Consumer Behavior Test 2 Material:
Decision Making Process:
-Evaluate and compare choices.
-Consumers need to make choices among alternatives -Consumers are always searching ways to satisfy utility
o Judgments: Evaluation or estimates regarding the
likelihood that something will happen. Judgment does not require the consumer to make a decision (choice).
Three Types of Decision Making: Cognitive, Habitual, Affective
o The decision process: starts with problem recognition and finishes with outcomes.
Cognitive: Deliberate, Rational, Sequential
Habitual: Behavioral, Unconscious, Automatic
Affective: Emotional, Instantaneous
Decision-Making Process: Problem recognition, Search, Evaluation, Choice, Outcomes.
o Problem Recognition: Occurs when consumer sees difference between current state and ideal state.
-Need Recognition: Actual State Declines We also discuss several other topics like mgmt 3320 midterm
-Opportunity Recognition: Ideal state moves upward
o Secondary Demand Strategy: Focuses on selective problem recognition ( I want Horizon, organic, 2% milk)
o Primary Demand Strategy: Focuses on the generic problem recognition (I want milk)
o INTERNAL & EXTERNAL SEARCH FOR INFO:
∙ Internal Search: The process of recalling
stored information from memory
∙ External Search: The process of collecting
info from outside sources.
- Pre-purchase vs. Ongoing search.
∙ What leads to search?
-Involvement: Is the decision important to
-Ease: Access to information
-Young people search more
-People w/ favorable shopping attitudes
5 types of Perceived Risks:
-Performance (Functional Risk)
Results of Searching: If you want to learn more check out physics midterm study guide
-Retrieval Set (vs. Universal Set)
-Evoked Set: Actively considered during the choice process -Inept Set: Aware of, but considered unacceptable
-Inert Set: Indifferent Towards
-Maximize your chance of being in the evoked set We also discuss several other topics like disadvantage of npv
-Strategies used by consumers to guide decision-making. -Some decision rules use product characteristics to guide decisions
-Some decision rules rely on stored information in consumers’ memories to guide decisions
o Evaluative Criteria
o Determinant Attributes
Lexicographic Decision Rule: The consumer ranks the attributes according to importance and then selected the brand that is superior on the most important attribute.
-If one brand ranks sufficiently high on just one attribute, it will be selected regardless of how it scores on other attributes. Elimination-by-aspect Decision Rule: Consumer sets a minimum standard for each attribute and if a brand fails to pass any standard, it is dropped from consideration. We also discuss several other topics like hphy uo
-Reduces a large consideration set to a manageable size. -Cutoffs can be adjusted
Conjunctive Decision Rule: Consumer sets a minimum acceptable standard as the cutoff point for each attribute-any brand that exceeds the cutoff point is accepted.
-Reduces large consideration set to a more manageable number of alternatives
-Consumer may settle for the first satisfactory brand as final choice or may another decision rule. If no satisfactory brand exist may adjust cutoffs or delay choice.
FEB 22 & FEB 27
DECISION MAKING APPROACH: The decision process starts with recognition and finishes with outcomes.
o Problem Recognition: Occurs when consumer sees difference between current state and ideal state.
- Changed circumstances We also discuss several other topics like mat102 utm
- Product acquisition
- Product consumption
- Product innovation
- Marketing influence
Problem Recognition: Two Strategies:
- Secondary Demand Strategy: Focuses on
selective problem recognition
- Primary Demand Strategy: Focuses on generic problem recognition
Need Recognition: Actual state declines
Opportunity Recognition: Ideal state moves upward
o Searching for Alternatives: Available alternatives, ttributes for available alternatives (Quality, Price, etc.), Importance of various attributes.
Internal Search: The process of recalling stored information in memory.
External Search: The process of collecting info from outside sources. Pre-Purchase vs. Ongoing Search. We get information from Retailer, Media,
-What leads people to search? People who search more: Young people, Educated people, Woman,
people with favorable attitudes towards shopping. Involvement: Is the decision important to
Perceived Risk (5 types): Financial (i.e., Monetary) Risk, Performance (i.e., Functional Risk), Physical Risk, Social Risk, Psychological Risk. Don't forget about the age old question of where is the epithalamus located
Ease: Access to information
o Determinants for External Search:
- Situational: Time, Information, availability,
- Consumer: Knowledge, involvement, beliefs & attitudes, demographics.
- Product: Differentiation, Perceived Risk, Price, Stability
- Retail: Distance, Differentiation.
o The Economics of Information: Consumer will gather as much data as needed to make informed decisions. We continue to search until costs exceed utility for information search. We will collect most valuable information first. o Results of Searching:
- Retrieval set
- Evoked set (Actively considered during the choice process)
- Inept set (Aware of, but considered unacceptable) - Inert Set (Indifferent towards)
- Maximize your chances of being in the evoked set. o Decision Rules: Strategy used by consumers to guide decision-making. Some decision rules use product characteristics to guide decisions (compensatory, non compensatory). Some decision rules rely on stored information in consumers’ memories to guide decisions. Compensatory Decision Rule:
-Select the best overall brand: Consumers evaluates brand options in terms of each relevant attribute and computes a weighted or summated score for each brand. The consumer chooses the brand with the highest score.
-A compensatory model because a positive score on one attribute can outweigh a negative score on a negative attribute.
Noncompansatory Decision Rules:
-Lexicographic decision rule: The consumer ranks the attributes according to importance and then selects the brand that is superior on the most
-If one brand ranks sufficiently high on just one attribute, it will be selected regardless of how it scores on other attributes.
Elimination-by-aspect Decision Rule: Consumer sets a minimum standard for each attribute and if a brand fails to pass any standard, it is dropped from consideration.
-Reduces a large consideration set to a manageable size.
-Cutoffs can be adjusted
-Often used in conjunction with another decision rule. Conjunctive Decision Rule: Consumer sets a minimum acceptable standard as the cutoff point for each attribute-any brand that exceeds the cutoff point is accepted.
-Reduces large consideration set to a more
manageable number of alternatives.
-Consumer may settle for the first satisfactory brand as final choice or may use another decision rule. -If no satisfactory brand exist may adjust cutoffs or delay choice.
Consumers are “cognitive misers”: Heuristics are used as shortcuts to decision making.
o Heuristic: Simple, experience-based rules of thumb used to guide decisions. Highest price=highest quality o Bias: Systematic error in processing/interpreting information. Overestimate probability of a rare event (e.g., plane crash).
o Types of Heuristics:
-Availability Heuristic (What comes to find first) If it is easy to recall, it must be bigger/better/ more likely.
-Representativeness Heuristic (How similar are prototypes in your mind) things are naturally correlated in the real world.
-Effort: What took more effort to make is better/higher quality/ worth more. Effort is informative.
o Diminishing Marginal Utility: As a person increases consumption of a product, there is a decline in the marginal utility that person derives from consuming each additional unity of that product.
o Anchoring & Adjustments: Start estimate at an initial value (anchor) and then adjust accordingly. Adjustment is often insufficient, anchors are often irrelevant.
o Framing Effect (Tversky & Kahneman 1981) - Risk Adverse: People who don’t like risk
- Loss Aversion: People tend to be more sensitive to losses than gains.
- The two problems are essentially identical, except that the choices are framed
o Consequences of Prospect Theory: We are risk-adverse when choosing two gains that have equal expected value. – Taking a $50 bill, or double or nothing.
-Framing in Companies: Companies do a lot of insensitive to have a healthy work force.
-Marketing Implications: Framing Effects: 93% Lean vs. 7% Fat
-Anchoring & Adjustments: Consumption- large bag of chips vs. small bag of chips
o Perspectives in decision theory:
-Normative: Focus is on finding rules that lead to the “best” decision in a given situation. How should consumers choose? Primarily used by economists.
-Descriptive: Focus is on describing how people make decisions. How do consumers choose? Primarily used by psychologists.
-Often, normative and descriptive approaches are at odds in decision science.
-Context effects: Reflects the influence of particular values of the objects in particular decision sets.
o Power of Default: Laziness/Ignorance. Suggestive o Query Theory: our preferences are affected by what we think about first.
o Compromise Effect: People don’t like buying the extreme. Looking for a “in-between” option for cheapest and expensive product.
o Decoy-Effects: Adding/Deleting Alternatives.
o Fairness: Willingness to pay for beer (Kahneman, Knetsch, & Thaler, 1986)
o Sunk Cost fallacy: We are reluctant to waste something we paid for.
-Sunk Cost: Prior investments of time, money, or effort. Lead us to make choices we otherwise wouldn’t make.
Why are Heuristics Valuable:
o Simply decision-making: reduces search costs, reduce thinking costs.
o Reasonably accurate: Based on prior experience
Mental Accounting: Money is fungible, but we don’t treat it that way. We make separate accounts in our mind, and assign money to those accounts.
o Spillover Effects: Unexpected changes in the marketing mix of one product in a retail setting can influence demand for other, unrelated items. (Positive or Negative)
- Positive: Price reductions
- Negative: Price increases, quality shortage
o Contagion Effects
o Payment Method: Cash or Credit. Payment method influences self-control. People who pay with cash have more self control
Post Purchase Experience:
o Product uses
o Brand extensions
o Future Behavior: Repeat Purchases (Habitual Decision Making)
o Make customers feel good about their purchases. -Alumni newsletters
-Salespeople at cash registers
-Follow up mails and thank you notes
5 Stages of Decision Making: Problem Recognition, information Search, Evaluation of Alternatives, Choice, Post Purchase
o Make customers confident about their purchases -Price protection policies
-Actual is below expectations= Dissatisfied
-Actual is equal to expectations= Satisfied
-Actual is above expectations= Delighted.
Customer satisfaction plays a big role in our future and is an important determinant of profits.
o Word of mouth: Influences two-thirds of all sales of goods.
o WOM is particularly powerful when we are unfamiliar with product category
o WOM is easy to spread, especially online
Customer Satisfaction as a competitive advantage: -Both Lexus and Infiniti see the care and feelings of buyers as a crucial skill which they can use to stand out in the glutted luxury car market.
-Voice Response: Appeal to retailer
-Private Response: Negative (Word-Of-Mouth)
-Need more positive comments to way heavily on the negative comments.
-Third Party Response: Legal Action
Spell out clear definitive and simple messages to customers Set expectations accurately
Communicate consistent messages
Post Purchase Regret: When customers perceive an unfavorable…. Discovers that their friend has bought a care that is equally and much more comfortable. You are certain you made the wrong choice.
Post Purchase Dissonance: Dissonance exists between their beliefs that they have bought a good are and that a good care should be comfortable.
Attribution Theory: People want to know who to blame when something goes wrong with an offering.
Three factors influenced who gets blamed:
o Stability: A stable factor or coincidence
o Locus: Internal (me-consumer)/ External
o Controllability: Controllable by marketer or
Equity Theory: We want fair exchanges, Inputs should equal outputs, cost should equal benefits.
Product Disposal: Marketers may want to shape product lifespan.
Consumption as a sequential process
o Other Reasons for product replacement
-New customer desire/attribute
-Desire for new features
-Change in personality traits.
o Secondary Markets: Need to understand flow of used goods to markets that depend on them.
-Second-hand markets (Ebay, flea markets, student markets) -Self-storage
-A threat to marketers
-Additional public policy implications of product disposition (Environmental Concern)
o People recycled when perceived effort is low
o Hyperbolic discounting: Get discounts upclose rather than in the future
WHAT IS CULTURE:
-Culture is a society’s personality; it shapes our identities as individuals -The sum of accumulation of shared meanings, rituals, norms, and traditions.
-The sum total of learned beliefs, values, and customs that serve to regulate the consumer behavior.
-Culture is learned and who you interact with.
o Enacted values: formal, documented values. Don’t need any direct experience to know these culture values. Every law is an enacted value
o Crescive Norms: Embedded in culture direct experience in culture to know these values
A Two-Way Street: Products and services the resonate with the priorities of a culture at any given time have a much better
chance of being accepted by consumers. Whi8ch cultures get accepted provides insight into the dominant culture. 3 Types of Culture Learning: Formal Learning, Informal Learning (mimicking someone’s behavior), Technical learning (anyone not a parental unit example: Teachers)
Enculturation: Learning about your own culture
Acculturation: Learning about cultures outside of your own. Rituals: are sets of multiple, symbolic behaviors that occur in a fixed sequence and that tend to be repeated periodically (Tailgating at football games)
o Presentation: Process of gift exchange when recipient responds to gift and donor evaluates response.
o Reformulation: giver and receiver adjust the bond between them.
o Right of passage: special times marked by a change in social status. (Puberty, death, divorce, dating, bar//bat mitzavah)
- Three Stages:
- Seperation: individual is detached from his original group - Liminality: Person is literally between statuses
- Aggregation: Person re-enters society after right of passage is complete.
o Sacralization: Occurs when ordinary objects, events, and even people take on a sacred meaning.
o Gestation: giver is motivated by an event to procure a gift. -Structural event: prescribed by culture (e.g Chrsitmas) -Emergent event: More personal
-Reformulation: Giver and receiver adjust the bond between them
Marketers find ways to encourage gift giving.
Businesses invent new occasions to capitalize on need for card/ritual artifacts
Right of Passage: Special times marked by a change in social status.
Desacralization: When a sacred item/symbol is removed from its special place or is duplicated in mass quantities (becomes profane).
o Religion has somewhat become desacralized.
A subculture is a group of people within a culture that differentiate itself from the parent culture to which it belongs, often maintaining some of its founding principles.
A counterculture is a subculture whose values and norms of behavior differ substantially from those of mainstream society, often in opposition to mainstream cultural mores.
∙ Symbolic innovation
∙ Technological innovation
Three major types of innovation:
o A continuous innovation, a modification of an existing product.
o A dynamically continuous innovation: More
pronounced change in existing product. Has a
modest impact on the way people do a thing,
creating some behavioral change.
o A discontinuous innovation: Creates major change in the way we live.
Cross-Cultural Marketing: Products that succeed in one culture may fail in another if marketers fail to understand the difference among customers in each place.
Advergaming: Refers to online games merged with interactive advertisements. Advertisers gain many benefits with
advergames. Plinking is the act of embedding a product in a video.