Chapter 5 Evaluating and Selecting Alternatives 1 After gathering information, consumers then need to begin the process of making a decision about resolving their problem. We will examine the evaluative criteria used; the measurement aspects of evaluative criteria; note that consumers’ judgments can be inaccurate; and that as judgement is difficult, consumers use surrogate indicators; we’ll study the decision rules that may be used; and finally discuss how to utilise this knowledge to formulate marketing strategy. Chapter 5 Evaluating and Selecting Alternatives The nature of evaluative criteria Tools to measurement evaluative criteria Consumers’ individual judgments are not necessarily accurate Role of surrogate indicators Types of decision rules consumers may apply Implications of evaluative criteria for marketing strategy Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Evaluation of Alternatives 2 Evaluative criteria are the various features a consumer looks for in response to a particular problem. How are the evaluative criteria measured? Must determine the most important criteria, assess the products based on how the consumer sees each product based on these criteria, and measure the relative importance of each criterion. Evaluation of Alternatives Evaluation criteria price brand name country of origin Determinants of criteria Measurement of evaluation criteria identify important criteria perception of each product for these alternative performance of each product Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Evaluation of Alternatives (cont.) 3 The consumer determines the alternatives, e.g. brands of car with a six-cylinder engine, then evaluates the alternatives based on criteria perceived to be important. The actual decision process can involve choosing a particular decision rule, whereby the alternatives are examined before a choice is made. We then discuss how this information can be used in marketing. Evaluation of Alternatives (cont.) Determining the alternatives Evaluating alternatives Selecting a decision rule non-compensatory compensatory constructive phased Marketing implications Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Consumer Decision Process Just to recap, consumers recognise that they need to acquire a product and gather information to enable an informed purchase. Consumers gather information about various alternative solutions to a recognised problem, and after they have done so, they evaluate the alternatives and select the course of action that seems most likely to solve the problem 4 Consumer Decision Process

Alternative Evaluation and Selection Process Evaluative criteria are the various features a consumer looks for in response to a particular problem. Price, brand name and country of origin are some of the main criteria that can be used, although this is dependent on the product category. A consumer may choose a particular brand and then compare stores on the price for that product. Before a marketing manager can develop a sound strategy for affecting consumer decisions, they must determine how the evaluative criteria are measured. This involves determining the most important criteria, assessing the products based on how the consumer sees each product based on these criteria, and measuring the relative importance of each criterion. (See page 123.) 5 Alternative Evaluation and Selection Process

The Measurement of Evaluative Criteria See page 124. The Measurement of Evaluative Criteria Before a strategy is developed, the marketing manager must know: Which evaluative criteria are used by the consumer How the consumer perceives alternative products in terms of each criterion The relative importance of each criterion Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Determining which Evaluative Criteria are Used It is important to know, when using direct methods, whether the consumers actually know why they have a preference for the various products/brands. They may not have thought about the criteria; however, this may be a very important research finding in itself. (See page 125 for descriptions of these methods.) Determining which Evaluative Criteria are Used Direct methods Asking consumers Focus groups Observation Indirect methods Projective techniques Perceptual mapping Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Perceived Performance of Six Television Sets This hypothetical information will allow us to learn about the various decision rules that consumers can apply to a given buying situation. The table indicates that some brands are rated as ‘very good’, e.g. Sony for price, or ‘very poor’, e.g. Sharp for price. Other attributes are rated in a similar manner. (See page 125.) Perceived Performance of Six Television Sets

Importance of Evaluative Criteria to Buyers Assume that three individual buyers have different requirements and that we rank their choice to indicate the attributes that are very important to each of them, e.g. price and memory are very important for Buyer A. If we assume that these 3 buyers represent groups of buyers, then this would represent the market segmentation for this product. (See page 125.) Importance of Evaluative Criteria to Buyers

Perceptual Mapping of Soap Brands Another method of evaluating the requirements of buyer groups is to prepare a perceptual map of the segments. With this information, marketers can evaluate how different brands are positioned according to evaluative criteria. (See pages 125–126.) 8 Perceptual Mapping of Soap Brands

Uses of Perceptual Mapping See page 126. Uses of Perceptual Mapping We use this method to help us understand consumers’ perceptions and the evaluative criteria they use We can use this information to determine: How different brands are positioned according to evaluative criteria How the positions of brands change in response to marketing efforts How to position new products using evaluative criteria Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

See page 126 for definitions and descriptions. Determining Consumers’ Judgments of Brand Performance in Terms of Specific Evaluative Criteria Rank-ordering scales Sematic-differential scales Likert scales Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Determining the Relative Importance of Evaluative Criteria See page 127 for a description of the constant sum method. Determining the Relative Importance of Evaluative Criteria Direct methods Constant sum

Determining the Relative Importance of Evaluative Criteria (cont.) See page 127 for a description. Determining the Relative Importance of Evaluative Criteria (cont.) Indirect methods Conjoint analysis A technique that provides data on the structure of consumers’ preferences for product features and their willingness to trade one feature for more of another. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Application of Conjoint Analysis See page 127 for discussion. Application of Conjoint Analysis

The technique of conjoint analysis can be used to determine the ‘ideal’ product for a particular market segment. Consumers are required to ‘trade-off’ the attributes against each other, for example a decision to purchase a computer requires trading off various attributes such as price, screen size, etc. against each other. Thus through research it is possible to measure consumers’ perception of the ‘ideal’ computer. A retailer and/or manufacturer can use this information and may decide to supply this product to the market segment. Using Conjoint Analysis to Determine the Importance of Evaluative Criteria

Individual Judgment and Evaluative Criteria See page 129 for descriptions of these. (An example could be demonstrated in class to show this, e.g. Cola taste test.) Individual Judgment and Evaluative Criteria The accuracy of individual judgments Use of a surrogate indicator Sensory discrimination Just-noticeable difference Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Use of Surrogate Indicators See page 130 for detailed discussion of surrogate indicators. Use of Surrogate Indicators Consumers frequently use an observable attribute of a product to indicate the performance of the product on a less observable attribute Reliance depends on: Predictive value Confidence value Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Use of Surrogate Indicators (cont.) See pages 130–132 for detailed discussion of price and brand as indicators. Use of Surrogate Indicators (cont.) Price Brand Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Use of Price to Indicate the Quality of Jewellery See page 131 for discussion. Use of Price to Indicate the Quality of Jewellery

Evaluative Criteria, Individual Judgments and Marketing Strategy See page 133 for discussion. Evaluative Criteria, Individual Judgments and Marketing Strategy Consumers use surrogate indicators Marketers can ensure that their products are superior for these criteria by Making direct reference to them in ads Using brand names Using celebrity endorsement Using country-of-origin Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Use of Celebrity Endorsement See page 133 for discussion. Use of Celebrity Endorsement

Use of Country of Origin See pages 133–134 for discussion. Use of Country of Origin

Decision Rules Used by Consumers 10 When consumers judge alternative brands on several evaluative criteria, they must have some method for selecting one brand from the various choices. Decision rules serve this function. A decision rule specifies how a consumer compares two or more brands. Five commonly used decision rules are the disjunctive, conjunctive, lexicographic, elimination-by-aspects, and compensatory rules. Marketing managers must be aware of the decision rule(s) used by the target market, since different decision rules require different marketing strategies. (See pages 134–135.) Decision Rules Used by Consumers Conjunctive Disjunctive Elimination-by-aspects Lexicographic Compensatory Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

Decision Rules Used by Consumers (cont.) See page 134ff for discussion. Decision Rules Used by Consumers (cont.)

Summary of the Decision Rules Conjunctive: Buyers select all brands (or the first brand) that surpass(es) a minimum level on each relevant evaluative criterion. Disjunctive: A buyer would select all brands (or the first brand) that surpass(es) a satisfactory level on any relevant evaluative criterion. So you may choose the TV that is the cheapest with a large screen. Elimination-by-aspects: To choose a TV using this rule, a consumer would rank the evaluative criteria in terms of importance. Start with the most important criterion and select the brand that scores highest on that dimension. If two or more brands tie, continue through the attributes in order of importance until one of the remaining brands outperforms the others. Lexicographic: rank the brands and choose the brand that is the highest on the most important attribute. For example, this may be price, therefore a consumer may choose the cheapest TV set. Compensatory: After ranking the products and rating the importance of each attribute, an overall score is calculated—the TV with the highest score is chosen. Summary of the Decision Rules 1. Conjunctive brands that meet a minimum level on each evaluative criterion 2. Disjunctive brands that meet a satisfactory level on any relevant evaluative criteria 3. Elimination-by-aspects rank brands on evaluative criteria select highest ranking brands until only one is left 4. Lexicographic rank brands on evaluative criteria importance select the one that is highest on most important criteria 5. Compensatory Select brand that has the highest score over all the relevant evaluative criteria Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins

See page 139. Understanding Target Buyers’ Decision Rules to Achieve Product Positioning

Alternative Decision Rules and Selection of a Television Set For interest, we note that different brands of TV set would be chosen depending on the particular decision rule that is being used by the consumer segments. (See page 138.) Alternative Decision Rules and Selection of a Television Set

Next Lecture… Chapter 6: Outlet Selection and Purchase Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Consumer Behaviour 4e by Neal, Quester, Hawkins