1. ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. BABIN / HARRIS CB Decision Making I: Need Recognition and Search CHAPTER 12 PART 4 ©ISTOCKPHOTO.COM/MICHAEL PETTIGREW 1

2. 2 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Outcomes Understand the activities involved in the consumer decision-making process. Describe the three major decision-making research perspectives. Explain the three major types of decision-making approaches. Understand the importance of the consideration set in the decision-making process. Understand the factors that influence the amount of search performed by consumers. LO 1 LO 2 LO 3 LO 4 LO 5

3. ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 1 Understand the activities involved in the consumer decision-making process. 3

4. 4 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 12.1: Basic Consumption Process and Decision-Making LO 1

5. 5 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 12.2: Consumer Decision- Making Process LO 1

6. 6 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Decision Making and Choice LO 1 Value Motivation Emotion

7. 7 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Decision Making 101 The “best” schools are not always the best choice for students. LO 1 © REPRINTED WITH PERMISSION OF THE PRINCETON REVIEW

8. ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 2 Describe the three major decision-making research perspectives. 8

9. 9 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 12.3: Perspectives on Consumer Decision Making LO 2

10. 10 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Rational Perspective What is rational to some may be irrational to others. LO 2 ©CJ GUNTHER/EPA/LANDOV Would you pay over $1,000 for a single season ticket to a basketball game?

11. ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 3 Explain the three major types of decision-making approaches. 11

12. 12 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Involvement and Risk Involvement The degree of personal relevance that a consumer finds in pursuing value from a given act. Types of risk Financial Social Performance Physical Time LO 3

13. 13 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 12.4 Decision-Making Approaches LO 3

14. 14 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Habitual Decision Making Loyalty programs, such as reward cards, provide benefits for consumers and marketers. LO 3 PRNEWSFOTO/BEST WESTERN INTERNATIONAL

15. ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 4 Understand the importance of the consideration set in the decision- making process. 15

16. 16 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Need Recognition Consumer perceives a difference between an actual state and a desired state. LO 4

17. 17 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Need Recognition States LO 4 Actual state–a consumer’s perceived current state. Desired state–a perceived state for which a consumer strives.

18. 18 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Desired State Desired states changed dramatically with the introduction of the iPad. LO 4 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ©BRENDON O’HAGAN/AFP/GETTY IMAGES

19. 19 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Search Behavior LO 4 Prepurchase External Ongoing Internal Information Overload

20. 20 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 12.5 Consideration Set LO 4

21. ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 5 Understand the factors that influence the amount of search performed by consumers. 21

22. 22 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. External Search Includes the gathering of information from external sources. Factors considered: –Ease of obtaining information from the source. –Objectivity of the source. –Trustworthiness of the source. –How timely the information can be obtained. LO 5

23. 23 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Evaluative Criteria The individual attributes or elements of a product or decision that are used by consumers in making a decision. Two that are used across almost all consumer decisions: –Price –Quality LO 5

24. 24 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. External Search and the Internet Lowers search costs Provides hedonic value Information control LO 5 ©VARIO IMAGES GMBH & CO. KG/ALAMY

25. 25 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Internet at Your Fingertips LO 5 New and popular search engines including Google and Bing allow you to solve your problems quickly online. Facebook provides us with the opportunity to connect with people all over the world. Consumers can buy directly from sponsored links on other sites, which produces an easy online shopping experience. As mobile technologies continue to evolve, consumers will be able to do everything on the go!

26. 26 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Factors Influencing Amount of Search Product experience Involvement Perceived risk Value of search effort Time availability Attitudes towards shopping Personal factors Situational influencers LO 5

27. 27 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 12.6 Experience and External Search LO 5 Sources: Srinivasan, Narasimhan, and Brian T. Ratchford (1991), “An Empirical Test of a Model of External Search for Automobiles,” Journal of Consumer Research, 18, 233-242; Johnson, Eric J., and Edward J. Russo (1984), “Product Familiarity and Learning New Information, “ Journal of Consumer Research, 11, 542-550; Moore, William L., and Donald R. Lehmann (1980), “Individual Differences in Search Behavior for a Nondurable, “ Journal of Consumer Research, 7, 296-307.

28. 28 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Search Regret LO 5 Negative emotions that come from a failed search process. When consumers are unable to find a solution to their problems, the decision-making process halts. As a result, consumers may feel the process was a wasted effort.

29. 29 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Pay to Play ©ISTOCKPHOTO.COM/WEBKING LO 5 A way to introduce new products to consumers is by requiring marketers to pay “slotting fees” to retailers. These fees guarantee that a new product will be placed in a specific location in the store. PROS: - Balance risk - Signal the value of the new product - Signal the attractiveness CONS: - Represent a type of extortion - Can violate anti-trust laws