Consumer decision making 211 MKT – Buyer behaviour

Consumers as problem-solvers Consumer decision-making is a central part of consumer behaviour, but the way we evaluate and choose products varies widely, depending on such dimensions as the degree of novelty or risk related to the decision. We almost constantly need to make decisions about products. Some of these decisions are very important and entail great effort, whereas we make others on a virtually automatic basis. The decision-making process is further complicated because of the sheer number of decisions we need to make in a marketplace environment characterized by consumer hyper choice.

Brainstorm Think of a few purchases you’ve done in the past couple of weeks: How did you go about doing these purchases? What went through your head? What actions did you take?

Model of Consumer Behaviour The Black Box

Decision making process A decision is actually composed of a series of stages that results in the selection of one product over another. This process can be described as below: Problem recognition – when we realize we must take action. Information search- consumers survey their environment for appropriate data to make a reasonable decision. Evaluation of alternatives – where the product alternatives are considered. Product choice – against non-compensatory or compensatory decision rules. Outcomes – does product satisfy consumers needs and wants?

Think - Do consumers go through all these steps for each and every purchase?

Perspectives on decision making The rational perspective – people calmly and carefully integrate as much information as possible with what they already know about a product, painstakingly weighing the pluses and minuses of each alternative, and arriving at a satisfactory decision. Behavioural influence perspective – (in conditions of low involvement) where decisions are made as a result of a learned response to environmental cues, e.g. buying on impulse as a result of a ‘special offer’ in a shop. Experiential perspective – in conditions of high involvement but where the selection made cannot be explained in an entirely rational manner. Discuss: Which one of those perspectives does your purchases within the last week fit into?

Continuum of Buying Decision Behaviour EXTENDED PROBLEM SOLVING There are no established criteria for evaluating a product or service The customer has not narrowed the choices consumer needs a great deal of information in order to establish a set of criteria with which to evaluate a specific item High involvement LIMITED PROBLEM SOLVING Consumers have basic criteria for evaluation but no preferred categories Consumer has to collect additional information in order to discriminate amongst brands The number and variety of information sources, alternatives and evaluative criteria used are reduced Low involvement HABITUAL DECISION MAKING Routine response behaviour Brand loyalty Inertia Low level of conscious decision making

Consumers as Problem Solvers HABITUAL DECISION MAKING Routine response behaviour Brand loyalty Inertia Low level of conscious decision making

Consumers as Problem Solvers LIMITED PROBLEM SOLVING Consumers have basic criteria for evaluation but no preferred categories Consumer has to collect additional information in order to discriminate amongst brands The number and variety of information sources, alternatives and evaluative criteria used are reduced Low involvement

Consumers as Problem Solvers EXTENDED PROBLEM SOLVING There are no established criteria for evaluating a product or service The customer has not narrowed the choices consumer needs a great deal of information in order to establish a set of criteria with which to evaluate a specific item High involvement

Limited / Extended Problem-Solving

Problem Recognition When a consumer recognises that there is a perceived problem to be solved. The problem can be small or large, simple or complex. Need recognition can occur by a consumer running out of a product, or by the creation of a new need, e.g. after decorating a room replacement furnishings to match new colour scheme. Marketers attempt to create: primary demand - encouraging consumers to use products regardless of the brand they choose. secondary demand - encouraging consumers to prefer one brand over another.

Problem Recognition: Shifts in Actual or Ideal States Marketing Strategies for Influencing Problem Recognition remind consumer of their purchase needs change consumer perceptions of the actual state change consumer perceptions of the desired state Figure 9.4 Problem recognition: shifts in actual or ideal states

Problem Recognition Marketing Strategies for Influencing Problem Recognition remind consumer of their purchase needs change consumer perceptions of the actual state change consumer perceptions of the desired state

Information Search Retailer Search Visits or calls to store, package information, pamphlets/brochures Media Search Information from advertising, on-line ads, websites and other marketing communications Interpersonal Search Advice from friends, relatives, neighbours etc. Independent Search Independent sources, magazines, consumer reports Experiential Search Product/service trials e.g. test drive 24

Information Search Pre-purchase Search Search for information after a need is recognised On-going Search Browsing for fun or keeping up to date with the marketplace Internal Vs External Search Information from prior experiences or external from various sources (see next slide) Deliberate Vs Accidental Search Knowledge via directed learning or passively learned through incidental learning 25

Evaluation of Alternatives ALL BRANDS Known Brands Unknown Brands Acceptable Unacceptable Indifferent Overlooked Brands Brands Brands BBrands Purchased Not Purchased (1) Evoked Set Inept Set Inert Set Those brands that a consumer is aware of (i.e., in his or her awareness set) can be classified as belonging to either an evoked, inert, or inept set. Consumers’ evoked sets (or consideration sets) include brands that they would readily consume. Brands in their inept sets are brands they are aware of, but dislike enough that they would not consume them. Brands in their inert sets are brands they are aware of but are indifferent toward and not likely to consume as long as brands in their evoked set are available. Consumers will focus their information search on brands in their evoked sets. Marketers of brands in a target consumer’s inert set have to work hard to get the consumer to process information that might affect the inclusion of the marketer’s brand in the consumer’s evoked set. Consumers will rarely accept favorable information on brands classified as inept. The formation of these sets depends on the information each individual consumer is exposed to over time, their experiences with the produ

Evaluation of Alternatives: Heuristics Mental rule of thumbs that are used to simplify decision-making and lead to speedy decisions. The rules vary from the very general to very specific. Shortcuts include – relying on a product signal, relying on well-known brand names as a signal of quality and believing market beliefs. When a brand is consistently purchased over time, this pattern may be due to true brand identity or inertia because it is the easiest thing to do.

Post Purchase Evaluation Actual performance Positive disconfirmation Negative disconfirmation Post cognitive dissonance ‘Shouldn’t have spent this much’ As consumers use a product they evaluate its performance in light of their own expectations 3 out comes are suggested 1 that it matches the standard expected leading to a neutral feeling M&S underwear 2 when the performance exceeds the standard a meal out. a packaged food. clothes re comments received or a hair colour 3 when performance is below standard pcd - sinking feeling outside the shop - how do marketers overcome it M&S all this feeds back to internal information for the next purchase very important that it is positive and that pcd is buffeted customers will come back thus making the store decision easier and routine

Choice is freedom (?) Marketers think that providing alternatives to consumers is favourable. Do you think that is true? Read the articles uploaded on moodle: Huffman, C. & Kahn, B.E. (1998). Variety for Sale: Mass Customization or Mass Confusion? Journal of Retailing, Volume 74(4), pp. 491-513. Malhotra, N. K. (1982). Information load and consumer decision making. Journal of consumer research, 8(4), 419-430. Shiv, B., & Fedorikhin, A. (1999). Heart and mind in conflict: The interplay of affect and cognition in consumer decision making. Journal of consumer Research, 26(3), 278-292.

Next week: Seminars: Paradox of choices Lecture 1: CW Brief Lecture 2: Sensation and Perception