Consumer Decision Making I

1. Consumer Decision Making I MKT 750 Dr. West

2. Agenda • Shopping insights diary assignment • Stages of Decision Making • Three Routes to Decision Making • The Role of Involvement

3. Shopping Insights Diary

4. Shopping Insights Diary • Introspective Approach vs Depth-Interview • Think through the purchase process involved in three recent purchases. • You will need to provide a description of howand why you decided to purchase the product, as well as offer insightsto other consumers like yourself, and marketers.

5. Means-End Chain Analysis: • Consumer behavior is both: • Purposeful • We strive to achieve short-term, and long-term goals • Revealing • Our behavior reflects our values • Trade-offs

6. Laddering Technique Values I:“Why is it important to you to use a camcorder that allows for five hours on one tape and one battery?” R: “Because I can take it to outside events, like baseball games.” I: “Why is that important to you?” R: “It assures me that I will capture important moments in my kids lives without worrying.” I: “Why is that important to you?” R: “Being a good parent requires that kids are left with visual images of their childhood to enjoy as adults..” Consequences Attributes

7. Need Recognition Search Alternative Evaluation Choice Post-Purchase Evaluation Consumer Decision Making • Consumer-side

8. Need Recognition Search Alternative Evaluation Choice Post-Purchase Evaluation Awareness Interest Desire Action Consumer Decision Making • Consumer-side • Marketer-side

9. Consumer Decision Making • Consumers make a wide variety of choices that range from life-altering (the decision to go to grad school, getting married) to mundane (filling your car with gasoline).

10. From Inertia to Passion Habitual Problem Solving Limited Problem Solving Midrange Problem Solving Extended Problem Solving Inertia Passion Simple Elaboration Nature of Processing

11. Nature of the Decision: • First time vs Repeat purchase • Purchase for Self versus Another • Functional products (e.g. washing machine) • Experiential products (e.g. perfume, clothing)

12. Consumers are “cognitive misers” • Heuristics are used as shortcuts to decision making • What might some of these be?

13. Need Recognition Search Alternative Evaluation Choice Post-Purchase Evaluation Rational Decision Making:

14. Need Recognition Ideal State Ideal State Ideal State Actual State Actual State Actual State No Problem Opportunity Problem Recognition Recognition

15. How are Needs Activated? • Changed circumstances • Graduation, new job, marriage, first baby … • Product acquisition • DVD player, Xbox • Product consumption • Toothpaste, milk, gasoline… • Product innovation • Software • Marketing influence

16. The Role of Self-Concept Alter the buyer’s perception of “ideal self” Products that enhance “self-concept” reduce the dissonance between the ideal and actual self. Ideal Self Actual Self Extended Self

17. James Bond Actual Self BMW Z3 Possessions and the Extended Self

18. How Companies Can Activate Need Recognition • Instill fear • Gets attention • Memorable • Need to provide a solution

19. Need Recognition Search Alternative Evaluation Choice Post-Purchase Evaluation Rational Decision Making:

20. Information Search

21. Information Search • Types of Information • Search Information -- observable prior to purchase • Experience Information -- can be obtained from direct experience with the product or service • Credence Information – product claims that are not readily observed even post purchase

22. Information Search

23. Information Search • Search is usually limited • Surveys indicate that 50% of consumers shop at a single store for a durable good, only 30% look at more than one brand of appliance • Highlights why top-of-mind awareness is crucial

24. What determines search? • Cost • Effort, time, delay, immediacy of need, money • The internet can lower search costs • Benefits • Savings, performance, satisfaction, avoidance of regret, ease of justification

25. What determines search?

26. Need Recognition Search Alternative Evaluation Choice Post-Purchase Evaluation Rational Decision Making:

27. Evaluation & Choice

28. Evaluating Alternatives • Determine criteria to be used for • evaluation of products • Assess the relative importance of the • each criteria • Evaluate each alternative based on the • identified criteria

29. Evaluating Alternatives • Criteria for the purchase of a car: • Space • Reliability • Safety • Longevity • Handling • Styling

30. Evaluating Alternatives • Assessing Importance: ei • Space 5 • Reliability 4 • Safety 4 • Longevity 3 • Handling 3 • Styling 2 * Importance: 5=Most Important, 1=Least Important

31. Evaluating Alternatives • Beliefs Regarding Product Performance: Product Evaluation: 4=Excellent, 3=Very Good, 2=Good, 1=Fair

32. Decision Rules • Cutoffs/Thresholds: restriction or requirements for acceptable performance • Signals (surrogate indicators) are product attributes used to infer other product attributes (e.g. high price often infers higher quality)

33. Decision Rules • Compensatory Rule: a perceived weakness of one attribute may be offset or compensated for by the perceived strength of another attribute • Noncompensatory Rule: a product’s weakness on one attribute cannot be offset by strong performance on another attribute

34. Compensatory Decision Rules • Simple additive (Equal Weight):bi The consumer adds the product evaluations across the set of salient evaluative criteria. The product with the largest score is chosen. • Weighted additive:biei Judgments of product evaluations are weighted according to importance

35. Simple Additive (Equal Weight)

36. Weighted Additive

37. Noncompensatory Decision Rules: • Lexicographic strategy: • Brands are compared on their most important attribute, and the winner is chosen. • If there is a tie the second most-important is considered, and so on, until a choice is identified

38. Lexicographic Rule

39. Lexicographic Rule

40. Lexicographic Rule

41. Noncompensatory Decision Rules: • Elimination by aspects (EBA): • Brands are compared on an attribute by attribute basis. • Alternatives are eliminated that fall below the consumer imposed cutoffs. • Process continues until a single alternative remains.

42. Elimination by Aspects Rule

43. Noncompensatory Decision Rules: • Conjunctive strategy (Satisficing): • Brand are evaluated, one at a time, against a set of thresholds established for each attribute. • The first brand that meets or exceeds the threshold for each attribute is chosen.

44. Conjunctive Rule

45. Assignment • Reading: • Chapters 17 - 18 (pp 604 - 616, 626 - 629, 637 - 651) • Topic: • Consumer Decision Making II • Assignment: • Write-up your Shopping Insights for next Wednesday. • Find a team of up to six class members