Consumer Decision Making I MKT 750 Dr. West

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

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 how and why you decided to purchase the product, as well as offer insights to other consumers like yourself, and marketers.

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

Laddering Technique Values Attributes Consequences 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..”

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

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

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).

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

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

Need Recognition Ideal StateIdeal StateActual State Actual State No ProblemOpportunity ProblemRecognition

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

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

Possessions and the Extended Self James Bond Actual Self BMW Z3

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

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

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

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

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

What determines search?

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

Evaluation & Choice

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

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

Evaluating Alternatives Assessing Importance: e i Space5 Reliability4 Safety4 Longevity3 Handling3 Styling2 * Importance: 5=Most Important, 1=Least Important

Evaluating Alternatives Beliefs Regarding Product Performance: Product Evaluation: 4=Excellent, 3=Very Good, 2=Good, 1=Fair b i ’s Importance e i Toyota Sienna Subaru Outback Volvo Cross Country Space5424 Reliability4343 Safety4334 Longevity3244 Handling3142 Styling2243

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)

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

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

Simple Additive (Equal Weight) bibi Toyota Sienna Subaru Outback Volvo Cross Country Space424 Reliability343 Safety334 Longevity244 Handling142 Styling

Weighted Additive bieibiei Importance Toyota Sienna Subaru Outback Volvo Cross Country Space54 (20)2 (10)4 (20) Reliability43 (12)4 (16)3 (12) Safety43 (12) 4 (16) Longevity32 (6)4 (12) Handling31 (3)4 (12)2 (6) Styling22 (4)4 (8)3 (6)

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

Lexicographic Rule Importance Toyota Sienna Subaru Outback Volvo Cross Country Space 5424 Reliability 4343 Safety 4334 Longevity 3244 Handling 3142 Styling 2243

Lexicographic Rule Importance Toyota Sienna Subaru Outback Volvo Cross Country Space 5424 Reliability 4343 Safety 4334 Longevity 3244 Handling 3142 Styling 2243

Lexicographic Rule Importance Toyota Sienna Subaru Outback Volvo Cross Country Space 5424 Reliability 4343 Safety 4334 Longevity 3244 Handling 3142 Styling 2243

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.

Elimination by Aspects Rule Cutoff = 3Importance Toyota Sienna Subaru Outback Volvo Cross Country Space 5424 Reliability 4343 Safety 4334 Longevity 3244 Handling 3142 Styling 2243

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.

Conjunctive Rule Cutoff = 2 Toyota Sienna Subaru Outback Volvo Cross Country Space 324 Reliability 343 Safety 334 Longevity 244 Handling 142 Styling 243 Very sensitive to order

Assignment Reading: Chapters (pp , , ) Topic: Consumer Decision Making II Assignment: Write-up your Shopping Insights for next Wednesday. Find a team of up to six class members