INDIVIDUAL
DECISION MAKING
The Purchasing Process
Why do we buy anything?
A Rational Problem Solver?
How do we solve our Problems – What’s the process?
PROBLEM RECOGNITION
INFORMATION SEARCH
EVALUATION OF ALTERNATIVES
PRODUCT CHOICE
CONSUMPTION & LEARNING
CONSUMER EFFORT IN
MAKING DECISIONS
Your car is now 12 years old and in need of constant repair. What
decision process do you go through in purchasing a new one?
Extended Problem Solving
 collect as much info as possible
 evaluate each product alternative carefully
 decision perceived to carry a fair degree of risk
 initiated by a motive central to the self-concept
engaged in when trying to satisfy an important
need or when we have limited knowledge of the
product or service
Your toaster is now toast. What process do you go through
in purchasing a new one?
Limited Problem Solving
 Moderate amount of time and effort spent on
information search and evaluation
 buyers generally unaware of brands and their
features.
 people use decision rules to chose among
alternatives
 some prior experience or knowledge of the
product or service
 Most purchases fall into this category.
Your at the gas station
paying for your gas
when you have an
uncontrollable urge to
buy a chocolate bar.
How do you decide
which one to buy?
Habitual Decision Making
Minimal search for, and evaluation of,
alternatives.
 Little or no conscious effort
 Decisions are routine
• Brand Loyalty: consistently buy the same
things
• Store Loyalty: consistently shop at same
store
The Feelings Economy
in a market category oversupplied
with interchangeable products or
services customer feelings drive
purchase decisions and profitability
customers can easily switch from you
to a competitor and get just about the
same benefits
Competition frequently based on
price
The marketer’s imperative is to
assess and appeal to customers’ feelings
The goal is to to increase customers’
pleasant feelings while minimizing
their unpleasant ones.
PROBLEM RECOGNITION
How do you recognize a need for a product?
 when there is a difference
between an actual state and a
desired state and that requires
resolution.
In this case it was
need recognition
– something was
lacking
opportunity recognition - something to be gained
Once You’ve recognized you have a problem what
motivates you to resolve the problem?
 how big the difference is between the desired and
actual states
 the relative importance of the problem
Marketing is all about
creating a need in the
mind of the customer
and then satisfying
that need.
Philip Kotler
What is primary demand?
The total demand for all brands in a product
category.
E.g. for specialty coffee shops = Starbucks +
Second Cup + Grabbajabba + etc.
Primary Demand Stimulation
Marketing activity intended to increase demand for
the product category
When breaking open a new product
category the marketer’s first job is to
create primary demand
• E.g. at one time there were no
personal data assistants
•Then Apple introduced its Newton
MessagePad.
•The task of Apple at that time was
to create primary demand, not
secondary demand because nobody
knew what a PDA was or how it
could be used to help them.
•I.e. it is to educate a market about a
product category - expensive
Primary
demand
stimulation
 Primarily a
possibility in new
product categories
in mature product
categories advertising
most appropriately used
by trade associations
Secondary demand
the demand for a given brand in a category
UK Grocery stores
Secondary (or Selective) Demand Stimulation
Marketing activity intended to increase demand for one
organization’s product or services over those of competitors.
I.e. competitive position
Acquisition of new customers strategies
– Head-to-head positioning
Superior quality
Price/cost leadership
Price promotions
– Differentiated positioning
Customer-oriented niches
Benefit positioning
Secondary (or Selective) Demand Stimulation
Retention strategies
– Maintenance of customer satisfaction
– Meet competition
– Relationship marketing
Product line strategies
– Line extensions
– Bundling
– Systems selling
INFORMATION SEARCH
WHAT ARE WE SEARCHING FOR?
 Existence of alternatives
 Evaluative criteria
 Performance of alternatives on the criteria
WHERE WILL WE SEARCH?
Internal Sources
– Previous searches
– Personal experiences
– Passive, low-involvement learning
 External Sources
–Personal sources
–Independent sources
–Marketing sources
–Experiential sources
(e.g. sales people, packaging)
WHAT DETERMINES THE
EXTENT OF THE SEARCH?
Cost of Search vs. Benefits
Market Characteristics
– Range of prices
– Number of alternatives
– Store distribution
– Information availability
Product Characteristics
– Price
– Product Differentiation
DETERMINANTS CONTINUED
Situational Characteristics
–
–
–
–
Time Availability
Purchase for Others
Pleasant Surroundings
Social Surroundings
Consumer Characteristics
– Experience/Knowledge
– Shopping Orientation
– Perceived Risk
– Social Status
– Age and Household Life Cycle
– Physical/Mental Energy
RISK FACTORS
More time and effort is spent in the buying process when
there is a high risk factor
 physical risk - to health - drugs, potentially dangerous
items
 financial risk - high priced items
 social risk - to social status, symbolic products
 functional risk - picking the wrong product that doesn’t
do the job or meet the need.
 psychological risk - to self esteem, feeling guilty
Do consumers always
search rationally?
Biases in Decision Making
Loss aversion
1. You've just been given $1,000 -- and two options.
• Option A guarantees you an additional $500.
• Option B lets you flip a coin: Heads, you get another $1,000;
tails, you get nothing more.
Which would you choose?
2. You've been given $2,000 -- and two options.
• Option A guarantees that you will lose $500.
• Option B lets you flip a coin: Heads, you lose $1,000; tails, you
lose nothing.
Which would you choose?
People feel the pain of a loss more strongly than the pleasure of an
equal gain.
Sunk cost fallacy
 As the president of an airline company, you have invested $10
million of the company's money into a research project.
 The purpose was to build a plane that would not be detected by
conventional radar.
 When the project is 90 percent completed, another firm begins
marketing a plane that cannot be detected by radar.
 Also, their plane is much faster and far more economical than the
plane your company is building.
 The question is: should you invest the last 10 percent of the
research funds to finish your radar-blank plane?
 NO - It makes no sense to continue spending money on the
project.
 YES - Since $10 mil. is already invested, I might as well finish it.
Rationality - The investment size is irrelevant to the
decision whether to continue or not
Surrogate indicator:
 readily observable attribute of a product used to
represent the performance level of a less observable
attribute
e.g., price and brand name are often used by consumers
as surrogate indicators of quality
HEURISTICS
 "rules of thumb" people use to make judgements and
decisions.
• never buy a car in the first model year (choice
heuristic)
• if buying a computer, go to Future Shop for the best
deal (search heuristic)
 Signals - infer hidden attributes from observable ones
 Covariation - usually vary with quality
• length of time in business
• country of origin
• price
• brand
• retail outlet
EVALUATION OF ALTERNATIVES
How do
consumers
narrow down the
alternatives and
choose one?
How Many brands of Mini vans can you think of?
evoked set
 The set of choices/brands that come to mind for purchase
(retrieval set)
 Important for marketer to get into the evoked set - these are the
brands that will be evaluated first
inept set
 brands which consumer is unaware of
inert set
 brands which person is aware of but considers unacceptable
New brands will be accepted into the evoked set but not brands
which have been rejected.
 Therefore important that it performs well when first introduced
Ford Edsel
 Ford Edsel 1958 (63,110);
1959 (44,891); 1960 (2,846)
 Radical styling, chrome-laden
and gadget-filled big car in a
small car market
 The pre-introduction publicity,
which lasted for a year, created a
super-car perception by
consumers, which the Edsel failed
to live up to.
 gained a reputation as being
unreliable, expensive and prone to
breaking down every thousand
http://edsel.net/multimedia/tv.html
miles.
MARKETING STRATEGIES
– Habitual decision, brand in evoked set
Maintenance of this behaviour
– Habitual decision, brand not in evoked set
Disrupt existing decision pattern
– Limited decision, brand in evoked set
Capture when making purchase decision
– Limited decision, brand not in evoked set
Intercept during information search
– Extended decision, brand in evoked set
Preference based on features and benefits
– Extended decision, brand not in evoked set
Acceptance of our brand
What is it?
HP OfficeJet G85 All-in-one scanner/copier/fax/printer
Product Categorization
 Consumers tend to put all products into mental categories
based on similarities and differences.
Categorization is the process of understanding what
something is by relating it to prior knowledge
 For example, when combination phone/fax/printers came
out, they were categorized by customers as a phone – not a
multifunction device.
 This is because they don’t have an established category for
multifunction devices, so they just stick the new product in
the phone category
Products are categorized in levels
Strategic Implications of Product Categorization
 Locating Products
• Where do you find wooden matches in the grocery store?
• Where do you find soya sauce?
Stimulating Interest
Defining Competitors
•Who are WestJets’ competitors
Positioning and Repositioning
PRODUCT POSITIONING
 The place a product or service occupies in consumers' minds
on important attributes relative to competitive offerings.
 Success of a positioning strategy often hinges on the marketers’
ability to convince consumers that the product should be considered
within a given category. Which is the sports car?
Porsche
Which is more prestigious?
Mercedes
Cadillac
Positioning is the centerpiece of Marketing
Strategy
– The positioning identifies the way a firm wants
customers to think about their product/brand to
maximize their product interest
– The positioning defines how the product will be
differentiated to compete in an increasingly
competitive marketplace
A Typical Positioning Has
Several Pieces...
Actual Product or Service Description
Target Market
Benefits
Competitive Context and Advantage
What are some dimensions, or characteristics, that you might use
to assess business schools?
On each of these dimensions, where would you position relative to
one another
U of Toronto, U of Calgary,
U of L,
Mount Royal College
REPOSITIONING
 changing the place an offering occupies in consumers' minds
relative to competitive offerings.
Mount Royal College has
decided to reposition itself as a
premier business school.
What do you suggest they do to
achieve this?
EVALUATIVE CRITERIA
When comparing products or services what criteria do you use?
HP
Dell
functional attributes
IBM
Compaq
Which margarine do you buy? And Why?
 determinant attributes
• differentiators
How can Marketers influence what attributes are important
Situational Influences on
Consumer Behaviour
Antecedent states
Purchase task
Physical surroundings
Social surroundings
Temporal effects
Situational Effects
Three areas of focus
– Antecedent states (situational effects)
– Purchase environment
– Post-purchase processes and issues
Antecedent States
Antecedent States are features of the individual
person that are not lasting characteristics
– Moods
– Conditions
Moods are temporary feeling states that are
generally not tied to a specific event.
Why do consumers shop?
 Social experience
 Sharing of interests
 Interpersonal attraction
 Instant status
 “Thrill of the hunt”
Moods
How do specific moods affect your
consumptions behaviors?
–
–
–
–
The Blues
The Blahs
The Bitches
The Bounces
Shopping orientations
–Economic consumer
Rational, goal-oriented, value maximization
–Personalized consumer
Focus on interpersonal relations with store personnel
–Ethical consumer
Support local stores vs. national chains
–Apathetic consumer
Shopping is not pleasurable, but must be done
periodically
–Recreational consumer
Fun, social activity, way to spend leisure time
Usage situation (who, what, when, where, how, why)
The Purchase Environment
Non-Store
Shopping
Retailing
as Theatre
Sales
Person
Key
Elements
Place-Based of Purchase Spontaneous
Media
Shopping
Store
Image
Non-Store Shopping - Direct Marketing
Telemarketing
$388
Home Catalog
Television Home
Shopping
In 1902 the Sears catalog was as
revolutionary in marketing as WalMart and the internet are today
Non-Store Shopping E- COMMERCE
Advantages
 can reach customers from around the world
 cuts out the middleman --- Disintermediated
 can boost sales by attracting people who don’t normally shop in
stores
 increased convenience
 Innovative methods
Disadvantages
competitors can reach customers from around the world
Some products difficult to sell over the Internet. E.g., clothes,
food
Jupiter Research
estimates that in
2005 online
grocery sales
totalled $3.3
billion, up from
$1.7 billion in
2003
Retailing as Theatre
West Edmonton Mall
Store Image
Location + Merchandise
+ Services +
Atmospherics + ? 
Store Image
Spontaneous
Shopping
Colorful point
of purchase
displays can
increase sales
According to a 2003 Booz
Allen Hamilton study, 85%
of brand loyalty is created
at the point of sales contact
and after;
only 15% is generated by
up-front promotions and
the quality of the product
itself.
Therefore a brand
marketer’s greatest (and
perhaps most overlooked)
asset in creating brand
equity and impact is the
frontline sales person
The Sales Person
Atmospherics
 The sum total of
(all) store stimuli,
physical &
psychological
characteristics
 The atmosphere
can have more
influence than the
service itself in the
purchase decision
Atmosphere Components
Ambient factors
Lighting
Sounds
Smells
Atmosphere Components
Design factors










Floor coverings
Ceilings
Wall coverings
Displays
Fixtures
Aisles
Colors
Layout
Cleanliness
Signage
Atmospherics Continued
Lighting
Consumers examine and handle more items
under bright lighting

Consumers spend more time at in-store displays
with bright lighting

Increased levels of lighting increase arousal,
pleasure, and approach behaviors of consumers.

Atmospherics Continued
Music
background music directly influences consumer
buying behavior and affects sales.

Background
music enhances customer’s perception
of store’s atmosphere.
Firms that played music in their facilities were
thought to care more about consumers.

Slow
tempo music encourages customers to stay
longer.
Customers
find music distracting in highinvolvement decisions and soothing in lowinvolvement decisions.
Color
Warm colours (red, yellow, and orange hue) tend
to evoke consumer feelings of comfort and
informality.
 Warm colors encourage quick decisions and
work best for low-involvement purchase decisions.
Cool colors (blue, green, and violet hues) are
favored when customers need time to make
decisions.
Children appear to favor brighter colors while
adults favor lighter tones.
Atmosphere Components
Social Factors
 Courteous
 Rude behavior
 Knowledgeable  Low information
 Service
 Insincere
 Personal Service Climate
(Calls for a well paid, highly
motivated, experienced work force)
 Employee dress norms
Social Factors
increasing numbers of consumers increase arousal levels
Post Acquisition Processes and Issues
 Consumption and Evaluation
 Customer satisfaction and dissatisfaction
 Product disposal issues
Customer Satisfaction
Does Performance (in terms of quality, functionality,
aesthetics etc. )Live up to Expectations?
Customer satisfaction and dissatisfaction
– Implications of satisfaction
Repeat purchases
Positive WOM
– Implications of dissatisfaction
No / fewer future purchase
Cost of retaining vs. replacing
customers
Negative WOM
Public vs. private complaint behavior
Legal or regulatory action
POSTACQUISITION
What alternatives are there for disposing of
products?
A toxic electronic wasteland
In 2002, Canadians tossed away 155,000
tonnes of high-tech toys
825,000
1.46 m
1.7m
1.46m
223,000
232.000
1.958 mil
575,000
523,000
Influences on Consumer Decision
Making
Psychological
influences:
•Motivation
•Personality
•Perception
•Learning
•Values, beliefs,
and attitudes
•Lifestyle
Marketing mix
influences:
•Product
•Price
•Promotion
•Place (distribution)
Sociocultural
influences:
Consumer
purchase
Decisionmaking
process
•Personal influence
•Reference groups
•Family
•Social class
•Culture
•Sub-culture
Situational
influences:
•Purchase task
•Social surroundings
•Physical surroundings
•Temporal effects
•Antecedent states