2. Decision Making and Involvement PDF

Preview

Summary

decision making notes...

Description

Decision Making and Involvement – Lecture 2:

FROM CHOICE TO DECISION MAKING: -

The decision-making process assumes that we seek to solve a problem or achieve a desired goal. A consumer purchase is a response to a problem. Solutions to some goals may be relatively simple, others are more complex.

CONSUMERS AS PROBLEM SOLVERS: -

-

-

Consumer decision-making is a central part of consumer behaviour, but the way we evaluate and choose products varies widely, depending on such dimensions as the degree of novelty or risk related to the decision. We almost constantly need to make decisions about products. Some of these decisions are very important and entail great effort, whereas we make others on a virtually automatic basis. The decision-making process is further complicated because of the sheer number of decisions we need to make in a marketplace environment characterised by consumer hyper choice. (too many choices)

PERSPECTIVES ON DECISION MAKING: -

-

-

The rational perspective – people calmly and carefully integrate as much information as possible with what they already know about a product, painstakingly weighing the pluses and minuses of each alternative, and arriving at a satisfactory decision. Behavioural influence perspective – (in conditions of low involvement) where decisions are made as a result of a learned response to environmental cues, e.g. buying on impulse as a result of a ‘special offer’ in a shop. Experiential perspective – in conditions of high involvement but where the selection made cannot be explained in an entirely rational manner.

TYPES OF CONSUMER DECISIONS:

-

Decision processes can be considered by the amount of effort that goes into the decision each time it must be made. Three forms exist: Extended problem-solving – there is a fair degree of risk and we use internal search and external sources. Limited problem-solving – this is a simple, straightforward decision process. Habitual decision-making refers to choices that we make with little or no conscious effort. This form is characterised by automaticity.

INVOLVEMENT: -

-

Involvement is the perceived relevance of a purchase to a consumer o Level of involvement is a key factor influencing the decision-making process. Extended problem solving = high involvement o Undertake extensive information search and evaluation of alternatives (associated with higher levels of risk) o active learning involves the acquisition of knowledge before purchase and therefore extensive information search Habitual decision-making = low involvement o Passive learning is the acquisition of knowledge without active learning (use beliefs) Limited problem solving = consumer less motivated to search for information or evaluate alternatives High involvement = cars Low involvement = toothpaste

LEARNING IN LOW AND HIGH INVOLVEMENT DECISION MAKING:

HIGH AND LOW INVOLVEMENT PURCHASES:

TYPES OF INVOLVEMENT: -

Product involvement is the perceived personal relevance of the product, based on needs, values, or interest. Message-response involvement reflects the consumer’s interest in marketing communications. Enduring involvement is ‘the pre-existing relationship between an individual and the object of concern’ (Houston and Rothschild, 1978, 3). Ego involvement is when consumers perceive products or brands as relevant to their personal interests.

HOW TO INCREASE INVOLVEMENT: -

Link the brand to hedonic needs Use distinctive or novel ways of communicating your product Use celebrities Tell a story Build a relationship Get the consumer to participate

COGNITIVE DECISION MAKING: -

-

-

Traditionally, consumer researchers approached decision-making from an informationprocessing perspective i.e. a rational perspective. According to this view, people calmly and carefully integrate as much information as possible with what they already know about a product, painstakingly weigh the pluses and minuses of each alternative, and arrive at a satisfactory decision. Marketers should carefully study and understand the consumer’s decision making process. Each step in the decision making process should be studied so marketers can understand how the consumer weighs information, form beliefs about options and how they select one criteria over others. WHY??- So marketers can develop products and promotional strategies that supply the information that consumers will look for in the most effective formats

STEPS IN CONSUMER DECISION MAKING:

1. PROBLEM RECOGNITION – - Problem recognition occurs when we experience a significant difference between our current state of affairs and some desired or ideal state. It is when a consumer recognises that there is a need to take action. - Problems can arise in two ways: - Need recognition – when a current possession malfunctions. - Opportunity recognition – the desire for something new. - Marketers’ role in problem creation: - Primary demand, encouraging consumers to use products regardless of the brand they choose. - Secondary demand, encouraging consumers to prefer one brand over another. - Problem Recognition occurs whenever the consumer sees a significant difference between his or her current state and some desired or ideal state.

MARKETERS ROLE IN PROBLEM CREATION: -

Problem recognition can occur naturally but can be spurred on by marketers HOW?? Primary Demand- Marketers create a primary demand where consumers are encouraged to buy a product regardless of brand e.g. mobile phones or smartphones Secondary Demand- Marketers create secondary demand where consumers are prompted to buy a certain brand other the other e.g. Apple or Samsung Secondary demand can only occur once primary demand has happened

2. INFORMATION SEARCH: - Information Search is the process in which the consumer surveys his or her environment for appropriate data to make a reasonable decision.

-

Internal vs external information search – internal searches of our memory banks helps consumers assemble information about different product alternatives. External information searches (advertisements, etc.) helps consumers to supplement current knowledge.

-

-

Deliberate vs accidental search – directed learning where consumers actively seek information or more incidental learning where consumers passively absorb information in their day-to-day routines. What examples can you think of incidental learning????

INFORMATION NEEDS: -

-

Vogt and Fesenmaier (1998) identified five classes of information need: Functional needs are the acquiring of knowledge from experience, and through stimuli such as advertising, to increase knowledge and reduce risk. They act to educate a consumer about the product’s utility, attributes and applications. Hedonic needs relate to the elements of pleasurable experiences that may occur during decision-making. Sign needs are the social and identity aspects of information search, what the product might say about us. Innovation needs relate to the searching for something that is new or different to the consumer. Aesthetic needs are where information is viewed as a stimulus to visual thinking, to imagining the product and how it looks in your life.

HOW MUCH SEARCH OCCURS: -

Search Tends to Be Greatest Among Those Consumers Who Are Moderately Knowledgeable About the Product.

DO CONSUMERS ALWAYS SEARCH RATIONALLY?: -

The amount of external search that we do for most products is surprisingly small, even when we would benefit by having more information. As a rule, purchase decisions that involve extensive search also entail some kind of perceived risk or belief that the product has potentially negative consequences from using or not using the product or service.

BIASES IN THE DECISION-MAKING PROCESS:

PERCEIVED RISK:

EVALUATION OF ALTERNATIVES: -

-

In the evaluation of alternatives stage, the product alternatives a person considers compromise their evoked set. Members of the evoked set usually share some characteristics; we categorise them similarly. The way a person mentally groups products influences which alternatives he or she will consider, and usually we associate some brands more strongly with these categories. The evoked set includes the possible brands already known to the consumer from which to choose. The consideration set includes brands from the evoked set that you might actually consider buying. The inept set are those brands that the consumer may have come across during their search or from previous experience but would not consider for this decision. The inert set includes those brands not under consideration at all.

PRODUCT CATEGORISATION: -

Categorisation is a crucial determinant of how a product is evaluated. Products in consumers’ evoked sets are likely to share similar features. Careful product grouping is important.

LEVELS OF CATEGORISATION:

STRATEGIC IMPLICATIONS FOR PRODUCT CATEGORISATION: The way a product is grouped with others has important ramifications for determining its competitors for adoption and the criteria used to make this choice.

PRODUCT CHOICE – SELECTING AMONG ALTERNATIVES: -

Evaluative Criteria are the dimensions used to judge the merits of competing options. The attributes actually used to differentiate among choices are Determinant Attributes. Marketers can educate consumers about a new decision criterion if they communicate to buyers: There are significant differences among brands on the attribute. Supply the consumer with a decision-making rule. Should convey a rule that can be easily integrated with how the person has made this decision in the past. Framing = the context in which a choice is presented to us Anchoring = over reliance on one piece of information to make a decision, e.g. price or taste

HEURISTICS: -

Very often, we use heuristics, or mental rules-of-thumb, to simplify decision-making and lead to speedy decisions. In particular, we develop many market beliefs over time. One of the most common beliefs is that we can determine quality by looking at the price. Other heuristics rely on well-known brand names or a product’s country of origin as a signal of product quality. When we consistently purchase a brand over time, this pattern may be due to true brand loyalty or simply due to inertia because it is the easiest thing to do.

Heuristics are methods to aid decision-making to arrive at satisfactory solutions by simplifying the complexity of assessing the probability and prediction of value in a choice situation. - Prediction heuristics are where the consumer is trying to predict an outcome; (e.g. availability heuristic, representativeness heuristic) Persuasion heuristics refer to how consumers take short cuts when processing advertisers’ messages; (e.g. consensus rule) Choice heuristics allows us to reduce the number of attributes to be considered for the possible alternative choices; (lexicographic heuristic) Compliance heuristics are built around the likelihood of choosing something based on complying with a request. -

-

CHOOSING FAMILIAR BRAND NAMES – LOYALTY OR HABIT: -

Many people buy the same brand every time due to Inertia, where a brand is bought out of habit merely because less effort is required. Brand Loyalty is a form of repeat purchasing behavior reflecting a conscious decision to continue buying the same brand. A brand-loyal customer is actively involved with the product for either emotional or objective reasons. Marketers struggle with Brand Parity, which refers to consumers’ beliefs that there are no significant differences among brands.

DECISION RULES: -

Consumers Consider Sets of Product Attributes by Using Different Decision Rules, Depending on the Complexity of the Decision and the Importance of the Decision to Them.

NON-COMPENSATORY RULES: -

-

i.e. when a product with a low standing on one attribute cannot compensate for this flaw by doing better on another attribute: Lexicographic rule: select the brand that is best on the most important attribute, keep comparing rank ordered attributes across all brands… (e.g. smart phone camera picture quality) Elimination by aspect rule: imposition of specific attribute cut-offs e.g. under £400 Conjunctive Rule: processing by brand rather than attribute, brand choice if meets all cutoffs, reject if fails

COMPENSATORY RULES: -

- give a product a chance to make up for shortcomings Simple additive rule: consumer chooses the largest number of positive attributes (a long list of benefits may be persuasive but also standard) Weighted additive rule: consumer considers the relative importance of the positively rated attributes

OUTCOMES OF CHOICE: -

The disconfirmation paradigm is the difference between a consumer’s pre-purchase expectations of the product’s performance and their post-purchase experience. Attributions arise when one evaluates the extent to which the initial product performance corresponds to one’s level of aspiration vis-à-vis that product, and one then questions the cause of outcome (Weiner, 2000:383).

CONCLUSION: -

The three categories of consumer decision-making are cognitive, habitual and affective A cognitive purchase decision is the outcome of a series of stages that results in the selection of one product over competing options The way information about a product choice is framed can prime a decision even when the consumer is unaware of this influence Overall, we often rely upon ‘rules-of-thumb’ to make routine decisions...