1. © 2001 South-Western College Publishing 1 CHAPTER FOUR CONSUMER DECISION MAKING Prepared by Jack Gifford Miami University (Ohio)

2. © 2001 South-Western College Publishing 2 THE IMPORTANCE OF UNDERSTANDING CONSUMER BEHAVIOR *CONSUMER BEHAVIOR describes how consumers make purchase decisions and how they use and dispose of the purchased goods and services *Knowing how consumers make decisions helps marketers have the right product or service at the right place at the right price using the right promotion

3. © 2001 South-Western College Publishing 3 THE CONSUMER DECISION-MAKING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE POSTPURCHASE BEHAVIOR Cultural, social, individual, and psychological context

4. © 2001 South-Western College Publishing 4 STEP ONE: NEED RECOGNITION *Occurs when consumers are faced with an imbalance between actual and desired physical or mental states *Is always triggered by an internal or external stimulus *A WANT exists when someone has an unfulfilled need and has determined that a particular good or service will satisfy it. *Marketers try to provide these stimuli to fulfill these wants with their products or services += ONE HUNGRY STUDENT PLUS ONE HAMBURGER COMMERCIAL = ONE MORE FAST FOOD SALE!

5. © 2001 South-Western College Publishing 5 STEP TWO: INFORMATION SEARCH *Can occur internally, externally, or both +Internal = memory +External from marketing-controlled sources (promotion) or non-marketing controlled (family/friends) sources +The extent of external search depends upon: -Perceived risk (Performance, Financial, Physical, Social, Psychological, Time-loss) -Knowledge -Prior experience -Level of interest in the good or service -Confidence level in internal decision-making ability

6. © 2001 South-Western College Publishing 6 STEP TWO: INFORMATION SEARCH (continued) INTERNAL SEARCH Memory Physiological needs All past experiences Values, attitudes and beliefs EXTERNAL SEARCH Marketing-controlled sources Non-marketing controlled sources EVOKED SET

7. © 2001 South-Western College Publishing 7 STEP TWO: INFORMATION SEARCH (continued) EVOKED SET CONSIDERATION SET Establish minimum and maximum cutoffs Limiting parameters, based upon knowledge, importance, risk, and confidence level

8. © 2001 South-Western College Publishing 8 STEP THREE: EVAUALTION OF ALTERNATIVES *Key attributes required *Minimum levels of need satisfaction *Importance of brand name *Possible limitations to selection [availability, price, physical limits (headroom in a car)] *Weigh internal and external information against purchase decision criteria

9. © 2001 South-Western College Publishing 9 STEP FOUR: PURCHASE DECISION *ACQUIRE THE USE OR OWNERSHIP OF THE PRODUCT OR SERVICE +Ability to buy +Willingness to buy +Authority to buy

10. © 2001 South-Western College Publishing 10 STEP FIVE:POSTPURCHASE BEHAVIOR *Depends upon the quality of match between expectations and outcomes +A positive match reinforces the correctness of the decision and provides future motivation to repeat the purchase decision under similar circumstances. +A negative match between expectations and actual outcomes will result in cognitive dissonance; if strong, they are unlikely to make the same “mistake” in the future. -Marketers try to reduce cognitive dissonance by producing products and service expectations that will be met by their offerings -Marketers also send follow up letters to reduce any lingering dissonance

11. © 2001 South-Western College Publishing 11 CONTINUUM OF CONSUMER BUYING DECISIONS

12. © 2001 South-Western College Publishing 12 FACTORS DETERMINING THE LEVEL OF CONSUMER INVOLVEMENT *Previous experience *Level of interest *Perceived risk of negative consequences *Specific situation *Social visibility of outcome MARKETING IMPLICATIONS ???

13. © 2001 South-Western College Publishing 13 FACTORS INFLUENCING CONSUMER BUYING DECISIONS CULTURAL FACTORS Culture & values Subculture Social class SOCIAL FACTORS Reference groups Opinion leaders Family INDIVIDUAL FACTORS Gender Age / Family Life Cycle Personality, self-concept, lifestyle PSYCHOLOGICAL FACTORS Perception Motivation Learning Benefits & Attitudes

14. © 2001 South-Western College Publishing 14 CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS *Exert the broadest influence over a person’s consumer behavior *The underlying elements of every culture include… Values Language Myths Customs Rituals Laws Material artifacts

15. © 2001 South-Western College Publishing 15 CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS *What people eat, how they dress, what they think and feel, what language they speak, are all dimensions of culture *Culture gives order to society *Marketer’s actions must be consistent with the culture and values of its target customers to be successful

16. © 2001 South-Western College Publishing 16 CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS *Culture is learned *Culture is dynamic, not static *The most important element of a culture is its shared values *Culture gives order to society *Examples of shared American values include... Success Materialism Freedom Progress Youth Capitalism

17. © 2001 South-Western College Publishing 17 CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS *As more companies expand their operations globally, the need to understand the cultures of foreign countries becomes increasingly important. HAMBURGER IN U.S.A. MADE WITH BEEF BECAUSE OF RELIGIOUS BELIEFS, MOST INDIANS DO NOT EAT BEEF

18. © 2001 South-Western College Publishing 18 CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS: SUBCULTURES *A SUBCULTURE is a homogeneous group of people who share elements of the overall culture as well as cultural elements unique to their own group *Subculture may be based upon any meaningful commonality, such as geographic regions, political or religious beliefs, national or ethnic background, use of leisure time, etc. *Membership may greatly influence what and how you consume, something of vital interest to marketers

19. © 2001 South-Western College Publishing 19 CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS: SOCIAL CLASS *A social class is a group of people who: +are nearly equal in status +regularly socialize among themselves +share behavioral norms *…and most importantly for marketers, consume similar goods and services for similar reasons -Upper classes -Upper middle class -Middle classes -Working class -Working poor -Underclass +Defined partially by occupation, income, education, and wealth

20. © 2001 South-Western College Publishing 20 SOCIAL INFLUENCES ON CONSUMER BEHAVIOR *Consumer interact with reference groups, opinion leaders and family members to obtain product information and decision approval to.. +Reduce risk of making a “wrong” decision +Reduce search time +Reduce uncertainty +To conform to subculture “Right” brand of tennis racket, shoes and tennis apparel.

21. © 2001 South-Western College Publishing 21 SOCIAL INFLUENCES ON CONSUMER BEHAVIOR: REFERENCE GROUPS *All formal or informal groups that influence the buying behavior of an individual are that person’s reference groups

22. © 2001 South-Western College Publishing 22 SOCIAL INFLUENCES ON CONSUMER BEHAVIOR: REFERENCE GROUPS +Direct Primary Groups -Family -Friends -Coworkers +Direct Secondary Groups -Clubs -Professional groups -Religious groups +Indirect reference groups -Aspirational reference groups -Nonaspirational, disassociative reference groups “I want to be like Mike” “If I buy one of those cars, people will think I’m a yuppie”

23. © 2001 South-Western College Publishing 23 SOCIAL INFLUENCES ON CONSUMER BEHAVIOR: OPINION LEADERS *Opinion leaders are persons who try “new things” first; if they are part of our positive reference group, we then may emulate their behavior. “That new two finger graphite bowling ball certainly works for Marti. Maybe I should buy one.”

24. © 2001 South-Western College Publishing 24 INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS *Gender differences +Physiological +Roles +Psychological +Shopping behavior *Age and Family Life Cycle differences +Tastes in food, clothing, cars, furniture, and recreation often change with age +Consumption patterns of single and married individuals are different. The presence of young children again influences consumption patterns

25. © 2001 South-Western College Publishing 25 INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS *Personality, self-concept and lifestyle +Personality: underling disposition, dominant characteristics, and how people react in interact +Self-concept: how consumers perceive themselves (ideal or real self image) +Lifestyle: a mode of living, as identified by a person’s activities, interests, and opinions

26. © 2001 South-Western College Publishing 26 INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS *Psychological dimensions include those factors that consumers use to interact with their world, to recognize their feelings, gather and analyze information, formulate thoughts and opinions, and take action. *Psychological dimensions are individual, environment and situation specific.

27. © 2001 South-Western College Publishing 27 INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS: PERCEPTION *The process by which we select, organize, and interpret stimuli into a meaningful and coherent picture is called perception +Selective exposure? +Cues? +Selective distortion? +Selective retention? +Subliminal perception?

28. © 2001 South-Western College Publishing 28 INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS: MOTIVATION *MOTIVES are the driving forces that cause a person to take action to satisfy specific needs. *One popular theory is Maslow’s Hierarchy of needs PHYSIOLOGICAL NEEDS SAFETY NEEDS SOCIAL NEEDS ESTEEM NEEDS SELF ACTUALIZATION NEEDS

29. © 2001 South-Western College Publishing 29 INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS: LEARNING, BENEFITS AND ATTITUDES *LEARNING +Experiential +Conceptual *Reinforcement and repetition boost learning *Concept of stimulus generalization and discrimination *BELIEFS & ATTITUDES +A BELIEF is an organized pattern of knowledge that an individual holds to be true +An ATTITUDE is a learned tendency to respond consistently toward a given event MARKETER’S OBJECTIVES?

30. © 2001 South-Western College Publishing 30 CULTURAL FACTORS Culture & values Subculture Social class SOCIAL FACTORS Reference groups Opinion leaders Family INDIVIDUAL FACTORS Gender Age / Family Life Cycle Personality, self-concept, lifestyle PSYCHOLOGICAL FACTORS Perception Motivation Learning Benefits & Attitudes An understanding of consumer behavior and the factors that influence it will help marketers successfully identify target markets and design effective marketing mixes!