1. 1 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4 Decision Making I: Need Recognition and Search

2. 2 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 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 type and amount of search performed by consumers. LO 12-1 LO 12-2 LO 12-3 LO 12-4 LO 12-5

3. 3 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 ▮ Understand the activities involved in the consumer decision-making process. LO 12-1

4. 4 Copyright © 2014 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 12-1

5. 5 Copyright © 2014 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 12-1

6. 6 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 Decision Making and Choice Value Motivation Emotion

7. 7 Copyright © 2014 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. © REPRINTED WITH PERMISSION OF THE PRINCETON REVIEW

8. 8 Copyright © 2014 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 12-2

9. 9 Copyright © 2014 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. ©CJ GUNTHER/EPA/LANDOV Would you pay over $1,000 for a single season ticket to a basketball game?

10. Types of Risk Financial – cost of the product. Social – how others view the purchase. Performance – likelihood of product performing as expected. Physical – safety of the product. Time – search time and time for product to be serviced or maintained.

11. 11 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

12. 12 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 Extended Decision Making ▮ Consumers search for information that will help them reach a satisfactory decision. ▮ Information search Internal sources External sources ▮ Lengthy process: careful evaluation of brand attributes (one at a time) ▮ Occurs when involvement and risk are high.

13. 13 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13 Limited Decision Making ▮ Very little search for information. ▮ Decisions based on prior beliefs about products and their attributes. Cognitive shortcuts, heuristics ▮ Occurs frequently ▮ Occurs when involvement and risk are relatively low.

14. 14 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14 Habitual Decision Making ▮ Consumers do not seek information at all when a problem is recognized. ▮ Choice is often based on habit. Efficient – minimal time/energy ▮ Brand loyalty – a deeply-held commitment to rebuy a product or service regardless of situational influences that could lead to switching behavior. ▮ Brand inertia – consumer simply buys a product repeatedly without any real attachment.

15. 15 Copyright © 2014 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. PRNEWSFOTO/BEST WESTERN INTERNATIONAL

16. 16 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Where’s the Loyalty? COMMENT: Consumers have shifted from brand loyalty to store loyalty… Do you agree or disagree?

17. 17 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17 Satisficing ▮ The practice of using decision making shortcuts to arrive at satisfactory, rather than optimal, decisions. ▮ Causes: Time pressures Search fatigue Budgetary constraints

18. 18 Copyright © 2014 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 STEPS ONE AND TWO OF THE CONSUMER DECISION MAKING MODEL (discussion content starts here) STEPS ONE AND TWO OF THE CONSUMER DECISION MAKING MODEL (discussion content starts here)

19. 19 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 STEP ONE: Need Recognition ▮ Need recognition – decline in actual state ▮ Opportunity recognition – a consumer’s actual state does not change, but their desired state changes. Influences on desired states:  Reference group information  Consumer novelty seeking  Cognitive thought processes

20. 20 Copyright © 2014 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. ©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

21. 21 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21 STEP TWO: Search Behavior Ongoing Prepurchase Internal External Information Overload

22. 22 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22 Do Consumers Always Search Rationally? ▮ Some consumers tend to avoid external search, especially with minimal time to do so and with durable goods ▮ Are all decisions rational?

23. 23 Copyright © 2014 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 12-4

24. 24 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24 External Search ▮ Gathering of information from external sources ▮ Factors considered: Ease of obtaining information from the source Objectivity of the source Trustworthiness of the source The speed with which the information can be obtained

25. 25 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25 Evaluative Criteria ▮ Product attributes that consumers consider when reviewing possible solutions to a problem ▮ Two that are used across almost all consumer decisions: Price Quality

26. 26 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26 Price & Quality ▮ PRICE: Information signaling how much potential value may be derived from consuming something. ▮ QUALITY: From a consumer perspective, it represents the perceived overall goodness or badness of some product. Consumers do not always seek high quality.

27. 27 Copyright © 2014 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 ©VARIO IMAGES GMBH & CO. KG/ALAMY

28. 28 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28 The Internet at Your Fingertips ▮ 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

29. 29 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29 Factors Influencing Amount of Search ▮ Involvement ▮ Perceived risk ▮ Value of search effort ▮ Time availability ▮ Attitude toward shopping ▮ Personal factors ▮ Situational influencers

30. 30 Copyright © 2014 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 12-5

31. 31 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 31 Search Regret ▮ Negative emotions that come from a failed search process ▮ When consumers are unable to find a solution to their problems, the decision-making process stops Consumers may feel the process was a wasted effort

32. 32 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 32 Search Regret - Example ▮ Reuben browsed through 3 online retailers’ websites looking for the game, Assassin's Creed Brotherhood ▮ Every website said that the product is out of stock ▮ He was frustrated by the amount of time he spent looking for the game