Chapter 9
Consumer
Consumer Decision Making
Decision Making
The Decision Process
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Every day we make numerous decisions
concerning every aspect of our daily lives
Particularly in American society, we are rarely
put in a position where we have no choices
Rational decision-making
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In economic theory, consumers are portrayed
as making rational decisions
Consumers attempt to maximize their utility
continuously within the constraints of limited
resources
Consumers must
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Be aware of all available product alternatives
Be capable of correctly ranking each in terms of
benefits and costs
Be able to identify the one best alternative
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Consumers are limited in their skills
Consumers are limited by their existing
values and goals
Consumers are limited in the extent of their
knowledge
Doesn’t take into account the impacts of
advertising and marketing
Effort Variation in Decision Making
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The amount of effort a consumer puts into a
decision varies depending on how involved
the consumer is with the purchase
In low involvement purchases, consumers
view the purchase as unimportant and the
outcome of the decision inconsequential
High involvement purchases are those that
are important from a financial, social or
psychological standpoint
Programmed decisions
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Decisions we make without much thought
(habitual)
Brand loyalty is related because it is another
method to minimize effort
Non-programmed decisions
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Decisions that are new or occur infrequently enough
that consumers have to undertake more of an effort to
obtain information
May involve extended problem solving where the
consumer has no established criteria for evaluating a
product category or specific brands in the category
May involve limited problem solving where the
consumer has established the basic criteria but has
not yet established preferences among brands
Impulse purchases require little or no cognitive effort
on the part of the consumer
A consumer decision-making model
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1.
2.
3.
4.
5.
John Dewey identified five stages in the
decision-making process
Problem/need recognition
Search activity
Identifying and evaluating solutions
Purchase or commitment
Post-purchase considerations
1. Problem/Need Recognition
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Sometimes arises from changes in
circumstances
Sometimes arises from marketing
Two different need recognition styles
1.
2.
Desired state: consumers whose desire for
something new triggers the decision process
Actual state: consumers who believe they have a
problem/need when a product fails
2. Pre-purchase Search Activity
Begins as soon as the problem/need is
identified
Extent of search depends on degree of
involvement
Nature of search depends on consumer’s
level of experience with the product
Two types of searches
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1.
2.
Internal
External
Internal search
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Consumer will search his/her memory before
seeking external sources
The greater the past experience, the less
external information needed
Many decisions are based exclusively or
primarily on internal information
Level of risk perceived is a major factor in
determining extent of search
External search
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“Shopping” (in a very broad sense)
Advertising and promotion
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including point of purchase and internet
Store visits
Objective sources (Consumer Reports, e.g.)
Friends and family (word of mouth)
Interesting facts about shopping
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In general, women enjoy shopping and men
do not
Even for high priced durables, many
consumers do minimal comparison shopping
Low-income shoppers, who have more to
lose, search less before making a purchase
than do more affluent consumers
3a. Identifying alternatives
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Consumers consider only a limited number of
alternatives
Referred to as the evoked set
Small number of brands the consumer is
familiar with, remembers, and finds
acceptable
Implication for marketers
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They need to make sure their products are
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Positioned properly
Advertised and promoted
Readily available
Supported by service, financing, etc.
Building customer loyalty is critical
3b. Evaluating alternatives: Prospect
Theory
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Based on the notion that consumers have to
give up something in order to get something
back in the marketplace
Proposes that people’s decisions are based
on how they value the potential gains and
losses that result from making choices
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Based on the “value function” theory, which reflects
consumers’ anticipation of the pleasure or pain
associated with a specific decision outcome
Value function explains the difference between the
psychological valuation of gains and losses and the
actual value of those gains and losses
the value function for losses is different for that for
gains
In practical terms, this means that consumers resist
giving up things that they already own
Endowment effect
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This phenomenon is referred to as the
endowment effect
This means, for example, that when
consumers are asked to name a selling price
for something they own, they often require
more money than they would pay to own the
same item
Framing
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Prospect theory predicts that preferences will
depend on how a problem is framed
In other words, the same decision can be
framed from either a gain or loss perspective
Marketers sometimes make use of
consumers’ differing perceptions about gains
and losses
4. Purchase or commitment: consumer
decision rules
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Purchase decision is the outcome of the
search and evaluation process
In reaching a decision, consumers use a
number of decision rules
Rules reduce the burden of making complex
decisions by providing guidelines or routines
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Rules have been broadly classified into two
major categories:
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Compensatory decision rules
Non-compensatory decision rules
Compensatory decision rules
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A consumer evaluates brand options in terms
of each relevant attribute of the product and
computes a weighted or summated score for
each brand
Presumably the consumer chooses the brand
with the highest score
Allows a positive score/evaluation on one
attribute to cancel a negative score on
another
Table 16.6 Hypothetical Ratings for Security Systems
FEATURE
System Price
Monthly
monitoring fee
ST. LOUIS
CLAYTON SECURITY MISSOURI
ALARM SYSTEM SERVICES
BUGLARY
10
1
5
4
6
5
1
10
5
3
10
6
3
10
6
Number of included
smoke detectors
wired to system
3
2
1
How home is
protected
2
10
6
27
56
34
Number of entry
doors protected
Number of keypads
included
Price for each
additional keypad
Non-compensatory decision rules
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A negative evaluation in one category
eliminates the brand from consideration
Implication of decision rules for
marketers
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A marketer familiar with these rules will use
promotional messages that highlight product
attributes that consumers are most likely to
evaluate in deciding on what brand to
purchase
5. Post-purchase evaluation
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As consumers use a product, they evaluate its
performance in light of their expectations
The extent of the evaluation depends on the
importance of the product decision
The product may
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Meet expectations
Exceed expectations
Fall short of expectations
Post-purchase evaluation becomes part of the
consumer’s experience and may affect future
related decisions
Instrumental vs. expressive performance
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Product performance is evaluated on a limited
number of product attributes
These include:
Instrumental performance: the utilitarian
performance of the physical product itself (a means
to a set of ends)
Expressive performance: social or psychological
attributes of the product (an end in itself)
Which aspect is dominant depends on the nature of
the product and its purchase