Insights into Consumer Decision Making II Professor West

Agenda  Discuss textbook case on Starbucks

Starbucks Success  What can we learn from Starbucks?  What is the key to Starbucks success?  How should they leverage their strong brand in response to growing competition?

Different forms of decision making

Marketing Implications  What are the marketing implications for the firm, and its competitors when consumers are engaging in:  Cognitive decision making  Experiential decision making  Habitual decision making

The Decision Sequence  Consumers face the problem of what to buy and where to buy it.  Outlet first, brand second  Brand first, outlet second  Simultaneous  What determines the order?

Planned vs Unplanned  Two-thirds of supermarket decisions and nearly three-quarters of all mass merchandise decisions are made in-store.  This points to the crucial role of the retail environment, including store layout, POP displays and promotions, atmospheric elements (lighting, music, scents)

Post-decision Effects

 What causes post-decision dissonance?  The degree of commitment or irrevocability of the decision  Importance and decision difficulty  Perceive risk associated with the decision  How can it be effectively managed?

Product Usage  Why do marketers care about how or whether a product is used?  What can be done to help?

Determinants of Customer Satisfaction

Customer Satisfaction  How do consumers evaluate product performance?  Performance is evaluated relative to our expectations.

Customer Satisfaction  What do we know about how this process occurs?  Assimilation – There is a reluctance to acknowledge discrepancies between expectations and performance via rationalization and attribution  Contrast – There is a tendency to exaggerate sizable discrepancies, a phenomenon known as reactance

Assimilation & Contrast Zone of Tolerance AssimilationContrast 10 Favorable 9 Performance Expectation Unfavorable 5 Performance

Satisfaction & Dissatisfaction Zone of Tolerance Elation Betrayal 10 Favorable 9 Performance Expectation Unfavorable 5 Performance

Customer Satisfaction  Satisfaction influences repeat buying  Positive post-consumption evaluations are essential for retaining customers  The likelihood that customers will remain loyal depends on their level of satisfaction

Customer Satisfaction  It shapes word of mouth  Consumers often talk about their consumption experiences  A firm’s ability to satisfy customers will affect its success in retaining current customers as well as recruiting new ones

Customer Dissatisfaction

Focus on Retention  We said on day one that the goal of studying consumer behavior was to better understand how to acquire, satisfy, and retain our customers...  An important lesson marketers have learned is that it is much less costly to retain existing customer than it is to acquire new ones…which makes customer satisfaction paramount!

Costs & Revenues Over Time

Customer Satisfaction  Implications for Competitive Strategy  Monitor satisfaction levels  Encourage dissatisfied customers to voice their concerns  Have a recovery system in place to address customer concerns  It is important to set realistic expectations and strive to exceed them

Influencing Expectations  Where do consumer expectations come from?  How can the firm influence them?

Next Time  Read  Chapters 8 – 10, 11 (pp , , , , )