Consumer Decision Making II MKT 750 Dr. West

Agenda Ad viewing Complete… Stages of Decision Making Three Routes to Decision Making The Role of Involvement

3 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

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

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 Economist’s Choice

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)

Realistically Speaking Consumers don’t expend the time or effort required to implement either of these strict compensatory rules. Instead we tend to rely on shortcuts to simplify the process and produce easily justifiable decisions

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. When does this rule work well and when will it fail?

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: Disjunctive strategy: A high threshold is set on the most important attributes. Any alternative that exceeds one of these thresholds is considered acceptable. A football team might use a disjunctive rule to pick its players in the draft to select the best athlete for a particular position rather than the “best-all-around player” When does this rule work well and when will it fail?

Disjunctive Rule Threshold = 5 Dustin Fox Branden Joe Mike Nugent Quarterback 221 Running Back 241 Safety 221 Center Back 421 Wide Receiver 221 Kicker

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. When does this rule work well and when will it fail?

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. I like to think of this as the dating or marriage rule… seeking Mr. or Mrs. Right When does this rule work well and when will it fail?

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

Experiential Model How is this different from the rational/cognitive model? When is this likely to occur? What are the implications for marketers and consumers?

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)

Impulse Purchases What are these? How are they different from other “unplanned purchases”?

Postpurchase Effects

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: How do consumers evaluate product performance? Performance is evaluated relative to our expectations. 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

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

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

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 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 It Shapes Word-of-Mouth

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!

Real-World Example Comair president, Randy Rademacher, resigned on Monday following the failure of a computer system that left left passengers stranded just before Christmas. Delta slashed fairs in an effort to appease the public

Customer Satisfaction 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 Implications for Competitive Strategy

Advertising claims Brand names Packaging Price Influencing Expectations

Next Time Reading: Chapters (pp , , , ) Topic: Changing Demographics Assignment: Two readings for team project, and depth interview report