Decision Making I: Need Recognition and Search BABIN / HARRIS CB PART 4 CHAPTER 12 Decision Making I: Need Recognition and Search ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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. 12-2 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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 Post-Choice Evaluation LO1 12-3 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Decision Making and Choice Value Motivation Emotion LO2 12-4 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Decision Making: 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 12-5 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Decision Making: Experiential and Behavioral Perspectives 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 Behavioral perspective—assumes that many decisions are learned responses to environmental influences. LO2 12-6 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Involvement and Perceived Risk Involvement—represents the degree of personal relevance that a consumer finds in pursuing value from a given act. Perceived risk—the perception of the negative consequences that are likely to result from a course of action and the uncertainty of which course of action is best to take. LO3 12-7 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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 12-8 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Decision Making Decision making approaches: Extended decision making Limited decision making Habitual (“routine”) decision making Extended decision making—consumers search for information that will help them reach a satisfactory decision. Information search: Internal and external sources Lengthy process Occurs when involvement and risk are high. LO3 12-9 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Satisficing The practice of using decision making shortcuts to arrive at satisfactory, rather than optimal, decisions. Causes: Time pressures Search fatigue Budgetary constraints LO3 12-10 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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 12-11 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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 12-12 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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. Inert set—alternatives to which consumers are indifferent. Inept set—unacceptable alternatives. LO4 12-13 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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 12-14 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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 12-15 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Price and Quality 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 be associated with it. Quality—from a consumer perspective, it represents the perceived overall goodness or badness of some product. Consumers do not always seek high quality. LO5 12-16 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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 12-17 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Factors Influencing Amount of Search Product experience Involvement Perceived risk Value of search effort Time availability Attitudes toward shopping Personal factors Situational influencers LO5 12-18 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.