Individual
Decision Making
Chapter 9
Opening Vignette: Richard
• What motivates Richard to begin his
quest for a new TV?
• What kind of perception does Richard
have about salespeople?
• What influenced Richard’s choice of
brand?
• What is the main reason Richard makes
his final selection?
9-2
Consumers As Problem Solvers
• A consumer purchase is a response to a
problem.
• Steps in the decision process:
– (1) Problem recognition
– (2) Information search
– (3) Evaluation of alternatives
– (4) Product choice
• Amount of effort put into a purchase
decision differs with each purchase.
9-3
Stages in Consumer Decision Making
Figure 9.1
9-4
Illustrating the Decision-Making Process
• This ad by the U.S.
Postal Service
presents a problem,
illustrates the
decision-making
process, and offers a
solution.
9-5
Decision-making Perspectives
• Rational perspective
– Purchase momentum
– Constructive processing
• Behavioral influence perspective
• Experiential perspective
9-6
Types of Consumer Decisions
• Extended Problem Solving:
– Corresponds to traditional decision-making
perspective
• Limited Problem Solving:
– People use simple decision rules to choose
among alternatives
• Habitual Decision Making:
– Choices made with little to no conscious effort
– Automaticity: Characteristic of choices made
with minimal effort and without conscious
9-7
control
Types of Consumer Decisions
• Continuum of Decision Making
Figure 9.2
9-8
Problem Recognition
• Problem recognition:
– Occurs whenever the consumer sees a significant
difference between his or her current state of affairs
and some desired or ideal state
• Need recognition: The quality of the consumer’s actual state
moves downward
• Opportunity recognition: The consumer’s ideal state moves
upward
– Primary demand: Consumers are encouraged to use
a product or service regardless of the brand they
choose
– Secondary demand: Consumers are encouraged to
use a specific brand – can only occur if primary9-9
demand exists
Problem Recognition:
Shifts in Actual or Ideal States
9-10
Figure 9.3
Information Search
• Types of Information Search:
– Prepurchase search: Consumer recognizes a
need and then searches the marketplace for
specific information
– Ongoing search: Browsing for fun or staying upto-date on what’s happening in the market
• Internal Versus External Search:
– Internal search: Scanning our own memory
banks for information about product alternatives
– External search: Obtaining product information
from advertisements, friends, or by observing
others
9-11
Internal vs. External Search
• Internal search
– Scanning memory to
assemble product alternative
information
• External search
– Obtaining information from
ads, retailers, catalogs,
friends, family, peoplewatching, Consumer Reports,
etc.
9-12
Silent Commerce
• Enables transactions/information gathering
without intervention by consumers or
managers
– Smart products
• RFID tag stores information and has an antenna to
communicate with computer network
• Discussion: silent commerce has the
potential to automate many of our
decisions
– Do you see any downsides to this trend?
9-13
Other Types of Information Search
• Deliberate Versus “Accidental” Search:
– Directed Learning: Results from existing knowledge
from previous active acquisition of information
– Incidental Learning: Passive acquisition of information
through exposure to advertising, packaging, and
sales promotion activities
• The Economics of Information:
– Approach that assumes consumers will gather as
much data as needed to make a decision
– Utility: Rewards of continued search
– Variety Seeking: Desire to choose new alternatives
over familiar ones
9-14
Do Consumers Always Search
Rationally?
• Some consumers
tend to avoid external
search, especially
with minimal time
to do so and with
durable goods (e.g.
autos)
• Symbolic items =
more external search
– High perceived risk
9-15
Do Consumers Always Search
Rationally? (Cont’d)
• Brand switching
– Variety seeking: unpredictability
can be rewarding to consumers
• When in good mood or little
stimulation elsewhere (sensoryspecific satiety)
– We select familiar brands, when
decision situation is ambiguous
or when there is little information
about competing brands
9-16
Biases in the Decision-Making
Process
• Mental Accounting:
– Decisions are influenced by the way a problem is
posed (framing)
• Sunk-cost fallacy:
– Having paid for something makes the consumer
reluctant to waste it
• Loss Aversion:
– People place more emphasis on loss than gain
• Prospect Theory:
– A descriptive model of how people make choices that
finds that utility is a function of gains and losses
9-17
How Much Search Occurs?
• Search activity is greater when…
– Purchase is important
– There is a need to learn more about purchase
– Relevant info is easily obtained/utilized
– One is younger, is better-educated, and
enjoys shopping/fact-finding
– One is female (compared to male)
– One places greater value on own style/image
9-18
Consumer’s Prior Expertise
• Moderately
knowledgeable
consumers tend to
search more than
product experts and
novices
• Experts: selective
search
• Novices: others’
opinions,
“nonfunctional”
attributes, and “top
down” processing
Figure 9.5
9-19
Perceived Risk
• Belief that product has
negative consequences
– Expensive, complex, hardto-understand products
– Product choice is visible
to others (risk of
embarrassment for wrong
choice)
• Risks can be objective
(physical danger) and
subjective (social
embarrassment)
9-20
Perceived Risk
• Purchase
decisions that
involve extensive
search also entail
some kind of
perceived risk.
Figure
9.6
9-21
Evaluation of Alternatives
• Choosing a brand/product among
available alternatives requires much of the
effort that goes into a purchase decision
– Just think about how many brands or different
brand variations there are!
– Discussion: Do you agree that having too
many choices is a bigger problem than not
having enough choices? Is it possible to have
too much of a good thing?
9-22
“Buy Button” in Your Brain
• Neuromarketing
– f.M.R.I. used to measure
consumers’ reactions to various
products/services
• DaimlerChrysler confirmed that
sports cars activated reward
center in male brains
• Coke’s strong brand identity was
actually displayed as unique in
f.M.R.I. studies
– What we say and how our brain
reacts can be two different
things!
9-23
Identifying Alternatives
• Extended problem solving = evaluation of
several brands
– Occurs when choice conflicts arouse negative
emotions (involving difficult trade-offs)
• Habitual decision = consider few/no brand
alternatives
9-24
Identifying Alternatives (Cont’d)
• Evoked set vs. consideration set
– We usually don’t seriously consider every
brand we know about
– In fact, we often include only a surprisingly
small number of alternatives in our evoked set
• Marketers must focus on getting their
brands in consumers’ evoked set
– We often do not give rejected brands a
second chance. Discussion: Why?
9-25
Product Categorization
• We evaluate products in terms of what we
already know about a (similar) product
• Evoked-set products usually share similar
features
– When faced with a new product, we refer to existing
product category knowledge to form new knowledge
• Marketers want to ensure that their products are
correctly grouped in knowledge structures
– Jell-O gelatin flavors for salads
9-26
Levels of Categorization
Figure 9.7
Discussion: Diagram the three levels here for a health club!
9-27
Strategic Implications
of Product Categorization
• Product Positioning:
– Success of a positioning strategy depends on
convincing the consumer that the product should be
considered in the category.
• Identifying Competitors:
– Many products compete for membership in a category
• Exemplar Products:
– Products which are a good example of a category
• Locating Products:
– Categorization can affect consumers’ expectations of
where the product can be located
• Products that do not fit clearly into categories confuse
consumers (e.g., frozen dog food)
9-28
Product Positioning
• This ad for Sunkist lemon juice attempts to establish
a new category for the product by repositioning it as
a salt substitute.
9-29
Product Choice
• Selecting among alternatives
– Once we assemble and evaluate relevant
options from a category, we must choose
among them
– Decision rules for product choice can be very
simple or very complicated
• Prior experience with (similar) product
• Present information at time of purchase
• Beliefs about brands (from advertising)
9-30
Evaluative Criteria
• Dimensions used to judge merits of
competing options
• Determinant attributes: features we use to
differentiate among our choices
– Criteria on which products differ carry more
weight
– Marketers educate consumers about (or even
invent) determinant attributes
• Pepsi’s freshness date stamps on cans
9-31
Evaluative Criteria (Cont’d)
• Procedural learning: cognitive steps before
making choice
– Marketers often point out significant
differences among brands on relevant
attribute…
• Then supply consumers with decision-making rule
(“if, then”) that has helped them make previous
decisions
9-32
Choosing the Solution
• Lava soap lays out the options and invites us to
choose the solution.
9-33
Heuristics: Mental Shortcuts
• Heuristics:
– Mental rules-of-thumb that lead to a speedy decision
– Examples: higher price = higher quality, buying the
same brand your mother bought
• Market Beliefs: Is It Better if I Pay More For It?
– Price-Quality Relationship: Pervasive market belief that
higher price means higher quality
– Larger stores offer better prices than smaller stores
– Items tied to “giveaways” are not a good value
9-34
Relying on a Product Signal
• Observable product attributes that
communicate underlying qualities
– Clean and shiny car = good mechanical
condition
• Covariation: perceived associations
among events
– Product type/quality and country of origin
– Consumers are poor estimators of covariation
(self-fulfilling prophecy: we see what we are
looking for)
9-35
Heuristics Simplify Choices
• Consumers often
simplify choices by
using heuristics such
as automatically
choosing a favorite
color or brand.
9-36
Country-of-Origin
• Overall, we tend to rate our
own country’s products
more favorably than do
people who live elsewhere
• Industrialized countries
make better products than
developing countries do
9-37
Country-of-Origin (Cont’d)
• We strongly associate certain items with specific
countries (stereotyping)
– Irish pubs
• Country-of-origin effects stimulate consumer
interest in the product
– Origin of product = attribute
• Expertise with product minimizes country-oforigin effects
• Ethnocentrism (“buy American”)
– Backlash against American-made products as a result
of war in Iraq
9-38
Macanudo Cigars
• This advertisement positions the Macanudo cigar as
part of Americana, even though it’s imported from
the Dominican Republic.
9-39
Qibla-Cola
9-40
Choosing Familiar Brand Names:
Loyalty or Habit?
• Branding = heuristic for loyal consumers
– Fierce loyalty to a brand = dominant market
share
– Marketers try to cultivate loyalty
• Rock band fan packages
9-41
Inertia: The Lazy Customer
• Many buy the same brand every time
– We buy out of habit because it requires less
effort
– Little/no underlying commitment here
• Brand switching frequently occurs (cheaper price,
original brand out-of-stock, point-of-purchase
displays)
9-42
Brand Loyalty
• Repeat purchase behavior reflecting a
conscious decision to continue buying the same
brand
– Repeat purchase + positive attitude toward brand
– Emotional attachment and commitment often result
over time (via self-image and prior experiences)
• Information overload and too many alternatives
strengthen reliance on brands for quality
• We are often less picky about where we buy our
favorite brands
– Discussion: How can retailer compete if we believe
we can get the same brands everywhere?
9-43