1 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4 Decision Making I: Need Recognition and Search

2 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 Learning Outcomes Understand the activities involved in the consumer decision-making process. Describe the three major decision-making research perspectives. Explain the three major types of decision-making approaches. Understand the importance of the consideration set in the decision-making process. Understand the factors that influence the type and amount of search performed by consumers. LO 12-1 LO 12-2 LO 12-3 LO 12-4 LO 12-5

3 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 ▮ Understand the activities involved in the consumer decision-making process. LO 12-1

4 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 12-1

5 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 12-1

6 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 Decision Making and Choice Value Motivation Emotion

7 Copyright © 2014 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 101 The “best” schools are not always the best choice for students. © REPRINTED WITH PERMISSION OF THE PRINCETON REVIEW

8 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 12-2

9 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Rational Perspective What is rational to some may be irrational to others. ©CJ GUNTHER/EPA/LANDOV Would you pay over $1,000 for a single season ticket to a basketball game?

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.

11 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

12 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 Extended Decision Making ▮ Consumers search for information that will help them reach a satisfactory decision. ▮ Information search Internal sources External sources ▮ Lengthy process: careful evaluation of brand attributes (one at a time) ▮ Occurs when involvement and risk are high.

13 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13 Limited Decision Making ▮ Very little search for information. ▮ Decisions based on prior beliefs about products and their attributes. Cognitive shortcuts, heuristics ▮ Occurs frequently ▮ Occurs when involvement and risk are relatively low.

14 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14 Habitual Decision Making ▮ Consumers do not seek information at all when a problem is recognized. ▮ Choice is often based on habit. Efficient – minimal time/energy ▮ 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.

15 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Habitual Decision Making Loyalty programs, such as reward cards, provide benefits for consumers and marketers. PRNEWSFOTO/BEST WESTERN INTERNATIONAL

16 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Where’s the Loyalty? COMMENT: Consumers have shifted from brand loyalty to store loyalty… Do you agree or disagree?

17 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17 Satisficing ▮ The practice of using decision making shortcuts to arrive at satisfactory, rather than optimal, decisions. ▮ Causes: Time pressures Search fatigue Budgetary constraints

18 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 4 STEPS ONE AND TWO OF THE CONSUMER DECISION MAKING MODEL (discussion content starts here) STEPS ONE AND TWO OF THE CONSUMER DECISION MAKING MODEL (discussion content starts here)

19 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 STEP ONE: Need Recognition ▮ Need recognition – decline in actual 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

20 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Desired State Desired states changed dramatically with the introduction of the iPad. ©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. ©BRENDON O’HAGAN/AFP/GETTY IMAGES

21 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21 STEP TWO: Search Behavior Ongoing Prepurchase Internal External Information Overload

22 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22 Do Consumers Always Search Rationally? ▮ Some consumers tend to avoid external search, especially with minimal time to do so and with durable goods ▮ Are all decisions rational?

23 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 12-4

24 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24 External Search ▮ Gathering of information from external sources ▮ Factors considered: Ease of obtaining information from the source Objectivity of the source Trustworthiness of the source The speed with which the information can be obtained

25 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25 Evaluative Criteria ▮ Product attributes that consumers consider when reviewing possible solutions to a problem ▮ Two that are used across almost all consumer decisions: Price Quality

26 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26 Price & Quality ▮ PRICE: Information signaling how much potential value may be derived from consuming something. ▮ QUALITY: From a consumer perspective, it represents the perceived overall goodness or badness of some product. Consumers do not always seek high quality.

27 Copyright © 2014 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 Lowers search costs Provides hedonic value Information control ©VARIO IMAGES GMBH & CO. KG/ALAMY

28 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28 The Internet at Your Fingertips ▮ Consumers can buy directly from sponsored links on other sites, which produces an easy online shopping experience ▮ As mobile technologies continue to evolve, consumers will be able to do everything on the go

29 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29 Factors Influencing Amount of Search ▮ Involvement ▮ Perceived risk ▮ Value of search effort ▮ Time availability ▮ Attitude toward shopping ▮ Personal factors ▮ Situational influencers

30 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 12-5

31 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 31 Search Regret ▮ Negative emotions that come from a failed search process ▮ When consumers are unable to find a solution to their problems, the decision-making process stops Consumers may feel the process was a wasted effort

32 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 32 Search Regret - Example ▮ Reuben browsed through 3 online retailers’ websites looking for the game, Assassin's Creed Brotherhood ▮ Every website said that the product is out of stock ▮ He was frustrated by the amount of time he spent looking for the game