1. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski CONSUMER DECISION-MAKING PROCESS

2. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-2 Consumer decision-making process At the end of this session, you should understand : The concept of consumers as decision makers Media and production consumption trends in Australia and be able to describe and explain a model of consumer decision making The influences on the decision-making process How the concept of involvement influences buying behaviour The impact of customer relationship marketing strategies and loyalty schemes on behaviour The Internet revolution and its influence on buyer behaviour

3. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-3 Decisions, decisions You have a wedding to attend and you have to buy a present and an outfit Write down the steps that you think you would go through to make these two purchases Discuss this with a partner and note any differences between the processes you identified and perhaps some of the factors influencing your decision making

4. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-4 Decisions and problems Decision - choice between alternatives that can potentially solve a problem Problem - the difference between the consumer’s actual state and their desired state See EXHIBIT 3.2 Another problem-solving product from Tontine, page 58 PowerPoint slides supplied on the Instructor Resource CD to accompany Consumer Behaviour include advertisement images.

5. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-5 The problem recognition process

6. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-6 Needs A need is a feeling that something is missing - may be emotional or physical in nature Utilitarian needs are based on the functional use Hedonic needs are based on emotional benefits See EXHIBIT 3.4 Palmolive Spa offers the hedonic benefit of relaxation, page 60. PowerPoint slides supplied on the Instructor Resource CD to accompany Consumer Behaviour include advertisement images.

7. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-7 Consumption trends Relaxation time is important and products or services to enhance this are sought Increased demand for one-stop shopping, particularly with aged market Intense competition between major retailers for FMCG market Increased consumer choice and frustration with amount of choice Information bombardment at all levels Consumers seeking more information before making purchases

8. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-8 Consumption trends (contd.) 18-35 year old males more informed about technology than other consumers Women still perform the majority of domestic duties, despite increased participation in the workforce Phone and Internet banking becoming increasingly popular Increased demand for cleaning, gardening and domestic services, particularly for 35-54 age group Uncertainty about the future encouraging a ‘spend now’ mentality, leading to increased household debt Suspicion of large corporations, making ‘trusted spokespersons’ more important to consumers

9. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-9 Media consumption trends and marketing communication Communication clutter is making the message of the marketer more difficult to notice or understand Strategies such as the use of ‘reality’ television is giving new success to related industries – e.g. Backyard Blitz and DIY Rescue prompting the sales of landscaping, gardening, building and decorating products and services Increased use of the Internet for communicating to markets, particularly the younger consumers

10. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-10 ‘The Internet persuaders’ - Activity Case in point 3.1 Read the above case study and discuss the associated questions Discuss

11. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-11 The decision-making process Types of decisions – Extended search decisions  Likely to involve a high level of time and effort in information search, expense and risk  Product or brand substitution is unlikely – e.g. house, car – Limited search decisions  Involves some search but the buyer may settle for a substitute  These purchase items are known as shopping goods – e.g. digital camera – Habitual or routine decisions  Everyday purchases that are difficult to influence or change – e.g. milk or bread

12. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-12 Types of consumer decisions and extent of problem solving

13. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-13 Marketing tactics High-involvement decisions – Ensure information is readily available Low-involvement decisions – Plan point of purchase reminders and in store promotions – Link the low involvement situation, e.g. tissues, with an emotional appeal to create an association with the product Marketing stimuli are more noticeable if they: – Fit with an individual's existing beliefs and values – Are trustworthy and believable – Are related to current needs – Do not create risk – Are easy to understand

14. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-14 The complex process of consumer decision making

15. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-15 Appealing to needs See EXHIBIT 3.5 Jeep appeals to the need for freedom on page 70 and EXHIBIT 3.8 Appealing to an unmet need for migraine relief, page 71. PowerPoint slides supplied on the Instructor Resource CD to accompany Consumer Behaviour include advertisement images.

16. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-16 Search and involvement Involvement – The amount of physical and mental effort and search that a consumer puts into a decision – This effort is influenced by the level of importance of the decision – e.g. emotional or financial risk Types of involvement – Situational – e.g. wedding outfit – Enduring involvement, a more permanent involvement reflected across a range of decisions – e.g. a consumer’s self perception as a fashionable wealthy person will influence all purchase decisions

17. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-17 Involvement Factors influencing involvement: – Personal involvement – Situation involved in at the time of purchase – Social visibility – Perceived risk of negative consequences – Previous experience As decision making becomes more complex, consumers rely more on previous experience, knowledge, attitudes and the advice of others and less on available information

18. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-18 Searching – May take months or less than a second Factors that influence additional search include: – Belief that current known brands are inadequate – More information on known brands is required – Friends or other information sources provide messages that conflict with current knowledge – A high degree of risk is involved and consumers require confirmation of their decisions Internal search – Memory – e.g. past purchases External search – Internet, printed media, advertising, friends and others Market mavens – Actively seek information on topics of interest

19. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-19 The internal search process and decision alternatives

20. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-20 Costs and benefits influence commitment to search

21. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-21 Evaluation – Consumers try to determine how well a product or service satisfies a particular need – Marketers determine what is important to consumers to ensure their products are different, distinct and best satisfy the need – Critical attributes  The product attributes that the consumer perceives as most important – Compensatory evaluation  When alternatives exist, consumers decide the benefits of all offerings in order to make a decision – Non-compensatory evaluation  Comparison of alternatives against specific criteria

22. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-22 Purchase and post purchase behaviour Where to spend? – Retailer vs supplier – Increased use of Internet and catalogue direct mail shopping – Personal shopping as an experience Happy or unhappy with purchase? – Post-cognitive dissonance  The uncomfortable post-purchase state that may exist when a choice between alternatives has been made  Increases with the level of financial or emotional risk involved in the decision  Marketers can provide information to satisfy consumers seeking post-decision reinforcement

23. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-23 Customer relationship management Gaining maximum value from marketing relationships with customers Profitability is higher with long-term existing customers as opposed to constantly seeking new customers with marketing efforts For example: – Regular car wash customers are encouraged by personal contact with car wash manager or staff to upgrade to a regular wax and vacuum for a discounted price – Relationships can also be built with the cleaning products suppliers, to ensure good prices, and the staff, to ensure they are friendly and efficient – Alternatively, the firm could increase advertising but may not increase sales enough to cover the cost of the advertising

24. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-24 Loyalty marketing schemes Loyalty schemes are designed to obtain repeat business from customers – e.g. FlyBuys and Frequent Flyers programs Loyalty may or may not be obtained in the long run Rather than loyalty, a scheme may result only in short-term repeat business Carefully targeted direct marketing is often a more effective means of building relationships with consumers

25. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-25 The Internet revolution and buyer behaviour It is generally accepted that the Internet makes life easier for consumers The Internet is still in the introduction phase of the Product Life Cycle Internet sites must work to reinforce the consumer’s decision Personal shopping experiences such as personal attention must be recreated in the online environment Emotional and functional needs must be met by online shopping Security and the ability to seek further information are still issues A personal presence, such as the direct sales representative contact telephone numbers or email address, are important

26. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-26 Six segments of Internet users Simplifiers – Do not spend long online and want quick, reliable transactions Surfers – A small group who spend a lot of time online, enjoy searching, but are not particularly loyal Bargainers – This group are after the best deal they can get online Connectors – A segment of consumers who are new to the Internet, investigate ways to purchase, but prefer the security of offline purchasing Routiners – Do not visit many sites, preferring to use only a small number Sporters – Use a small number of sport and entertainment sites

27. Copyright  2005 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour by Karen Webb Slides prepared by Sarah Fletcher and Morena Dobrowolski 3-27 Quiz time What is meant by: – Market mavens – Utilitarian needs – Hedonic needs – External searches – Compensatory evaluation – Post-cognitive dissonance – Problems – Needs – Limited search decisions – High involvement decisions – Critical attributes – Surfers