Rationality vs. Emotions: Insights into Consumer Decision Making

1. Rationality vs. Emotions: Insights into Consumer Decision Making Professor West

2. 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

3. Understanding Consumer Motives • Motivations are the underlying reasons for behavior

4. Values Consequences Attributes Laddering Technique 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..”

5. Values Consequences Attributes Hierarchical Value Map

6. Motivational Conflict • Approach-Approach • Choosing between two attractive alternatives (e.g., two great job offers) • Approach-Avoidance • A choice situation that entails both positive and negative consequences (e.g., the desire to stay healthy but an aversion to exercise) • Avoidance-Avoidance • A choice between undesirable outcomes (e.g. breast self-exams, colonoscopy, seeing your dentist)

7. Understanding Motives • Effective communication requires understanding what consumers are looking for, and why.

8. Consumer Involvement • Involvement is the “perceived relevance” based on inherent needs, values, and interests • From “inertia to passion” • Involvement determines the degree of effort or energy expended toward the object or activity • Many faces • Product, Message-related, Situational, Purchase

9. Need Recognition Search Alternative Evaluation Choice Post-Purchase Evaluation Traditional Model of Decision Making • Consumer-side

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

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

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

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

14. Consumers are “cognitive misers” • Heuristics are used as shortcuts to decision making • What might some of these be? • Ask a friend or family member • By what my mother always buys • Find the cheapest • Pick the compromise alternative …

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

16. Need Recognition Ideal State Ideal State Ideal State Actual State Actual State Actual State Status Opportunity Problem Quo Recognition Recognition

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

18. 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

19. Information Search

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

21. Information Search

22. 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, and product differentiation are crucial

23. What Determines Extent of 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

24. Evaluation & Choice

25. Evaluation & Choice • 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

26. Rationality versus Emotions • Buying a new car • Finding the perfect prom dress

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

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

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

30. Decision Rules • Compensatory Rule: a perceived weakness of one attribute may be offset or compensated for by the perceived strength of another attribute • Economic models of rational behavior whereby consumers maximize utility • Noncompensatory Rule: a product’s weakness on one attribute cannot be offset by strong performance on another attribute. • Descriptive models of behavior that capture how consumers simplify their decision making

31. 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

32. Simple Additive (Equal Weight)

33. Weighted Additive

34. Noncompensatory 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)

35. 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

36. Lexicographic Rule

37. Lexicographic Rule

38. Lexicographic Rule

39. 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.

40. Elimination by Aspects Rule

41. 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.

42. Conjunctive Rule

43. Buying A New Car

44. Marketing Insights • What can an auto manufacturer learn from this? • What can a dealer learn from this?

45. Emotional Decision Making • Planning for prom… • Depends on if you’re a girl or guy

46. Marketing Insights • What can a marketing learn from this? • How is the process different than buying a car?

47. Marketer’s Job • To understand the process • Anticipate where consumers will look for information and make it easily accessible • Be aware of what matters, (the head or the heart) • Search for opportunities to delight your customers

48. Assignment • Read • Chapters 10, 14 – 16, 18 (pp 362 – 367, 500 - 508, 513 - 517, 525 - 542, 556 - 565, 570 – 578, 626 - 629, 637 - 651) • Exam Essay -- Examine one of your own or another person’s recent purchase. Detail the steps involved and provide insights to a marketer or another consumer.