Consumers Rule by 1O7900m

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									   Individual
Decision Making

    Chapter 9
Consumers as Problem Solvers
• Consumer purchase = response to problem




                                  9-2
Consumers as Problem Solvers
• Decision-making process
 –a series of steps
 –automatic
 –or job-like
 –Complicated by
   • consumer hyper-choice

                             9-3
     Decision-making Process
      Problem Recognition
                          Richard realizes that he
                           dislikes his B&W TV
        Information Search
                             Richard surfs Web to
                               learn about TVs
    Evaluation of Alternatives
                           Richard compares
                         models on reputation and
          Product Choice         features
                           Richard chooses a TV
                          with an appealing feature
             Outcomes
                          Richard brings home and
Figure 9.1 (Abridged)          enjoys his TV
                                                      9-4
 Decision-making Perspectives
• Rational perspective
  – Purchase momentum
  – Constructive processing


• Behavioral influence perspective

• Experiential perspective
                                     9-5
 Types of Consumer Decisions
• Continuum of Decision Making




                Figure 9.2       9-6
 Habitual (routine) Decision Making
• Automaticity:
  – choices made with little/no conscious effort
  – Efficient decisions:
    • minimal time/energy


• Challenge for marketers…
  – Convincing Consumers
    • to replace habit with new one
                                        9-7
   Limited Problem Solving
• More straightforward/simple

• Simple decision rules
 –to choose among alternatives
   • Cognitive shortcuts


                                 9-8
   Extended Problem Solving
• Initiated by self-concept motive
• purchase decision is perceived risk
• Consumer collects information
  – Internal and external search
• evaluation of brand attributes
  – (one at a time)


                                   9-9
 STEP #1: Decision Process

• PROBLEM RECOGNITION




                       9-10
      Problem Recognition
• Consumer sees difference between
 –current state &
 –ideal state




                             9-11
       Problem Recognition
• Need recognition
• actual state moves downward
• examples
  –Running out of a product,
  –buying a deficient product, or
  –creating new needs


                                    9-12
      Problem Recognition
• Opportunity recognition:
• ideal state moves upward

  –Exposed to different/better quality
   products
    • (standard of comparison)


                                  9-13
      Problem Recognition
• For the Marketer:
 –primary demand
 –secondary demand




                            9-14
  Step #2: Decision process

• INFORMATION SEARCH




                         9-15
        Information Search
• Consumers need information to solve
  problem
  – We survey our environment for
    appropriate data to make decision


• Pre-purchase search-
• vs. ongoing search
                                        9-16
         Silent Commerce
• transactions/information gathering
• without intervention
• by consumers or managers




                                  9-17
       Silent Commerce

• Smart products
   • RFID tag
      –stores information and
      –antenna communicates with
       computer network


                              9-18
  Internal vs. External Search
• Internal search
 –Scanning memory
 –to assemble product alternative info




                                9-19
  Internal vs. External Search
• Obtaining information from
  – ads,
  – retailers,
  – catalogs,
  – friends,
  – family,
  – people-watching,
  – Consumer Reports, etc.
                               9-20
   Deliberate vs. “Accidental”
             Search
• Directed learning (deliberate)
 –existing product knowledge
 –previous information search
 –experience of alternatives




                                9-21
Deliberate vs. “Accidental” Search

• Incidental learning (Accidental):
 –mere exposure over time
 –to conditioned stimuli and
 –observations of others




                               9-22
The Economics of Information
• Consumers gather data needed to
  make informed decisions
  – We continue to search
    • until costs exceed utility of info search
       – (as long as process is not too time-consuming)


  – most valuable information
    • collected first

                                               9-23
  Do Consumers Always Search
         Rationally?
• to avoid external search,
  – minimal time to do so
  – durable goods (e.g. autos)


• Symbolic items = more external
  search
  – High perceived risk

                                   9-24
  Do Consumers Always Search
          Rationally?
• Brand switching
 –Variety seeking:
   • unpredictability
     –can be rewarding to consumers
   • in good mood or
   • little stimulation elsewhere
     –(sensory-specific satiety)

                                      9-25
  Do Consumers Always Search
      Rationally? (Cont’d)
• Brand switching

 –We select familiar brands,
   • ambiguous decision situation
   • if little information
     –about competing brands



                                    9-26
            Biases in
    Decision-making Process
• Mental accounting
  – Framing a problem
  – in terms of gains/losses
  – influences our decisions


• Sunk-cost fallacy:
  – reluctant to waste something
    • we have paid for

                                   9-27
 Biases in Decision-making Process

• Loss aversion:
• We place more emphasis on loss
• than on gain
 –Prospect theory
 –Gambling study


                              9-28
  How Much Search Occurs?
• Search activity is greater when…
  – Purchase is important


  – need to learn more about purchase


  – Relevant info is easily obtained/utilized…


                                         9-29
  How Much Search Occurs?
• Search activity is greater when…
  – younger, better-educated,

  – enjoys shopping/fact-finding


  – female (compared to male)

  – places greater value on own style/image
                                     9-30
   Consumer’s Prior Expertise
• Moderately             Figure 9.5
  knowledgeable
  consumers
• tend to search
  more than
  product experts
  and novices


                           9-31
    Consumer’s Prior Expertise
• Experts:                Figure 9.5

• selective search
• Novices:
• others’ opinions,
• “nonfunctional”
  attributes,
• “top down” processing
                            9-32
          Perceived Risk
• Belief that product has
  negative consequences
  – Expensive,
  – complex,
  – hard- to-understand
  – visible to others
    • (risk of embarrassment for
      wrong choice)

                                   9-33
         Perceived Risk
• Risks can be
• objective
  – (physical danger)
• subjective
  – (social embarrassment)




                             9-34
9-35
   Step #3: decision Process
• EVALUATION OF ALTERNATIVES




• Stop here
• Finish on Friday

                          9-36
  3. Evaluation of Alternatives
• Choosing a brand/product
    • among available alternatives
• requires much of the effort
    • that goes into a purchase decision


  –think about # brands & different
   brand variations
                                      9-37
    # 3 Alternatives evaluation
Neuromarketing
Extended vs. limited problem solving
Habitual decisions
Evoked set vs. Consideration set
Product categorization & levels
Product positioning
Exemplar products
Locating products
                                       9-38
 a. “Buy Button” in Your Brain
• Neuromarketing
 – F.M.R.I.measures consumers’ reactions

   • DaimlerChrysler :
      –sports cars activated reward center in
       male brains
   • Coke’s strong brand identity
      –displayed as unique in F.M.R.I. studies

                                          9-39
      b. Product Categorization
•   Levels
•   Implications
•   Product positioning
•   Identifying competitors
•   Exemplar products
•   Locating products


                              9-40
Product Categorization
 We evaluate new products
        in terms of
  what we already know
 about a (similar) product
Product Categorization
  Evoked-set products
      Alternatives
       consumers
   usually know about.
Product categorization

  Consideration set
   Alternatives that are
   actually included in
deliberations about which
      one to choose
      Levels of Categorization
Figure 9.7




Discussion: Diagram the three levels here for a health club!
                                                           9-44
 Strategic Implications
 of Product Categorization
   1. Product positioning
Convincing consumer that product should
 be considered within a given category
                Orange juice:
    “It’s not just for breakfast anymore”

                Pepsi A.M.
                  failed
Strategic Implications of Product
         Categorization
  2. Identifying competitors
  Surface differences in products
  can compete on super-ordinate level
         for consumer dollars

   Viewing “Entertainment” to include:
            bowling & ballet
Strategic Implications of Product
         Categorization
• 3. Exemplar products
 –Brands
   • strongly associated with a category
   • get to “call the shots”
   • by defining evaluative criteria for
     category
     –Some may fill niches within category

                                       9-47
Strategic Implications of Product
     Categorization (Cont’d)
• 4. Locating products
 –Products not fitting clearly into
  categories
 –confuses consumers
 –Example:
   • (e.g., frozen dog food)
                               9-48
9-49
 STEP #4: decision process

• PRODUCT CHOICE




                       9-50
        Product choice

• Selecting among alternatives
 –Evaluative criteria
 –Product signals
 –Loyalty vs. habit
 –Decision rules
                           9-51
       Evaluative criteria
• Dimensions used to judge merits
  of competing options

• Determinant attributes
 –Features we actually use to
  differentiate among our choices

                               9-52
  Selecting from alternatives

• Decision rules & criteria
 –Procedural learning
 –Cybermediaries


                           9-53
          Product Choice
• Decision rules for product choice
  –simple to very complicated
    • Prior experience with product
    • information at time of purchase
    • Beliefs about brands
      –(from advertising)

                                9-54
       Evaluative Criteria
• Procedural learning:
• cognitive steps before making
  choice




                             9-55
   Eval Criteria:   Cybermediaries
• product information on Web
• Problem = narrowing our choices!
• Cybermediary:
  – helps filter and organize online market
    information


                     SHOPPING.COM


                                      9-56
    Forms of Cybermediaries
• Directories/portals
                        YAHOO!



• Web site evaluators
                WORLD BEST WEBSITES


• Forums, fan clubs, and user groups
                                  ABOUT.COM

• Financial intermediaries
                        PAY PAL
                                              9-57
          Evaluative Criteria:
  Electronic Recommendation Agents

• Intelligent agents
• & collaborative filtering
  –Learn from past user behavior
    • to recommend new purchases
  –“Shopping robots” filtering



                                   9-58
  Electronic Recommendation Agents

• Asks user to communicate
  preferences
• Recommends list of sorted
  alternatives
• Findings associated with such
  agents

                               9-59
  Selecting from alternatives

•Hueristics
 –Observable product attributes
 –Co variation
 –Price quality relationship
 –Country of origin

                           9-60
            Evaluative Criteria:
   Heuristics: Mental Shortcuts
• Mental rules-of-thumb
• leads to speedy decision
  – higher price = higher quality,
  – buying same brand as mother bought
• May be bad decisions
  – due to flawed assumptions
  – (especially with unusually named brands)


                                         9-61
Product signals




                  9-62
 Market Beliefs=shortcuts
• Price-quality relationship:
  – we tend to get what we pay for
• Other common marketing beliefs
• (see Table 9.3 for full list):
        • All brands are same
        • Larger stores offer better prices
        • Items tied to “giveaways”
            –are not a good value

                                              9-63
   Relying on a Product Signal
• Observable product attributes
• communicates underlying qualities
  – Clean and shiny car = good mechanical
    condition




                                        9-64
  Relying on a Product Signal
• Covariation:
• perceived associations among
  events
  – Product type/quality & country of origin




                                       9-65
              Country-of-Origin
• rate own country’s products more favorably
  – than do people who live elsewhere
• Industrialized countries
  – make better products than developing countries do
• Attachment to own vs. other cultures
  – Nationalists
  – Internationalists
  – Disengaged
                                            9-66
     Country-of-Origin

• Attachment to own vs. other
  cultures
 –Nationalists
 –Internationalists
 –Disengaged

                          9-67
   Country-of-Origin (Cont’d)
• associate certain items with
  specific countries (stereotyping)
  – Irish pubs


• Country-of-origin effects
• stimulate consumer interest in the
  product
  – Origin of product = attribute
                                    9-68
   Country-of-Origin (Cont’d)
• Expertise with product
 – minimizes country-of-origin effects

• Ethnocentrism (“buy
  American”)
 – Backlash against American-made
   products
 – as a result of war in Iraq
                                     9-69
Choosing Brand names




                   9-70
  Inertia: The Lazy Customer
• Many buy same brand every time
 –habit requires less effort
 –Little/no commitment
   • Brand switching frequently occurs
     –cheaper price,
     –original brand out-of-stock,
     –point-of-purchase displays

                                     9-71
            Brand Loyalty
• Repeat purchase behavior
• reflects conscious decision
• to continue buying the same brand
  – Emotional attachment and commitment
  – often result over time
  – (via self-image and prior experiences)


                                     9-72
            Brand Loyalty
• Information overload and
• too many alternatives
• strengthen reliance on brands for
  quality

• less picky about where we buy our
  favorite brands


                                      9-73
Decision Rules




                 9-74
        Decision Rules


• Compensatory
 –Simple additive rule
 –Weighted additive rule



                           9-75
          Decision Rules
• Noncompensatory:
• shortcuts via basic standards
  –Lexicographic rule
  –Elimination-by-aspects rule
  –Conjunctive rule


                                  9-76
       N-C Decision Rules
• Lexicographic rule
  –selecting the brand that is the best
   on the most important attribute




                                  9-77
        N-C Decision Rules
• Elimination-by-aspects rule
  – specific cutoffs are imposed




                                   9-78
        N-C Decision Rules
• Conjunctive rule
  – processing by brand
  – uses cutoffs
    • if a brand does not meet one, brand is
      rejected
  – May delay decision or modify cutoffs


                                          9-79
          #5: OUTCOMES
• This chapter doesn’t cover step 5 in
  decision process

• Covered in chapter 10
  – Buying & disposing of products




                                         9-80
THE END




          9-81

								
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