Consumer Behavior

Consumer Decision Making

Process
 Consumer Decision Making
 Consumers make decisions to reach goals
 Defined as the processes involved in
analyzing problems, searching for
solutions, evaluating alternatives,
choosing among options, and evaluating
outcomes.
 A Simple Model of Consumer Decision Making
External
InfluencesEfforts
Firm’s Marketing
Socio-cultural Environment
1. Family
1. Product
Input 2. Informal sources
2. Promotion
3. Other non-commercial sources
3. Price
4. Social class
4. Channels of distribution
5. Subculture and culture
Consumer Decision Making
Psychological Field
Need Recognition 1. Motivation
2. Perception
Process Pre-purchase Search 3. Learning
4. Personality
Evaluation of Alternatives 5. Attitudes

Experience
Post-decision Behavior
Purchase
Output
1. Trial Post-purchase Evaluation
2. Repeat purchase
 Generic Decision Making Model
 Problem recognition
 Search
 Alternative evaluation
 Choice
 Post-acquisition evaluation
 Alternative Perspectives on
Consumer Decision Making
 Decision Making: Emphasizes the rational, information
processing approach to decision making
 Experiential Perspective: Emphasizes that consumers
are “feelers” as well as thinkers, that consumers are
symbolic, and that consumers buy in order to obtain
sensations and emotions - impulse purchase,
compulsive consumption, variety seeking
 Behavioral Influence: Contingencies of the
environment influence behavior, e.g., lighting, physical
arrangement of space, strong reinforcers.
 Three Perspective on Decision Making
1. Traditional Decision Making
A. High Involvement Decisions
Problem Extensive Extended Complex Acquisition
Recognition Search alternative choice Evaluation
Evaluation
B. Low Involvement Decisions
Problem Limited Minimal Simple Acquisition
Recognition Search alternative Choice evaluation
Evaluation Process
 Perspective in decision making

Experiential Perspective
Problem
Recognition Search for Alternative Choice Acquisition
(Affect driven) Affect based evaluation ( affect based) evaluation
Solution (Comparison
of affect)
3. Behavioral Influence

Problem Search Choice Acquisition

Recognition ( learned ( behavior evaluation
( results from response) results ( self-perception
Discriminative from process)
Stimulus) reinforcers)
 Problem Recognition
 Occurs when a discrepancy develops
between an actual and a desired state.
(This definition is identical to that for needs.)
 Factors affecting actual state: product depletion,
failure of product to meet expectations.
 Factors affecting desired state: goals, aspirations,
and change in circumstances
 Consumption visions: self-constructed mental
simulations of future consumption situations —
e.g., romantic dinner for two.
 Pre-need products: the anticipation of future
needs, such as insurance, burial services, home
loan, etc.
 The Process of Problem Recognition

Desired Consumer Current Situation

Lifestyle

Desired State Actual State

Nature of Discrepancy

No difference Desired State exceeds Actual State exceeds

actual state desired state

Problem Recognized
satisfaction
 Marketing Strategy for Problem
Recognition
 Marketing managers have four concerns related
to problem recognition:
1. They need to know what problems consumers
are facing
2. Must know how to develop the marketing mix to
solve consumer problems
3. They occasionally want to cause consumers to
recognize problems
4. There are times when managers desire to
suppress problem recognition among consumers
 Marketing Strategy for Problem Recognition
Measuring consumer problems
i. Intuition: analyze a given product category and logically
determine where improvements could be made
ii. Survey:
iii. Focus group
a. Activity analysis: determine what problems, according to
consumers, occur during the performance of the activity
b. Product analysis: problems with purchase or use of
product/brand
c. Problem analysis: starts with list of problems and ask
respondents to indicate which activities/ brands are associated
with those problems
d. Human Factor Research: determine human capabilities in such
areas as vision, strength , fatigue and effect on these capabilities
by lighting, temperature, and sound
 Marketing Strategy for Problem Recognition
 Reacting to problem recognition:
Product development, modifying channels of
distribution, changing pricing policy, revising
advertising campaign
Each firm must be aware of the consumer
problems it can solve, which consumers have
these problems, and situations in which these
problems arise
 Activating Problem Recognition
Generic versus Selective Problem Recognition
 Marketing Strategy for Problem Recognition
i. Generic problem recognition
Involves a discrepancy that a variety of brands within
a product category can reduce. A firm will attempt to
influence generic problem :
a. It is early in the product life cycle
b. The firm has a very high percentage of the
market
c. External search after problem
recognition is apt to be limited
d. It is an industry-wide cooperative effort
ii. Selective problem recognition:
Firms attempt to cause selective problem recognition
to gain or maintain market share.
 Approaches to activating problem recognition

i. Influence desired state:

Advertise the benefits your products will provide,
hoping that these benefits will become desired by
consumers
ii. Influence perceptions of existing state:
Many personal-care and social products take this
approach, like “ even you’re best friend won’t tell you’
 Suppressing problem recognition:
Makers of brands with substantial habitual or limited
decision purchases do not want their customers to
recognize problems with brands
 Search Behavior
 Defined as the actions taken to identify and obtain
information to solve a consumer problem
 Types of search
 Internal: the retrieval of information from long-term
memory.
 External search: acquiring information from outside
sources, such as friends, books, magazines, etc.
 Pre-purchase search: search that results directly from
problem recognition.
 On-going search: search for intrinsic reasons
independent of a specific need. Frequently occurs
among hobbyists.
 Internal Search
 Five categories of information may be
retrieved as a result of internal search:
 Awareness set: total universe of options recalled
from memory.
 Unawareness set: options not recalled.
 Consideration set: the subset of options
acceptable for further consideration
 Inert set: subset to which the consumer is
indifferent
 Inept set: subset considered unacceptable.
 Categories of Decision Alternatives
All potential alternatives ( brands, products)

Awareness set:
alternative consumer Unawareness Set:
aware of Alternatives not known

Evoked set: Inert set: Back Inept set: Avoided

alternatives up alternates alternatives
considered

Specific
alternatives Alternatives considered
Purchased but not purchased
Information Sources for
Purchase Decision Information
sources

Internal External
information Information

Actively Passively
acquired Active Search
acquired

Past Low Personal

Personal Groups Market
Searches involvement Contacts
Experience info
 External Search
 Measuring external search:
 Using a number of stores visited, friends contacted,
buying-guides consulted, etc.
 Measure extent of reliance on a particular source, which
is called instrumentality of search.
 Factors Influencing Degree of External Search
 Search until marginal gains exceed marginal costs.
 Involvement — increases search
 Time available — increases search
 Perceived risk — Increases search
 Attitudes toward shopping — increases search
 Higher education, income - increases search
 Factors Influencing the Degree of Search
 The Economic Perspective of Search
Consumers search as long as the marginal gains from search
exceed marginal costs
Keep on searching as long as each incremental gain in knowledge
exceeds the cost incurred to acquire extra bit of knowledge
Benefits obtained
Financial
Do the Terminate
Psychological expected No
Search Effort
Physical benefits of
external search
Product exceed the
expected cost?
Cost of Search
Out-of-pocket
Continue
Psychological Yes Search Effort
Time
Opportunity
 Factors that are likely to increase pre-
purchase search
Product Factors
Long inter-purchase time (a long-lasting or
infrequently used product)
Frequent changes in product styling
Volume of purchase (large number of units)
High price
Many alternative brands
Much variation in features
 Factors that are likely to increase pre-
purchase search
Experience
First-time purchase
No past experience because the product is new
Unsatisfactory past experience within the product category
Social Acceptability
The purchase is for a gift
The product is socially visible
Value-Related Considerations
Purchase is discretionary rather than necessary
All alternatives have both desirable and undesirable consequences
Family members disagree on product requirements or evaluation of alternatives
Product usage deviates from important reference group
The purchase involves ecological considerations
Many sources of conflicting information
Factors that are likely to increase pre-
purchase search
Product Factors
Demographic Characteristics of Consumer
Well-educated
High-income
White-collar occupation
Under 35 years of age
Personality
Low dogmatic
Low-risk perceiver (broad categorizer)
Other personal factors, such as high product involvement and
enjoyment of shopping and search
Alternative Pre-purchase Information
Sources for an Ultra-light Laptop

PERSONAL IMPERSONAL

Friends Newspaper articles

Neighbors Magazine articles
Relatives Consumer Reports
Co-workers Direct-mail brochures
Computer salespeople Information from product
Calling the electronics store advertisements
Internet/web sites
How much do consumers search?
 Research suggests that consumers search
surprisingly little. Why?
 Extensive on-going search/pre-purchase
search
 Enduring involvement
 High costs and few benefits of search
 High brand loyalty
 Self-report surveys may understate actual
search
Marketing strategies based on information search

Target Market Decision Making Pattern

Limited
Brand Habitual Extended Decision
Decision
Position Decision Making Making
Making

Brand in Maintenance Capture Preference

Evoked Set Strategy Strategy Strategy

Brand not in Disrupt Intercept Acceptance

Evoked Set Strategy Strategy Strategy
 Strategies For Brands in Evoked Set
 Maintenance Strategy: ( Habitual decision
making)
 If brand is purchased habitually by target
market, strategy should be to maintain that
behavior
 This requires consistent attention to product
quality, distribution ( avoiding out of stock
situations) and reinforcement advertising
 Maintain product development and
improvements, and counter short term
competitive strategies such as coupons, point-
of purchase displays, or rebates
 Strategies For Brands in Evoked Set
2. Capture Strategy: (Limited decision Making)
 Decision making involves few brands that are
evaluated only on a limited number of criteria such as
price or availability
 Much of the information search takes place at the
point of purchase or readily available media prior to
purchase
 Objective is to capture as large a share of their
purchase as possible
 Need to know where they search and what information
they look for
 Provide information on price and availability in local
media through cooperative advertising, point of
purchase through displays, adequate shelf space and
distribution
 Strategies For Brands in Evoked Set
3. Preference Strategy (Extensive decision making)
 Strong position on attributes important to target
market
 Information must be provided in all appropriate
sources
 Extensive advertising to groups that do not purchase it
but recommend it to others
 Independent groups should be encouraged to test the
brand
 Sales personnel should be provided detailed
information about the attributes
 Provide sales personnel with extra motivation to
recommend the product
 Point of purchase displays and pamphlets should also
be made available
 Strategies for brands not in evoked set
1. Disrupt strategy (Habitual decision making)
 Disrupt the existing decision pattern
 Short run: Attention-grabbing advertisement aimed
specifically at breaking habitual decision making
 Free samples, coupons, rebates are common
approaches to disrupt habitual decision making
 Long term: Major product improvement
accompanied by attention-grabbing advertising could
shift the target market into extensive form of
decision making
 Strategies for brands not in evoked set

2. Intercept strategy (Limited decision making)

 Objective to intercept the consumer during the
search for information on brands in the evoked
set
 Emphasis should be on advertising in local
media, point of purchase displays and shelf
space.
 Lot of emphasis on gaining attention as they
will not be seeking information
 Strategies for brands not in evoked set

3. Acceptance Strategy (Extensive decision

making)
 Very similar to preference strategy
 Must attract attention or otherwise motivate
them to learn about your brand
 Primary objective is not to sell the brand but
move the brand to evoked set.
 When purchasing situation arises, the
consumer will seek additional information on
this brand
 Evaluation and Choice
 During alternative evaluation consumers form beliefs
and attitudes regarding decision alternatives
 Choice involves selection of one option from a set of two
or more alternatives
Alternative Evaluation:
In alternative evaluation stage of the acquisition
process, the consumer compares the options identified
as potentially capable of solving the problem that
initiated the decision process.
As they compare options, consumers form beliefs,
attitudes, and intentions about the alternatives under
consideration
Alternative evaluation can be analyzed from the
viewpoint of the three perspectives:
High Involvement Hierarchy : Beliefs about
attributes are compared
Low Involvement Hierarchy: Limited number of
beliefs about attributes are compared
Experiential Hierarchy: Affective reactions are
compared
Behavioral Influence Hierarchy: No internal
comparison processes are recognized as
occurring prior to behavior
 Consumer Judgment and Alternative Evaluation
Two types of judgment:
1. Estimating likelihood that something will occur
2. Valuing the desirability or undesirability of something
 Consumers also assess risk during alternative evaluation
 Risk perception is based on consumer’s judgment of
likelihood that negative outcomes will occur and the
degree of negativity of these outcomes
 People use judgmental heuristics to make such rules
 Judgmental heuristics are the simple rules of thumb
people use to make estimates about the quality of
products; they are basically attempting to determine the
likelihood that the product contains the attribute of
quality
 Judgmental heuristics to estimate
probabilities
1.The anchoring and adjustment heuristics:
 When judging probability, people frequently
start from an initial value and then adjust
upward and downward to obtain final
answer
 Problem of this approach is that different
starting points often result in different
answers because upward and downward
adjustments are often insufficient
 Starting point acts to distort the estimate
2. The Availability Heuristics:
States that people assess the probability of an event by
the ease with which the event can be brought to mind.
 The easier it is for people to recall an outcome, the more
likely they are to think that it will occur
 The major goal of about advertising is to make
information highly available to the memory
 If a company is more successful than its competitors in
associating its brands with a positive attribute, it will have
strong competitive advantage, even though competing
brands may just rate as high on that attribute
 Researchers have found that that one method of making
an action or outcome available in the memory is to induce
consumers to imagine its occurrence
 Judgmental heuristics to estimate probabilities
3. Rule of thumb by which people determine the
probability that “Object A” belongs to “ Class B” by
assessing the degree that object A is similar or
stereotypical of class B
 Marketers often attempt to take advantage of this
heuristics
 Knockout products with similar names and packaging to
leading brands
4. Law of small numbers: people have a strong tendency
to believe that a sample is a true representation of a
population even when the sample is extremely small
 Focus groups
 Great influence of word-to-mouth communications
 Judging Goodness or Badness
 Two general classes of factors influence people’s
judgment about goodness/badness of potential
outcomes:
1. How consumers value the alternatives
2. How they relate the outcomes to the goodness/
badness of the associations they have made
between the outcome and their memories
Valuing gains and losses: Refers to an individual’s
psychological assessment of the goodness/badness
of an outcome based on the level of outcome in
relation to some reference point
a. Prospect Theory:
How people psychologically interpret the goodness
or badness of an option does not necessarily match
any objective or actual measure of its value
The difference between actual and psychological
valuation of gains and losses is captured in a graph
called the hypothetical valuation function
Four managerial implications about how consumers
value gains and losses :
1. Losses are given more weight than gains
2. If people perceive that they are in gain domain, they
will tend to act conservatively
3. If people perceive they are in loss domain they will
tend to act risky
4. The same decision can be framed from either a gain
or loss position
 Framing and Prospect Theory
 Framing refers to whether a person perceives a
decision being made from a position of gain or loss
 Depending upon a decision-maker’s reference point,
the same dilemma may be framed as either gain or
loss
 Consumer Applications
If a price change is framed as a change from the base
price of the product, its impact will not be as it would
be if it were from zero on prospect theory curve.
Tactics to induce customers to perceive a price
reduction as a gain of x amount rather than
change in base price: (a) rebates (b) gifts
 Time framing and valuing gains and losses
The distance in time between when a decision is made
and when gains and losses from that decision are
realized influence valuation
 Consumers prefer to take gains in the present and
postpone their losses
 Sales promotion devices: buy-now-pay-latter
 Consumer’s self control may also explain this
phenomenon of discounting losses that occur in the
future
 Discounting principle also explains why coupons’
expiration dates strongly impact redemption patterns
 The Consumer Choice Process
 Choice is among alternative brands and
services, and among stores

 Non-comparable alternatives are two or

more choice options in different product
categories, such as deciding whether to
buy a new stereo or a new television
High and Low Involvement Conditions
 Compensatory models are used in high-
involvement conditions and allow high
ratings on one attribute to compensate
for low ratings on another
 Non-compensatory models are used in
low-involvement situations and
emphasize that high ratings on some
attributes will not compensate for low
ratings on another attribute
 High-Involvement Choice
 With compensatory models an alternative is not
necessarily rejected because it has low ratings
on any particular attribute.
 Multi-attribute models are employed in which
information on attributes is combined into an
overall judgment, and the brand with the
highest overall judgment is chosen.
 Fishbein Attitude Toward the Object Model
illustrates a compensatory, multi-attribute
model.
 The Consumer Choice Process
 Choices under High Involvement and Low Involvement:
a. High involvement = compensatory models
b. Low involvement = non compensatory models
Non compensatory model
Consumer perceptions

Evaluative Hewlett- IBM

NEC Compaq Macintosh Toshiba
criteria Packard
Price 5 3 3 4 2 1
Weight 3 4 5 4 3 4
Processor 5 5 5 2 5 5
Battery life 1 3 1 3 1 5
After sales 3 3 4 3 5 3
service
3 3 3 5 3 3
Display
quality
1.Conjunctive Rule:
 Establishes minimum required performance
standards on each evaluative criterion and selects all
brands that surpass the minimum standards
 Assume that following represents the minimum
standards
 Price 2, weight 4, processor 3, battery life 1, after
sales support 2, display quality 3.
 In this example four computers are eliminated –
IBM, NEC, Macintosh and Toshiba as they all failed
to meet minimum standards.
 Once alternatives not providing required features
are eliminated, another choice rule can be used to
make a brand choice that meets all minimum
standards
.
Disjunctive Rule:
Establishes a minimum level of performance for
each important attribute at a fairly high level. All
brands that surpass the performance level of any
key attribute are considered acceptable
Price 5, weight 5, processor not critical, battery life
not critical, after sales support not critical, display
quality 5.
You would find NEC (price), HP ( Weight) and
Macintosh (display quality) to warrant further
consideration. One might purchase (a) the first
brand found acceptable, (b) use another decision
rule to choose among brands, or add additional
criteria to one’s list
 Non-compensatory Models
 Elimination by aspects rule: Requires the consumer to rank the
evaluative criteria in terms of their importance and establish a cut-
off point for each criterion
 All brands are first considered on the most important criterion. All
those that do not surpass the cut-off points are dropped from
consideration. If more than one brand passes the cut-off point, the
process is repeated on those brands for the second most important
criterion. This continues until only one brand remains
Characteristics Rank cut-off point
Price 1 3
Weight 2 4
Display Quality 3 4
Processor 4 3
After sales support 6 3
Price will eliminate IBM and Toshiba; remaining Compaq, HP, and
Macintosh exceed the weight requirement. Only Macintosh exceeds
the third requirement, display quality
 Non-Compensatory Models
 Lexicographic Decision Rule:
Requires the consumer to rank the criteria in order of
importance. The consumer then selects the brand that
performs best on the most important attribute. If two
or more brands tie on this attribute, they are
evaluated on the second most important attribute.
This continues until one brand performs better than
the other
The lexicographic decision rule is similar to elimination
by aspect rule. The difference is that the lexicographic
rule seeks maximum performance at each stage while
elimination by aspects model seeks satisfactory
performance at each stage.
Decision Rule Brand choice
Conjunctive HP. And Compaq
Disjunctive Macintosh, HP, NEC
Elimination by aspects Macintosh
Lexicographic NEC
 Experiential Choice Process
1 The Affect-Referral Heuristic: Consumers base their
choice on their overall emotional response to an
alternative
 Explains why consumers are brand loyal
2. The effects of brand awareness: Brand awareness may
also influence consumer choice process through an
affect-referral process. This may be due to mere-
exposure phenomenon
3. Impulse Purchases: Buying action undertaken without
a problem having been previously recognized or
buying intention formed prior to entering a store
4. Effects of moods on choice:
5. People in positive mood respond favorably to
emotional appeals than informational appeals
 Hypothetical Use of Popular Decision Rules in
Making a Decision to Purchase an Ultra-light
Laptop
DECISION RULE MENTAL STATEMENT

Compensatory rule “Iselected the computer that came out best when I
balanced the good ratings against the bad ratings.”

Conjunctive rule “I selected the computer that had no bad features.”

Disjunctive rule “I picked the computer that excelled in at least one

attribute.”
Lexicographic rule “I looked at the feature that was most important to
me and chose the computer that ranked highest on
that attribute.”
Affect referral rule “I bought the brand with the highest overall
rating.”