What decision strategies

do buyers use to choose

brands and products?

The Psychology of

buying
B y Mi c h a e l G . Mu l h e r n

Product, brand and marketing managers need to

anticipate how buyers will act in the marketplace. Qualita-
tive and quantitative information from potential buyers is
often collected in order to aid in this process. Once insights
are gained from this information, managers can build strat-
egies for sustainable competitive advantage.
Underlying the data researchers collect and the analyses
they run are some basic assumptions about how individuals
act in the marketplace. As researchers, we attempt to repli-
cate or mimic the buying decision when asking questions—
either qualitatively during a focus group, site visit or ethno-
graphic interview or quantitatively via a survey. However,
recent evidence suggests our methods may not capture the
full extent of the psychological processes that buyers engage
in when making their marketplace choices.

14 Fall 2009
marketing research 15

E xecutiv e S umma r y
Researchers try to replicate or mimic the buying
decision when asking questions of buyers. This hap-
pens either qualitatively during a focus group, site
visit or ethnographic interview or quantitatively via a
survey. However, these methods may not capture the
full extent of the psychological processes that buyers
engage in when making their marketplace choices.
This article examines these processes and suggests
ways to tap into them with our research methodologies.
The Consumer Psychology Perspective
In their review of the consumer psychology literature,
Simonson et al differentiate among several subgroups. One is
the information processing segment, and another is the behav-
ioral decision theory (BDT) subgroup. (See Simonson, Itamar,
Z. Carmon, R. Dhar, A. Drolet and S. Nowlis (2001), “Con-
sumer Research: In Search of an Identity” Annual Review of
Psychology, 52, 249-275.)
Both are based in psychology; however, the information
processing segment focuses on cognition and affect while
the behavioral decision theorists emphasize choice models,
economic psychology and search strategies. The question
of how individuals with limited time and resources manage
uncertainty has been of interest to both sets of writers. Both
also seek to understand and explain how buyers make choices,
albeit with a slightly different emphasis. This is illustrated by
the following:
• S ocial cognition focuses on stages in the communication
(hierarchy of effects) model and attitude formation, while
BDT focuses on the decision making model, especially the
determinants of choice.
• S ocial cognition focuses on memory-based tasks, while
BDT focuses on stimulus based tasks.
• S ocial cognition employs cognitive response and recall
measures, while BDT uses information acquisition, verbal
protocols and response time.
Further, Loken notes that work in social cognition has
identified several dual processing models. (See Loken, Barbara
(2006), “Consumer Psychology: Categorization, Inferences,
Affect and Persuasion,” Annual Review of Psychology
57, 453-485.)
Dual processing models imply that several different cogni-
tive styles can be used during the course of a single decision.
The degree of motivation and thought required effects the
balance between these styles. Generally, the higher the motiva-
tion and elaborative thought given to a decision, the greater
the systematic, detailed information processing is assigned to
16 Fall 2009
the task. Conversely, if a buyer has limited motivation and is
unwilling or unable to give extensive, systematic thought to
the decision, then heuristic rules are more frequently used.
These ideas were initially introduced in the 1970s by Kahne-
mann and Tversky and have more recently been popularized
by behavioral economists such as Thaler and Ariely.
More generally, Simonson et al state that “Behavioral
decision theory (BDT) serves as a bridge between the ‘behav-
ioral’ and ‘quantitative’ sides of marketing since both BDT
and quantitative research share the link to economics and the
focus on consumer choice.”
The Role of Dual Processing
Buyers are often faced with a plethora of brands and
products when making a choice. In fact, some pundits believe
buyers are faced with too many choices. How many is too
many will vary by individual, type of product or service and
many other factors, but the key point is that simplification is
often required to prevent information overload and less than
optimal decision making.
It is becoming clear that buyers engage in a two-step deci-
sion process to cope with these time constraints and cognitive
limitations (i.e., how much information one can manage and
what information is available in short-term memory) while
making relatively rational and satisfactory decisions. Stated
differently, the classical economic assumptions of compre-
hensive information gathering, predefined preferences and
product evaluation incorporating a thorough assessment of
potential consequences are not likely to occur in most buying
situations.
An initial simplification step involves selecting a set of
brands or products for further consideration by employing
non-compensatory decision rules. While a number of non-
compensatory processes (e.g., elimination by aspects, lexico-
graphic, conjunctive, disjunctive, etc.) have been identified
in the marketing, economics and psychological literature,
all involve a ranking of features or attributes or assigning a
threshold to the levels of these features among the products or
services being offered. The outcome is a subset of offerings to
be further evaluated. Called the consideration or evoked set,
this subset is determined by employing heuristics that simplify
choice by using “fast and frugal” rules. (See Gigerenzer, G.
and D.G. Goldstein (1996), “Reasoning the Fast and Frugal
Way: Models of Bounded Rationality,” Psychological Review,
103(4), 650-669.)
These are adaptation strategies drawn on to form infer-
ences with limited information. At this point, the buyer’s goal
is to identify what he really must have or must avoid. Typi-
cally rational rather than emotional in nature, these heuristics
take the form of “cutoff” or “screening” rules. Both academic
and practitioner research have illustrated that this is a widely
used simplification strategy.
Once a subset of potential products is identified, a com-
pensatory process is used for a more thorough review. This
involves a decision strategy where a buyer allows a really
“good” feature or level to compensate for a really “bad”
feature or level while retaining
a close-to-optimal value derived Exhibit 1 Measurement and analysis considerations
from the product or service.
Non-compensatory decision
Process Measurement Analysis and model building
rules. Orme and Johnson con-
ducted a choice-based conjoint
study that involved home buying. Ranking
(See Orme, Bryan K. and Richard Constant sum Descriptive statistics
M. Johnson (2008), “Testing Non-compensatory Magnitude estimation Cross tabulations
Adaptive CBC: Shorter Ques- Q sort Log linear
tionnaires and BYO vs. “Most Build your own Logit
Likelies” Sawtooth Software
Technical Paper.) They asked re- Self explicated (with or without
spondents via open-end questions trade-off questions)
Compensatory
to describe how they selected Ranking and/or rating levels
which homes to consider. Several Full or partial profiles
Regression (either ordinary
respondent comments are listed Paired comparisons
least squares or logistic)
below. (Italics added.) Note that Choice sets
Logit (either binary or multinomial)
Maximum difference
key words such as “must have,”
“eliminate” and “unacceptable”
are used. These imply that certain
screening criteria are being uti-
lized to simplify the decision. Compensatory decision rules. Compensatory processes
require a trade-off of some kind. A trade-off is where a level
• I focused on the most important things for me. The num- of one feature or attribute is given up to get more of another
ber of rooms was the most important so, if the number feature or attribute (e.g., higher price for more square foot-
was unacceptable, I took it out of my consideration. Then age). Some hypothetical examples of compensatory processes
I looked at the yard size and so on and so on. being used would include the following statements:
• I would first rule out by price—nothing over $300,000. • A
 lthough I have several small children and would like a
Then I looked at the schooling and dropped any that were large lot for them to play on, their education is more im-
in the bottom third of the nation. After that I would look portant to me. So I’d be willing to buy a home on a smaller
at the lot size and home size to make my final decision. lot if the schools were among the best in the nation.
• W
 hat I did was eliminate houses that were definitely not • I’ll pay more if the schools are of the highest quality.
for me because of price range and very low square feet
first. By doing that, I am not considering a home that I • S quare footage is important but not if I exceed my ability
would never buy anyway, so then I can consider a home to pay and end up with an onerous mortgage.
that I really want. • I prefer an older home but if it doesn’t have the square
• I knew which things I would rule out right away—the footage I need, I’ll look at newer homes.
1,400, 3,000 and 4,000 sq. ft. homes; any homes with • M
 ore square footage won’t make up for fewer than three
fewer than two baths; any in school districts in bottom bedrooms.
third; any over $300,000. Then I could look at whichever
houses were left and see if they had other qualities I liked.
Factors Influencing Decision Rule Usage
• I looked at the categories that were most important to me. Occasion- or situation-based segmentation has been used
For example, I wanted a large lot and a new home. Those widely by marketers to customize marketing programs. Simi-
two categories were first looked at. larly, the use of cutoff or screening rules is likely to be situ-
• I looked at the must-have features first and eliminated the ational as well, both in their use and the features used in the
houses that didn’t have them. heuristics. As an example, when traveling by air, a vacation
traveler may screen flights based on price, while a business
• I picked the few things that I could not live without. There traveler may be more focused on flight times and comfort.
was usually only one option that had them all. Situational factors such as time pressure, search complexity
• I eliminated ones first based on how many bedrooms. I and cost, switching costs are a few situational elements that
would eliminate them if there were less than three, and effect decision rules being implemented.
then I jumped to the school. I eliminated the ones that In addition to situational factors, a cursory literature
were in the bottom third of nation. review and the author’s experience suggest several additional

marketing research 17
categories of factors will likely be relevant to the decision
rules employed for any given buying decision. Internal buyer
characteristics such as product or category experience, cogni-
tive style, and risk tolerance may impact decisions.
Further, marketing factors will have an influence. Degree of
product differentiation, breadth and depth of models available
are product-related factors that likely impact a buyer’s deci-
sion strategies.
Lastly, the survey instrument itself will have an effect. For
example, the nature of the task (i.e. preference elicitation
method) and the complexity of the task may modify one’s de-
cision rules. To illustrate, a rating or ranking task requires less
cognitive effort than comparisons or tradeoffs. Consequently,
the preference elicitation task used by the survey researcher
can impact the decision strategies selected. Along these same
lines, as task complexity increases, the buyer may reach a
point where she/he oversimplifies or engages in satisficing
rather than optimizing behavior.
It is hypothesized that, as a general rule, the more elements
a buyer needs to consider and the more complex the elements
are, the more likely she/he is to simplify using non-compen-
satory decision processes. It is important for the researcher
to consider these elements prior to conducting research. A
grasp of these factors will facilitate the design and likely offer
insights into the “why” of the results.
Based upon an extensive literature review, Hauser and his
colleagues (See Hauser, John, Steve Gaskin, Min Ding (2009),
“A Critical Review of Non-Compensatory and Compensatory
Models of Consideration Set Decisions,” Sawtooth Software
Conference Proceedings, Sequim, WA) have suggested that
non-compensatory decision rules are more likely to be imple-
mented when there are:
• many brands
• many products/models
• n
 on-comparable products/models (e.g. SUV vs. sporty
coupe)
• higher search costs
• more complex decisions
• h
 igher likelihood of information overload (e.g. unfiltered
info)
• t ime pressure for the ultimate decision (e.g. selecting a
health insurance provider during an open enrollment
period)
• p
 reliminary decisions (e.g. early in a multi stage buying
process).
Research Design Questions to Ask
Obviously, it behooves the researcher to tailor research
designs, data collection, analysis and reporting to the type of
decision strategies buyers employ. To accomplish this, we need
to address these questions:
18 Fall 2009
• A
 re screening rules being used? If so, by what proportion
of the population?
• I f screening rules are being applied, which features or
levels are being used to simplify the decision?
• A
 re these features and levels being used to in-
clude “must have” products or to eliminate “must
avoid”/“unacceptable” products? Or both?
• A
 re respondents using features (e.g., price is the most im-
portant feature) or levels (e.g., not greater than $200,000)
to screen products and services? Or both?
• O
 nce a consideration set has been formed, what trade-offs
are being made?
• H
 ow do these screening rules and trade-offs vary by situa-
tion, occasion or context?
Measurement and Analysis Considerations
Within the survey context, there are a variety of ways to
assess these processes. For non-compensatory decision rules,
common question formats such as ranking, constant sum,
magnitude estimation, Q sort and “build your own” can
guide our measurement. Analytically, descriptive statistics,
cross tabulations, log linear and logit models will facilitate
determining which rules are being used and to what extent.
Capturing compensatory decision processes has long been
the domain of conjoint analysis and discrete choice modeling.
These approaches use a variety of measurement devices that
include self-explicated (with or without trade-off questions),
ranking and/or rating levels, full or partial profiles, paired
comparisons, choice sets and maximum difference questions.
From a model-building perspective, regression (either ordinary
least squares or logistic) or logit (either binary or multino-
mial) are the most commonly used utility estimation models.
A summary is provided in Exhibit 1 (page 17).
Software is available to capture both compensatory and
non-compensatory processes in a single questionnaire. Deal
and Cunningham provide a review in the Summer 2009 issue
of Marketing Research.
Implications for Marketers and Researchers
Marketing theory suggests we need to tailor our market-
ing programs to individuals or groups of individuals based
upon our understanding of their perceptions, preferences and
behavior. By investigating the use of non-compensatory and
compensatory decision strategies implemented by buyers,
marketers and researchers can come closer to this ideal.
By more accurately identifying the nature of the buyer
decision process for a given situation, a researcher has the
potential to tailor the research methods chosen and insights
gained to the marketing issue driving the project. l
Michael G. Mulhern is president, Mulhern Consulting. He
may be reached at mmulhern@nwlink.com.