2. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 3 CHAPTER Consumer Decision Making

3. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 2 Explain why marketing managers should understand consumer behavior The Importance of Understanding Consumer Behavior The Importance of Understanding Consumer Behavior LO 1

4. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 3 “Ultimate” consumers who buy goods and services for their own personal or household use. The Consumer Market

5. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 4 Needs vs. Wants (Typical Textbook Def.)  Needs –Unsatisfactory conditions of the consumer that lead him or her to actions that will make the conditions better  Wants –Desires to obtain more satisfaction than is absolutely necessary to improve unsatisfactory conditions

6. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 5 LO 1 Consumer Behavior Processes a consumer uses to make purchase decisions, as well as to use and dispose of purchased goods or services; also includes factors that influence purchase decisions and the product use.

7. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 6 REVIEW LEARNING OUTCOME LO 1 Understanding Consumer Behavior Consumer behavior consumers make purchase decisions consumers use and dispose of product = HOW

8. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 7 Analyze the components of the consumer decision-making process The Consumer Decision-Making Process LO 2

9. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 8 Consumer Decision-Making Process LO 2 A five-step process used by consumers when buying goods or services. Consumer Decision-Making Process

10. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 9 Consumer Decision-Making Process LO 2 Postpurchase Behavior Postpurchase Behavior Purchase Evaluation of Alternatives Evaluation of Alternatives Information Search Need Recognition Cultural, Social, Individual and Psychological Factors affect all steps Cultural, Social, Individual and Psychological Factors affect all steps

11. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 10 Need Recognition LO 2 Result of an imbalance between actual and desired states. Need Recognition Need Recognition

12. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 11 Need Recognition LO 2 Marketing helps consumers recognize an imbalance between present status and preferred state. Present Status Present Status Preferre d State Internal Stimuli External Stimuli

13. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 12 Stimulus LO 2 Any unit of input affecting one or more of the five senses:  sight  smell  taste  touch  hearing Stimulus

14. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 13 LO 2 Recognition of Unfulfilled Wants  When a current product isn’t performing properly  When the consumer is running out of a product  When another product seems superior to the one currently used

15. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 14 LO 2 Information Search Internal Information Search  Recall information in memory External Information search  Seek information in outside environment  Nonmarketing controlled  Marketing controlled

16. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 15 STAGE 2 – INFORMATION SEARCHIS INFLUENCED BY:  EVOKED SET:  Group of brands that come to mind around time of purchase  CONSIDERATION SET:  Group of brands a consumer will consider buying after search is complete  Car Tire Brands?  Typically 3-5 Brands in Consideration Set

17. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 16 LO 2 Evoked Set Group of brands, resulting from an information search, from which a buyer can choose Evoked Set

18. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 17 LO 2 Evaluation of Alternatives and Purchase Evoked Set Purchase! Analyze product attributes Analyze product attributes Rank attributes by importance Rank attributes by importance Use cutoff criteria

19. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 18 LO 2 Purchase To buy or not to buy... Determines which attributes are most important in influencing a consumer’s choice

20. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 19 Cognitive Dissonance LO 3 Cognitive Dissonance Inner tension that a consumer experiences after recognizing an inconsistency between behavior and values or opinions.

21. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 20 Postpurchase Behavior LO 3 Consumers can reduce dissonance by:  Seeking information that reinforces positive ideas about the purchase  Avoiding information that contradicts the purchase decision  Revoking the original decision by returning the product Marketing can minimize through: Effective Communication Follow-up Guarantees Warranties

22. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 21 Identify and understand the cultural factors that affect consumer buying decisions Cultural Influences on Consumer Buying Decisions LO 4

23. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 22 Factors Influencing Buying Decisions LO 4 Social Factors Individual Factors Psycho- logical Factors Cultural Factors CONSUMER DECISION- MAKING PROCESS BUY / DON’T BUY

24. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 23 Culture LO 4 Culture Set of values, norms, attitudes, and other meaningful symbols that shape human behavior and the artifacts, or products, of that behavior as they are transmitted from one generation to the next.

25. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 24 Components of Culture LO 4 Myths Language Values Customs Rituals Laws Material artifacts

26. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 25 Culture is... LO 4 Learned Functional Pervasive Dynamic

27. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 26 Value LO 4 Value Enduring belief that a specific mode of conduct is personally or socially preferable to another mode of conduct.

28. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 27 Core American Values LO 4 Success Materialism Freedom Progress Youth Capitalism http://www.thesource.com Online

29. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 28 Subculture LO 4 Subculture A homogeneous group of people who share elements of the overall culture as well as unique elements of their own group. http://www.dead.net Online

30. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 29 Social Class LO 4 Social Class A group of people in a society who are considered nearly equal in status or community esteem, who regularly socialize among themselves both formally and informally, and who share behavioral norms.

31. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 30 Social Class Measurements LO 4 Wealth Other Variables Income Education Occupation

32. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 31 Identify and understand the social factors that affect consumer buying decisions Social Influences on Consumer Buying Decisions Social Influences on Consumer Buying Decisions LO 5

33. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 32 Social Influences LO 5 Reference Groups Opinion Leaders Family Members

34. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 33 Reference Group LO 5 A group in society that influences an individual’s purchasing behavior. Reference Group

35. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 34 Influences of Reference Groups LO 5  They serve as information sources and influence perceptions.  They affect an individual’s aspiration levels.  Their norms either constrain or stimulate consumer behavior.

36. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 35 Opinion Leaders LO 5 An individual who influences the opinion of others. Opinion Leaders

37. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 36  Social Environment usually much more influential  Opinion Leaders Important –Rich’s runners’ group example... Reference Group Impact Example

38. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 37 Family LO 5  Initiators  Influencers  Decision Makers  Purchasers  Consumers Purchase Process Roles in the Family

39. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 38 Identify and understand the individual factors that affect consumer buying decisions Individual Influences on Consumer Buying Decisions LO 6

40. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 39 Individual Influences LO 6 Gender Age Life Cycle Personality Self-Concept Lifestyle Personality Self-Concept Lifestyle

41. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 40 Identify and understand the psychological factors that affect consumer buying decisions Psychological Influences on Consumer Buying Decisions LO 7

42. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 41 Psychological Influences LO 7 Perception Motivation Learning Beliefs & Attitudes

43. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 42 Perception LO 7 Process by which people select, organize, and interpret stimuli into a meaningful and coherent picture. Perception

44. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 43 Perception LO 7SelectiveExposureSelectiveExposureSelectiveDistortionSelectiveDistortionSelectiveRetentionSelectiveRetention

45. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 44 Perception LO 7 Selective Exposure Selective Distortion Selective Retention Consumer notices certain stimuli and ignores others Consumer notices certain stimuli and ignores others Consumer changes or distorts information that conflicts with feelings or beliefs Consumer changes or distorts information that conflicts with feelings or beliefs Consumer remembers only that information that supports personal beliefs Consumer remembers only that information that supports personal beliefs

46. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 45 Marketing Implications of Perception LO 7  Important attributes  Price  Brand names  Quality and reliability  Threshold level of perception  Product or repositioning changes  Foreign consumer perception

47. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 46 The “F” Test Fs Count the number of Fs in the following sentence: FINISHED FILES ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE OF MANY YEARS.

48. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 47 Stimulus Discrimination vs. Stimulus Generalization

49. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 48 Interpretation: Meaning consumer attaches to a stimulus  NAMES  Signal Power /Quality (Toro Snow Pup/Master)  Cars: Mustang / Barracuda / Viper  Donkey / Weasel?  NUMBERS –350 Z / WD-40 / Acura CL?  COLORS –Different for different cultures

50. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 49 Interpretation: Meaning consumer attaches to a stimulus  COLOR –Signal Newness or Quality (Black Label) –Signal Product Contents (Sodas)

51. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 50 Motivation LO 7 A method of classifying human needs and motivations into five categories in ascending order of importance. Maslow’s Hierarchy of Needs Maslow’s Hierarchy of Needs

52. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 51 Maslow’s Hierarchy of Needs LO 7

53. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 52 Safe-T-Man Safety Appeal toward Women...

54. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 53 Safety Appeal toward Children...

55. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 54 Types of Learning LO 7 Experiential Conceptual An experience changes behavior Not learned through direct experience http://www.cspinet.org Online

56. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 55 Beliefs and Attitudes LO 7 Belief Attitude An organized pattern of knowledge that an individual holds as true about his or her world. A learned tendency to respond consistently toward a given object.

57. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 56 Changing Attitudes LO 7  Change beliefs about the brand’s attributes  Change the relative importance of these beliefs  Add new beliefs

58. Chapter 1Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 57 COMPENSATORY VS. NON-COMPENSAGTORY CHOICE MODELS Chapter Consumer Markets and Buying Behavior 3

59. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 58 Compensatory vs. Non-Compensatory Decision-Making Models Compensatory: Strong attributes can compensate for Weak ones. (These shoes are ugly, but they’re cheap, and they are extremely comfortable) Non-Compensatory: Attributes don’t compensate for each other. Select or dismiss based on key attribute or lack thereof. (Many different types of NC Models)

60. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 59 Dissatisfaction Complaint NWOM

61. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 60 Complaint Behavior and NWOM The number of unsatisfactory incidents FAR OUTWEIGHS the number of actual complaints Why is this???

62. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 61 Complaint Behavior Research indicates that there is a greater likelihood of consumer complaint when: 1) The consumer is a member of a more upscaleSocioeconomic group 2) The dissatisfaction is more severe 3) The consumer places the blame for the DISSAT on the marketer (rather than self) 4) The consumer perceives that the marketer will be responsive to the complaint

63. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 62 Negative Word-of-Mouth Consumer is much more likely to engage in NWOM rather than direct complaint At least 3 reasons for NWOM: 1) To make his/herself feel better (catharsis) 2) To warn other consumers of bad experience 3) To punish the offending marketer

64. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 63 Research on NWOM shows that: Consumers tend to place more weight on (-) information when making evaluations than on (+) information Consumer will tell (on average) 8 or more about their Dissatisfaction However, Information Tech. is raising the stakes…

65. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 64 Complaint and Repurchase Intentions Consumers whose complaints are handled satisfactorily report extremely high repurchase intentions Consumers whose complaints are not handled satisfactorily report higher repurchase intentions than those that did not complain

66. Chapter 5Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 65 Marketing Implications Encourage (legitimate) complaint behavior Toll-Free Hotlines Stress Satisfaction Guarantees Address complaints promptly or else they will engage in NWOM...