Consumer Decision Making

1

Chapter 3 Instructor Shan A. Garib, Fall 2012

Consumer’s product and service preferences constantly changing-marketing managers must have knowledge of consumer behaviour in order to offer the right marketing mix!

Consumer Behaviour: how consumers make purchase decisions and how they dispose of the good-analysis of factors that influence purchase decisions and use

2

The general process used as a guide for studying how consumers make decisions

1.Need recognition2.Information search3.Evaluation of alternatives4.Purchase5.Postpurchase behaviour

3

The general process used as a guide for studying how consumers make decisions1.Needs recognition – when consumers are faced with an imbalance between actual and desired states

-consumer exposed to internal/external stimuliseg. Hunger or thirst or firend recommendation

-marketing managers can create wants, an unfulfilled need

-marketing managers objective to create an imbalance through ads and promotion

4

Marketing managers: -can create wants, an unfulfilled need

-observe trends in the marketplaceeg. IKEA tables for Gen Y

-objective to get consumers to recognize imbalance through ads and promotion

-surveys reveal this imbalance

5

Consumers recognize unfulfilled needs and wants through:

-when current products not performing-or run out of product

eg. toilet paper-see a product that outperforms

eg. Car stereo now have mp3’s

6

The general process used as a guide for studying how consumers make decisions

2. Information search – for information about alternatives available to satisfy needs

internal search: recall of info from memory on previous experience

external search: for info from marketing sources

-nonmarketed: not marketers promoting product but from experience

7

The general process used as a guide for studying how consumers make decisions

external search: for info from marketing sources

-nonmarketed: not marketers promoting product but from experience or public sources like consumer reports

-marketed: biased towards a specific product because it’s from the makers

8

The general process used as a guide for studying how consumers make decisionsFactors affecting external search:

-the greater the risk of failure and the greater the interest the more the consumer searches for information

-prior knowledge of product or service means less searching

-confidence in own’s decision making ability-prior exprience with product eg west jet

9

Info search should yield a buyer’s evoked set of perferred alternatives

10

The general process used as a guide for studying how consumers make decisions

3&4. Evaluation of alternatives & Purchase –when the consumer is ready to make a decision

-use internal and external info-narrow down alternatives by:- attributes eg. 4X4 car-cut-offs eg. 23K CAD-rank based on performance

11

Goal of marketing manager to determine which attributes have the most influence on choice

-eg. Price, brand name (set of promises)

12

The general process used as a guide for studying how consumers make decisions

4. Postpurchase behaviour – how well product/service meets expectations determines whether satisfied or not

-marketing manager has to reduce any doubt

-when inconsistencey between values and behaviour it is called cognitive dissonance

13

-when inconsistencey between values and behaviour it is called cognitive dissonance

eg. buying organic at a higher cost

-consumers seek new information to justify purchase to back up positive ideas about product/service

-marketning managers sometime send out post purchase letters with positive statements

14

All consumer buying decisions fall within three categories:

1.Routine Response Behaviour2.Limited Decision Making3.Extensive Decision Making

Products bought in these categories can be described in terms of 3 factors:

15

1. Level of consumer invovlement2. Length of time to make a decision3. Cost of product4. Degree of information search5. Number of alternatives considered

16

Most important1.Level of consumer involvement – amount of time and effort buyer invests in the search, evaluation, and decision process

17

Frequently purchased, low cost products are associated with routine response behaviour

-such products can also be called low involvement products

-usually consumers are familiar with products in this category but stick with one brand/product

-usually don’t experience needs recognition until they see ads or see product on shelfs

-consumers here buy first and eval. Later-opposite of extensive decisions

18

Extensive Decision Making – consumers buying unfamiliar, expensive products or infrequently bought item

-most complex type of consumer buying decision and is associated with high consumer involvement

-consumer wants to make the right decision so they want to know as much as possible about the product-usually experience cognitave dissonance

19

Limited Decision making – consumer has previous product experience but unfamiliar with current brands available

-associated with lower levels of involvment because consumers spend moderate amoun of searchign for information or considering alternatives

-if ususal brand is sold out then consumver will evaluate otehr brands before buying

20

Level of involvement depends on:

1. Previous experience – more exp., less involvement2. Interest - more interest, more involvement3. Perceived Risk of Negative Consequences - more risk, more involvement4. Situation – dinner parties5. Social Visibility - more visibility , more involvement ie risky to purchase

21

Social, cultural, individual and psychological factors strongly influence the decision process

Cultural factors influence the most on decision makingSocial factor sum up the social interactions between a consumer and influential groups of peopleIndividual factors like gender, age, personality etc...are unique to individuals

22

Social, cultural, individual and psychological factors strongly influence the decision process

Psycological factors determine how consumers percieve and interact with their environments -eg. Perception, motivation, learning, beliefs, attitudes

23

Cultural factors mostly influence the decision process

Culture (and Values):-essential character of society that

distinguishes it from other cultural groups-underlying elements of every culture is

values, laguage, myths customs, ritual and laws-everything consumers do without thinking

24

Cultural factors mostly influence the decision process

Culture is:Pervasive - everything consumers do without

thinkingFunctional – human interaction creates values

and prescribes acceptable behaviours Learned – must learn what is acceptable from family and friends

Dynamic – adapts to changing needs and environment

25

Cultural factors mostly influence the decision process

Values – the enuring beliefes shared by a society that a specific mode of conduct is acceptable

-this is the most defining element of culture

26

Cultural factors mostly influence the decision process

Understanding cultural differences-as companies expand globally, companies

need to understand foreign cultures needs and wants and desires

eg. Colour meaning, language translations

27

Cultural factors mostly influence the decision process

Subculture – culture divided based on demo., geography, ethnicity, political beliefs, religion

-homogenious group sharing elements of the overall culture but also ones unique to own group

eg. French, bikers, hackers

28

Cultural factors mostly influence the decision process

Social Class – a group of people who are considered nearly equal in status or community esteem who socialize among themselves and who have shared behavioural norms -majority of Canadians describe themselves as middle class

29

Cultural factors mostly influence the decision process

Working Class – distinct subset of middle class -interest in organized labour is a

shared value -job security as most important reason

for taking job

30

Cultural factors mostly influence the decision process

Most significant difference is lifestlyeSocial class is measured as a combo of:

-income, education, wealth, etc...-education is the greatest determinant of class

31

Cultural factors mostly influence the decision process

Marketers are interested in social class for two reasons: -determines which medium to use for advertising

eg. Middle class watch TV more-determines where to distribute product

32

Consumers likely to seek out the opinions of others to reduce their search and evaluation effort or uncertainty

Specifically consumers interact with:1.Reference groups2.Opinion leaders3.Family members

33

Consumers likely to seek out the opinions of others1. Reference groups – informal and formal groups that influence buying behaviourFor marketers reference groups have three important implications:A)They serve as informal sources of information and influence perceptionsB)They affect aspiration levelsC)Their norms either constrain or stimulate consumer behaviour

34

Consumers likely to seek out the opinions of others2. Opinion Leaders – reference group members who are leaders and influence

-usually the first to try new products out of pure curiosity

eg. Teenagers and new technology, txting-new source of opinion leaders are blogs

35

Consumers likely to seek out the opinions of others3. Family – responsible for socialization process, the passing down of cultural values and norms

Decision making roles vary in the family:A) Initiators suggest initiate the need for the purchase process eg bikeB) Influencers are members whose opinions are valued eg mothers watch prices

36

Consumers likely to seek out the opinions of others

Decision making roles vary in the family:C) Decision maker actually makes the decisionD) Purchaser exchanges money for the productE) Consumer is the actual user

37

Consumers are influenced by personal characterisitcs that are unique to individuals

-usually stable throughout lifetime

Gender – physiological differences between men and women lead to different needs

-there are distinct cultural, social, and economic roles played by men and women that influences Decision Making Process (DMP)

eg buying cars, men: performance, women: cup holders

38

Consumers are influenced by personal characterisitcs that are unique to individuals

Age and Family life cycle stage - how old the consumer is determines their needs, tastes eg. age and TV

-family life cycle is an orderly series of stages through which consumers’ attitudes and behavioural tendencies evolve through maturity, experience, chaning income and status

39

Consumers are influenced by personal characterisitcs that are unique to individuals

Age and Family life cycle stage - marketers define their target markets in terms of family life cycle eg. Young singles, young married with children, middle aged married without children

40

Consumers are influenced by personal characterisitcs that are unique to individuals

Personality, self-concept, and lifestyle -Personality: a way of organizing and grouping how an individual typically reacts to situationsSelf-concept: how consumers percieve themselves eg attitudes, beliefs and self-evaluations

41

Consumers are influenced by personal characterisitcs that are unique to individuals

Personality, self-concept – are reflected in a lifestyle, or mode of living by activities, interests and opinions

Psychographics is an analytical technique used to examine consumer lifestyles and to categorize consumers, segment into target markets

42

An individuals buying decisions are further influenced by psychological factors:Perception, motivation, learning, beliefs and attitudes

-These are what consumers use to interact with the world-used to recognize their feelings, gather and analyze their feelings, information, formulate opinions and take action

43

An individuals buying decisions are further influenced by psychological factors

Perception: selection, organize, and interpret stimuli into a meaningful coherent picture

stimuli – any unit of input affecting your 3 sensesSelective exposure – decision on which stimuli to notice eg. smell triggers memories, or colour red for coke, shocked into attention

44

An individuals buying decisions are further influenced by psychological factors

Selective distortion – consumers change information that distort information that conflicts with their feelings or beliefs

eg buys cheaper brand and then get info about better brand but still think cheaper brand is better or just as good

45

An individuals buying decisions are further influenced by psychological factors

Selective retention – remembering only information that supports personal feelings or beliefs

-consumer forgets all information that maybe inconsistant bith beliefs eg. News about illegal practices sweat shop labour

46

An individuals buying decisions are further influenced by psychological factors

Threshold level of perception - the minimum difference in a stimulis that the consumer will notice eg. Changing price by 20% compared to 13%

-when discounted on a name brand item the notice is large compared to store brand

47

An individuals buying decisions are further influenced by psychological factors

Motivation – buy a product to fulfil a need, these needs become motives

eg. Motivated by hunger for McD’s

Motives: are the driving forces that cause to take action to satisfy a need

48

An individuals buying decisions are further influenced by psychological factorsOne motivation theory is Maslow’s hierarchy of needs arranges needs in ascending order of importance:1. Self-actualization – reach a satitation point2. Esteem needs – recognition status3. Social needs - belonging4. Safety needs - security5. Physiological needs - hunger

49

An individuals buying decisions are further influenced by psychological factors

Learning – the process that creates in behaviour through experience and practice

Two types: 1.Experiential – experience changes your behaviour2.Conceptual – no direct experience but changes your behaviour eg. Diet drinks

50

An individuals buying decisions are further influenced by psychological factors

What boosts learning?

Reinforcement – can be positive or negative eg dog training

Repetition – message spread over time to drill in heads of consumers

51

An individuals buying decisions are further influenced by psychological factors

Beliefs – organized pattern of knowledge that person holds true about the world

Closely related to brand image, a set of beliefs about a particular brand

Attitudes – a learned tendency to respond consistently toward a given object like a brand

52

An individuals buying decisions are further influenced by psychological factors

Attitudes – a learned tendency to respond consistently toward a given object like a brand

-rest on individual’s value system which represents personal standards or good and bad, right and wrong eg credit card use in the EU

53