Consumer Decision Making

1. Consumer Decision Making Chapter 3 Instructor Shan A. Garib, Fall 2012

2. 3.1 The Importance of Understanding Consumer Behaviour Consumer’s product and service preferences constantly changing -marketing managers must have knowledge of consumer behaviour in order to offer the right marketing mix! Consumer Behaviour: how consumers make purchase decisions and how they dispose of the good -analysis of factors that influence purchase decisions and use

3. 3.2 The Consumer Decision-Making Process The general process used as a guide for studying how consumers make decisions • Need recognition • Information search • Evaluation of alternatives • Purchase • Postpurchase behaviour

4. The Consumer Decision-Making Process The general process used as a guide for studying how consumers make decisions • Needs recognition – when consumers are faced with an imbalance between actual and desired states -consumer exposed to internal/external stimulis eg. Hunger or thirst or firend recommendation -marketing managers can create wants, an unfulfilled need -marketing managers objective to create an imbalance through ads and promotion

5. The Consumer Decision-Making Process Marketing managers: -can create wants, an unfulfilled need -observe trends in the marketplace eg. IKEA tables for Gen Y -objective to get consumers to recognize imbalance through ads and promotion -surveys reveal this imbalance

6. The Consumer Decision-Making Process Consumers recognize unfulfilled needs and wants through: -when current products not performing -or run out of product eg. toilet paper -see a product that outperforms eg. Car stereo now have mp3’s

7. 3.2 The Consumer Decision-Making Process The general process used as a guide for studying how consumers make decisions 2. Information search – for information about alternatives available to satisfy needs internal search: recall of info from memory on previous experience external search: for info from marketing sources -nonmarketed: not marketers promoting product but from experience

8. The Consumer Decision-Making Process The general process used as a guide for studying how consumers make decisions external search: for info from marketing sources -nonmarketed: not marketers promoting product but from experience or public sources like consumer reports -marketed: biased towards a specific product because it’s from the makers

9. The Consumer Decision-Making Process The general process used as a guide for studying how consumers make decisions Factors affecting external search: -the greater the risk of failure and the greater the interest the more the consumer searches for information -prior knowledge of product or service means less searching -confidence in own’s decision making ability -prior exprience with product eg west jet

10. The Consumer Decision-Making Process Info search should yield a buyer’s evoked set of perferred alternatives

11. The Consumer Decision-Making Process The general process used as a guide for studying how consumers make decisions 3&4. Evaluation of alternatives & Purchase –when the consumer is ready to make a decision -use internal and external info -narrow down alternatives by: - attributes eg. 4X4 car -cut-offs eg. 23K CAD -rank based on performance

12. The Consumer Decision-Making Process Goal of marketing manager to determine which attributes have the most influence on choice -eg. Price, brand name (set of promises)

13. The Consumer Decision-Making Process The general process used as a guide for studying how consumers make decisions 4. Postpurchase behaviour – how well product/service meets expectations determines whether satisfied or not -marketing manager has to reduce any doubt -when inconsistencey between values and behaviour it is called cognitive dissonance

14. The Consumer Decision-Making Process -when inconsistencey between values and behaviour it is called cognitive dissonance eg. buying organic at a higher cost -consumers seek new information to justify purchase to back up positive ideas about product/service -marketning managers sometime send out post purchase letters with positive statements

15. 3.3 Types of Consumer Buying Decisions and Consumer Involvement All consumer buying decisions fall within three categories: • Routine Response Behaviour • Limited Decision Making • Extensive Decision Making Products bought in these categories can be described in terms of 3 factors:

16. Types of Consumer Buying Decisions and Consumer Involvement • Level of consumer invovlement • Length of time to make a decision • Cost of product • Degree of information search • Number of alternatives considered

17. Types of Consumer Buying Decisions and Consumer Involvement Most important • Level of consumer involvement – amount of time and effort buyer invests in the search, evaluation, and decision process

18. Types of Consumer Buying Decisions and Consumer Involvement Frequently purchased, low cost products are associated with routine response behaviour -such products can also be called low involvement products -usually consumers are familiar with products in this category but stick with one brand/product -usually don’t experience needs recognition until they see ads or see product on shelfs -consumers here buy first and eval. Later -opposite of extensive decisions

19. Types of Consumer Buying Decisions and Consumer Involvement Extensive Decision Making – consumers buying unfamiliar, expensive products or infrequently bought item -most complex type of consumer buying decision and is associated with high consumer involvement -consumer wants to make the right decision so they want to know as much as possible about the product -usually experience cognitave dissonance

20. Types of Consumer Buying Decisions and Consumer Involvement Limited Decision making – consumer has previous product experience but unfamiliar with current brands available -associated with lower levels of involvment because consumers spend moderate amoun of searchign for information or considering alternatives -if ususal brand is sold out then consumver will evaluate otehr brands before buying

21. Factors Determining the Level of Consumer Involvement Level of involvement depends on: 1. Previous experience – more exp., less involvement 2. Interest - more interest, more involvement 3. Perceived Risk of Negative Consequences - more risk, more involvement 4. Situation – dinner parties 5. Social Visibility - more visibility , more involvement ie risky to purchase

22. Factors Influencing Consumer Buying Decisions Social, cultural, individual and psychological factors strongly influence the decision process Cultural factors influence the most on decision making Social factor sum up the social interactions between a consumer and influential groups of people Individual factors like gender, age, personality etc...are unique to individuals

23. Factors Influencing Consumer Buying Decisions Social, cultural, individual and psychological factors strongly influence the decision process Psycological factors determine how consumers percieve and interact with their environments -eg. Perception, motivation, learning, beliefs, attitudes

24. 3.4 Cultural Influences on Consumer Buying Decisions Cultural factors mostly influence the decision process Culture (and Values): -essential character of society that distinguishes it from other cultural groups -underlying elements of every culture is values, laguage, myths customs, ritual and laws -everything consumers do without thinking

25. Cultural Influences on Consumer Buying Decisions Cultural factors mostly influence the decision process Culture is: Pervasive - everything consumers do without thinking Functional – human interaction creates values and prescribes acceptable behaviours Learned – must learn what is acceptable from family and friends Dynamic – adapts to changing needs and environment

26. Cultural Influences on Consumer Buying Decisions Cultural factors mostly influence the decision process Values – the enuring beliefes shared by a society that a specific mode of conduct is acceptable -this is the most defining element of culture

27. Cultural Influences on Consumer Buying Decisions Cultural factors mostly influence the decision process Understanding cultural differences -as companies expand globally, companies need to understand foreign cultures needs and wants and desires eg. Colour meaning, language translations

28. Cultural Influences on Consumer Buying Decisions Cultural factors mostly influence the decision process Subculture – culture divided based on demo., geography, ethnicity, political beliefs, religion -homogenious group sharing elements of the overall culture but also ones unique to own group eg. French, bikers, hackers

29. Cultural Influences on Consumer Buying Decisions Cultural factors mostly influence the decision process Social Class – a group of people who are considered nearly equal in status or community esteem who socialize among themselves and who have shared behavioural norms -majority of Canadians describe themselves as middle class

30. Cultural Influences on Consumer Buying Decisions Cultural factors mostly influence the decision process Working Class – distinct subset of middle class -interest in organized labour is a shared value -job security as most important reason for taking job

31. Cultural Influences on Consumer Buying Decisions Cultural factors mostly influence the decision process Most significant difference is lifestlye Social class is measured as a combo of: -income, education, wealth, etc... -education is the greatest determinant of class

32. Cultural Influences on Consumer Buying Decisions Cultural factors mostly influence the decision process Marketers are interested in social class for two reasons: -determines which medium to use for advertising eg. Middle class watch TV more -determines where to distribute product

33. 3.3 Social Influences on Consumer Buying Decisions Consumers likely to seek out the opinions of others to reduce their search and evaluation effort or uncertainty Specifically consumers interact with: • Reference groups • Opinion leaders • Family members

34. Social Influences on Consumer Buying Decisions Consumers likely to seek out the opinions of others 1. Reference groups – informal and formal groups that influence buying behaviour For marketers reference groups have three important implications: • They serve as informal sources of information and influence perceptions • They affect aspiration levels • Their norms either constrain or stimulate consumer behaviour

35. Social Influences on Consumer Buying Decisions Consumers likely to seek out the opinions of others 2. Opinion Leaders – reference group members who are leaders and influence -usually the first to try new products out of pure curiosity eg. Teenagers and new technology, txting -new source of opinion leaders are blogs

36. Social Influences on Consumer Buying Decisions Consumers likely to seek out the opinions of others 3. Family – responsible for socialization process, the passing down of cultural values and norms Decision making roles vary in the family: A) Initiators suggest initiate the need for the purchase process eg bike B) Influencers are members whose opinions are valued eg mothers watch prices

37. Social Influences on Consumer Buying Decisions Consumers likely to seek out the opinions of others Decision making roles vary in the family: C) Decision maker actually makes the decision D) Purchaser exchanges money for the product E) Consumer is the actual user

38. 3.6 Individual Influences on Consumer Buying Decisions Consumers are influenced by personal characterisitcs that are unique to individuals -usually stable throughout lifetime Gender – physiological differences between men and women lead to different needs -there are distinct cultural, social, and economic roles played by men and women that influences Decision Making Process (DMP) eg buying cars, men: performance, women: cup holders

39. Individual Influences on Consumer Buying Decisions Consumers are influenced by personal characterisitcs that are unique to individuals Age and Family life cycle stage - how old the consumer is determines their needs, tastes eg. age and TV -family life cycle is an orderly series of stages through which consumers’ attitudes and behavioural tendencies evolve through maturity, experience, chaning income and status

40. Individual Influences on Consumer Buying Decisions Consumers are influenced by personal characterisitcs that are unique to individuals Age and Family life cycle stage - marketers define their target markets in terms of family life cycle eg. Young singles, young married with children, middle aged married without children

41. Individual Influences on Consumer Buying Decisions Consumers are influenced by personal characterisitcs that are unique to individuals Personality, self-concept, and lifestyle- Personality: away of organizing and grouping how an individual typically reacts to situations Self-concept: how consumers percieve themselves eg attitudes, beliefs and self-evaluations

42. Individual Influences on Consumer Buying Decisions Consumers are influenced by personal characterisitcs that are unique to individuals Personality, self-concept – are reflected in a lifestyle, or mode of living by activities, interests and opinions Psychographics is an analytical technique used to examine consumer lifestyles and to categorize consumers, segment into target markets

43. 3.7 Psychological Influences on Consumer Buying Decisions An individuals buying decisions are further influenced by psychological factors: Perception, motivation, learning, beliefs and attitudes -These are what consumers use to interact with the world -used to recognize their feelings, gather and analyze their feelings, information, formulate opinions and take action

44. Psychological Influences on Consumer Buying Decisions An individuals buying decisions are further influenced by psychological factors Perception: selection, organize, and interpret stimuli into a meaningful coherent picture stimuli – any unit of input affecting your 3 senses Selective exposure – decision on which stimuli to notice eg. smell triggers memories, or colour red for coke, shocked into attention

45. Psychological Influences on Consumer Buying Decisions An individuals buying decisions are further influenced by psychological factors Selective distortion – consumers change information that distort information that conflicts with their feelings or beliefs eg buys cheaper brand and then get info about better brand but still think cheaper brand is better or just as good

46. Psychological Influences on Consumer Buying Decisions An individuals buying decisions are further influenced by psychological factors Selective retention – remembering only information that supports personal feelings or beliefs -consumer forgets all information that maybe inconsistant bith beliefs eg. News about illegal practices sweat shop labour

47. Psychological Influences on Consumer Buying Decisions An individuals buying decisions are further influenced by psychological factors Threshold level of perception - the minimum difference in a stimulis that the consumer will notice eg. Changing price by 20% compared to 13% -when discounted on a name brand item the notice is large compared to store brand

48. Psychological Influences on Consumer Buying Decisions An individuals buying decisions are further influenced by psychological factors Motivation– buy a product to fulfil a need, these needs become motives eg. Motivated by hunger for McD’s Motives: are the driving forces that cause to take action to satisfy a need

49. Psychological Influences on Consumer Buying Decisions An individuals buying decisions are further influenced by psychological factors One motivation theory is Maslow’s hierarchy of needs arranges needs in ascending order of importance: 1. Self-actualization – reach a satitation point 2. Esteem needs – recognition status 3. Social needs - belonging 4. Safety needs - security 5. Physiological needs - hunger

50. Psychological Influences on Consumer Buying Decisions An individuals buying decisions are further influenced by psychological factors Learning – the process that creates in behaviour through experience and practice Two types: • Experiential – experience changes your behaviour • Conceptual – no direct experience but changes your behaviour eg. Diet drinks