Lesson 2

Consumer Decision Making

Process
 Disclaimer
• Kindly note, LCM study materials are available FREE of
charge to students and are intended to be used ONLY
as supplementary reference material. They do not in
any way replace the recommended books that
students are advised to use to supplement knowledge
and understanding of the module.
• Students can purchase the recommended reading
books from a retailer of their choice. However,
students experiencing problems in obtaining books
independently can contact us to make a purchase using
LCM’s account with Amazon.
 Learning Outcomes
This lecture note covers the following learning
outcome:

LO2 - Outline and explain the steps in a range

of consumer decision making processes.
 Agenda

• Consumer Decision Making Process

• Alternative forms of decision making

• Heuristics

• Decision rules
Consumer Decision Making Process

Problem Recognition

Information Search

Information Evaluation

Purchase Decision

Post Purchase
Evaluation
 Consumer Decision Making Process

Example: Zoe is a junior executive in her twenties working in a prominent

sportswear company. She has decided to purchase a new mobile phone. Let’s look
at a potential decision making process for her.

Problem • Zoe feels her mobile phone is outdated to

match her needs and wants to buy a new
Recognition one

Information • Zoe talks to some of her friends about buying

Research a new phone and types of phones

Information • Zoe goes online and compares several models

Evaluation in terms of price, features and user ratings

• Zoe makes her choice based on features that

Decision she was looking for

Post Purchase • Zoe makes the purchase and enjoys her new
Evaluation mobile phone
 Consumer Decision Making Process
Problem Recognition

• This is the first step in the process. The buying process is initiated when the
consumer identifies a problem or need that has to be fulfilled. Needs can be
triggered from either internal or external stimuli.
• Internal stimuli arises from an individual’s average need e.g. hunger and then
becomes a drive. External stimuli comes from the environment we live in, e.g.
When a colleague buys a new car it can act as a external stimuli.
• By identifying the circumstances and stimuli that create needs in consumers,
marketers can generate a need with marketing strategies. To understand what
triggers a need, consumer behaviours has to be studied. Specially for
discretionary products or services(vacations, luxury products, entertainment)
• To get consumers to consider such items, marketing strategies need to be carried
out to enhance motivation.
 Consumer Decision Making Process
Information Search

• When a consumers interest is aroused by stimuli, they normally try to look for
information. Two levels of interest can be identified:
– Heightened attention - It is a milder state of arousal where consumers
receptiveness is increased
– Active information search - at this stage consumer engages in the search for
information more actively using various sources such as friends, internet and
reading materials.
• From a marketers perspective these sources of information are very important.
There are four main categories of information sources:
– Personal: Family, friends, neighbours, acquaintances
– Commercial: Advertising, websites, sales persons, dealers, packaging, displays
– Public: Mass media, consumer rating organisations
– Experimental: handling, examining, using the product
 Consumer Decision Making Process
Information Search contd..

Successive sets involved in consumer decision making

•Total number of brands available in the market

Total set

•The number of brands the consumers knows

Awareness about
set

•Brands that meet the initial buying criteria

Considerat
ion set

•The preferred set of brands

Choice set

•Final selection
Decision
 Consumer Decision Making Process
Evaluation of alternatives

• During this stage consumers usually compare products based on their

various features and benefits using the information from the previous
stage.

Identifying alternatives
All Alternatives
Retrieved set

Evoked Inept Set

Inert Set
Set

Alternative sets (1)

 Consumer Decision Making Process

Evaluation of alternatives contd..

Expectancy value model

This is a model that explains how attitudes and beliefs are formed. We take the
example of Zoe’s mobile phone. There are four brands in the choice set. There are
four attributes that she's looking for. The table below shows her beliefs on how
each brand scores on the four attributes. As demonstrated in this example a single
brand does not dominate, e.g. If Zoe wants best price its brand A and, if its touch
screen its brand B.

Computer Attribute
Touch Screen Camera Price Memory
A 4 3 10 5
B 10 8 6 4
C 8 9 7 3
D 6 8 5 6
 Consumer Decision Making Process
Evaluative Criteria

• Evaluative Criteria are the dimensions a consumer will use to evaluate the
features of the alternative choices.

• Some consumers would compare based on functional criteria. For others, style,
ease of operation, related services, or prestige may be important. The criteria will
depend on factors such as product under consideration and consumers beliefs
and attitudes. Another important factor is perceived reliability .

• Consumers usually assess goods and services by the features or benefits that are
important to them. Through their activities marketers try to influence the type of
criteria that consumers use in their product evaluations. Typically with
commercials that compare the features of their brand with those of their rivals.
Determinant attributes are those used to differentiate between alternative
products.
 Consumer Decision Making Process

Purchase Decisions

When making the purchase decision, a consumer makes up to five sub-decisions:

We will take the previous example of Zoe choosing a new phone:
• Brand : Nokia
• Dealer : Local Nokia outlet
• Quantity : one
• Timing : weekend
• Payment method : credit card

• Characteristics of the consumer, the circumstances of the decision and social

context all play a part in the decision making process. Everyday purchases do not
require such a formal process, e.g. Buying a regular FMCG good like flour.
 Consumer Decision Making Process
Purchase Decisions contd..
Purchase Decision
Intervening factors

Attitudes of Unanticipated
others situational factors

Purchase
intention

Evaluation of
alternatives

Steps between Evaluation of Alternatives and a Purchase decision (2)

 Consumer Decision Making Process

Purchase Decisions contd..

Perceived risk

This is a belief held by the consumer that he or she will have to face negative
consequences by purchasing a particular product.
There are several types of perceived risk:

1.Functional risk
2.Physical risk
3.Financial risk
4.Social risk
5.Psychological risk
6.Time risk

Consumers have strategies to deal with perceived risk such as decision avoidance,
preference for warranties and seeking advice from friends.
 Consumer Decision Making Process

Post Purchase Behaviour

The involvement of marketing in the decision making process continues even after
the purchase. After buying a product consumers may observe negative features or
hear of a good product review that justifies the purchase. The marketer has to
ensure that the consumer feels good about the brand in the post purchase phase.

• Post purchase satisfaction

• Post purchase actions

• Post purchase use and disposal.

 Consumer Decision Making Process

Post Purchase Behaviour

• Post purchase satisfaction

• Consumer satisfaction can be defined as how well the products actual
performance met the perceived expectations. A satisfied consumer is likely to
become a regular and help in creating a positive word of mouth reputation for the
product. Three possible outcomes are possible with regard to satisfaction

– Disappointed : when product fails to match the expectations

– Satisfied : performance meets the expected level
– Delighted : performance is beyond the expected level

• The actual performance level has to be communicated accurately to avoid

misleading and ultimately dissatisfying consumers.
 Consumer Decision Making Process

Post Purchase Behaviour

• Post purchase actions

• If the consumer is satisfied he or she will talk favourably about the brand with
friends, colleagues and family. A satisfied consumer may become a repeat
purchaser, e.g.75% of Toyota buyers were highly satisfied and they expressed an
interest in buying a Toyota again.

• On the other hand, dissatisfied consumers can decide to stop buying, warn friends,
complain to regulatory and government bodies, bring lawsuit against the company
etc.

• Keeping the communication with the consumer even after the purchase, helps to
minimise dissatisfaction. For example, marketers can encourage buyers to make
suggestions for improvement, provide ‘how to use’ booklets etc.
 Consumer Decision Making Process

Post Purchase Behaviour

• Post purchase use and disposal

• Products are disposed of in a number of ways, e.g. Sold, thrown away, rented,
converted to a another purpose. Marketers have to understand consumer
behaviour in this stage and communicate to consumers. e.g. Batteries need to be
disposed in a environmentally acceptable manner.

• From an organisational perspective, the importance of product disposal is that it is

linked with product consumption rate. i.e. the faster the buyer consumes the
product the faster they need to repurchase another one. Marketing strategies can
be designed to attract consumers to repurchase their brand.
 Alternative forms of decision making

The three main alternative forms of decision making methods of a consumer are:

• Habitual/routine decision making

• Limited decision making
• Extended decision making

Habitual Decision Limited Decision Extended Decision

Making Making Making

Low involvement High involvement

In the purchase In the purchase

The factors that differentiates these methods are level information search, degree
of prior experience, amount of perceived risk, time pressure and frequency of
purchase.
 Alternative forms of decision making

Habitual/routine decision making

Examples of routine purchases are the daily newspaper, weekly groceries, regular
coffee order:
• Decision is make quickly

• Level of involvement in the selection process is minimum

• Product is evaluated after the purchase

• Low cost goods

• High frequency of buying

• Consumer is likely to stay with one brand.

 Alternative forms of decision making

Limited Decision making

Clothes, gifts, home furnishings, and vacations are examples of items where
consumers would typically use limited decision making:

• Involvement level is comparatively low

• Prices of products range between low to moderate

• Few brands are evaluated before the purchase decision is made

• Moderate amount of time is spent to make a decision

 Alternative forms of decision making

Extended Decision Making

• Purchasing a house, selecting a college, a first car, or a location for a wedding are
examples of extended decision making:

• High degree of involvement

• Product Prices are high

• Many brands are evaluated before the purchase decision

• Considerable amount of time is spent to make a decision

 Heuristics

• Day to day life is filled with decisions ,whether it is your breakfast cereal or what
radio station to listen to. In decision making consumers seek the assistance of
heuristics.

• Researches have identified that in low involvement decision making consumers

rely on heuristics. i.e. rules of thumb or mental short cuts.

• For example, Bob has decided to buy a shirt at his usual store named X .This
decision is driven by his belief that this store thinks it has the best range and its
brand gives him confidence. Therefore Bob is ignoring any information search
about competitors or substitute products. His assumption about X acted as a
shortcut that removed a few steps from the decision making process.
 Heuristics

For a marketer, understanding heuristics is an advantage that helps them forecast

consumers behaviour when purchasing their brand. In this lecture note three main
heuristics are described:

• The Representativeness Heuristic

• The Availability Heuristic

• The Anchoring and Adjustment Heuristic

 Decision rules

• Information processing strategies of consumers are called decision rules. These

help a person in the decision making process by providing guidelines for complex
decisions.

• They can be used to evaluate various options and reduce the risk involved in the
decision. Decision rules can be classified into two categories :

– Compensatory Decision Rules

– Noncompensatory Decision Rules

 Decision rules

• Noncompensatory Decision Rules

• Conjunctive Decision Rule

Here consumers form a different, minimally acceptable cut off level for each
attribute. If a particular brand does not meet the cut off level of any attribute that
brand is removed from consideration.

• Disjunctive Rule
It is the opposite of conjunctive rule. In this the consumer decides a separate
minimally acceptable performance level for each attribute. The brand is accepted
if any of the attributes meets or exceeds the cut off level.

• Lexicographic Decision Rule

The attributes are ranked according to perceived relevance or importance to the
consumer. Then different alternatives are compared in terms of the single attribute
that is believed to be most important. If one brand out of the group scores an
acceptable score it will be selected, regardless of the score on any other attribute.
 References

1. Hawkins D.I., Best, R.J. and Coney K.AConsumer Behavior: Building

Marketing Strategy.;Tata McGraw-hill ;2003.

2.Kotler, P. and Keller, K.L. Marketing Management. Pearson Education

2006; Fig 6.6. Steps between Evaluation of Alternatives and a Purchase
decision,p197