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Chapter 8 Decision Making 8-1 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall CONSUMER BEHAVIOR, 10e Michael R. Solomon.

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Presentation on theme: "Chapter 8 Decision Making 8-1 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall CONSUMER BEHAVIOR, 10e Michael R. Solomon."— Presentation transcript:

1 Chapter 8 Decision Making 8-1 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall CONSUMER BEHAVIOR, 10e Michael R. Solomon

2 8-2 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter Objectives When you finish this chapter, you should understand why: 1. Consumer decision making is a central part of consumer behavior, but the way we evaluate and choose products varies widely. 2. A decision is actually composed of a series of stages that results in the selection of one product over competing options.

3 8-3 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter Objectives (continued) Decision making is not always rational. Our access to online sources is changing the way we decide what to buy. We often fall back on well-learned “rules- of-thumb” to make decisions. Consumers rely upon different decision rules when evaluating competing options.

4 Learning Objective 1 Consumer decision making is a central part of consumer behavior, but the way we evaluate and choose products varies widely. 8-4 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

5 8-5 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Figure 8.1 Stages in Consumer Decision Making

6 8-6 Figure 8.2 Continuum of Buying Decision Behavior Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

7 For Reflection Is it a problem that consumers have too many choices? Would it be better to have less choices? How does it affect consumer decision-making? 8-7 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

8 Learning Objective 2 A decision is actually composed of a series of stages that results in the selection of one product over competing options. 8-8 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

9 8-9 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Figure 8.1: Steps in the Decision-Making Process Problem recognition Information search Evaluation of alternatives Product choice

10 8-10 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Figure 8.3 Problem Recognition

11 8-11 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Stage 1: Problem Recognition Occurs when consumer sees difference between current state and ideal state Need recognition: actual state declines Opportunity recognition: ideal state moves upward

12 8-12 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Stage 2: Information Search The process by which we survey the environment for appropriate data to make a reasonable decision Prepurchase or ongoing search Internal or external search Online search

13 8-13 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Table 8.2 A Framework for Consumer Information Search Prepurchase versus Ongoing Search Prepurchase SearchOngoing Search DeterminantsInvolvement with purchase Involvement with product MotivesMaking better purchase decisions Building a bank of information for future use OutcomesBetter purchase decisionsIncreased impulse buying

14 Search for Information Internal search: Retrieving knowledge from memory or genetic tendencies External search: Collecting information from peers, family, and the marketplace

15 Search Internal Search MEMORYMEMORY Need Recognition Attention Comprehension Acceptance Retention Exposure CDP Model External Search Stimuli Peers Family Marketplace

16 Internal Search

17 External Search When motivated by an upcoming purchase decision, external search is known as pre-purchase search When information acquisition takes place on a relatively regular basis, regardless of sporadic purchase needs, it is known as ongoing search

18 8-18 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Deliberate versus “Accidental” Search Directed learning: existing product knowledge obtained from previous information search or experience of alternatives Incidental learning: mere exposure over time to conditioned stimuli and observations of others

19 What to Search? Which choice alternatives should the consumer search? Those choice alternatives that consumers gather information about during pre-purchase search are referred to as the external search set

20 Where to Search? Different informational sources are available to the consumer

21 Where to Search? Consumers are more likely to rely upon the opinions of other individuals than information sources with vested interests in their decisions Other consumers respected for their expertise in a particular product category are referred to as opinion leaders or influentials

22 Consumer Search on the Internet Consumers are increasingly turning to the Internet for their search needs

23 Consumer Search on the Internet Particular search words or phrases used by consumers fall into three categories 70% Generic terms; representing product categories 20% Specific retailers; e.g., Best Buy, Gateway.com 10% Specific products; e.g., Canon digital camcorder, HP notebook

24 How Much to Search? Cost versus benefit perspective: people search for decision-relevant information when the perceived benefits of the new information are greater than perceived costs of acquiring the information

25 8-25 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Figure 8.5 Amount of Information Search and Product Knowledge

26 Learning Objective 3 Decision making is not always rational Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

27 8-27 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Do Consumers Always Search Rationally? Some consumers avoid external search, especially with minimal time to do so and with durable goods (e.g. autos) Symbolic items require more external search Brand switching: we select familiar brands when decision situation is ambiguous Variety seeking: desire to choose new alternatives over more familiar ones

28 8-28 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Biases in Decision-Making SEARCH Process Mental accounting: framing a problem in terms of gains/losses influences our decisions Sunk-cost fallacy: We are reluctant to waste something we have paid for Loss aversion: We emphasize losses more than gains Prospect theory: risk differs when we face gains versus losses

29 8-29 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Minolta Understands Perceived Risk

30 8-30 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Figure 8.6 Five Types of Perceived Risk Monetary risk Functional risk Physical risk Social risk Psychological risk

31 8-31 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall An Appeal to Social Risk

32 8-32 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Alternatives Complete Market Set (all available alternatives for problem/need) Evoked Set (comes to mind for problem/need from internal & external search) Consideration Set (actually considered to solve problem/need) Awareness Set (all available alternatives aware of from internal/external search)

33 Constructing the Consideration Set Primarily from Memory Retrieval set: consideration set that depends on recall of alternatives from memory Not all alternatives retrieved from memory will be considered Consumers limit their consideration to those alternatives toward which they are favorably predisposed

34 Pre-purchase Evaluation “EVOKED SET” Alternatives & Evaluation Criteria from Internal & External Search

35 8-35 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Figure 8.7 Levels of Abstraction

36 8-36 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Strategic Implications of Product Categorization Position a product Identify competitors Create an exemplar product Locate products in a store

37 8-37 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Product Choice: How Do We Decide? Once we assemble and evaluate relevant options from a category, we must choose among them Decision rules for product choice can be very simple or very complicated Prior experience with (similar) product Present information at time of purchase Beliefs about brands (from advertising)

38 Deciding How to Evaluate Choice Alternatives Rely on preexisting product evaluations stored in memory Construct new evaluations based on information acquired through internal or external search Direct Experience: prior purchase or consumption experiences with product Indirect Experience: experiences or impressions gained second-hand

39 8-39 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Information Necessary for Recommending a New Decision Criterion It should point out that there are significant differences among brands on the attribute It should supply the consumer with a decision-making rule, such as if, then It should convey a rule that is consistent with how the person made the decision on prior occasions

40 Constructing New Evaluations The Categorization Process: the evaluation of a choice alternative based on the evaluation of the category to which it is assigned Categories may be general (drinks) or specific (colas) Evaluation of a category can be transferred to a new product assigned to that category Brand extensions allow firms to use categorization to their advantage

41 Constructing New Evaluations Noncompensatory Evaluation Strategies : a product’s weakness on one attribute cannot be offset by strong performance on another attribute

42 Constructing New Evaluations Noncompensatory Evaluation Strategies Lexicographic strategy: brands are compared initially on the one most important attribute, and the winner is chosen. If more than one is evaluated similarly on that attribute, the second most important is considered, and so on, until a winner is identified. Elimination by aspects: similar to the lexicographic strategy; however, the consumer imposes cutoffs Conjunctive strategy: each brand is compared, one at a time, against a set of cutoffs which is established for each salient attribute. If a brand meets the cutoffs for all attributes, it is chosen.

43 Constructing New Evaluations Noncompensatory Evaluation Strategies

44 Constructing New Evaluations Compensatory Evaluation Strategies: a perceived weakness of one attribute may be offset or compensated for by the perceived strength of another attribute Simple additive: the consumer counts or adds the number of times each alternative is judged favorably in terms of the set of salient evaluative criteria. The alternative with the largest number of positive attributes is chosen. Weighted additive: judgments about an alternative’s attribute performance are weighted by the attribute’s importance. The alternative with the best overall performance is chosen.

45 BRANDSPRICE (1-5) QUALITY (1-5) CONVENIENCE (1-5) TOTAL A42511 B2529 COMPENSATORY DECISION RULES Simple Additive Weighted Additive BRANDSPRICE (20%) (1-5) QUALITY (50%) (1-5) CONVENIENCE (30%) (1-5) TOTAL (100%) A4 x.2 = 0.82 x.5 = 15 x.3 = B2 x.2 = 0.45 x.5 = 2.52 x.3 =

46 8-46 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Neuromarketing Uses functional magnetic resonance imaging, a brain-scanning device that tracks blood flow as we perform mental tasks Marketers measure consumers’ reactions to movie trailers, choices about automobiles, the appeal of a pretty face, and loyalty to specific brands

47 8-47 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall For Reflection What risky products have you considered recently? Which forms of risk were involved?

48 Learning Objective 4 Our access to online sources changes the way we decide what to buy Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

49 8-49 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Cybermediaries The Web delivers enormous amounts of product information in seconds Cybermediary: helps filter and organize online market information Examples: Shopping.com, BizRate.com

50 Learning Objective 5 We often fall back on well-learned “rules- of-thumb” to make decisions Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

51 8-51 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Heuristics Product Signals Market Beliefs Country of Origin

52 8-52 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Choosing Familiar Brand Names Zipf’s Law: our tendency to prefer a number one brand to the competition Consumer inertia: the tendency to buy a brand out of habit merely because it requires less effort Brand loyalty: repeat purchasing behavior that reflects a conscious decision to continue buying the same brand

53 8-53 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter Summary Decision making is a central part of consumer behavior and decisions are made in stages Decision making is not always rational We use rules of thumb and decision rules to make decisions more efficiently


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