Consumer Decision Making

WEEK 2, SESSION 3 & 4

Activity
Consumer Purchase
• A consumer purchase is response to a problem
• Problem Recognition >>> Information search>>> Evaluation of Alternatives >>>
Product choices>>> Outcomes >>> Learning and experience
• Not all purchase decisions are same. Some are more important than others thus
the amount of effort we put into each one differs. (Routine/Impulse/ Once in a
lifetime decision) (Low involvement/high involvement)
• Rational perspective on consumer decision making: Rational perspective based on
economics of information approach; it assumes that consumer will gather as much
information as needed to make an informed decision. It is also based on utilitarian
assumption i.e., people will put themselves out to collect as much information as
possible, as long as the process of gathering it is not too onerous or time
consuming.
Four views on consumer decision making
• An economic view: Rational perspective based on economics of information approach; it
assumes that consumer will gather as much information as needed to make an informed
decision. It is also based on utilitarian assumption i.e., people will put themselves out to
collect as much information as possible, as long as the process of gathering it is not too
onerous or time consuming.

• A passive view: Consumer are basically submissive to the self-serving interests and
promotional efforts of marketers. In the passive view, consumers are perceived as
impulsive and irrational purchasers, ready to yield to the aims and into the arms of
marketers. The principal limitation of the passive model is that it fails to recognize that the
consumer plays an equal, if not dominant, role in many buying situations – sometimes by
seeking information about product alternatives and selecting the product that appears to
offer the greatest satisfaction and at other times by impulsively selecting a product that
satisfies the mood or emotion of the moment.
Four views on consumer decision making
• An emotional view: Consumers associate deep feelings or emotions, such as joy,
fear, love, hope, sexuality, fantasy and even a little ‘magic’, with certain
purchases or possessions. These feelings or emotions are likely to be highly
involving. Consumers’ moods are also important to decision-making. Mood can
be defined as a ‘feeling state’ or state of mind. 6 Unlike an emotion, which is a
response to a particular environment, a mood is more typically an unfocused,
pre-existing state – already present at the time a consumer ‘experiences’ an
advertisement, a retail environment, a brand or a product.

• A cognitive view: Consumers are thinking problem solver. Within this framework, consumers
are frequently pictured as either receptive to or actively searching for products and services that fulfi l their needs and
enrich their lives. consumers often develop short-cut decision rules (called heuristics) to facilitate the decision-making
process. They also use decision rules to cope with exposure to too much information (i.e. information overload).
Four views on consumer decision making
• A cognitive view: Consumers are thinking problem solver. Within this
framework, consumers are frequently pictured as either receptive to or actively
searching for products and services that fulfi l their needs and enrich their
lives. consumers often develop short-cut decision rules (called heuristics) to
facilitate the decision-making process. They also use decision rules to cope
with exposure to too much information (i.e. information overload).
Types of Consumer Decisions
 Consumer researchers think in terms of a continuum, anchored on
one end by habitual decision making and at the other extreme by
extended problem solving. Many decisions fall somewhere in the
middle so we describe these as limited problem solving.
 Habitual Decision making : convenience Vs. Inertia
  Limited Problem Solving
Motivation Low risk and involvement
Information Little search
Search Information Processes
passively
In store decision likely
Alternative Weakly held beliefs
Evaluation Only most prominent criteria
used
Alternatives perceived as
basically similar
Non-compensatory strategy
used
Purchase Limited shopping time
May prefer self service
Choice often influenced by
store displays
Extended Problem Solving
High risk and involvement
Extensive search
Information processes actively
Multiple Sources consulted prior to
visits
Strongly held beliefs
Many criteria used
Significant differences perceived
among alternatives
Compensatory strategy used
Many outlets shopped if needed
Communication with store
personnel often desirable
 Routine Response Limited Problem Solving Extensive
Behavior
Low-Cost Products More Expensive
products
Frequent Infrequent
purchasing purchasing
 
Low consumer High Consumer
involvement involvement
Familiar Product Unfamiliar product
Class and Brands class and brands

Little thought, Extensive thought,

search or time search , and time
given to purchase given to purchase
Steps in the consumer decision
making
Step 1: Problem recognition
• Actual state Vs. Ideal state
• Quality of actual state decreases
• Ideal state moves upward
Step 2: Information Search
• Information search is the process by which we survey the environment for
appropriate data to make a reasonable decision.
• Types of Information search
Prepurchase Ongoing
Motive: Making better Motive: Building a bank of
purchase decisions information for future use
experiencing fun and pleasure
Outcomes
Increased product and market Increased product and market
Knowledge knowledge leading to
Better purchase decisions  Future buying inefficiencies
Increased satisfaction with the  Personal influence
purchase outcome Increased satisfaction from
search and other outcomes
Step 2: Information Search
 Internal/ External Search
 Deliberate Versus Accidental search
 Variety Seeking
 Biases in the decision-making process:
o Mental Accounting /Sunk cost fallacy : Mental accounting demonstrates that the
way we pose a problem and whether it’s phrased in terms of gains or losses
influences our decisions. Football example; having paid for something makes us
reluctant to waste it.
o Loss aversion: This means that we emphasize our losses more than our gains.
Losing money is more unpleasant than gaining money.
Step 2: Information Search
o Prospects theory:
o Option 1: You are given $30 and a chance to flip a coin: Heads you win $9; tails you lose $9
o Option 2: You get $30 outright or you accept a coin flip that will win you either $39 or $21
o We value money differently depending on its source.
o Finally, research in mental accounting demonstrated that extraneous characteristics of the
choice situation can influence our selections, even though they wouldn’t if we were totally
rational decision makers.
o Perceived Risk: As a rule, purchase decision that involve extensive search also entail
perceived risk, or the belief that there may be negative consequences from using or not
using a product or service. This may occur when the product is expensive or complex and
hard to understand. Finally perceived risk can be a factor if people can see what we
choose, and we may be embarrassed if we make the wrong choice.
  Buyers most sensitive to risk
Monetary Risk Risk capital consists of money and
property. Those with relatively little
income and wealth are most vulnerable.
Functional Risk Risk capital consists of alternative means
of performing the function or meeting
the need. Practical consumers are most
sensitive.
Physical Risk Risk capital consists of physical vigor,
health, and vitality. Those who are
elderly, frail, or in ill health are most
vulnerable.
Social Risk Risk capital consists of self-esteem and
self-confidence. Those who are insecure
and uncertain are most sensitive.
Psychological Risk Risk capital consists of affiliations and
status. Those lacking self-respect or
attractiveness to peers are most
sensitive.
Purchase most subject to risk
High-ticket items that require substantial
expenditures are most subject to this form of
risk.
Products or services whose purchase and use
required the buyer’s exclusive commitment
are most sensitive.
Mechanical or electrical goods (such as
vehicles or flammables),
Drugs and medical treatment, and food and
beverages are most sensitive.
Socially visible or symbolic goods, such as
clothes, jewelry, cars, homes, or sports
equipment are most subject to social risk.
Expensive personal luxuries that mat
engender guilt, durables and services whose
demands self-discipline or sacrifice are most
sensitive.
 Step 3: Evaluating Alternatives
• Many choices
• Identifying alternatives: How do we decide which criteria are important, and how do we narrow
down product alternatives to an acceptable number and eventually choose one instead of other?
The answer depends on the decision-making process we are using. A person who is engaging in
extended problem solving may carefully evaluate several brands whereas someone making a
habitual decision may not consider any alternative to his normal brand.

• Total Set >>> Evoked set>>>Consideration set

• A marketer who find that his brand is not in his target market’s evoked set has cause to worry.

• Categorizing Products : We represent a product in a cognitive structure at one of three levels. For
example : Icecreams; Superordinate (Abstract level) >>>Basic >>>> Subordinate level (
specific/individual brands). Basic level category is the most useful to classify products because at
this level the item we group together tend to have a lot in common with each other but still
permit us to consider a broad enough range of alternatives.
Step 3: Evaluating Alternatives
• The way we categorize products has a lot of strategic implications. This process affects
which products consumers will compare to our product and also the criteria they will
use to decide if they like us or the other guys.
• Product positioning >>> identifying competitors >>> Exemplar products>>> locating
products
•
Step 4: Product choice and selecting among
alternatives
• Evaluative Criteria: are the dimensions we use to judge the merits of competing
options. An important point is that criteria on which products differ from one another
carry more weight in the decision process than do those where the alternatives are
similar. Determinant attributes are the features we actually use to differentiate among
our choices. “Feature Fatigue”. Sustainability and social responsibility as differentiating
attributes.
• Role of Web mediaries, Heuristics (mental rules of thumb that lead to a speedy
decisions), relying on product signal ( attributes, country of origin, ethnocentrism,
brands)
Decision rules we use when we care
• Non-compensatory decision rules: When a product with low standing on one
attribute cannot compensate for this flaw by doing better on another
attribute.
• Lexicographic Rule: When a person uses the lexicographic rule, he selects the brand that
is the best in the most important attribute. If he feels two or more brands are equally
good on that attribute, he then compares them on the second most important attribute.
• The Elimination – by – Aspects Rule: The buyer also evaluates brands on the most
important attribute.
• The Conjunctive Rule: Whereas the two former rules involves processing by attribute, the
conjugation rule entails processing by brand. As with the elimination-by-aspects
procedure, the decision maker establishes cutoffs for each attribute. He chooses a brand
if it meets all the cutoffs, but failure to meet any one cutoff means he will reject it.
Decision rules we use when we care
• Compensatory decision rules: This give a product a chance to make up for its
shortcomings. The willingness to let good and bad product qualities balance
out can result in quite different choices. Researchers identify two basic types of
compensatory rules.
• Simple additive rule: the consumer merely chooses the alternative that has the largest
number of positive attributes. This is most likely to occur when his ability or motivation to
process information is limited.
• Weighted additive rule: When using this rule, the consumer also takes into account the
relative importance of positively rate attributes, essentially multiplying brand ratings by
importance weights.
Purchase decision-making within
professional consumer services:
organizational or consumer buying
behaviour?
Introduction
• ‘Surrogate shoppers’ are defined as commercial enterprises who are
consciously engaged and paid by the consumer or other party to
make or facilitate selection decisions on behalf of the consumer.
• The professional service provider makes or facilitates the purchase
decision, but it is the client who pays for the product and consumes
it. Therefore, it is conceptually harder to define the customer is
such transactions. Professional service providers possess expertise
developed through formal higher education and exercise expert
judgement to tackle their client’s often complex problems.
Research Objective
• Is the purchase decision making that takes place within professional
services comparable to organizational or consumer buying? If not,
how does it distinguish itself?

• This article elaborates on three aspects of purchase decision-

making: the actors involved (who make the decisions), the
purchase-decision task (what kind of decisions are made), and the
nature of the decision-making process (how the decisions are
made).
The actors involved in purchase decision making
• whose interests, objectives, and needs the purchase serves.
• Generally, organizations and consumers act in their own interests, whereas
professional service providers are commissioned to decide for others.
• On the contrary, consumers hire professional service providers to serve
their own and not the provider’s or the professional organization’s
interests: there is a belief in the notion that the service provider can be
counted upon to advance the client’s best interests, rather than self-seeking
interests such as profits or status.
• In consumer and organizational buying, the costs of purchases are borne
within one financial entity. In consumer and organizational buying, the costs
of purchases are borne within one financial entity.