Consumer Behavior – Topic 2

Economic Models: Consumer Behavior Models; Need Recognition, Search, Pre-purchase

Alternative Evaluation, Purchase, Consumption, Outcomes

Your personal involvement in the product, service or candidate will impact how you buy,
order or vote. We speak of low and high involvement. This is a function of just how
much searching you are willing to do. Low involvement products would include such
things as sugar or salt vs. high involvement such as cars or computers. And the price of
the item does not indicate the level of involvement by the consumer. Some very
inexpensive items become high involvement (i.e., clothes, gifts).

Factors that may lead to why people do not buy

1. marketing factors: Let me remind you of the 4-Ps of marketing – the marketing
factors: product, price, promotion, and place. Perhaps the product is poorly
priced and thus is too high for the product category or the product is just not a
good product.
2. cultural factors: a classic study was done immediately following World War II for
Nescafe, an instant coffee. During the war when many products were rationed,
such as coffee, Nescafe was a very popular product. However when the war
ended, the product lost much share in the market. A taste test revealed that the
flavor was competitive with regular coffee. Why then did people consider instant
coffee as inferior? Haire devised a study in which two identical shopping lists
were presented to shoppers with only one difference – One of the lists had regular
coffee while the other had instant Nescafe. Then the subjects were asked to
describe the shopper based on the list. The shopper whose list included Nescafe
was described as a “lazy housekeeper”. Thus Haire determined that this was a
cultural problem and his advice to the manufacturer was to stress taste. Today the
public has not problem with instant (in fact quick preparation is considered a
positive attribute!)
3. social factors: what will other people think – what will the neighbors think – this
has to do with social risks. Clothes fall into this factor. Thus in marketing certain
products associated with social risks, it is helpful to have someone famous wear
them. The classic example is Gloria Vanderbilt whose jeans set off a revolution.
Prior to G. Vanderbilt, jeans were considered work clothes and prohibited from
most restaurants, schools, theaters etc. Vanderbilt, whose ancestor was indeed the
robber baron of the same name, was a minor model and clothing designer. She
designed a skin right woman’s jean and marketed them as evening, date, dress-up
wear. This was in the early 1970s. Today jeans are accepted pretty much
anywhere and the price point range from Wrangler through the top designers.
4. personal factors: this has to do with how the individual may perceive of a
product’s appropriateness for them – These considerations include gender, age,
educational level. For example, in our culture men generally do not shop for
cosmetics although male skin is subject to the same degree of dryness and aging
as a woman’s . A mature female may feel that a particular outfit is too young for
her or perhaps a skirt too short.
 5. structural factors – think about how certain products simply would not fit into
your life. If you live in New York, where would you store a boat? Where would
you surf? What about the scuba industry – where can you dive? Consider how
we park in this city with one bumper kissing the next. Now imagine opening a
large and heavy SUV back door – there simply isn’t room to do so.
6. psychological factors – really has to do with what limits our minds may place on
certain categories:
a. instinctive fears – humans have a genetic predisposition to fight for life
and that which is safe. Electric blankets may be of concern to certain
people who are fearful that they may be electrocuted. The same is true
with microwave ovens as they contain a small amount of radiation.
Certainly cell phones and the potential for tumors from radiation has been
a concern. Contact lenses, laser eye surgery – all are concerning to some
people.
b. fear of something new – computer technology was extremely inaccessible
to many, in particular the elderly so to offset this fear, manufacturers would
stress how simple it was that even a child could operate it
c. fear of large expenditures – off course we are all concerned about
spending large sums of money – the solution is to talk about the value and
not the price of the product

There are also some confusions for the potential consumer that include issues such as
being offered too many choices. What the computer industry found was that it was far
more effective to offer fewer models.
There may also be confusion concerning how to estimate value, such as with used cars.
Now new car companies have begun offering “pre-owned” vehicles with warranties (used
cars in the past were sold with an “as is” condition and no warranty).
Confusion may also exist with a “blurred image” that is, when products look much alike
but in fact are different, such as with computers. Computers companies began to
differentiate their products with branding, such as with “intel inside”.

Economic Model

What economists have contributed to the field of consumer behavior

1. consumption function – the concept that everything relates to income – the

availability of disposable income –
2. George Katona - - a psychological economist – developed the field of behavioral
economics, that is the “human” side of economics. Katona was interested in
measuring consumer confidence and developed an Index of consumer confidence
to measure consumer sentiment about the future of the economy.
The way people feel about the economy very much impacts spending. That is if
they feel good, then they will spend more.
Several research organizations measure these feelings by telephone surveys. In
general, if consumer confidence goes down, then spending goes down.
 3. Law of Demand - - when product scarce, it is very desirable. Prices will go up
but eventually, as desire is filled, then demand may go down, and with it, price.
4. Price/quality relationships – people don’t know how to judge quality and rely on
such surrogate indicators as cost, brand name (which is really a surrogate
indicator of quality, the name of the retail store, or product, or manufacturer.

Price Quality Relationships

Consumers often are not able to judge quality so they will use surrogate indicators as
substitutes. To really be able to judge quality, often you would need an engineering
degree!
A brand name might be used as a substitute for quality (i.e., IBM equals quality) – and a
brand name can be transferred to other products via what is referred to as a Brand
Extension. Moving a name from one category to another, such as Tylenol, an analgesic
and now leading in the cold/flue and allergy category. Think about how Arm &
Hammer has moved into new categories with its power name.

The public looks for ways of judging quality. If there is no brand name, then they may
use a store name. Or perhaps the country where the product was manufactured. Of
course the worst cue is price yet we still imagine “you get what you pay for.” In this
case, it is advantageous for a company to charge the highest possible price. But if the
product is priced too high, then no one will buy it. However if it is too inexpensive, it
will not be purchased either. Experience and good judgment are necessary in
determining how to price a product.
A study published in the Journal of Consumer Affairs use ratings from Consumer Reports
and compared these to price asking “do you get what you pay for?” The study noted a
low correlation

Engel, Kollet, Blackwell developed one of the most thorough models of Consumer
Behavior. First they identified all the relevant variables that effect consumers and then
they showed the relationship among these variables.

Three major categories were identified:

1. Environmental Influences
a. cultural – what you buy, what you eat – culture is learned. In American
we don’t eat cats or dogs – they are our pets. The same is true with insects
although insects are consumed in many countries worldwide and are not
only convenient, economical but also nutritious
b. Personal influences –consider the people you admire and your opinion
leaders and reference groups (i.e., Paris Hilton – why do people care
where she goes and what she does?).
2. Industrial Differences
a. consumer resources (time, money) and information processing abilities.
The ability to process information (i.e., older people do so quite differently
than you do) will effect the processing or ads as well. For the elderly need
simpler messages.
 b. Motivational and involvement (both conscious and unconscious) -
motives certainly play a key role role in what you buy – is a car for
transportation or MORE than transportation? For many a car is a symbol
of their success. Sometimes there are hidden motives in purchases, such
as a men who purchase diamonds and furs to again show how successful
they are. Diamonds are also a symbol of love and longevity.
c. Knowledge –what you know about a product or product category will
clearly impact both search and purchase behavior.
d. Attributes – often times can predict behavior as their appears to be a
connection between attitudes and behavior. Marketers try to study
attitudes to predict behavior – attitudes include feelings and knowledge
e. Personality and lifestyle

3. Psychological Processes
a. information processing – we are bombarded with information – how does
the consumer process and make sense of it?

Decision Processing Behavior

Three decisions occur over time:
1. Need Recognition – the awareness of a need – the recognition that there is a
difference between an ideal state and an actual state (i.e., this could be an internal
activation of a motive such as being hungry and seeing someone else eating – this
is an environmental influence and overweight people are often activated by the
external.
2. Search for information (connected to internal search) first we check our own
memory – if the information is in our mind. Next we will conduct an external
search by using marketing provided material (i.e., advertising) or perhaps word-
of-mouth, which may seem more objective.
With an external search, where we search is often impacted by our culture,
situation, family etc. as well as personality. If you are particularly nervous about
making a bad decision, you will most likely do a more thorough search. Other
means by which we may search includes word-of-mouth, friends as with movies)
or perhaps we rely on the media critics. There are other means of locating
objective sources, such as Consumer Reports, or the Web.

Information Processing

The marketer will conduct much research to determine what they have that their
competitors do not (i.e., Marlboro uses a symbol, the cowboy, not to say that this is a
macho cigarette but rather that this is a product for the individualistic – the cowboy
represents the America ideal – the individual who lives with nature and smokes though
everyone says not to)

The consumer will go through alternatives and look for important attributes.
A purchase is made – in stores or perhaps by the web or the phone.
A customer will be either satisfied or dissatisfied – and this becomes the post purchase
alternative evaluation.
If the consumer’s expectations are met by performance, then they are satisfied. If they
are not met by performance, then they are dissatisfied.
Advertising gives the consumer high expectations but is that productive? It could
boomerang is the consumer expects too much and is disappointed.

The last stage of information processing has to do with divestments. When you are
finished with a product you can get rid of it, you can sell or you can throw it away.
However you can not treat all products in the same manner.

Decision Process Continuum:

EPS – Extended Problem Solving requires a great deal or time and thus is a time
consuming decision process. This is the sort of decision making that accompanies a high
involvement product.
LPS – Limited Problem Solving is a quick search usually done when there are few
alternatives and the brand is recognized.

Repeat purchases – when buy a product several times – this may utilize:
a. repeated problem solving – people not want to do this however may be required –
the brand may no longer exist
b. habitual decision making
1. brand or company loyalty – often true with cars – will buy the same kind
because the consumer does not want to go through EPS
2. inertia – resembles loyalty – mostly used with LPS (sugar, salt) where
consumers will easily switch In Consumer Behavior it is important to
make the distinction between TRUE loyalty and inertia.

Special categories or buying behavior:

1. impulse buying – get emotionally involved and short circuit the brain – just
buy it – companies try to get you to act immediately using a high sense of
urgency – that you need to have it NOW
2. variety seeking – bored and want a change

Factors as to if you go through EPS or LPS – the marketer needs to know how the
consumer makes a choice.
For EPS, 3 conditions need to be met:
1. the alternatives are differentiated (this is the entire idea of EPS is that you
think alternative brands are all different – if you believe they are all alike, then
not EPS – if all the same, then LPS)
2. you have the time available for deliberation (if little time, then can’t do EPS)
3. the degree of involvement – use the Engle involvement scale

Involvement depends on:

1. person
 2. subject
3. situation

Regarding the object – some products are high in perceived risks (in marketing there are
6 kinds of risks)
a. performance – there is no risk factor with salt or sugar, but certainly
there is with cars and computers
b. financial – you could lose money with the product
c. time – you could waste time with the product
d. physical – fear for physical welfare – medication
e. social – fear of using the wrong one – particularly true with clothes,
but certainly not with salt or sugar
f. psychological – you think you should not be using this product –
again, particularly true with clothes –t here are taboos as well such as
with cigarettes – taboos exist with social also

Some products are high in all fears (i.e., sports car) while some are low in all (sugar/salt).
If the product is high, it will require high involvement (i.e., purchase of wine for yourself
or for others

A. Need recognition (aware of a need). There is an amount of discrepancy between an

actual state and a desired state.
How to activate a need:
1. changed circumstance
a. get a job (need car, computer, clothing, software)
b. get married (need furniture, applies [white goods]
2. product acquisition – buying one product will invariably precipitate the
purchase of others (buy a house and need furniture etc.)
3. time – haven’t eaten so hungry
4. product consumption – finish a product and need to replace (food, cosmetics)
5. individual differences – not everyone is the same – some people are more
effected by their actual state (their computer breaks vs. desire state – aware of
something else and want it (new computer even though the old one is ok) –
same with gyms that advertise a desired state body
6. marketing influences – the purchase is to activate need and get you to need
recognition state – show desired states in advertising – activating the need in
advertising works on either: a. selective demand – demand for a particular
brand, or b. primary demand for a generic product not brand
Associations are promoter for primary demand (i.e., eggs, milk, cotton, beef,
raisins, pork, potatoes).
Need recognition has to be activated to move into a search state.
B. Search – or Pre-Purchase Search
1. internal – search long term memory
2. external – sometimes you can’t do internal if this is the first time the product is
being purchased or if purchased previously but were not satisfied.
The types of risk that will impact search - if low risk then use internal – Kleenex vs.
Puffs or high risk where you may need to access an eternal search – if the risk is
social/psychological, then may turn to word-of-mouth or an opinion leader
Other risks, such as performance, financial, time, may find consumer relying on
Consumer Reports or the Web.

Some people college information on a regular basis in preparation for a future purchase –
they conduct on-going research (ie, computer magazines, fashion magazines).

Three dimensions of search:

1. degree – how much searching? Total amount of search is a function of the
number of brands – research indicates that people are different in the amount of
search they will engage in – the cost of acquiring information and the value of the
information – that is, there is the cost of time and money to get information – if
the fear is that there is a lot to loss and much to gain and the cost is not too high,
then search
2. direction – the content of search – which brands are considered, which attributes?
3. Sequence – the order used in searching

How search:
1. word of mouth advertising
2. at point-of-purchase – go and look at the package//product
3. sales people – this is dangerous because often they recommend the highest profit
produt
4. advertising – a paid form of persuasion
5. consumer reports – objective testing
6. web – browse and find discussion groups, which is like word-of-mouth – or
perhaps to the web page – sometimes users will rate the product

Sequence of search
One approach is to take a brand and study it:
1. consider all the salient attributes o the brand – do this fully for one and then
move to another processing thoroughly from brand to brand to brand
2. by attributes – processing by attributes – if not enough information to make a
decision, then look at the next attribute and process from attribute to attribute

Things found to effect search behavior:

Degree, direction, sequence of determinants of search
1. situation – includes temporal (time) and social
2. product determinants – the kind of product – if expensive, then spend more time –
real estate agernt shows you the most overpriced house first to show you “reality”
a. price
b. degree of product differentiation – if all the same, not do much searching
c. stability of category – electronics are always hanging – if stable, don’t
need much search
 d. goods vs. services – with services it is difficult to get information and
must use word-of-mouth (perhaps ask for references)
3. retail determinants – the more similar the product, the less research and
alternatively, the more differences, the more search
4. consume determinant – depends on knowledge –if know a lot about a product,
may do less searching – the search itself requires knowledge
Researchers have studied the inverse “u” effect where with little knowledge or a
lot of knowledge, the consumer will conduct the most search
5. involvement – high involvement product means the most search
6. perceived risk – performance, financial time, psychological, social – if low, no
risk
7. beliefs and attitudes – in the Journal of Marketing Research, Duncan, a research,
found the main factor impacting search to be beliefs – what beliefs you have (i.e.,
do you believe that sales people are informed, then do less search) or if you
believe you make important decisions quickly and this results in regret, then
perhaps do more search. Also what your attitudes toward shopping – if you hate
to do it, then do less search – especially beliefs about the benefits of shopping
8. cost of search – if time is valuable, do less search
9. demographics – research shows:
a. age – inverse relationship between age and shopping – older do less
because they have more experience
b. high income people do less search because dollars don’t matter as much
c. better education do more search – search requires education (Consumer
Reports are read by educated)

Evaluative Criteria

The attributes/dimensions people use to evaluate a product – they can use price, brand
name, country of origin.
Some of these are more important, ore more salient. How important are criteria? Think
of fast food restaurants – what attributes are salient? Location, speed of service, raging
for certain foods, easy access value etc. – these are the determinant attributes.

It is the job of the advertiser to define the determinant attribute and stress it in the
campaign.

Evaluative criteria may be effected by:

a. situation - so if only :15 minutes may chooser a particular restaurant –
different if more time or if taking someone out
b. similarity of choice alternatives
c. motives:
a. utilitarian (rational reason) so focus on utilitarian things like price
b. emotional or hedonic – status and style
d. involvement – an important construct of Consumer Behavior – if high
involvement (sports car vs. detergent – price, look, speed, power etc.) – look
 at more evaluative criteria vs. low involvement where perhaps only look at
price
e. knowledge – if don’t know product category then tend to rely on brand (drill
perhaps buy Black & Decker) – brand becomes a surregate indicator of quality
Choice Criteria

Pre-purchase determining choice alternatives – with computers it may be the brand.

1. Awareness set – all the brands in the category that consumer is aware of
2. Evoked Set – all of the brand that the consumer would actually purchase
3. Inept set – the brands that the consumer would not buy – not necessarily bad
products, just not right or the consumer
4. Inert Set – what is left – don’t know enough to be either in favor of or against it
5. Unawareness set – don’t know it exists

Confused image – enough advertising that the consumer knows the product exists ut not
anything about it

There is a lot of research on the Evoked set – this is interesting to marketers – how large
the Evoked set sometimes with certain product categories is large even if high
involvement (such as beer).
If the consumer is extremely brand loyal, then the evoked set will be small – perhaps only
one brand – smokers’ evoked set is small.
With perceived risk, the correspondence with evoked set is inverse – that is, more risk,
smaller the evoked set - if really nervous about some product category, a consumer may
have an evoked set of one.

Overt search – the amount of search time positively correlates, that is the bigger the
evoked set, then the longer the time needed to consider.

Evaluative Criteria:

How consumers make choices – we’re already considered attributes considered when
selecting colleges (reputation, faculty, courses, tuition, location).
Two kinds of rules that consumers may consider and are studied:
1. compensatory decision rules (compensation) – so even if the product does not do
well on one of these things, then other categories that it does do well in, will
compensate. – Fishbein model (psychology/sociology).
2. Non-compensatory rules – attribute can not compensate for another
a. Conjunctive rule – consumer have cutoffs/minimums on each attribute – if
it fails on anyone of those, it is out of consideration (i.e., buying a house –
must have 3 bedrooms, 2 baths, garage and be under $500,000.) –
minimally acceptable level for cut of point for each attribute – if product
falls below cut off point for any attribute, then it is out of the running
b. disjunctive rule – minimally acceptable levels, however if the brand meets
or exceeds the cut of on at least one attribute, it will be
considered/accepted
 c. lexicographic rule (lexicon) – determine the most important attribute and
choose the product that best fulfills this – rank attributes and compare
alternatives if tie then consider next important attribute

Applied research based on Consumer Behavior and choice found that if you ask people to
choose between 2 things, people go for the mean (i.e., cheap product and middle price
produce or between cheap, middle price and expensive – people prefer the middle)

Purchase

Considerations include:
1. when to buy - These are considered if this is a fully planned purchase
(recognition to search to pre purchase alternative evaluation to purchase).
But when this is an unplanned purchase (50% of purchases are impulsive) then
choice is not based on problem solving. Obviously if this is an impulsive, or
hedonic, and gives you pleasure, which is a characteristic of impulse buying –
spontaneity – excitement – the compulsion to have/own it – most likely little time
is spent in consideration and search.
Marketers try to manipulate the variables so that you will buy on impulse. Think
about the design of the store that is created to encourage you to shop. The retail
atmosphere encourages this by placing the escalators such that you have to walk
through a portion of the floor before going up the next level.
2. how to buy
3. where to buy – a store or not? Some people enjoy the retail experience whereas
others prefer the quiet of on-line purchases
4. what to buy

Ultimately, the outcome is satisfaction or dissatisfaction

Buyer’s regret or cognitive dissonance (Festinger)

Festinger found that once you make a decision especially if it is a bit decision,
you may be afraid that you made the wrong choice and regret it.
Consumers try to confirm that they have made the right choice. After a purchase
they may notice the ads for the product, notice others who use the product (are
they like the buyer?) and thus seek confirmation o choice.

Research has confirmed that when a marketer calls after a purchase, particularly a
high involvement purchase such as a car, to check satisfaction when the buyer is
the most vulnerable, the call acts as confirmation and also guarantees customer
loyalty.
Marketers care about satisfaction – this is Relationship Marketing – having a
relationship with the customer.

Consumer Behavior Odyssey (1968)

 1. sacred vs. profane consumption – sacred is significant and powerful –
much more than the consumption itself. With sacred there is:
a. ritual – rituals have artifacts – often products – when you
retire often given a gold watch (an artifact) – this watch has
more meaning than simply a watch. Also consider a
wedding gown, or Valentine candy or even watching
football and eating pizza and drinking beer
b. pilgrimage – places have significance – restaurant where
had first date or proposed or hotel or a home (Elvis and
Graceland)
c. quintessence – some objects become special to people
beyond the object itself such as a Swiss Army knife or a
Mont Blanc pen, or a car
d. collecting – makes them sacred (i.e., bottle caps, matches).
2. Compulsive consumption – excessive – can disrupt and destroy a life (ie.,
gambling, shopping)

Again, the outcome is either satisfaction or dissatisfaction. There is an entire Journal

devoted to the study of consumer satisfaction and how to measure it. Most definitions o
satisfaction revolve around the definition “if it meets or beats your expectation, then =
satisfaction.

Expectancy Disconfirmation Model – pre purchase expectations vs. actual outcome.

If you ask people to rate things, they will usually rate high, so the results are not very
accurate. Expectations are not helpful either (i.e., if your wait at the Post Office is
shortened your satisfaction may be higher but your expectations were unrealistically
low).
The research on satisfaction looks at what you expected and if you had high expectations,
you may be dissatisfied.

1. positive disconfirmation – product did better than expected

2. simple confirmation – performance equaled expectation
3. negative disconfirmation – performance was less than expected

The double edge sword is that if advertising gives you too high of an expectation, you
will be dissatisfied, but if it is too low you won’t buy the product.
Anderson a research, addressed this – he said give the buyer high but not immeasurably
high expectations. It is ok if the actual experience is slightly lower than the expectation,
and cognitive dissonance will bring you up but if it is too high, then extremely
dissatisfied.

If a customer is dissatisfied only 5% will complain to others. More will complain to the
retailer via the net or store. Thus the word of mouth is negative and as we know, word-
of-mouth spreads exponentially. Complainers tend to have a higher education, higher
income and are younger. What percent of complaints are resolved satisfactorily? 60%
Complaint Behavior -
This is a function of whether you think that the complaint will work and also how
difficult is it to seek redress. If the consumer has had a successful resolution in the past
they are more likely to complain. There is an entire field involved in finding ways to
satisfy the customer.