Class 16 Consumer Decision Making CA 2018 Consumer Insight A.Kwanta Sirivajjanangkul A.Panitta Kanchanavasita Albert Laurence School of Communication Arts Department of Advertising 2013

Consumers as Decision Makers Basic sequence of steps we undergo when we make decisions Decision Making How the particular situation in which we find ourselves affects these decisions and how we go about evaluating the results of our choices Buying and Disposing An overview of group processes and discusses the reasons we are motivated to conform to the expectations of others when we choose and display our phurchases Group Influence and Opinion Leadership The purchase decisions in conjunction with others, especially coworkers or family members Organizational and Household Decision Making This section explores how we make consumption decisions and discusses the many influences others exert during this process

Chapter outline We Are Problem Solvers Type of Consumer Decisions Steps in Decision Making Process Problem Recognition Information Search Evaluation of Alternatives Product Choice Rules-of Thumb

1 We Are Problem Solvers

Overview of Consumer Decision Process 1 Overview of Consumer Decision Process Problem Recognition Information Search Evaluation of Alternatives Product Choice Outcomes Consumer purchase is a response to a problem

Types of Consumer Decisions 2 Types of Consumer Decisions

Types of Consumer Decisions 2 Types of Consumer Decisions Extended Problem Solving: Most closely to traditional decision making Collect as much as information search both from our memory (internal search) and from outside source such as Google Evaluate each product alternative – often consider the attributes of one brand at a time

Types of Consumer Decisions 2 Types of Consumer Decisions Limited Problem Solving: More straightforward and simple We are likely to use simple decision rules as we choose among alternatives These cognitive shortcuts enable us to fall back on general guidelines, instead of having to start from scratch every time we need to decide

Types of Consumer Decisions 2 Types of Consumer Decisions Habitual Problem Solving: We choose choices with little conscious effort Many purchases are so routinized that we may not realize we have made them until we look in our shopping carts We make these choices without conscious control – “automaticity”

Types of Consumer Decisions 2 Types of Consumer Decisions Routine Response Behavior Limited Problem Solving Extended Problem Solving Low cost products Expensive product Frequent purchasing infrequent purchasing Low consumer involvement High consumer involvement Familiar product class and brands Unfamiliar product class and brands Little thought search or time given to purchase Extensive thought search or time given to purchase

Characteristics of Limited VS Extended Problem Solving 2 Characteristics of Limited VS Extended Problem Solving Limited Problem Solving Extended Problem Solving Motivation Low risk and involvement High risk and involvement Information Search Little search Information processed passively In-store decision likely Extensive search Information processed actively Multiple sources consulted prior to visits Alternative Evaluation Weakly held beliefs Only most prominent criteria used Alternatives perceived as basically similar Noncompensatory strategy used Strongly held beliefs Many criteria used Significant differences perceived among alternatives Compensatory strategy used Purchase Limited shopping time; may prefer self-service Choice often influenced by store displays Many outlets shopped if needed Communication with store personnel often desirable

Steps in Decision Making Process 3 Steps in Decision Making Process

3 Problem Recognition When we experience a significant between our current state of affairs and some state we desire We realize that to get from here to there we need to solve problem Problem could be small, large or complex Ex. We are hungry  we need to find something to eat Ex. We are tired  we need to take a rest Ex. We need a new eco car  we need to buy a new car ?

Problem Recognition: Shifts in actual or ideal state 3 Problem Recognition Problem Recognition: Shifts in actual or ideal state No Problem Opportunity Recognition Need Recognition Ideal state Actual state Ideal Actual Problem arise in 1 or 2 ways A person who runs out of gas experiences

3 Information Search The process by which we survey the environment for appropriate data to make a reasonable decision Recognizing a need and search the marketplace for specific information  prepurchase search Browsing and searching to stay up-to-date on what’s happening in the marketplace  ongoing search Internal search: scan our own memory banks to assemble information about different product alternatives External search: obtain information from advertisements, friends, or just plain people watching

A Framework for Consumer Information Search 3 A Framework for Consumer Information Search Prepurchase Search Ongoing Search Determinants Involvement in the purchase Market environment Situational factors Involvement in the product Motives Making better purchase decisions Building a bank of information for future use Experiencing fun and pleasure Outcomes Increased product and market knowledge Better purchase decisions Increased satisfaction with the purchase outcome Increased product and market knowledge leading to Future buying efficiencies Personal influence Increase impulse buying Increased satisfaction from search and other outcomes

How Much Do We Search? 3 We search more: when the purchase is important when we have more of a need to learn more about the purchase when it is easy to obtain the relevant information Amount of Search Product Knowledge The Relationship Between Amount of Information Search and Product Knowledge

Evaluation of Alternatives 3 Evaluation of Alternatives

How Do We Decide Among Alternatives? 3 How Do We Decide Among Alternatives? Evoked set: the alternatives that consumers know Consideration set: the alternatives that consumers consider Consumers do not consider every single brand they know about because it is out of their price range or they have had a bad experience with it Consumers often consider a small number of alternatives

How Do We Decide Among Alternatives? 3 How Do We Decide Among Alternatives? How do we put products into categories? Knowledge Structure: a set of beliefs and the way we organize these beliefs in our minds Marketers need to ensure that customers correctly group their products There are basically 3 levels for product category: Superordinate category: is more abstract ex. Dessert Basic level category: the most useful to classify product, group product that have a lot in common with each other, but still have a broad enough range of alternatives ex. Fatterning dessert or Nonfatterning dessert Subordinate category: is more specific, often include individual brands ex. Ice cream, pie, cake ขนมหวาน ขนมหวานไทย ขนมหวานฝรั่ง ขนมหวานทำจากไข่ ทำขากมะพร้าว

Application for Marketers 3 Application for Marketers

Strategic Implications of Product Categorization 3 Strategic Implications of Product Categorization Position a Product Positioning strategy has ability to convince consumers to consider products within a given category Identify Competitors At the abstract, superordinate level, many products will be compared with other brands in the same category Creating an overlapping category can associate consumers to think about different attributes Create an Examplar Product Create a sample to make product to be easy to recognize and recall Locate Products in a Store Product categorization also can affect consumers’ expectations regarding the places they can locate a desired product

3 Product Choice

How Do We Select from the Alternatives? 3 How Do We Select from the Alternatives? Evaluation Criteria: the dimensions we use to judge the merits of competing options Mostly, the choices will be considered based on each product attributes of each brand Determinant Attributes: are the feature we actually use to differentiate among our choices

How Do We Select from the Alternatives? 3 How Do We Select from the Alternatives? Recommendations for marketers to create a new decision criterion Messages should convey 3 pieces of information: There are significant among brands on the attributes There is a decision making rule ex. If…(deciding among competing brands), then … (use the attributes as a criterion). There is a rule that consistent with how the person made the decision on prior occasions

4 Rules-of-Thumb

4 Why do we often fall back on well-learned “rules-of-thumb” to make decisions?

Heuristics: Mental Shortcuts 4 Heuristics: Mental Shortcuts Heuristics: or mental rules-of-thumb to make a speedy decision It happens especially when limited problems solving occurs prior to making a choice These rules can range from the very general Ex. Higher priced product = higher quality Ex. Buy the same brand I bought last time And it could range to the very specific Ex. Buy Domino, the brand of sugar my mother always bought Consumers often simplify when they use heuristics such as automatically choosing a favorite color or brand

Heuristics: Mental Shortcuts 4 Heuristics: Mental Shortcuts Product signal: the visible elements ex. Brand names, country of origin, price, the retail outlets that carry the product Country of Origin: is a determinant attribute in the decision-making process Consumers strongly associate certain items with specific countries and products from those countries often attempt to benefit from these linkages Ethnocentrism: is the tendency to prefer products or people of one’s own culture to those of other countries Ethnocentric consumers are likely to feel it is wrong to buy products made elsewhere, particularly this may have a negative effect on the domestic industry

Do We Choose Familiar Brand Names Because of Loyalty or Habit? 4 Do We Choose Familiar Brand Names Because of Loyalty or Habit?

4 Loyalty VS Habit Inertia: The Lazy Customer Consumers buy a brand out of habit because it requires less effort If the product is out of stock, they will not hesitate to change their mind Brand Loyalty: A “Friend”, “Tried-and- True” Brand loyalty describes repeat purchasing behavior that reflects a conscious decision to continue buying the same brand They will not only buy the brand but they will also have a strong positive attitude toward the brand

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