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Progress of purchase decision process L4 Ing. Jiří Šnajdar 2013.

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2 Progress of purchase decision process L4 Ing. Jiří Šnajdar 2013

3 4.1 Phase of purchase decision Analysis of purchase decision of consumer. American economists and psychologist Katona characterised two types of consumer decision : real decision – goods of investment character, is accompanied by : conscious and systematic obtaining of information about product and repeated comparison with competitive products, activity in preparation behaviour – saving or choice of other budgetary possibilities, living through the future consumption.

4 addictive behaviour - subject uses – knowingly or unknowingly – previous experiences. Usually does not go before systematic preparation of purchase. For example : visit of some shops, relatively short decision process, influenced by actual offer situation.

5 Analysis show that decision process is influenced also by personal qualities. Persons with lower IQ is the process closed sooner and it is hard to change it. Persons with higher IQ are more opened new information and are prepared to work with them and to change decisions. Specific progression of activities is called purchase decision process.

6 Progress of purchase decision Five main bases : problem recognising, searching for information, valuation of alternatives, purchase decision and phase of behaviour after purchase. Problem recognising - Formation of problem thanks to unfavourable change of current situation Damage of some device, equipment etc. Depletion of sources. Worsening of quality of marketing tools (for example changes in price).

7 -Formation of problem thanks to increase of level of required situation Consumer recognises increasing of possibilities, which are connected with satisfaction of given need : market innovations, new activities. This can also be results of consumer thinking, cognitive learning.

8 Some factors of perceived relation of real and expected (required situation): family characteristics, financial deliberation, changes of conditions, previous decisions, culture, social stratification, individual development, market situations, marketing activities, information background and its movements.

9 Sometimes the purchase decision process does not develop further : contradiction is not enough motivated, sources for its solution are not sufficient, conditions connected with solution are too demanding for information, time etc. Effort of marketing activation of recognising of problem can also fall contra–productively : can lead to purchase of competitive product by communication stress on problem, purposely bigger contradiction between real and required situation can return in form of boomerang effect at own use of product.

10 Searching for information Problem recognising leads the consumer to searching for relevant information. It is partly inner searching a partly outer searching for information. Inner searching is reviving of appropriate information in long-term memory of consumer. The inner searching leans on association nets of memory.

11 Outer searching means obtaining of information from outside. First form of raised attention. Passive approach only. Active searching represents systematic, active and pointing effort of consumer to obtain appropriate information about possibilities to solve their problem. - Information sources At information obtaining : Sources of reference surrounding From marketing view is valid knowledge in connection with operation of reference groups to search for and accost ideological leaders.

12 Neutral sources Information about structure and quality of offer. Neutral sources reduce especially risks : functional, financial and physical. Sources of inner searching in sphere of marketing mix incorporate : personal outer sources non personal : - promotional information, advertisement, scenes, - prospects, which in general consumer gets on purchase place. Relatively tight binding to concrete decision process, - newspaper advertisement articles (advertorials) - consumer magazines - wrappings

13 Disadvantage of commercial information sources is lower perceived credibility. - Personal experience. Among consumers exist marked differences in way of information searching, this is important mainly from view of development of market segments profiles. - Influences to be conditional on information searching Previous experience. Perceived risk.

14 Kinds of risks : 1.Financial : releasing of too high financial amount. 2.Functional : purchased product will not fulfil expected function. 3.Physical : possibilities that product will hurt the consumer. 4.Social : worry about negative attitude of social surrounding to given purchase. 5.Psychical : worry about possible inner conflict.

15 Market ambience. Product characteristics. Rate of keenness for product, problem. Situation variables. Predisposition of consumer. Researches show that : rate of information searching falls with growing age, extent of information searching is higher in initial phases of family cycle, women have tendency to higher information searching then men, higher education brings bigger extent of outer information searching, higher social status means rather higher information searching.

16 Alternatives evaluation - Choice of product type - Awareness set are those products, marks, which consumer recall spontaneously. - Evoked set includes all alternatives, which consumer actively assesses by decision as possible problem solution. - Inner set includes those marks, consumer knows about, but they come in hi decision only when marks of considered set are not available. - Inept set includes marks, consumer knows about, but has negative attitude to them.

17 For marketing orientation is useful to know what create by consumer the awareness set and evoked set. Information are obtained with help of open questions : “What marks … do you remember ? “Do you know for example these marks …? Howard, J.A., Sheth, J.N., The theory of Buyer Behaviour, Wiley, New York 1969 Knowledge, respecting of cognitive structures is one of essential enters in positioning or repositioning of marks, at rebranding and strategies connected with them. In perceptual maps appears at the same time position of competitive products.

18 - Own decision inside considering space Assumptions about fundamental things : functional attributes, symbolical attitudes, aesthetic feature, purchase criterions. Importance given to features : used criterions have no sense for consumer. Assumptions about products / marks - Process of consumer decision Two basic ways how the consumer can decide about given alternatives – non-compensatory and compensatory rules (principles) of decision.

19 Non-compensatory rules of decision, evaluating of advantages in one criterion cannot equalise absence in other criterions – disjunctive rule (principle), conjunctive rule, lexicographic rule, elimination according to qualities. Compensatory decision, evaluating – disadvantages in some attributes can be balanced by advantages in other criterions. It is additive rule : Consumer measures values of criterions at individual marks, thinks about importance of criterions and on the base of the overall result takes out the one with the best overall result.

20 It is additive rule : Consumer measures values of criterions at individual marks, thinks about importance of criterions and on the base of the overall result takes out the one with the best overall result. It is taken out the variant with most positive attributes. Tendency to compensation approaches breaks through more in connection with products, where is characteristic high keenness and where number of alternatives is not high. (D. I. Hawkins, K.A: Coney). At large number of alternatives is the procedure according to conjunctive rule. Hawkins, D.I., Best, R.J., Coney, K.A., Consumer Behaviour : Implications for Marketing Strategy, IRWIN 1995

21 - Cognitive algebra Kroeber Riel at analysis of decision process comes out from Fishbein thesis, that it is possible to narrow product characteristic as incentive of motivation implicit and decision process to limited number of dominate factors. Than the analysis is divided into these phases : Identification of dominant factors. Evaluation of importance of individual factors. Evaluation, how the consumer evaluates these factors at tested products. Synthetic evaluation of preferences in decision process.

22 These cognitive evaluation programmes are formalised into some schemas called “cognitive algebra”. Formal cognitive schemas are affected by subjective emotional influence. At market research we meet with quasi accidental information, which can totally reverse cognitive made decision. : evaluation can be by non appreciated emotions moved – misrepresented, schema of evaluation has tendency to move in the direction to addictive decision processes, decision is from formally logical view difficult,

23 Factors, included in the cognitive algebra, are modified : for individual commodities and their role by consumer, for end (social) groups. As “key” information are usually considered : mark usage price (one of the most problematic categories). This approach is similar to classical economical Marshall model.

24 Cognitive decision programmes evaluating programmes : point systems evaluating project – type Ogilvy Vademecum. (product is possible to evaluate with some volume of percentage according to given schema). Selective programmes, which are based on comparative access and serves for product selection from more alternatives.

25 Alternative models (accord. to Kroeber Riel) can issue from decision schemas : -Dominate principle : subject chooses the variant, where individual signs are relative balanced, but in one sign is the product evaluated more positively than other alternatives. - Conjunctive principle : it is compared, accord. to Fishbein thesis, certain (limited) volume of signs. Chosen alternative is those, which in all signs reaches certain critical value. By conjunctive rule we meet with compensation access (is high price compensated by high quality ?)

26 -Disjunctive principle : subject comes out from criterions of relatively demanding critical values, product is chosen if reaches at least in one sign this critical value. -Lexicographical principle : subject comes out form certain (dominant) sign, which considers for the most important. Then he chooses alternative, which fulfil this feature (sign) the best. Example can be decision process by fashion goods. Kroebel-Riel W., Weinberg P. Konsumentenverhalten, Vahlen

27 - Principle of attribution elimination : All alternatives, which do not reach by the most important sign certain value, are eliminated. Some marker believes : „Highly promoted goods will be good.” “To buy known mark is less risky”. “Big shops have better prices than small.” “New opened shops have more advantageous prices”. “Big package are almost always cheaper than small – per unit.” “New products are more expensive at introducing on market.” “Plastic products have less quality than from natural materials.”

28 Purchase decision By evaluating of alternatives is reached purchase intent, which precedes to own purchase (or refusal). Social ambience in given relation we understand in narrow binding to own purchase action. In this meaning we refer again to influence of purchase groups. Situation influences – between important group of situation influences, which can show up during purchase action, belong influences of business ambience.

29 attitudes of others evaluating of alternatives purchase intent situation factors purchase decision perceived risk - Situation influences of business ambience - Assortment. - Merchandising : mean (mostly) way of goods exhibit (in shop). - Atmosphere in shop : outer and inner elements- - - Personnel : social aspects, expertise, purchase qualification – specific event of marketing research - mystery shopping.

30 Analysis - decision tree Analysis of cognitive decision programme is part of analysis called decision tree. In analysis decision tree we look for how individual phases, elements of decision process follow on time continuous. Analysis includes : phase of information collecting : has different rate of activity in dependence with real or addictive decision phase of choice of purchase place : connected with segmentation analysis, phase of activities in decision process : it is important the sequence of purchase decisions, phase of choice : how and where happens choice of commodity, mark, product, phase of choice criterions : accord. to above stated schemas.

31 Respondent is not able to describe in detail his decision process, therefore it is necessary to proceed : good preparation of phasing, pair comparison of individual phases, analysis of concrete events. Methodology of analysis decision tree requires elaborated questionnaire, as specific methodological process is used so called assist purchase, respondent is accompanied by questioner during shopping and describes his thoughts and justifying why he is doing individual operations. Decision tree analysis is important for placing of promotions (appeals) to a place or media.

32 -Purchase decision – Finish of purchase action Purchase of certain product – alternative of purchase decision or decision from other alternative. Postponement of purchase – missing of confirmation about right decision or short time of postponement. Refusal of purchase. (to use other means – repair) After purchase behaviour The last phase starts with usage of product.

33 Behaviour after purchase loyalty generalisation positive word-of-mouth yes Usage - Expectingsatisfaction ? no change of mark discrimination negative W-o-M Satisfaction is not only result of usage of product, but is also connected with level of expectation. Expectation is changeable in time.

34 Dimensions of satisfaction / dissatisfaction It is useful to follow series of partial levels : Satisfaction with functional characteristics of product quality, appearance, symbolic, social and purchase characteristics and others. Satisfaction with other marketing activities. Importance given to characteristics. Potential changes in behaviour. Connection with purpose of product usage. Average satisfaction in given market area, individual satisfaction and difference in satisfaction in market segments.

35 - Factors strengthen satisfaction product, which solves problem in required way, corresponding communication about product character, good information, good service, after purchase services, responsive approach to tools of shop support, marketing based on relationships (relationship marketing) dissatisfaction with competition.

36 - Factors strengthen after purchase dissonance and dissatisfaction consumer must decide among more equivalent alternatives, it is not possible to try the product, there is a big spontaneity of purchase, small possibility to cancel the purchase (return the product, change for others etc.) consumer has few information about product, consumer is satisfied with competition offer, consumer´s characteristics are indecisiveness and low self-assurance.

37 Importance of satisfaction with product, purchase decision Satisfaction with product is the base of marketing concept and has basic importance. Loyalty (brand loyalty, producer) is intentional (non-accidental), continues in time, is based on choose of alternatives, is function of psychological (evaluating) process. Generalisation : Consumer his satisfaction from good experience transmits to advantageous incline to given company at purchase decision and to its products. Positive “Word-of-Mouth”. Satisfied consumer acclaims product, mark in his personal communication with other members of his reference groups.

38 - Consequences of dissatisfaction Dissatisfaction leads to change of mark, discrimination and negative references. - Change of mark (brand switching) : Consumer decides for other product. - Discrimination. Consumer does not buy any product from this firm. - Negative “Word-of-Mouth”. Consumer hands over his negative experience to other members of his reference groups.

39 - Products laying aside Consumer after some time can decide to eliminate a product from usage. The product can be laid aside : partially – in frame of multiply furnishings (second habitation, reserve) parted with, exchanged, sold. The way how the product consumers do not use any more has clear marketing implications : connection with environment, possibilities for recycling, marketing inputs in level of offer new for old. Following of laid aside process offers often interesting insight on consumers behaviour. It is possible to affect segments responsive to environmental problems.

40 4.2. Modification of purchase decision process Routine, accustomed purchase behaviour – by purchase of goods, which consumer knows, which buys frequently, which is not connected with a big risk. Limited problem solution - occasional purchase when consumer knows given product category, but decides between not tested products. Enlarged decision – articles, products with low purchase frequency, with high price, big perceived risk.

41 Factors influencing integration of type of purchase decision Direction of influence,routine, limited, complex Keenness (involvement) and purchase decision Process of purchase decision if significant influenced by involvement. We can differentiate purchase involvement and product involvement. Purchase involvement – level, how the consumer deals with purchase decision and involvement. Rate of purchase involvement is temporary condition of consumer´s mind. Product involvement means permanent consumer´s interest in given product category. This involvement must not be connected with purchase of product. Consumer can be with his purchase little involved - because he uses only the one and no other mark.

42 Influence of rationality / emotion on KRP process High or low involvement for purchase is not fully associated with rational or emotive position of decision. It is about two parallel developing courses of consumer´s purchase decision. -Complex purchase decision With integrating of all phases of purchase decision into involvement process we meet in following situations : articles with high prices, technically complicated products, things of long-term use, articles with high (perceived) risk of use (medicaments, cars), articles with higher symbolical value (clothes). Here we meet most often with realistic occurrence of compensation rules of decision.

43 By these processes has bigger importance after purchase dissonance. Effort to low dissonance is also so called assimilation effect. Consumer accustoms with product, e.g. ignore (and relativizes) some insufficiency of product and estimates its merits. When occur big disagreement between expected and concrete functions of product, appears conversely contrast effect – it leads to domination of negative features at evaluating of purchased product and later to refusal of this mark at all.

44 purchase decision process with symbolic sense: Considerable importance have emotional factors, criterions. Product is bought rather for its symbolic than utility – function value. Importance of self-conception and social roles in KRP. Less – explicit – direct expressing of utilities : who uses given product, mark, who agrees it. Esthetical feelings. Less – rational features, or product characteristics (function parameters, price) Routine – habit purchase decision Is repeated purchase decision, doing almost without searching for information and evaluating of variants. Own decision is almost missing.

45 Routine purchase is connected with low involvement. Loyalty to mark can influent from originally complex decision. By repeated purchase is not choice of mark from consumers view important, purchase is not capital-intensive, no risk. When a problem appears, for its solution is given product essential, consumer buys the best accessible mark, which he to can accustom to buy (without previous alternatives evaluation). In consumer´s view has habit purchase its importance. Lower risks (if any). Therefore buys often mark, that buy others. Saves time and spends effort, minimises necessity to look for new information.

46 -Impulsive purchase behaviour This purchase behaviour is characteristic by often changes of marks (brand switching). 4.3. Diffusion of innovations Consumers in his relation to new product, which finally starts to use, goes through some stages : - Adoption process Knowledge, Understanding, Interest, Evaluation substantiation, Attempt, Adoption.

47 Diffusion process Four main positions of diffusion of innovations : character of own innovation., (discontinuous, dynamic continuous, symbolic continuous, communication ways (positive w-o-m, use of co- branding, use of content complementary www), conditions of social system – relation inside reference groups and between them, importance of specific norms, traditions, standards, opinions expected inside social system, time.

48 Diversity of consumers in willingness to adopt new products is intercepted in few groups(E.M.Rogers) Innovators. Buy product as first, consumer radicals. (2,5 % of population). Early adopters. Belong between consumers who are very opened to new products, consumer liberals. (13,5 % of population). Early majority. Adopt new product earlier then average consumer, they like new products, but their relation is more careful. (approx. 34 % of population of given market). Late majority. Buy product or start to buy regularly only when the product use many people in his surrounding. Conservative consumers. (further 34 % of given market).

49 Laggards. Adopt new product when everybody has it or buys it. From view of market it is not a new product anymore. Consumers ultraconservatives. (Last 16 % of consumers). Not accepted. They never buy given product from different reasons. Stated groups of consumers can difference according to product categories. We meet similar problem as by opinion leaders (opinion leaders also appear especially among innovators and early adopters).

50 Influencing affecting diffusion and adoption Process of propagation of innovations among consumers influence some fundamental factors: Type of decision. Collective or individual. The less persons is integrated, the slower the innovation spreads. Relative advantage. The more advantageous than current problems solutions is the innovating perceived, the faster spreads (fax, digital cameras). Satisfying of feeling needs. The clearer and more important needs the innovation satisfies, the faster spreads. (Example use of Pampers). Observability, visibility, communication. If effects are positive, effects of new product visible, the product spreads better. (Example spreading of walkmen and mobile telephones).

51 Difficulty. The more difficult to understand usage, purpose, the more difficult is usage, the slower in the innovation spread. Compatibility. The more marked changes at complementary products requires the innovation, the slower it spreads. Possibility to try. The better is possibility to try the product (example low price), the faster it spreads. With this is connected also partibility – possibility to buy little amount, this supports willingness to try the product. Perceived risk. The lower, the faster in innovation diffuse.

52 Values barriers. Unknown relation price/value (value for money). Innovations have often relatively high prices. Consumer cannot by such innovations, where is no comparison and experience, adequately at his purchase decision justify higher price. Character of social category, group. Changes adept rather categories, groups of younger, more educated. Psychological barriers. Connected with tradition and image. Marketing effort. When appropriately spent means on marketing communication and other parts of marketing mix, the innovation spreads faster.

53 4.4 Situation conditional Situation influences are all factors, that do not eventuate from consumer´s predisposition and that is not possible to understand as impulses producing some consumer behaviour, but at the same time they influence him. Most of situation influences on consumer behaviour is possible to place in one of following groups : Physical circumstances : For example change of weather and other natural events, change of physical ambience of shops, geographical elements and places of institutions.

54 Social circumstances : It is about other persons present at consumer´s decision in all its phases. This way influence consumer behaviour of individual people, who are not members of social groups of consumer. These accidental social interaction, are form of “Word of Mouth”, in this case is reference power lower. Time circumstances : Categorisation of consumer behaviour in certain time scope, that has few levels : Seasonality, events in past and in the future, time necessary fore concrete activity, time to disposal – not only time for purchase, but also time of preparation and usage.

55 - Type of task : Specific argument of purchase or opportunity of usage, information obtaining, binding to specific role. Different connections of purchase for yourself and purchase for others (example present). - Previous conditions : Momentary disposition of consumer (anxiety, pleasure, excitement,…), momentary condition of consumer, financial situation.

56 - Others non expected changes of ambience. For example : changes in traffic, in shop nests and services (goods takeover, different temporary closures, adaptation, changes in personnel), other changes in infrastructure (current is not on,…). In connection with affecting on situation influence develop following tendencies : The bigger is mark loyalty, the less important is affect of situation influence. The bigger is permanent product involvement, the smaller is affect of situation influence. Multiplied usage of product reduces level of situation influence.

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