Chapter 11 Decision Making I: Need Recognition and Search Babin/Harris © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Learning Outcomes Understand the activities involved in the consumer decision making process. Describe the three major decision making research perspectives. Explain the three major decision making approaches. Understand the importance of the consideration set in the decision making process. Understand the factors that influence the amount of search performed by consumers. © 2009 South-Western, a division of Cengage Learning.

Basic Consumption Process and Decision Making Need Want Exchange Costs and Benefits Reaction Value Decision Making Process Need recognition Search for information Evaluation of alternatives Choice LO1 © 2009 South-Western, a division of Cengage Learning.

Decision Making Perspectives Rational decision making Experiential decision making Behavioral decision making LO2 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Rational Perspective Considered to be the traditional approach. Assumes: Consumers diligently gather information about purchases, compare alternatives, and make informed decisions. Human beings are rational. Fits well with the concept of utilitarian value. LO2 © 2009 South-Western, a division of Cengage Learning.

Experiential Perspective Assumes that consumers often make purchases and reach decisions based on the affect, or feeling, attached to the product or behavior under consideration. “Feel-do-think” hierarchy Often focuses on hedonic value. LO2 © 2009 South-Western, a division of Cengage Learning.

Behavioral Perspective Assumes that many decisions are learned responses to environmental influences. LO2 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Involvement Represents the degree of personal relevance that a consumer finds in pursuing value from a given act. LO3 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Types of Risk Financial – cost of the product. Social – how others view the purchase. Performance – likelihood of product performing as expected. Physical – safety of the product. Time – search time and time for product to be serviced or maintained. LO3 © 2009 South-Western, a division of Cengage Learning.

Decision Making Approaches Extended decision making Limited decision making Habitual (“routine”) decision making LO3 © 2009 South-Western, a division of Cengage Learning.

Extended Decision Making Consumers search for information that will help them reach a satisfactory decision. Information search Internal sources External sources Lengthy process Occurs when involvement and risk are high. LO3 © 2009 South-Western, a division of Cengage Learning.

Limited Decision Making Very little search for information. Decisions based on prior beliefs about products and their attributes. Occurs frequently Occurs when involvement and risk are relatively low. LO3 © 2009 South-Western, a division of Cengage Learning.

Habitual Decision Making Consumers do not seek information at all when a problem is recognized. Choice is often based on habit. Brand loyalty – a deeply-held commitment to rebuy a product or service regardless of situational influences that could lead to switching behavior. Brand inertia – consumer simply buys a product repeatedly without any real attachment. LO3 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Satisficing The practice of using decision making shortcuts to arrive at satisfactory, rather than optimal, decisions. Causes: Time pressures Search fatigue Budgetary constraints LO3 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Need Recognition A consumer perceives a difference between an actual state and a desired state. “Opportunity recognition” – a consumer’s actual state does not change, but their desired state changes. Influences on desired states: Reference group information Consumer novelty seeking Cognitive thought processes LO4 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Search Behavior The behavior that consumers engage in as they seek information that can be used to satisfy needs. Categories: Ongoing search Prepurchase search Internal search External search LO4 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Consideration Set Universal set – total collection of all possible solutions to a recognized need. Awareness set – brands or alternatives to which a consumer is aware. Consideration set – acceptable alternatives. Inept set – unacceptable alternatives. Inert set – alternatives to which consumers are indifferent. LO4 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. External Search Includes the gathering of information from external sources. Factors considered: Ease of obtaining information from the source. Objectivity of the source. Trustworthiness of the source. How timely the information can be obtained. LO5 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Evaluative Criteria The individual attributes or elements of a product or decision that are used by consumers in making a decision. Two that are used across almost all consumer decisions: Price Quality LO5 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Price Information signaling how much potential value may be derived from consuming something. Negative view of price – lower price is more desirable. Positive view of price – price signals how desirable a product is and how much prestige may associated with it. LO5 © 2009 South-Western, a division of Cengage Learning.

© 2009 South-Western, a division of Cengage Learning. Quality From a consumer perspective, it represents the perceived overall goodness or badness of some product. Consumers do not always seek high quality. LO5 © 2009 South-Western, a division of Cengage Learning.

External Search and the Internet Ways that the Internet improves consumer search activities: Can lower search costs and make the process more productive. Search process can deliver hedonic value. Consumers can control information flow. LO5 © 2009 South-Western, a division of Cengage Learning.

Factors Influencing Amount of Search Product experience Involvement Perceived risk Value of search effort Time availability Attitudes towards shopping Personal factors Situational influencers LO5 © 2009 South-Western, a division of Cengage Learning.