The Consumer Decision Process

Customer Decisions Decisions customers make in the marketplace as buyers, payers, and users, include: – Whether to purchase – What to purchase – When to purchase – From whom to purchase – How to pay for it

Consumer Decision Process Model Purchase Problem Recognition Search for Information Consumption Post-consumption Evaluation Divestment Pre-purchase Evaluation of Alternatives

Consumer Decision Process Continuum Midrange Problem Solving Habitual Problem Solving Extended Problem Solving High Low Degree of Complexity Limited Problem Solving

Consumer Decision Process Model Problem Recognition

Step 1. Problem Recognition Similarities with motivation…not always a problem Marketers Impact

Consumer Decision Process Model Need Recognition Search for Information

Search For Information Internal search: retrieving know- ledge from memory External search: collecting informa- tion from peers, family, and the marketplace Search may be passive as consumers become more receptive to information around them, or consumers can engage in active search behavior

Internal Search: Searching for Information from Memory What Kind of Information Is Retrieved from Internal Search? – Recall of Brands Consideration or Evoked Set – Recall of Attributes – Recall of Evaluations – Recall of Experiences

Awareness, Evoked, and Consideration Sets Awareness Set (All the brands in the Awareness) Brands NOT recalled Brands NOT considered Consideration Set (Brands considered) Evoked Set (Brands recalled)

External Search: Searching for Information from the Environment External Search – Prepurchase Search – Ongoing Search

Sources of Information for Customers Advertising Salespersons Product/service brochures Store displays Company web sites PERSONAL Friends and other acquaintances Past experience INDEPENDENT SOURCES Public information (e.g., Consumer Reports, Better Business Bureau, news reports in media, government publications, such as The Census of Manufacturers) Product or service experts: (e.g., auto critic, home appraiser, pharmacist, and so on) Internet (bulletin boards) MARKETER SOURCESNONMARKETER SOURCES

Determinants of the Amount of Search Perceived risk Involvement Familiarity Expertise Time pressure

How do we classify information?

More infos than presented. Not as organized. subjective (ex.: design) and/or objective criteria accessibility biases missing infos Type of Information

Type of biases Biases due to the source (salesperson versus family) Own Biases (mental accounting: challenge to rational evaluation) – Snowstorm and football… – Framing issues Information Overload (Customers are exposed to so much information that they are unable to process it to make a decision)

Consumer Decision Process Model Need Recognition Search for Information Pre-purchase Evaluation of Alternatives

The process of evaluating alter- natives identified from search, which leads to product or brand most likely to satisfy the consumer Can use new or preexisting evalu- ations stored in memory Evaluative criteria: standards and specifications used to compare different products and brands

How to Categorize? Levels of categorizationStrategic Implications for marketers  Positioning  Identification of competitors Identification of Alternatives

What do you think about this ad?

Heuristics “Simple rules of thumb used to aid judgments or decisions.”Heuristics: What types of mental shortcuts?  Product signal  Market beliefs  Country of origin  Brand Loyalty Choices: How to make the decision?

Alternatives Evaluation Alternatives Evaluation Other Heuristics – Compensatory – Noncompensatory

The rule : where ST = total score; I i = importance of attribute i; P i = performance of brand i on attribute i; k = number of attribute. Multi-Attribute Model

Multi-Attribute Model Application From 1 very bad to 5 very good

Use of the multi-attribute rule by a Customer Poor (1) 4Average (2) Excellent (4) Brand 3WEIGHTBrand 1Brand 2 Excellent (4) 1Poor (1) Good (3) 3 Poor (1) 4(1) + 3(3) + 1(4) + 2(1) = 19 4(2) + 3(3) + 1(1) + 2(3) = 24 4(4) + 3(1) + 1(3) + 2(2) = 26 Poor (1) 2 Good (3)Average (2) Quality ATTRIBUTE Customer support Fit with desired performance standards Total Price Brand RATINGS

Compensatory Attribute Processing Models Additive Difference Model – Brands Compared by Attribute, Two at a Time – Differences Added Up as Decision Maker Proceeds by Attribute; e.g.: EpsonCanon Diff Price Weight Processor Battery Life After Sale Support Display Quality TOTAL -1 (Canon is marginally better)

Noncompensatory Brand Processing Models Conjunctive Models – Minimum Cutoffs Set for Each Attribute (Reject if Below Cutoff) – Need Additional Rule to Rule Out Remaining Alternatives (If More Than One) Disjunctive Model – Acceptable Levels for Attributes Decided (Reject if Below Cutoff) – Decision Based on Several, but Not All, Important Attributes

Conjonctive Rule

Disjonctive Rule

Noncompensatory Attribute Processing Models Lexicographic Model – Attributes ordered by importance – If one alternative dominates on that attribute, it is chosen; otherwise, proceed to next most important attribute – I want to get the brand that does best on the attribute(s) most important to me. Elimination by Aspects – Attributes ordered by importance; alternatives acceptable on first attribute proceed to evaluation on further attributes – I will eliminate any brands that have a value of 3 or below, beginning with the most important attribute.

Elimination by Aspects

Lexicographic Rule

What did you learn ? CASE ANALYSIS

Reality of Consumer Decision Making Consumers may use multiple decision-making strategies Emotions and imagery often accompany rational, cognitive analysis ALL ALTERNATIVES NON- COMPENSATORY EVALUATION COMPENSATORY EVALUATION SURVIVING ALTERNATIVES

Consumer Decision Process Model Purchase Need Recognition Search for Information Pre-purchase Evaluation of Alternatives

Purchase Purchase decisions involve choosing a form of retailing, a specific retailer, and a particular product and brand Purchase intention can change during the purchase stage--it can be influenced by factors such as in- store promotions, discounts, or stock-outs

Deviation From the Identified Choice The preferred brand may be out of stock New in-store information may reopen the evaluation process Financing terms may render a purchase infeasible

Consumer Decision Process Model Purchase Need Recognition Search for Information Consumption Prepurchase Evaluation of Alternatives

Consumer Decision Process Model Purchase Need Recognition Search for Information Consumption Post-consumption Evaluation Pre-purchase Evaluation of Alternatives

Post-consumption Evaluation Satisfaction: when expectations are met or exceeded by perceived performance Dissatisfaction: when performance falls short of expectations Consumption is an important determinant of satisfaction Cognitive dissonance: questioning decision (post-purchase regret) Emotion affects evaluation

Importance of Customer Satisfaction Satisfied customers come back Leads to profitability – Example: Consumer in supermarket spends over $50,000 in a life time – Satisfied customer can provide $150,000 of business for a car dealer over a life time

Exhibit 12.8: The Disconfirmation Paradigm

Measuring Satisfaction in Terms of Expectations How did we do? How was our: Fell Below Expectations Met Expectations Exceeded Expectations Room appearance Room cleanliness Registration speed Friendliness of staff Room service promptness

Customer Dissatisfaction Dissatisfied customers stop purchasing, complain, and spread negative WOM. The average business does not hear from 96% of its unhappy customers. The average person with problems tells 9 or 10 people. 95% of complainers will do business with you if complaint is resolved quickly.

Responses to Dissatisfaction Complaints – Consumer Complaints – When Complaints Are Likely to Occur – Complainer Types

Satisfaction Is Not Enough 65% to 85% of customers who defect to competitors say they were “satisfied” or “very satisfied.” Customer retention is key--develop long- term relationships.

Customer Retention Tactics Care about your customers. (2/3 of customers defect because they feel the company doesn’t care about them.) Remember customers between sales. (Contact on birthdays, etc.) Build trusting relationships (expertise, reliability, concern). Monitor the service delivery process. Be there when you are needed (service and repair). Provide extra effort (beyond the call of duty).

Irrevocability of the decision Choice Difficulty of choice Doubts Cognitive Dissonance Stress Strategies Reduce Importance of the decision Reduce perceived value of rejected options Importance of the decision Anxiety of the consumer Increase Perceived value Of chosen option Cognitive Dissonance

Consumer Decision Process Model Purchase Need Recognition Search for Information Consumption Post-consumption Evaluation Divestment Pre-purchase Evaluation of Alternatives

Divestment How consumers dispose of the packaging or product after use Options include: Disposal Remarketing or reselling Recycling Consumers’ environmental concerns about divestment may affect product choice

Variables Shaping the Decision Process Environmental Differences: Culture: values, ideas, artifacts, and symbols that help individuals interpret, communicate, and evaluate as members of society Social Class Family Personal Influence Situation

Case Study 1. Watching the purchase decision of some of the people in the video, would you say this pattern is typical of a product in a low-involving category? Describe the purchase process of one of these persons or your own purchase decision? 2. What are the key attributes of the product? How does the company position itself relatively to these attributes? 3. How important are other people in the decision making process regarding the purchase of this product? How does the company use this aspect? What do you think of that?