16-1 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

16-2 PART IV: CONSUMER DECISION PROCESS

16-3 CHAPTER 16 ALTERNATIVE EVALUATION AND SELECTION

16-4 Consumer Behavior In The News… And you thought it was all about the styling!  Auto marketers are pushing extended warranties to better compete for market share.  Suzuki is a good example.  7-year  100,000 miles  Can you name the top three factors (attributes) that convinced consumers to choose Suzuki? Source: J. Halliday, “Extended warranty heats up auto sales,” Advertising Age, November 1, 2004, p. 12.

16-5 Consumer Behavior In The News… And you thought it was all about the styling!  Can you name the top three factors (attributes) that convinced consumers to choose Suzuki?  Warranty – 54%  Price – 51%  Reliability – 49%  And, competitors have followed suite – including GM and Mitsubishi. Source: J. Halliday, “Extended warranty heats up auto sales,” Advertising Age, November 1, 2004, p. 12.

16-6 Alternative Evaluation and Selection

16-7 How Consumers Make Choices Rational choice theory Rational choice theory assumes the consumer has sufficient skills to calculate which option will maximize his/her value, and will choose on this basis.   The task is to identify or discover the one optimal choice.   The decision maker collects information levels of attributes across alternatives, applies the appropriate choice rule, and the superior option is revealed.

16-8 How Consumers Make Choices bounded rationality In reality, all consumers have bounded rationality   A limited capacity for processing information. Consumers also often have goals that are different from, or in addition to, selecting the optimal alternative.  metagoal  A metagoal refers to the general nature of the outcome being sought.

16-9 How Consumers Make Choices Metagoals in Decision Making Maximize the accuracy of the decision Maximize the accuracy of the decision Minimize the cognitive effort required for the decision Minimize the cognitive effort required for the decision Minimize the experience of negative emotion Minimize the experience of negative emotion Maximize the ease of justifying the decision Maximize the ease of justifying the decision

16-10 How Consumers Make Choices 1.Affective Choice 2.Attitude-Based Choice 3.Attribute-Based Choice Three types of consumer choice processes:

16-11 How Consumers Make Choices Affective choices tend to be more holistic. Brand not decomposed into distinct components for separate evaluation. Evaluations generally focus on how they will make the user feel as they are used. Affective Choice Choices are often based primarily on the immediate emotional response to the product or service.

16-12 How Consumers Make Choices Affective choice most likely under consummatory motives.  Consummatory motives  Consummatory motives underlie behaviors that are intrinsically rewarding to the individual involved.  Instrumental motives  Instrumental motives activate behaviors designed to achieve a second goal. Affective Choice

16-13 How Consumers Make Choices Attribute- versus Attitude-Based Choice Processes Attribute-Based Choice Requires the knowledge of specific attributes at the time the choice is made, and it involves attribute-by- attribute comparisons across brands. Attitude-Based Choice Involves the use of general attitudes, summary impressions, intuitions, or heuristics; no attribute-by- attribute comparisons are made at the time of choice.

16-14 How Consumers Make Choices Motivation, information availability, and situational factors interact to determine which choice process will be used.   Example: the easier it is to access complete attribute-by-brand information, the more likely attribute- based processing will be used.   So, brands with attribute advantages but lacking strong reputations…   Should provide attribute comparisons in an easy-to- process format in their marketing and packaging. Attribute-Based versus Attitude-Based Choice Processes

16-15 How Consumers Make Choices Many decisions, even for important products, appear to be attitude-based. Thus, marketers often have a dual task: 1. 1.Provide promotions that resonate with consumers making attitude-based choices Provide performance and supporting information to create preference for consumers making attribute-based choices. Attribute-Based versus Attitude-Based Choice Processes

16-16 Evaluative Criteria Evaluative criteria Evaluative criteria - various dimensions, features, or benefits sought in response to a specific problem. Most decisions involve an assessment of one or more evaluative criteria.

16-17 Evaluative Criteria Evaluative criteria are typically product features or attributes associated with either benefits desired by customers or the costs they must incur. Evaluative criteria can differ in   type   number   importance Nature of Evaluative Criteria

16-18 Evaluative Criteria Measurement of Evaluative Criteria Involves a determination of:   The Evaluative Criteria Used   Judgments of Brand Performance on Specific Criteria   The Relative Importance of Evaluative Criteria

16-19 Evaluative Criteria 1.Direct 1.Direct methods include asking consumers what criteria they use in a particular purchase. 2.Indirect 2.Indirect techniques assume consumers will not or cannot state their evaluative criteria. Projective techniquesProjective techniques - allow the respondent to indicate the criteria someone else might use. Perceptual mappingPerceptual mapping - researcher uses judgment to determine dimensions underlying consumer evaluations of brand similarity. Determination of Which Evaluative Criteria Are Used

16-20 Evaluative Criteria Perceptual Mapping of Beer Brand Perception

16-21 Evaluative Criteria Measuring consumer judgments of brand performance on specific attributes can include:   Rank ordering scales   Semantic Differential Scales   Likert Scales Determination of Consumers’ Judgments of Brand Performance on Specific Evaluative Criteria Performance on Specific Evaluative Criteria

16-22 Evaluative Criteria directindirect The importance assigned to evaluative criteria can be measured either by direct or by indirect methods.   The constant sum scale is the most common direct method. Determination of the Relative Importance of Evaluative Criteria

16-23 Evaluative Criteria Conjoint analysis is the most popular indirect method.   Conjoint presents consumes with a set of product descriptions which they evaluate.   Statistical analysis is used to derive attribute importance from these overall evaluations. Determination of the Relative Importance of Evaluative Criteria

16-24 Individual Judgment and Evaluative Criteria  Accuracy of Individual Judgments  Use of Surrogate Indicators  The Relative Importance and Influence of Evaluative Criteria  Evaluative Criteria, Individual Judgments, and Marketing Strategy

16-25 Individual Judgment and Evaluative Criteria Consumers can have difficulty judging competing brands on complex evaluative criteria such as quality or durability.  cando  Consumers can and do make such judgments.   But even seemingly simple judgments such as price comparisons can be complex!   The inability of consumers to accurately evaluate many products can result in inappropriate purchases.   This is a major concern of marketing regulators. Accuracy of Individual Judgments

16-26 Individual Judgment and Evaluative Criteria Surrogate indicator A Surrogate indicator is an attribute used to stand for or indicate another attribute. For example, consumers often use the following factors as surrogate indicators of quality (a.k.a. quality signals):  price  advertising intensity  warranties  brand  country of origin Use of Surrogate Indicators

16-27 Individual Judgment and Evaluative Criteria Factors influencing the importance of various criteria:   Usage situation   Competitive context   Advertising effects The Relative Importance and Influence of Evaluative Criteria

16-28 Individual Judgment and Evaluative Criteria   Marketers must understand the evaluative criteria consumers use and develop products that excel on these features.   Marketers must understand consumer use of surrogate indicators.   Marketers must understand the factors influencing consumer perceptions of the importance of evaluative criteria. Evaluative Criteria, Individual Judgments, and Marketing Strategy

16-29 Decision Rules for Attribute-Based Choices Choice rules can be characterized as either compensatory and non-compensatory.   A compensatory rule – high level of one attribute can offset a low level of another.   Non-compensatory rules – high level of one attribute cannot offset a low level of another.

16-30 Decision Rules for Attribute-Based Choices  Conjunctive Rule  Disjunctive Rule  Elimination-by-Aspects Rule  Lexicographic Rule  Compensatory Rule Non-compensatory

16-31 Decision Rules for Attribute-Based Choices Choosing Between Six Notebook Computers Final Choice Depends on Decision Rule Being Used

16-32 Decision Rules for Attribute-Based Choices Conjunctive Rule Conjunctive Rule: Establishes minimum required performance for each evaluative criterion. Selects the first (or all) brand(s) that meet or exceed these minimum standards. If minimum performance was: Price3 Weight4 Processor3 Battery life 1 After-sale support 2 Display quality 3

16-33 Decision Rules for Attribute-Based Choices WinBook, Dell, IBM, and Toshiba are eliminated because they fail to meet all the minimum standards. Conjunctive Rule Minimum343123

16-34 Decision Rules for Attribute-Based Choices Disjunctive Rule Disjunctive Rule: Establishes a minimum required performance for each important attribute (often a high level). All brands that meet or exceed the performance level for any key attribute are acceptable. If minimum performance was: Price5 Weight5 Processor Not critical Battery life Not critical After-sale support Not critical Display quality 5

16-35 Decision Rules for Attribute-Based Choices WinBook, Compaq, and Dell meet minimum for at least one important criterion and thus are acceptable. Disjunctive Rule Minimum55---5

16-36 Decision Rules for Attribute-Based Choices Elimination-by-Aspects Rule First, evaluative criteria ranked in terms of importance Second, cutoff point for each criterion is established. Finally (in order of attribute importance) brands are eliminated if they fail to meet or exceed the cutoff. If rank and cutoff were: RankCutoff Price13 Weight24 Display quality 34 Processor43 After-sale support 53 Battery life 63

16-37 Decision Rules for Attribute-Based Choices Step 1: Price eliminates IBM and Toshiba Step 2: Weight eliminates WinBook Step 3: Of remaining brands (HP, Compaq, Dell), only Dell meets or exceeds display quality minimum. Elimination-by-Aspects Rule Minimum343334

16-38 Decision Rules for Attribute-Based Choices Consumer ranks the criteria in order of importance. Then selects brand that performs best on the most important attribute. If two or more brands tie, they are evaluated on the second most important attribute. This continues through the attributes until one brand outperforms the others. WinBook would be chosen because it performs best on Price, our consumer’s most important attribute. Lexicographic Decision Rule

16-39 Decision Rules for Attribute-Based Choices compensatory decision rule The compensatory decision rule states that the brand that rates highest on the sum of the consumer’s judgments of the relevant evaluative criteria will be chosen. Compensatory Decision Rule

16-40 Decision Rules for Attribute-Based Choices Compensatory Decision Rule Importance Score Importance Score Price30 Weight25 Processor10 Battery life 05 After-sale support 10 Display quality 20 Total100 Assume the following importance weights: Using this rule, Dell has the highest preference and would be chosen. The calculation for Dell is:

16-41 Decision Rules for Attribute-Based Choices Summary of Resulting Choices from Different Decision Rules