Consumer Behaviour
Topic 8
Individual Decision Making
Consumers are faced with the needs to make decisions about products
and services on a constant basis. Some of the decisions are very
important to the consumer and entail great effort, while others are made
on virtually an automatic or impulse basis. Perspectives on decision
making range from a focus on habits that people develop over time to a
focus on novel situations involving a great deal of risk where consumers
must carefully collect and analyze information prior to making choices.
A typical decision process involves several steps. The first step is how
consumers recognize the problem (problem recognition). Realization that
a problem exists may be prompted in a variety of ways, ranging from
actual malfunction of a current purchase to a desire for new things
based on exposure to different circumstances or advertising that provides
a glimpse into what is needed to “live the good life.” Shifts in the actual
or ideal state are at the heart of problem recognition.
The second step is information search. This may range from simply
scanning memory to determine what has been done to resolve the
problem in the past to undertaking extensive fieldwork where the
consumer consults a variety of sources to amass as much information as
possible from a variety of sources. In many cases, people engage in
surprisingly little search. Instead, they rely upon various mental
shortcuts, such as brand names or price, or they simply imitate others.
In the third stage the consumer performs an evaluation of alternatives
that were developed in the search stage. The product alternatives that
are considered comprise the individual’s evoked set. Members of the
evoked set usually share some characteristics (i.e., they are categorized
similarly). The way products are mentally grouped influences which
alternatives will be considered, and some brands are more strongly
associated with these categories than are others (i.e., they are more
prototypical).
Very often, evaluative criteria (dimensions used to judge the merits of
competing options) and heuristics (mental rules of thumb) are used to
simplify decision making. In particular, people may develop many market
beliefs over time. One of the most common beliefs is that price is
positively related to quality. Other heuristics rely on well-known brand
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names or a product’s country of origin as signals of product quality.
When a brand is consistently purchased over time, this pattern may be
due to true brand loyalty or simply to inertia because it’s the easiest
thing to do.
When the consumer eventually must make a product choice from among
alternatives, a number of decision rules may be used. Non-compensatory
decision rules eliminate alternatives that are deficient on any of the
criteria the consumer has chosen to use. Compensatory decision rules,
which are more likely to be applied in high-involvement situations, allow
the decision maker to consider each alternative’s good and bad points
more carefully to arrive at the overall best choice.
Lecture Outline
1. Consumers as Problem Solvers
a. Most consumers go through a series of steps when they make a
purchase. They
are:
1) Problem recognition
2) Information search
3) Evaluation of alternatives
4) Product choice
a) Learning occurs on how well the choice worked out.
b) This learning affects future choices and purchases.
b. Because some purchase decisions are more important than others,
the amount of effort we put into each differs.
1) Sometimes the decision is almost automatic.
2) Sometimes the decision is one where a great deal of thinking
and analysis is required.
Perspectives on Decision Making
c. Traditionally, consumer researchers have approached decision
makers from a rational perspective. In this view, people calmly
integrate as much information as possible with what they already know
about a product, painstakingly weigh the pluses and minuses of each
alternative, and arrive at a satisfactory decision.
1) Though this approach is correct in many instances, it does not
describe all forms of decision making. Sometimes actions may be
contrary to those predicted by rational models.
2) Purchase momentum occurs when initial impulses increase
the likelihood that we will buy even more than we need.
3) Consumers probably have many strategies for making
decisions. This is called constructive processing.
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4) Environmental cues may be used (such as buying on impulse).
This form of decision making is called the behavioural influence
perspective.
5) In other cases, consumers are highly involved in a decision,
but still the decisions cannot wholly be explained rationally. This is
called the experiential perspective. This approach stresses gestalt (or
totality) of the product or service. Marketers in these areas focus on
measuring consumers’ affective responses to products or services and
develop offerings that elicit appropriate subjective reactions.
Types of Consumer Decisions
d. Decision processes can be considered by the amount of effort that
goes into the decision each time it must be made. Three forms exist:
1) Extended Problem Solving—There is a fair degree of risk and
we use internal search and external sources. The consumer tries to
collect as much information as possible. Corresponds most closely to the
traditional decision-making perspective.
2) Limited Problem Solving—This is a simple, straightforward
decision process. Buyers use simple decision rules to choose among
alternatives. Cognitive shortcuts are used.
3) Habitual Decision Making—These are characterized as simple
automatic decisions. This form is characterized by automaticity where
there is a mini effort and an absence of conscious control.
2. Problem Recognition
a. Problem recognition occurs whenever the consumer sees a
significant difference between his or her current state of affairs and some
desired or ideal state.
1) The consumer perceives there is a problem to be solved, which
may be large or small, simple or complex.
2) A problem can occur in two ways.
a) The quality of the consumer’s actual state (running out of
gas, for example can move downward (need recognition).
b) The consumer’s ideal state (e.g., desiring a newer flashy
car) can move upward (opportunity recognition).
c) Either way, a gulf occurs between the actual state and the
ideal state.
b. Need recognition can occur in several ways:
1) The quality of the person’s actual state can be diminished by:
a) Running out of a product.
b) By buying a product that turns out to not adequately
satisfy needs.
c) By discovering new needs.
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c. Opportunity recognition often occurs when a consumer is exposed
to different or better-quality products.
d. Although problem recognition can and does occur naturally, this
process is often spurred by marketing efforts.
1) Marketers attempt to create primary demand, where
consumers are encouraged to use a product or service regardless of the
brand they choose.
2) Secondary demand, where consumers are prompted to prefer a
specific brand over others, can only occur if primary demand already
exists.
3. Information Search
a. Once a problem has been recognized, consumers need adequate
information to resolve it. Information search is the process in which the
consumer surveys his or her environment for appropriate data to make a
reasonable decision.
Types of Information Search
b. Types of search that the consumer may undertake once a need
has been recognized include:
1) Prepurchase search—an explicit search for information.
2) Ongoing search—used by veteran shoppers to keep abreast of
changes in the product categories of interest to them.
c. Information sources can roughly be broken into:
1) Internal search—a memory scans to assemble information
about different product alternatives.
2) External search—information is obtained from advertisements,
friends, or just plain people-watching.
d. Search can be deliberate or accidental.
1) Deliberate search is the result of directed learning—this is an
active search.
2) Accidental search is the result of incidental learning—exposure
to learning over time (this is a passive search).
4. The Economics of Information
a. The traditional decision-making perspective incorporates the
economics-of-information approach to the search process; it assumes
that consumers will gather as much data as is needed to make an
informed decision.
1) Consumers form expectations of the value of information.
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2) The utilitarian assumption implies that the most valuable
units of information will be collected first.
3) Most people, however, do not want to spend long time
collecting information.
b. Consumers do not always search rationally. Low income
consumers search the least.
1) Rational search does not always occur.
a) The amount of external search is surprisingly small.
2) Consumers often visit only a few stores before making a
decision to purchase.
3) Avoiding external search is less prevalent when consumers
consider the purchase of symbolic items.
a) Most external search involves the opinions of peers.
4) Consumers are often observed to be in a state of brand
switching.
5) This is often caused by a desire to switch (variety seeking) and
usually occurs when the consumer is in a good mood.
6) We often switch brands even if we like the old brand.
c. There are biases in the decision-making process.
1) A mental accounting can take place.
2) Framing occurs because of the way a problem is posed.
3) The sunk-cost fallacy says that having paid for something
makes us reluctant to waste it.
4) Loss aversion says that people put more emphasis on loss
than on gain in a situation. An example of this would be prospect theory.
5) There can always be outside influences on our selections.
How Much Search Occurs?
d. As a general rule, search activity is greater when:
1) The purchase is important.
2) There is a need to learn more about the purchase.
3) The relevant information is easily obtained and utilized.
e. Consumers differ in the amount of search they tend to undertake:
1) Females shop more than men.
2) Younger, better-educated people shop more than others.
3) Those who enjoy shopping shop more.
f. The consumer’s prior expertise can also affect the search and
shopping process.
1) Search tends to be greatest among those consumers who are
moderately knowledgeable about the product.
2) The type of search varies with varying levels of expertise.
a) Experts use selective search.
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b) Novices rely on opinions of others and “non-functional”
attributes.
3) As a rule, purchase decisions that involve extensive search also
entail some kind of perceived risk or belief that the product has
potentially negative consequences. Types of risk include:
a) Objective risk forms (such as physical danger).
b) Subjective factor risk forms (such as social
embarrassment).
5. Evaluation of Alternatives
Identifying Alternatives
a. The alternatives actively considered during a consumer’s choice
process are his or her evoked set. In reality, this can be a very small set.
1) The evoked set is composed of those products already in
memory (the retrieval set), plus those prominent in the retail
environment.
Product Categorization
b. Product categorization is how consumers organize their beliefs
about products or services. This is a crucial determinant of how a
product is evaluated.
1) Products in a consumer’s evoked set are likely to be those that
share some similar features.
2) This knowledge is represented in a consumer’s cognitive
structure (the factual knowledge about products—beliefs—and the way
these beliefs are organized in people’s minds).
3) There are several levels of categorization:
a) Basic level—items have much in common but a number of
alternatives exist.
b) Super-ordinate level—abstract concepts.
c) Subordinate level—individual brands.
c. Product categorization has many strategic implications. Some of
these are:
1) Product positioning—The conception of the product relative to
other products in the consumer’s mind. To some extent this is how a
product is categorized by the consumer.
2) Identifying competitors—Are different products substitutes?
3) Exemplar products—The most known, accepted product or
brand.
4) Locating products—Consumers often expect to find certain
products within certain places within the store environment.
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6. Product Choice: Selecting among Alternatives
a. Once the relevant options from a category have been assembled
and evaluated, a choice must be made among them.
Evaluative Criteria
b. Evaluative criteria are the dimensions used to judge the merits of
competing options. Forms can be:
1) Differences—Significant differences among brands on an
attribute (anti-lock brakes). The attributes actually used to differentiate
among choices are determinant attributes.
2) Supplying the consumer with decision-making rules.
c. When consumers make decisions, marketers often want to impact
their decision making. The decision about which attributes to use is the
result of procedural learning. To do this (effectively recommend a new
decision criteria), the marketer must convey three pieces of information:
1) It should point out that there are significant differences among
the brands on the attribute.
2) It should supply the consumer with a decision-making rule.
3) It should convey a rule that can be easily integrated with how
the person has made this decision in the past.
Cybermediaries
d. In cyberspace, simplification is the key.
1) How can people organize the vast amount of information on
the Web?
2) One type of business that is growing to meet the demand for
information and service on the Web is the cybermediary. This
intermediary helps to filter and organize online market information so
that customers can identify and evaluate alternatives more efficiently.
Collaborative filtering may be used.
3) Forms include:
a) Directories and portals
b) Web site evaluators
c) Forums, fan clubs, and user groups
d) Financial intermediaries
e) Intelligent agents
Heuristics: Mental Shortcuts
e. Consumers often rely on heuristics (mental rules-of-thumb that
lead to speedy decisions). These rules can be general or specific.
Sometimes these shortcuts are not in the consumer’s best interest.
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f. One frequently used shortcut is the tendency to infer hidden
dimensions of product from observable attributes. This can result from:
1) Product Signals—a visible act that signifies underlying quality.
2) Co-variation—perceived associations among events that may or
may not actually influence one another.
g. Other assumptions include:
1) Market beliefs—knowledge of the market that is used to guide
decisions.
2) One of the most pervasive market beliefs is the price-quality
relationship.
3) Country of origin as a product signal.
a) This is often a signal of quality.
b) The consumer must avoid stereotypes.
c) The tendency to prefer products or people of one’s own
culture over those from another country is called ethnocentrism.
h. Branding is a marketing strategy that often functions as a
heuristic.
1) Many people tend to buy the same brand just about every time
they go to the store.
This consistent pattern is due to inertia, where a brand is
bought out of habit merely because less effort is required.
2) Brand loyalty is a form of repeat purchasing behaviour
reflecting a conscious decision to continue buying the same brand. There
is more brand parity today and therefore brand loyalty is harder to
achieve (and keep).
Decision Rules
i. Consumers consider sets of product attributes by using different
rules, depending on the complexity of the decision and the importance of
the decision to them.
j. Simple decision rules are non-compensatory decision rules,
meaning a product with a low standing on one attribute cannot make up
for this position by being better on another attribute. Rules within this
structure can be:
1) The lexicographic rule—the brand with the best attribute is
selected.
2) The elimination-by-aspects rule—must have a specific feature
to be chosen.
3) The conjunctive rule—the consumer processes products by
brand. Cutoffs are established for each brand. Failure to meet one cutoff
means the brand will be rejected.
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k. Unlike non-compensatory decision rules, compensatory decision
rules give a product a chance to make up for its shortcomings. You
weigh the good points against the bad.
1) There are two basic types of compensatory decision rules:
a) Simple additive rules—the consumer merely chooses the
alternative having the largest number of positive attributes.
b) Weighted additive rules—the consumer considers the
relative importance of positive attributes.
End.
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