitive brand info & make a final value judgment? �Some basic concepts will help us understand consumer evaluation process; 1. 2. 3. First, the consumer is trying to satisfy a need. Second, the consumer is looking for certain benefits from the product solution. Third, the consumer sees each product as a bundle of attributes with varying abilities for delivering the benefits sought to satisfy these needs. 64

The Buying Decision Process: The Five Stage Model �The attributes of interest to buyers vary by product, for instance, HOTELS; location, cleanliness, atmosphere, price � MOUTHWASH; color, effectiveness, germ-killing taste/flavor, price � TIRES; safety, tread life, ride quality, price � capacity, 65

The Buying Decision Process: The Five Stage Model BELIEFS & ATTITUDES �Through experience & learning, people acquire beliefs & attitudes, which in turn influence buying behavior. � BELIEF; is a descriptive thought that a person holds about something. � ATTITUDE; is a person’s enduring favourable or unfavorable evaluation, emotional feelings, & action tendencies towards some object or idea. 66

The Buying Decision Process: The Five Stage Model �Attitudes put us into a frame of mind; liking or disliking an object, moving toward or away from it. � They lead us to behave in a fairly consistent way toward similar objects. �Because attitudes economize on energy & thought, they can be very difficult to change. � A company is well-advised to fit its product into existing attitudes rather than to try to change attitudes. 67

The Buying Decision Process: The Five Stage Model EXPECTENCY-VALUE MODEL � The consumers arrive at attitudes towards various brands through an attribute evaluation procedure. � They develop a set of beliefs about where each brand stands on each attribute. � THE EXPECTENCY-VALUE MODEL of attitude formation posits that consumers evaluate products & services by combining their brand beliefs— the positives & negative—according to importance. � This model is a compensatory model, in that perceived good things for a product can help to overcome perceived bad things. 68

The Buying Decision Process: The Five Stage Model Stage Four; Purchase Decision In executing the purchase intention, the consumer may make up to five subdivision; 1. 2. 3. 4. 5. Brand, Dealer, Quantity, Timing, & Payment Method 69

The Buying Decision Process: The Five Stage Model Non-compensatory Method of Consumer Choice � Consumers often take “mental shortcuts” using simplify choice heuristics. �Heuristics are rules of thumb or mental shortcuts in the decision process. �With a noncompensatory models of consumer choice, positive & negative attribute considerations do not necessarily net out. � Evaluating attributes in isolation makes decision making easier for a consumer, but it also increases the likelihood that she would have made a different choice if she had deliberated in greater detail. 70

The Buying Decision Process: The Five Stage Model There are three types of Heuristics; 1. CONJUNCTIVE heuristic, in which the consumer sets a minimum acceptable cutoff level for each attribute & chooses the first alternative that meets the minimum standard for all attributes. 2. LEXICOGRAPHIC heuristic, in which the consumer chooses the best brand on the basis of its perceived most important attribute. 3. ELIMINATION-BY-ASPECT heuristic, in which the consumer compares brands on an attribute selected probabilistically—where the probability of choosing an attribute is positively related to its importance—and eliminates brands that do not meet minimum acceptable cutoffs. 71

The Buying Decision Process: The Five Stage Model �Factors affecting whether & how we use choice heuristics: 1. 2. 3. 4. Our brand or product knowledge, The number & similarity of brand choices Time pressure involved, & The social context—the need for justification to a peer or boss 72

The Buying Decision Process: The Five Stage Model INTERVENING FACTORS �Even if consumers form brand evaluations, two general factors can intervene between the purchase intention & purchase decision. 1. Attitudes of others The more intense the other person’s negativism & the closer the other person is to us, the more we will adjust our purchase intention. 2. Unanticipated situational factors Such factors may erupt to change the purchase intention. 73

The Buying Decision Process: The Five Stage Model A consumer’s decision to modify, postpone, or avoid a purchase decision is heavily influenced by perceived risk. 1. 2. 3. 4. 5. 6. FUNCTIONAL RISKS; the product does not perform up to expectations. PHYSICAL RISKS; the product poses a threat to the physical well-being or health of the user or others. FINANCIAL RISKS; the product is not worth the price paid. SOCIAL RISKS; the product results in embarrassment from others. PSYCHOLOGICAL RISKS; the product affects the mental well-being of the user. TIME RISKS; the failure of the product results in an opportunity cost of finding another satisfactory product. 74

The Buying Decision Process: The Five Stage Model 75

The Buying Decision Process: The Five Stage Model Stage Five; Postpurchase Behavior �The marketer’s job does not end with the purchase. � After the purchase, the consumer might experience dissonance that stems from noticing certain disquieting features or hearing favorable things about other brands & will be alert to info supporting her decision. �Marketing communication should supply beliefs & evaluations that reinforce the consumer’s choice & help him feel good about the brand. 76

The Buying Decision Process: The Five Stage Model POSPURCHASE SATISFACTION � The larger the gap between expectations & performance (dissatisfaction, &delight), the greater the dissatisfaction. �The consumer’s coping styles play important role here; Some consumers magnify the gap when the product isn’t perfect & are highly dissatisfied. � Others minimize it & are less dissatisfied. � 77

The Buying Decision Process: The Five Stage Model POSTPURCHASE ACTIONS If the consumer is satisfied, she is more likely to purchase the product again. � The satisfied customer will also tend to say good things about the brand to others. � �Dissatisfied consumers may abandon or return the product. They may take public action by complaining to the company, going to a lawyer, etc. � Private actions include deciding to stop buying the product (exit option), or warning friends (voice option) � 78

The Buying Decision Process: The Five Stage Model POSTPURCHASE USE & DISPOSAL 79

Other Theories of Consumer Decision Making �The consumer decision process may not always develop in a carefully planned fashion. � There are some other theories and approaches to explaining it. Levels of Consumer Involvement �Consumer involvement is the level of engagement & active processing the consumer undertakes in responding to a market stimulus. 80

Other Theories of Consumer Decision Making Elaboration Likelihood Model (Richard Petty, & John Cacioppo) �It describes how consumers make evaluations in both low- & high-involvement circumstances. �There are two means of persuasion in this model; � The Central Route, where attitude formation or change stimulates much thought & is based on a diligent, rational consideration of the most important product info. � The Peripheral Route, where attitude formation or change provokes much less thought & results from the association of a brand with either a positive or negative peripheral cues. � PERIPHERAL CUES for consumers include a celebrity endorsement, a credible source, or any object that generates positive feelings. 81

Other Theories of Consumer Decision Making �Consumers follow the central routes only if they possess sufficient motivation, ability, & opportunity. Consumers must want to evaluate a brand in detail, � They have the necessary brand & product or service knowledge in memory, & � They have sufficient time & the proper setting. � �If any of these factors are missing, consumers tend to follow the peripheral route & consider less central, more extrinsic factors in their decisions; 82

Other Theories of Consumer Decision Making Low-Involvement Marketing Strategies � Many products are bought under conditions of low involvement & the absence of significant brand differences—like Salt, or Sugar. �Consumers have low involvement with low-cost, frequently purchased products. � Marketers use four techniques to turn low involvement product into one of high involvement; 1. First, they can link the product to some involving issue. 2. Second, they can link the product to some involving personal situation. 3. Third, they might design ads to trigger strong emotions related to personal values or ego defense. 4. Fourth, they might add an important feature. 83

Other Theories of Consumer Decision Making Variety-seeking Buying Behavior � Some buying situations are characterized by low involvement but significant brand differences. �Here consumers often do a lot of brand switching. � Brand switching occurs for the sake of variety, rather than dissatisfaction. �Example, cookies 84

Other Theories of Consumer Decision Making �The Market Leaders will try to encourage habitual buying behavior by dominating the shelf space with a variety of related but different product versions, avoiding out of stock conditions, & sponsoring frequent reminder advertising. �Challenger Firms will encourage variety seeking by offering lower prices, deals, coupons, free samples, & advertising that tries to break the consumer’s purchase & consumption cycle & presents reasons for trying something new. 85

Behavioral Decision Theory & Decisional Economics DECISION HEURISTICS & BIASES �Behavioral decision theorists have identified many different heuristics & biases in everyday consumer decision making. � They come into play when consumers forecast the likelihood of future outcomes or events. 86

Behavioral Decision Theory & Decisional Economics 1. The Availability Heuristics Consumers base their predictions on the quickness & ease with which a particular example of an outcomes to mind; if an example comes to mind too easily, consumers might overestimate the likelihood of its happening. � For instance, a recent product failure may lead a consumer to inflate the likelihood of future product failure & make him more inclined to purchase a product warranty. � 87

Behavioral Decision Theory & Decisional Economics 2. The Representativeness Heuristics Consumers base their predictions on how representative or similar the outcome is to other examples. � One reason that package appearances may be so similar for different brands in the same product category is that they want to be seen as representative of the category as a whole. � 3. The Anchoring & Adjustment Heuristics Consumers arrive an initial judgment & then adjust it based on additional info. � For service marketers, it is critical to make a strong first impression to establish a favourable anchor, so that subsequent experiences are interpreted in a more favourable light. � 88

Behavioral Decision Theory & Decisional Economics Framing �Decision framing is the manner in which choices are presented to and seen by a decision maker. �A $200 cell phone may not seem that expensive in the context of a set of $400 phones but may seem very expensive if those phones cost $50. 89

Behavioral Decision Theory & Decisional Economics MENTAL ACCOUNTING �It refers to the way consumers code, categorize, & evaluate financial outcomes of choices. � Formally, it is the tendency to categorize funds or items of value even though there is no logical basis for the categorization. � For instance, individuals often segregate their savings into separate accounts to meet different goals even though funds from any of the accounts can be applied to any of the goals. 90

Behavioral Decision Theory & Decisional Economics According to Chicago’s Richard Thaler, mental accounting is based on a set of key core principles; 1. 2. 3. 4. Consumers tend to segregate gains. Consumers tend to integrate losses. Consumers tend to integrate smaller losses with larger gains. Consumers tend to segregate small gains from large losses. 91

Behavioral Decision Theory & Decisional Economics The principle of mental accounting are derived in part from PROSPECT THEORY. It maintains that consumers frame their decision alternatives in terms of gains & losses according to a value function. � Consumers are generally loss averse; they tend to overweight very low probabilities & underweight very high probabilities. � 92

Behavioral Decision Theory & Decisional Economics Profiling the Customer Buying-Decision Process How can marketers learn about the stages in the buying process for their product? 1. Introspective Method; they can think about how they themselves would act. 2. Retrospective Method; they can interview small number of recent purchasers, asking them to recall the events leading to their purchase. 93

Behavioral Decision Theory & Decisional Economics 1. Prospective Method; they can locate consumers who plan to buy the product & ask them to think out loud about going through the buying process. 2. Prescriptive Method; they can ask consumers to describe the ideal way to buy the product. 94

Behavioral Decision Theory & Decisional Economics Trying to understand the consumer’s behavior in connection with a product has been called mapping the customers’ consumption system, customer activity cycle, or customer scenario. 95

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