Chapter 9 Individual Decision Making By Michael R. Solomon Consumer Behavior Buying, Having, and Being Sixth Edition

Opening Vignette: Richard What motivates Richard to begin his quest for a new TV? What kind of perception does Richard have about salespeople? What influenced Richard’s choice of brand? What is the main reason Richard makes his final selection?

Consumers As Problem Solvers A consumer purchase is a response to a problem. Steps in the decision process: (1) Problem recognition (2) Information search (3) Evaluation of alternatives (4) Product choice Amount of effort put into a purchase decision differs with each purchase.

Stages in Consumer Decision Making Figure 9.1

Illustrating the Decision-Making Process This ad by the U.S. Postal Service presents a problem, illustrates the decision-making process, and offers a solution.

Perspectives on Decision Making Rational Perspective: Consumers integrate as much info as possible, weigh pluses and minuses, arrive at a decision Purchase Momentum: Initial impulses increase the likelihood of buying more Constructive Processing: Sequence of events by which the consumer evaluates the effort needed to make a choice and then chooses a strategy based on the level of effort required

Decision-making perspectives How do people come to a decision: The rational perspective – people calmly and careful integrate as much information as possible with what they already know about a product and weigh up the pros and cons of each before making a decision. Behavioural Influence perspective – (in conditions of low involvement) where decisions are made as a result of a learned response to environmental cues, e.g. buying on impulse as a result of a ‘special offer’. Experiential perspective – in conditions of high involvement but where the selection made cannot be entirely rational.

Experiential Websites

Types of consumer decisions Habitual decision-making – those that are made routinely and with little or no conscious effort. Extended decision-making – usually initiated by a motive that is fairly central to self-concept and the final decision is perceived to carry a fair degree of risk. Limited decision-making – usually straightforward and simple. There is no real motivation to search for information and evaluate each alternative rigorously.

A Continuum of Buying Decision Behavior Figure 9.2

Characteristics of limited versus extended problem-solving

Limited vs. Extended Problem Solving

Problem Recognition Problem recognition: Occurs whenever the consumer sees a significant difference between his or her current state of affairs and some desired or ideal state Need recognition: The quality of the consumer’s actual state moves downward Opportunity recognition: The consumer’s ideal state moves upward Primary demand: Consumers are encouraged to use a product or service regardless of the brand they choose Secondary demand: Consumers are encouraged to use a specific brand – can only occur if primary demand exists

Problem Recognition: Shifts in Actual or Ideal States Figure 9.3

Information Search Types of Information Search: Prepurchase search: Consumer recognizes a need and then searches the marketplace for specific information Ongoing search: Browsing for fun or staying up-to-date on what’s happening in the market Internal Versus External Search: Internal search: Scanning our own memory banks for information about product alternatives External search: Obtaining product information from advertisements, friends, or by observing others

How Much Search Occurs? As a general rule, search activity is greater when: (1) The purchase is important. (2) When there is a need to learn more about the purchase. (3) When the relevant information is easily obtained and utilized. (4) Females search more than men. (5) Younger, better educated search more than others. (6) Those who enjoy shopping search more.

Expertise... The consumer’s prior expertise can also affect the search and shopping process. (1) Search tends to be greatest among those consumers who are moderately knowledgeable about the product. (2) The type of search varies with varying levels of expertise: (a) Experts use selective search. (b) Novices rely on opinions of others.

Consumer Information Search Framework

Other Types of Information Search Deliberate Versus “Accidental” Search: Directed Learning: Results from existing knowledge from previous active acquisition of information Incidental Learning: Passive acquisition of information through exposure to advertising, packaging, and sales promotion activities The Economics of Information: Approach that assumes consumers will gather as much data as needed to make a decision Utility: the most valuable units of information will be collected first. Variety Seeking: Desire to choose new alternatives over familiar ones

Do Consumers Always Search Rationally? Consumers don’t necessarily engage in a rational search process. Low-income consumers search the least. Brand Switching: Changing brands even if the current brand satisfies the consumer’s needs – Variety seeking Sensory-specific satiety: A cause of variety seeking when there is relatively little stimulation in the consumer’s environment

Rational Consumer? This Singaporean beer ad reminds us that not all product decisions are made rationally.

Biases in the Decision-Making Process Mental Accounting: Decisions are influenced by the way a problem is posed (framing) Sunk-cost fallacy: Having paid for something makes the consumer reluctant to waste it Loss Aversion: Prospect Theory: people place more emphasis on loss than on gain in a situation.

How Much Search Occurs? Greater Search Activity When: The purchase is important There is a need to learn more about the purchase Relevant information is easily obtained and used The Consumer’s Prior Expertise: Search tends to be the greatest among those consumers who are moderately knowledgeable about the product The type of search differs according to expertise Selective search: A more focused and efficient search which is typical of experts Novices are more likely to rely on the opinions of others

Information Search vs. Product Knowledge Figure 9.5

Perceived Risk in Advertising Minolta features a no-risk guarantee as a way to reduce the perceived risk in buying an office copier.

Perceived Risk Purchase decisions that involve extensive search also entail some kind of perceived risk. Figure 9.6

Identifying alternatives Identifying alternatives

Alternatives... The alternatives actively considered during a consumer’s choice process are his or her Evoked set. In reality, this can be a very small set. Marketers want their products to be in the evoked set. (1) The evoked set is composed of those products already in memory (the retrieval set), plus those prominent in the retail environment. (2) The alternatives that the consumer is aware of but would not consider buying are his or her inept set. (3) Those products not entering his or her consideration comprise the inert set.

Evaluation of Alternatives Identifying Alternatives: Evoked Set: Products already in memory (the retrieval set) plus those prominent in the retail environment Product Categorization: Categorization: Mentally placing a product with a set of other comparable products - (the factual knowledge about products [beliefs] and the way these beliefs are organized in people’s minds). Levels of Categorization: Basic level category - items have much in common but a number of alternatives exist. Superordinate category - abstract concepts. Subordinate category - individual brands.

Levels of Abstraction in Dessert Categories Figure 9.7

Discussion Question Kimberly-Clark spent over $100 million developing it’s “Cottonelle Fresh Rollwipes” (moist flushable wipes). Why do you think the product has failed to be adopted by American consumers? What can Kimberly-Clark do to increase acceptance of the product?

Strategic Implications of Product Categorization Product Positioning: Success of a positioning strategy depends on convincing the consumer that the product should be considered in the category. Identifying Competitors: are different products substitutes? Exemplar Products: the most known, accepted product, or brand in a category Locating Products: Categorization can affect consumers’ expectations of where to find certain products within certain places within the store environment.

Product Positioning This ad for Sunkist lemon juice attempts to establish a new category for the product by repositioning it as a salt substitute.

How to judge... Evaluative criteria are the dimensions used to judge the merits of competing options. Forms can be: (1) Differences – significant differences among brands on an attribute (anti-lock brakes). (2) Supplying the consumer with decision-making rules. Convey a rule that can be integrated with how the person has made this decision in the past

Product Choice: Selecting Among Alternatives Evaluative Criteria: Dimensions used to judge the merits of competing options Determinant Attributes: Attributes used to differentiate among choices To recommend a new decision criteria, a communication should: Point out that there are significant differences among brands on the attribute Supply the consumer with a decision-making rule Convey a rule that can be integrated with how the person has made this decision in the past

Heuristics Mental rule of thumbs that are used to simplify decision-making and lead to speedy decisions. The rules vary from the very general to very specific. Shortcuts include – relying on a product signal, relying on well-known brand names as a signal of quality and believing market beliefs. When a brand is consistently purchased over time, this pattern may be due to true brand identity or inertia because it is the easiest thing to do.

Choosing the Solution Lava soap lays out the options and invites us to choose the solution.

Cybermediaries Cybermediary: Cybermediaries take different forms: An intermediary that filters and organizes online marketing information to aid in evaluation of alternatives Cybermediaries take different forms: Directories and portals (e.g. fashionmall.com) Web site evaluators (e.g. Point Communications) Forums, fan clubs, and user groups (e.g. about.com) Financial intermediaries (e.g. PayPal) Intelligent agents (e.g. mysimon.com)

Online Information Search Search engines like Ask Jeeves simplify the process of online information search.

Intelligent Agents

Heuristics: Mental Shortcuts Mental rules-of-thumb that lead to a speedy decision Relying on a Product Signal: Product signal: Aspect of an item that visibly communicates some underlying quality Covariation: Perceived associations among events that may or may not influence one another Market Beliefs: Is It Better if I Pay More For It? Price-Quality Relationship: Pervasive market belief that higher price means higher quality

Heuristics Simplify Choices Consumers often simplify choices by using heuristics such as automatically choosing a favorite color or brand.

Heuristics (cont.) Country-of-Origin as a Product Signal Roper Starch Worldwide categorization of people’s level of cultural attachment Nationalists Internationalists Disengaged Country-of-origin: Can be an important piece of information in the decision-making process Stereotype: A knowledge structure based on inferences across products Ethnocentrism: Tendency to prefer products or people of one’s own culture. Consumer Ethnocentrism Scale (CETSCALE): Measures ethnocentrism

Discussion Question The clothing ad to the right captions, “Authentic American Clothes Since 1949” Which of the Roper Starch Worldwide segments is this ad designed to appeal to? Is this a product where country of origin is typically important?

Country of Origin A product’s country of origin is an important piece of information in the decision-making process. Certain items are strongly associated with specific countries, and products from those countries often attempt to benefit from these linkages.

Macanudo Cigars This advertisement positions the Macanudo cigar as part of Americana, even though it’s imported from the Dominican Republic.

Qibla-Cola

Heuristics (conc.) Inertia: the lazy consumer Choosing Familiar Brand Names: Loyalty or Habit? Brand loyalty is prized by marketers Brand equity can be defined as the difference between the market value and the book value of a brand. Inertia: the lazy consumer Inertia: A brand is bought out of habit because less effort is required Brand Loyalty: A “Friend,” Tried-and-True: Brand parity: Consumers’ beliefs that there are no significant differences between brands

Hypothetical Alternatives for a TV Set

Decision Rules Noncompensatory Decision Rules: Choice shortcuts where a product with a low standing on one attribute cannot compensate by being better on another attribute The Lexographic Rule The Elimination by Aspects Rule The Conjunctive Rule Compensatory Decision Rules: Give a product a chance to make up for its shortcomings Simple Additive Rule Weighted Additive Rule

Non-compensatory decision rules, (1) The lexicographic rule – the brand with the best attribute is selected. (2) The elimination-by-aspects rule – must have a specific feature to be chosen. (3) The conjunctive rule – the consumer processes products by brand.

Compensatory rules... Unlike non-compensatory decision rules, compensatory decision rules give a product a chance to make up for its shortcomings. You weight the good points against the bad. There are two basic types of compensatory decision rules: (a) Simple additive rules – the consumer merely chooses the alternative having the largest number of positive attributes. (b) Weighted additive rules – the consumer considers the relative importance of positive attributes.

Hypothetical Use of Popular Decision Rules in Making a Decision to Purchase an Ultra-light Laptop MENTAL STATEMENT Compensatory rule “I selected the computer that came out best when I balanced the good ratings against the bad ratings.” Conjunctive rule “I selected the computer that had no bad features.” Disjunctive rule “I picked the computer that excelled in at least one attribute.” Lexicographic rule “I looked at the feature that was most important to me and chose the computer that ranked highest on that attribute.” Affect referral rule “I bought the brand with the highest overall rating.”