1. Consumer Decision Making II MKT 750 Dr. West

2. Agenda Discuss Shopping Diary Insights Classical, Modified, and Extended Frameworks Back to Stages of Decision Making Evaluation of Alternative, Decision Rules, Choice and Post-purchase Evaluation A Model of Customer Satisfaction

3. 3 Classical Framework: Preferences & Beliefs Need Recognition Search Evaluation Purchase Decision Post-Purchase Feelings

4. Modified Framework Decision Sequence:Know Feel Do Decision Stages When Product Class is: When Brand is: Need Recognition Information Search Evaluation Behavior Purchase Decision Post-purchase Evaluation NEW FAMILIARNEW FAMILIAR

5. Extended Framework Low Involvement High Involvement Routine Utilitarian/ Functional Hedonic/ Ego-Expressive Decision Making Usage Primary Motivational Conditions Contexts

6. Variations in Choice Utilitarian/ Functional Decision Sequence? Triggers? Problem solving? Search? Choice heuristic/rule? Role of Price? Low Hedonic/ InvolvementEgo Expressive

7. Variations in Use Utilitarian/ Functional Source of satisfaction? Brand Loyalty? Low Hedonic/ InvolvementEgo Expressive

8. 8 Classical Framework: Preferences & Beliefs Need Recognition Search Evaluation Purchase Decision Post-Purchase Feelings

9. Evaluating Alternatives Determine criteria to be used for evaluation of products Assess the relative importance of the each criteria Evaluate each product based on the identified criteria

10. Evaluating Alternatives Criteria for the purchase of a car: Space Reliability Safety Longevity Handling Styling

11. Evaluating Alternatives Assessing Importance: e i Space5 Reliability4 Safety4 Longevity3 Handling3 Styling2 * Importance: 5=Most Important, 1=Least Important

12. Evaluating Alternatives Beliefs Regarding Product Performance: Product Evaluation: 4=Excellent, 3=Very Good, 2=Good, 1=Fair b i ’s Importance e i Toyota Sienna Subaru Outback Volvo Cross Country Space5424 Reliability4343 Safety4334 Longevity3244 Handling3142 Styling2343

13. Decision Rules Cutoffs/Thresholds: restriction or requirements for acceptable performance Signals are product attributes used to infer other product attributes (e.g. high price often infers higher quality)

14. Decision Rules Compensatory Rule: a perceived weakness of one attribute may be offset or compensated for by the perceived strength of another attribute Noncompensatory Rule: a product’s weakness on one attribute cannot be offset by strong performance on another attribute

15. Compensatory Decision Rules Simple additive (Equal Weight):  b i The consumer adds the product evaluations across the set of salient evaluative criteria. The product with the largest score is chosen. Weighted additive:  b i e i Judgments of product evaluations are weighted according to importance

16. Simple Additive (Equal Weight) bibi Toyota Sienna Subaru Outback Volvo Cross Country Space424 Reliability343 Safety344 Longevity244 Handling142 Styling242 152219

17. Weighted Additive bieibiei Importance Toyota Sienna Subaru Outback Volvo Cross Country Space54 (20)2 (10)4 (20) Reliability43 (12)4 (16)3 (12) Safety43 (12)4 (16) Longevity32 (6)4 (12) Handling31 (3)4 (12)2 (6) Styling22 (4)4 (8)2 (4) 577470

18. Noncompensatory Decision Rules: Lexicographic strategy: Brands are compared on their most important attribute, and the winner is chosen. If there is a tie the second most-important is considered, and so on, until a choice is identified

19. Lexicographic Rule Importance Toyota Sienna Subaru Outback Volvo Cross Country Space 5424 Reliability 4343 Safety 4344 Longevity 3244 Handling 3142 Styling 2242

20. Lexicographic Rule Importance Toyota Sienna Subaru Outback Volvo Cross Country Space 5424 Reliability 4343 Safety 4344 Longevity 3244 Handling 3142 Styling 2242

21. Lexicographic Rule Importance Toyota Sienna Subaru Outback Volvo Cross Country Space 5424 Reliability 4343 Safety 4344 Longevity 3244 Handling 3142 Styling 2242

22. Noncompensatory Decision Rules: Elimination by aspects (EBA): Brands are compared on an attribute by attribute basis. Alternatives are eliminated that fall below the consumer imposed cutoffs. Process continues until a single alternative remains.

23. Elimination by Aspects Rule Cutoff = 3Importance Toyota Sienna Subaru Outback Volvo Cross Country Space 5424 Reliability 4343 Safety 4344 Longevity 3244 Handling 3142 Styling 2242

24. Noncompensatory Decision Rules: Conjunctive strategy (Satisficing): Brand are evaluated, one at a time, against a set of thresholds established for each attribute. The first brand that meets or exceeds the threshold for each attribute is chosen.

25. Conjunctive Rule Cutoff = 2 Toyota Sienna Subaru Outback Volvo Cross Country Space 324 Reliability 343 Safety 344 Longevity 244 Handling 142 Styling 242 Very sensitive to order

26. Implications Purchase decisions involve multiple parties Initiator/Gatekeeper – Who starts the process and gathers information Influencer – Whose opinions are sought concerning criteria to evaluate alternatives Decider – The person(s) with authority to determine how money will be spent Buyer – The purchasing agent User – The person(s) who use the product

27. Implications Products are not strictly functional or hedonic Customer service is key Salespeople need to avoid offending the customer Getting into the customer’s consideration set is essential.

28. Determinants of Satisfaction: What happens when product performance doesn’t meet expectations? Assimilation – a reluctance to acknowledge discrepancies via rationalization and attribution Contrast – the tendency to exaggerate differences, a phenomenon known as reactance

29. Assimilation & Contrast Zone of Tolerance AssimilationContrast 10 Favorable 9 Performance 8 7 6 Expectation Unfavorable 5 Performance 4 3 2 1

30. 10 High Expectations Favorable 9 Performance 8 7 6 Unfavorable 5 Performance 4 3 2 1 Expectancy Disconfirmation Dissatisfaction Satisfaction Zone Zone Negative Disconfirmation “Disappointment”

31. 10 High Expectations Favorable 9 Performance 8 7 6 Unfavorable 5 Performance 4 3 2 1 Expectancy Disconfirmation Dissatisfaction Satisfaction Zone Zone Negative Disconfirmation “Betrayal”

32. Expectancy Disconfirmation Dissatisfaction Satisfaction Zone Zone 10 Favorable 9 Performance 8 7 6 Unfavorable 5 Performance 4 3 2 1 Low Expectations Positive Disconfirmation “Ambivalence”

33. Expectancy Disconfirmation Dissatisfaction Satisfaction Zone Zone 10 Favorable 9 Performance 8 7 6 Unfavorable 5 Performance 4 3 2 1 Low Expectations Positive Disconfirmation “Elation”

34. Customer Satisfaction Satisfaction influences repeat buying Positive post-consumption evaluations are essential for retaining customers The likelihood that customers will remain loyal depends on their level of satisfaction

35. Customer Satisfaction Consumers often talk about their consumption experiences A firm’s ability to satisfy customers will affect its success in retaining current customers as well as recruiting new ones It Shapes Word-of-Mouth

36. Customer Satisfaction Monitor satisfaction levels Encourage dissatisfied customers to voice their concerns Have a recovery system in place to address customer concerns Implications for Competitive Strategy

37. Advertising claims Brand names Packaging Price Influencing Expectations

38. Summary of Decision Making & Satisfaction

39. Means-to-an-endEnd-in-itself Choice Process: Low Involvement Routine High Involvement Functional Hedonic/ Ego Expressive Decision Sequence Process Trigger Search Evaluation Decision Rule Price

40. Means to an endEnd in itself Usage Experience: Low InvolvementHigh Involvement Hedonic/ Ego Expressive Satisfaction Model Brand Loyalty

41. Core Concepts to Consider Define the market: What problem is the consumer trying to solve? What goals is the firm helping the consumer attain? What needs, latent or manifest, are being filled?

42. Core Concepts to Consider Decision-making unit: Users Who uses the product or service? Decider/ Buyer Who approves, and who makes the purchase? Influencer Who influences the choice? Initiator/Gatekeeper Who is responsible for initiating the process and gathering information?

43. Core Concepts to Consider Basis for segmentation: Benefit segments Psychographics Use Frequency Heavy & Light users Price Sensitivity Deal prone & Price insensitive Relationship Strength Committed, Switcher

44. Core Concepts to Consider Market Diffusion Process: What were consumers doing before? What could make the product obsolete? What characteristics facilitate adoption? Product versus Consumer Who are early adopters? Laggards?

45. Core Concepts to Consider Decision-making process: Type of product or service Utilitarian/Functional, Hedonic/Ego-expressive, Low Involvement/Routine What triggered the event? Is there a search for information How are alternatives evaluated? How does post-purchase evaluation feed back?

46. Core Concepts to Consider Attributes influencing choice: Product-related Similarities and differences between brands? Which determine attributes choice? What is the relative importance of attributes? Situation-related Why are non-buyers not buying? What prevents need recognition? What obstacles prevent decision making?

47. Core Concepts to Consider How is the product used: How much, how often, when, where, with whom? What would increase the frequency? Who gets credit for success, and blamed for failure? How is the product stored, transported, dispensed? What services accompany product use?

48. Core Concepts to Consider Characterization of the Relationship: What kind of things have gone wrong? What kind of surprises were experienced? Relationship Effects: How likely is the consumer to Recommend the brand to others? Try an extension of the brand? Remain inoculated against competition? How long is the relationship likely to persist? Does the brand command a price premium?

49. Core Concepts to Consider Relationship Effects: How likely is the consumer to Recommend the brand to others? Try an extension of the brand? Remain inoculated against competition? How long is the relationship likely to persist? How many other brands would the consumer consider? Does the brand command a price premium?

50. Assignment Study, Study, Study!!