Consumer Decision Making and Beyond CHAPTER FIFTEEN Consumer Decision Making and Beyond

Copyright 2010 Pearson Education, Inc. Learning Objectives To Understand What a Consumer Decision Is. To Understand the Three Levels of Consumer Decision Making. To Understand Four Different Views or Models of Consumer Decision Making. To Understand in Detail the Model of Consumer Decision Making Originally Introduced in Chapter 1. Here is an outline of the topics for Chapter Fifteen. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Learning Objectives (continued) To Understand the Nature and Scope of Consumer Gift Giving. To Understand the Significance of Consuming and Possessing. To Understand the Need for Relationship Marketing. Here is an outline of the topics for Chapter Fifteen. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Levels of Consumer Decision Making Extensive Problem Solving A lot of information needed Must establish a set of criteria for evaluation Limited Problem Solving Criteria for evaluation established Fine tuning with additional information Routinized Response Behavior Usually review what they already know Not all consumer decision-making situations are the same and marketers generally put them into these three groups. At one extreme is extensive problem solving which usually involves a lot of information, whereas routinized response behavior usually requires little or no information. Limited problem solving lies in the middle of these two extremes where new information is often added and a criterion for evaluation is formed. Consumers tend to have little experience with the product category when engaging in extensive problem solving as opposed to being very familiar with a routinized purchase. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Models of Consumers: Four Views of Consumer Decision Making An Economic View A Passive View A Cognitive View An Emotional View There are four types of models which explain why consumers act the way they do. In an economic view, there is perfect competition and the consumer makes rational decisions. They are aware of all choices, can rank their benefits, and can choose the best alternative. Unfortunately for many, the perfect consumer does not exist. On the other extreme is the passive view, in which the consumer is passive to the marketer in making their decisions. Here the consumer plays no role as they would in a cognitive view where the consumer is a thinking problem solver. We have discussed emotions and they are at the center of the emotional model of consumer decision making. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Copyright 2010 Pearson Education, Inc. Discussion Questions How are the four models of consumer decision making similar? How do they differ? To answer this question, try to break each model down to understand the role the consumer and the marketer play. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Consumer Decision Making Figure 15.3 An overview of consumer decision making shows three main sections. The first includes all the external influences on a consumer. This includes sociocultural factors as discussed in previous chapters, as well as the marketer’s efforts. The second section includes the individual’s consumer decision making, which occurs in the three stages of need recognition, prepurchase search, and evaluation of alternatives. This process is guided by psychological factors and the consumer’s experiences. The third major section includes the actual purchase and how the consumer feels and what they think after they purchase the product. This web link brings you to Microsoft’s search engine Bing. How is it better than other search engines in helping consumers through this process? Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Copyright 2010 Pearson Education, Inc. Discussion Question What types of sociocultural inputs would influence the purchase of a: Plasma TV Hybrid vehicle Sugar-free ice cream This discussion question focuses on the first part of the model from the previous slide. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Process - Need Recognition Usually occurs when consumer has a “problem” Need recognition styles Actual state Desired state A consumer usually realizes they have a need when they have a problem. Maybe they are hungry or are having friends over for dinner on Saturday night so they seek out choices in food. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Copyright 2010 Pearson Education, Inc. Prepurchase Search Begins with internal search and then moves to external search The impact of the Internet There are many factors that increase search Product factor Situational factors Social acceptability Consumer factors Once the consumer has decided they have a need, they search through their mind for information on the product or service. After this, they may use the Internet, contact friends, or go to retail locations to learn more about a product. Some consumers will search for information for a long time, whereas others will make the search as short as possible. The time of the search can be related to the complexity and price of the product, the situation, experience with the product, or the social acceptability tied to the product. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Evaluation of Alternatives Evoked set Criteria used for evaluating brands Consumer decision rules Decisions by functionally illiterate population Going online for decision-making assistance Lifestyles as a consumer decision strategy Incomplete information Applying decision rules Series of decisions Decision rules and marketing strategy When looking at the choices available and how they rate, the consumers will blend the list of brands they have acquired with the list of criteria that they have decided is important. The specific brands that the consumer considers is called the evoked or consideration set. A diagram of this set is shown on the following slide. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Copyright 2010 Pearson Education, Inc. The Evoked Set Figure 15-5 The evoked set is the group of acceptable brands that the consumer has found through internal and external search. Unknown brands cannot be in this set since they are unknown. Decision making is very hard for intangible services. This web link helps consumers who are trying to find a doctor – a difficult service to evaluate. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Issues in Alternative Evaluation Evoked Set Criteria used for evaluating brands Consumer decision rules and their application Decisions by functionally illiterate population Going online for decision-making assistance Lifestyles as a consumer decision strategy Incomplete information Applying Decision Rules Series of decisions Decision rules and marketing strategy Consumers will establish criteria which are important to evaluate brands. These are usually product attributes such as auto focus, flash, image stabilization, lens type, size and weight for a new digital camera. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Hypothetical Use of Decision Rules Table 15.7 Mental Statement Compensatory rule I selected the netbook that came out best when I balanced the good ratings against the bad ratings Conjunctive rule I selected the netbook that had no bad features Disjunctive rule I picked the netbook that excelled in at least one attribute Lexicographic rule I looked at the feature that was most important to me and chose the netbook that ranked highest on that attribute Affect referral rule I bought the brand with the highest overall rating This table helps explain some of the decision rules and the statements a consumer would make when basing a decision on the rule. Copyright 2010 Pearson Education, Inc. 14 Chapter Fifteen Slide

Issues in Alternative Evaluation Evoked Set Criteria used for evaluating brands Consumer decision rules and their application Decisions by functionally illiterate population Going online for decision-making assistance Lifestyles as a consumer decision strategy Incomplete information Applying Decision Rules Series of decisions Decision rules and marketing strategy It may be shocking to hear that 20 percent of Americans do not possess the language and math skills required from a typical retail environment. In fact, illiterate consumers make decisions in different ways as seen on the figure on the following slide. They tend to base their decisions on less information and use more basic processing tactics. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Copyright 2010 Pearson Education, Inc. The Decision Process for Functionally Illiterate Consumers - Figure 15.6 This figure presents the decision process for an illiterate consumer. They tend to use a different variety of cognitive and emotional tactics as well as decision heuristics. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Issues in Alternative Evaluation Evoked Set Criteria used for evaluating brands Consumer decision rules and their application Decisions by functionally illiterate population Going online for decision-making assistance Lifestyles as a consumer decision strategy Incomplete information Applying Decision Rules Series of decisions Decision rules and marketing strategy Many consumers will no longer make a decision without going online. In addition, many consumers will purchase products to maintain a lifestyle they have chosen. For many, purchase decisions are related to healthy lifestyles, luxury living, or simplifying their lives. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Coping with Missing Information Delay decision until missing information is obtained Ignore missing information and use available information Change the decision strategy to one that better accommodates for the missing information Infer the missing information In some situations, the consumer does not have all the information they need to make their decision. Some consumers will move ahead by ignoring the missing information, changing their strategy or inferring the missing information. Others will wait until they can find the missing information in the hopes of making a more thorough and sound decision. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Issues in Alternative Evaluation Evoked set Criteria used for evaluating brands Consumer decision rules and their application Decisions by functionally illiterate population Going online for decision making assistance Lifestyles as a consumer decision strategy Incomplete information Applying Decision Rules Series of decisions Decision rules and marketing strategy Consumers can apply their decision rules to similar or dissimilar alternatives. They may decide between a vacation and a new car. They will use decision rules focused on these alternatives and may include attributes such as fun, excited, necessary. In either case, this is just the first decision in a series of decisions. If they pick the vacation, they would have decisions on where to visit, who to bring, where to stay, and what airline to fly. Marketers must be aware of these decision rules so they can send the right messages through the correct channels at the best time to reach the consumer. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Output of Consumer Decision Making Purchase behavior Trial purchases Repeat purchases Long-term commitment Postpurchase evaluation There are three types of purchases consumers make – trial, repeat, and long-term commitment. Trial includes the first time a consumer buys a product when there is potential for repeat purchases. This is their attempt to evaluate the product to see if they really like it. If so, there will be repeat purchases over time. Products which are rarely purchased and kept for a long time are different then those trial-and-repeat purchases. These long-term commitment products include cars, appliances, and housing. In either situation, the consumer will always have postpurchase evaluation, which is further explained on the following slide. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Postpurchase Evaluation Actual Performance Matches Expectations Neutral Feeling Actual Performance Exceeds Expectations Positive Disconfirmation of Expectations Performance Is Below Expectations Negative Disconfirmation of Expectations The performance of a product will meet, exceed, or not meet expectations that the consumer had for the product when they purchased. Consumers and marketers prefer to reduce cognitive dissonance, which is the feeling a consumer has that they made the wrong choice. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Copyright 2010 Pearson Education, Inc Discussion Questions What are four ways that consumers reduce postpurchase dissonance? How can marketers work to help consumers reduce the dissonance? Reflect on the thoughts you might have after you purchase something expensive. If you begin to feel remorse, what might you do to confirm that it was a good decision? Copyright 2010 Pearson Education, Inc Chapter Fifteen Slide

Copyright 2010 Pearson Education, Inc. Gifting Behavior Gifting is an act of symbolic communication, with explicit and implicit meanings ranging from congratulations and love, to regret, obligation, and dominance. The definition of gifting or gift giving or gift exchange is very broad and involves gifts given voluntarily as well as through obligation. Gifts represent about 10 percent of all retail purchases in North America so are an important part of the economy. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Consuming and Possessing Consumers find pleasure in possessing, collecting, or consuming Products have special meanings and memories Consumers purchase and own things and experiences for a variety of reasons. Many people collect as a hobby and we have many possessions which are much more important to us than the price for which they could be sold. Products help us remember the past and view the future. This web link brings you to eBay. What is the most unlikely possession you can imagine people collecting? You will likely find it here. Copyright 2010 Pearson Education, Inc. 24 Chapter Fifteen Slide

A Model of Consumption Figure 15.11 This is a model of consumption that reflects what has been discussed throughout this chapter and through the entire series of PowerPoints that accompany this textbook. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Relationship Marketing Marketing aimed at creating strong, lasting relationships with a core group of customers by making them feel good about the company and by giving them some kind of personal connection with the business. Relationship marketing is important to all firms. Trust between the firm and its consumers will lead to strong and long-lasting relationships. It is usually much more economical for a company to retain an existing customer than to recruit a new customer. Copyright 2010 Pearson Education, Inc. Chapter Fifteen Slide

Relationship Marketing Success Figure 15.12 This figure presents many factors that can account for success in a relationship marketing program. Copyright 2010 Pearson Education, Inc. 27 Chapter Fifteen Slide

Important Questions Draw consumer decision making process and label it. What are the levels of consumer’s decision making process? Explain briefly. Define post-purchase evaluation? What are the three possible outcomes of this evaluation? How do consumers reduce post-purchase cognitive dissonance

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