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Individual Decision Making

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Presentation on theme: "Individual Decision Making"— Presentation transcript:

1 Individual Decision Making
Chapter 9 Individual Decision Making

2 Stages in Consumer Decision Making
Problem Recognition Information Search Stages in Consumer Decision Making Evaluation of Alternatives Product Choice Outcomes

3 Perspectives on Decision Making
Consumer researchers have approached decision makers from a Rational Perspective. People integrate information about a product, weigh pluses and minuses of each alternative, and arrive at a satisfactory decision. This approach does not describe all forms of decision making. Behavioral Influence Perspective explores decisions made under conditions of low involvement. Consumers may be highly involved in a decision, but still the decisions can not wholly be explained rationally. Experiential Perspective stresses the Gestalt, or totality, of the product or service.

4 A Continuum of Buying Decision Behavior
Habitual Decision Making Limited Problem Solving Extensive Problem Low-Cost Products More Expensive Products Frequent Purchasing Infrequent Purchasing Low Consumer Involvement High Consumer Involvement Familiar Product Class and Brands Unfamiliar Product Class and Brands Little Thought, Search, or Time Given to Purchase Extensive Thought, Search, and Time Given to Purchase

5 Problem Recognition Problem Recognition Occurs Whenever the Consumer Sees a Significant Difference Between His or Her Current State and Some Desired or Ideal State. Consumer’s Ideal State Need Recognition Occurs By: Running Out of a Product Inadequate Product Creating New Needs Opportunity Recognition Occurs By: Exposure to Different or Better-Quality Products Consumer’s Actual State

6 Information Search Information Search is the Process in Which the Consumer Surveys His or Her Environment for Appropriate Data to Make a Reasonable Decision. Types of Search Prepurchase - an Explicit Search for Information. Ongoing Search - Browsing Used by Veteran Shoppers for Up-to-Date Information. Information Sources Internal Search - Memory Scan to Assemble Information. External Search - Information Obtained from Advertisements, Friends, or People Watching. Information Searches Deliberate Search is the Result of Directed Learning. Accidental Search is the Result of Incidental Learning.

7 The Economics of Information
Economics-of-Information approach assumes that consumers will gather as much data as is needed to make an informed decision. Implies consumers will continue the search until the rewards of doing so (utility) exceed the costs. Consumers, however, do not always search rationally. Amount of external search for most products is surprisingly small, even when it would benefit the consumer. Exception: Symbolic products such as clothing. Consumers often Brand Switch as they seek variety in their product experiences.

8 Biases in the Decision-Making Process
Mental Accounting Decisions are Influenced by the Way the Problem is Posed (Framing) Sunk-Cost Fallacy Having Paid for Something Makes Us Reluctant to Waste It. Loss Aversion People Place More Emphasis on Loss Than They Do Gain.

9 Framing - Version X You’ve decided to see a Broadway play and have bought a $60 ticket. As you enter the theater, you realize you’ve lost your ticket. You can’t remember the seat number, so you can’t prove to the management that you bought a ticket. Would you spend $60 for a new ticket?

10 Framing - Version Y You’ve reserved a seat for a Broadway play for which the ticket price is $60. As you enter the theater to buy your ticket, you discover you’ve lost $60 from your pocket. Would you still buy the ticket? (Assume you have enough cash left to do so).

11 The Consumer’s Prior Expertise
Search Tends to Be Greatest Among Those Consumers Who Are Moderately Knowledgeable About the Product. Product knowledge Amount of Search

12 Types of Perceived Risk

13 Evaluation of Alternatives
All Alternatives Evaluation of Alternatives Evoked Set Actively Considered Inert Set Aware of, But Would Not Buy Inept Set Not Entering Consideration Retrieval Set Prominent Products in Environment

14 Levels of Product Categorization
Superordinate Level Includes Abstract Concepts. Dessert Nonfattening Dessert Fattening Dessert Basic Levels Have Much More in Common, But a Number of Alternatives Exist. Ice Cream Cake Fruit Diet Ice Pie Subordinate Levels Includes Individual Brands. Yogurt

15 Strategic Implications of Product Categorization
Product Positioning Conception of the Product Relative to Other Products in the Consumer’s Mind Identifying Competitors Are Different Products Substitutes? Exemplar Products Most Known, Accepted Product or Brand Locating Products Consumers’ Expectations Regarding the Places to Locate a Desired Product.

16 Product Choice: Selecting Among Alternatives
Evaluative Criteria are the dimensions used to judge the merits of competing options. The attributes actually used to differentiate among choices are Determinant Attributes. Marketers can educate consumers about a new decision criterion if they communicate to buyers: There are significant differences among brands on the attribute. Supply the consumer with a decision-making rule. Should convey a rule that can be easily integrated with how the person has made this decision in the past.

17 Heuristics are Mental Rules-of-Thumb That Lead to a Speedy Decision.
Country of Origin Product Signal Brand Loyalty Market Beliefs Common Heuristics Retail Outlets Price/ Quality Relationship Brand Names

18 Heuristics Used By Large Hotel
Rule of thumb at Washington hotel Seven days prior to date accept up to 50 rooms overbooking (on top of 724 rooms available); One day prior to date, accept up to 20 rooms being oversold.

19 Heuristics by Individuals
Dump stock if it falls 15% below your purchase price. “If it sounds too good to be true, it is.”

20 Choosing Familiar Brand Names: Loyalty or Habit?
Many people buy the same brand every time due to Inertia, where a brand is bought out of habit merely because less effort is required. Brand Loyalty is a form of repeat purchasing behavior reflecting a conscious decision to continue buying the same brand. A brand-loyal customer is actively involved with the product for either emotional or objective reasons. Marketers struggle with Brand Parity, which refers to consumers’ beliefs that there are no significant differences among brands.

21 Elimination-By-Aspects
Decision Rules Consumers Consider Sets of Product Attributes by Using Different Decision Rules, Depending on the Complexity of the Decision and the Importance of the Decision to Them. Lexicographic Simple Additive Noncompensatory Decision Rules Compensatory Decision Rules Elimination-By-Aspects Weighted Additive Conjunctive

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