Copyright © 2002 All rights reserved. 1 CHAPTER 8 Individual Customer Decision Making

1

Copyright © 2002

All rights reserved.

CHAPTER 8CHAPTER 8

Individual Customer

Decision Making

Individual Customer

Decision Making

CUSTOMER BEHAVIOR: A MANAGERIAL PERSPECTIVECUSTOMER BEHAVIOR: A MANAGERIAL PERSPECTIVE

PART 3: Customer Decisions and RelationshipsPART 3: Customer Decisions and Relationships

CUSTOMER BEHAVIOR: A MANAGERIAL PERSPECTIVECUSTOMER BEHAVIOR: A MANAGERIAL PERSPECTIVE

PART 3: Customer Decisions and RelationshipsPART 3: Customer Decisions and Relationships

Copyright © 1999 by Thomas Southwestern. All rights reserved.

CHAPTER 8CHAPTER 8PART 3

2 Copyright © 2002


Customer Behavior: A Managerial Perspective

Conceptual FrameworkConceptual Framework

Payer

UserBuyerUNDERSTANDING

CUSTOMER BEHAVIOR

UNDERSTANDING CUSTOMER BEHAVIOR

Individual Decision Making ProcessIndividual Decision Making Process

ProblemRecognition

Information Search

Alternative Evaluation

PurchasePost-Purchase

Experience



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Location and Cost of an Individual DecisionLocation and Cost of an Individual Decision

Individual consumption can occur in three places: Home Business organizations Public places

The values of the three customer roles interplay, and trade-offs become integral to the decision process



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Customer DecisionsCustomer Decisions

Decisions customers make in the marketplace as buyers, payers, and users, include: Whether to purchase What to purchase When to purchase From whom to purchase How to pay for it



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Mental BudgetingMental Budgeting

Customers mentally set aside budgets for product categories



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Customer Decision ProcessCustomer Decision Process

PurchasesPurchasesPost-purchase Experience

Post-purchase Experience

Alternative EvaluationAlternative Evaluation

Information Search

Information Search

Problem Recognition

Problem Recognition



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Step 1: Problem RecognitionStep 1: Problem Recognition

A customer problem is any state of deprivation, discomfort, or wanting

Problem recognition is a realization by the customer that he or she needs to buy something to get back to the normal state of comfort physically and psychologically



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Stimuli for Problem Recognition Stimuli for Problem Recognition

Internal stimuli / Problem stimuli Perceived states of physical or psychological

discomfort that causes problem recognition

External stimuli / Solution stimuli Marketplace information that causes problem

recognition



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Four Situations for Problem RecognitionFour Situations for Problem Recognition

VIVID LATENT

FAMILIARStock

DepletionEducational Marketing

NOVELLife Stage

ChangeNew Product Technology



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Step 2: Information SearchStep 2: Information Search

Three elements of the information-search phase are: Sources of information Search strategies Amount of search






Awareness, Evoked, and Consideration SetsAwareness, Evoked, and Consideration Sets

Awareness Set (All the brands in the

Awareness)

Brands NOT recalled

Brands NOT considered

Consideration Set(Brands considered)

Evoked Set(Brands recalled)






Sources of Information for CustomersSources of Information for Customers

• Advertising• Salespersons• Product/service brochures• Store displays• Company web sites

PERSONAL• Friends and other acquaintances• Past experience

INDEPENDENT SOURCES• Public information (e.g., Consumer

Reports, Better Business Bureau, news reports in media, government publications, such as The Census of Manufacturers)

• Product or service experts: (e.g., auto critic, home appraiser, pharmacist, and so on)

• Internet (bulletin boards)

MARKETER SOURCES NONMARKETER SOURCES






Low Cost of Information SearchLow Cost of Information Search

The Internet Democratization of information

The growth of Interactive Home Shopping (IHS) is dependent on: Selection Screening Reliability Product comparison






Search StrategySearch Strategy

The pattern of information acquisition customers utilize to solve their decision problems Customer decision strategies

Routine problem solving Extended problem solving Limited problem solving

Systematic vs. heuristic search strategies






Systematic versus Heuristic SearchSystematic versus Heuristic Search

Systematic search consists of a comprehensive search and evaluation of alternatives

Heuristics are quick rules of thumb and shortcuts used to make decisions






Strategies Used for Handling Missing InformationStrategies Used for Handling Missing Information

Interattribute inference

Evaluative consistency

Other-brand averaging

Negative cue






Determinants of the Amount of SearchDeterminants of the Amount of Search

Perceived riskInvolvementFamiliarityExpertiseTime pressureFunctional versus expressive nature of the product or serviceInformation overloadRelative brand uncertainty






Perceived RiskPerceived Risk

Performance risk

Social risk

Psychological risk

Financial risk

Obsolescence risk






InvolvementInvolvement

Purchase-decision involvement is the degree of concern and caring that customers bring to bear on the purchase decision

Enduring involvement is on-going interest in the product or service






Illustrative Measures of Consumer InvolvementIllustrative Measures of Consumer Involvement

This product isUnimportant _______________ ImportantMeans a lot to me _______________ Means nothing to me*Unappealing _______________ AppealingValuable _______________ Worthless*Unexciting _______________ Exciting

PRODUCT INVOLVEMENT OR IMPORTANCE:

• Cars offer me relaxation and fun when life’s pressures build up.• I prefer to drive a car with a strong personality of its own.• To me, a car is nothing more than an appliance.*• I enjoy conversations about cars.

ENDURING PRODUCT INVOLVEMENT: (Example: consumer involvement with cars)

• In choosing this product, I would not care at all/would care a lot about which brand, make, or model I buy.

• How important would it be for you to make a right choice of this product? Not at all/Extremely Important• It is not/it is a big deal if I make a mistake in choosing _____(the product name).*

PURCHASE INVOLVEMENT:

*Reverse scored.






Familiarity and ExpertiseFamiliarity and Expertise

A Classification of Shopping Types on the Internet

Harris Interactive Shopping Type

Description% of Total

Online Shoppers

1. eBivalent Newbies Newest to the Internet; does not spend a lot online and likes online shopping the least

5%

2. Hooked, Online and Single

Likely to be young males; has been online the longest; banks, invest, and ships online the most often

16%

3. Time-Sensitive Materialists

Most interested in convenience and saving time; wants fast check-out and one-stop shopping

17%

4. Brand Loyalists Go directly to the site of the merchant they know; spend the most online

19%

5. Hunter-Gatherers Ages 30-49 with two children; utilize sites that compare and provide analysis

20%

6. Clicks and Mortar Group

Shops online but prefers to buy offline; concerned with online privacy and security; visits shopping malls the most

23%






Time PressureTime Pressure

Time is scarce due to: Both spouses working Many customers employed in more than one

job Many customers re-enrolling in school New leisure activities enabled by technology






Brand UncertaintyBrand Uncertainty

Relative brand uncertainty is the uncertainty about which brand is best among a set of brands

Individual brand uncertainty is the uncertainty about what each brand offers






Functional Versus Expressive Nature of Products And ServicesFunctional Versus Expressive Nature of Products And Services

Information Processing Mode (IPM) Some people buy primarily for their physical

performance

Affective Choice Mode (ACM) Some people buy primarily or significantly for

their social image or for their sensory enjoyment






Information OverloadInformation Overload

Customers are exposed to so much information that they are unable to process it to make a decision






Step 3: Alternative EvaluationStep 3: Alternative Evaluation

Choice Models Compensatory Noncompensatory






Use of the Compensatory Choice Model by a Business CustomerUse of the Compensatory Choice Model by a Business Customer

Poor (1)4 Average (2) Excellent (4)

VENDOR 3WEIGHT VENDOR 1 VENDOR 2

Excellent (4)1 Poor (1) Good (3)

Good (3)3 Good (3) Poor (1)

4(1) + 3(3) + 1(4) + 2(1) = 19

4(2) + 3(3) + 1(1) + 2(3) = 24

4(4) + 3(1) + 1(3) + 2(2) = 26

Poor (1)2 Good (3) Average (2)

Quality

ATTRIBUTE

Customer support

Fit with desired performance standards

Total

Price

VENDOR RATINGS






Noncompensatory ModelsNoncompensatory Models

Conjunctive model The minimum cutoffs on all salient attributes are set

Disjunctive model Entails trade-offs between aspects of choice alternatives

Lexicographic model Attributes of alternatives are rank-ordered in terms of importance

Elimination by aspects model Attributes of alternatives are rank-ordered in terms of

importance, and cutoff values are defined






How and When Models Are UsedHow and When Models Are Used

Concepts Processing by brand/supplier or by attribute Comparative features of various choice

models The two-stage choice process Rapid heuristics Satisficing






Step 4: PurchaseStep 4: Purchase

Choice Identification

Purchase Intent

Purchase Implementation






Delay in ImplementationDelay in Implementation

REASONS FOR DELAY

CUSTOMER ROLEREASON

MEAN IMPORTANCE

UserNeeded more information 3.43

User, payer, buyerTime Pressure--To busy to devote the time 3.91

UserNot sure if needed the item 2.75

PayerCouldn’t afford at the time 3.19

UserFelt another product at home would do 2.70

UserSocial and psychological risk if a wrong choice were made 2.70

User, payerExpected price reduction or product modification in the near future 2.52

User, payerPerformance and financial risk if a wrong choice is made 2.65

BuyerFind shopping unpleasant 2.34

User, payerNeeded others’ consent 2.41

CUSTOMER ROLEREASON

MEAN IMPORTANCE






Delay in Implementation (cont’d)Delay in Implementation (cont’d)

REASONS FOR DELAY CLOSURE

CUSTOMER ROLEREASON

MEAN IMPORTANCE

User, buyerFound the time 3.62

UserDecided on another alternative 3.84

PayerLower price became available 3.10

UserNeed had become passing 3.51

BuyerFound a good store 2.41

BuyerTired of shopping further 2.70

User, payerObtained the advice and consent I needed 2.14

PayerWas able to justify the expense 2.32

UserDue to good word-of-mouth 2.01






Deviation From the Identified ChoiceDeviation From the Identified Choice

The preferred brand may be out of stock

New in-store information may reopen the evaluation process

Financing terms may render a purchase infeasible






Step 5: Postpurchase ExperienceStep 5: Postpurchase Experience

Decision Confirmation

Experience Evaluation

Satisfaction/Dissatisfaction

Future Response: Exit, Voice, or Loyalty






Measuring Satisfaction in Termsof ExpectationsMeasuring Satisfaction in Termsof Expectations

How did we do? How was our:

Fell Below Expectations

Met Expectations

Exceeded Expectations

Room appearance

Room cleanliness

Registration speed

Friendliness of staff

Room service promptness






Complaining Behavior

Complaining Behavior

Determinants of ComplainingDeterminants of Complaining

• Performance expectation gap• Product/service importance• Performance expectation gap• Product/service importance

Dissatisfaction SalienceDissatisfaction Salience

• Aggressiveness• Self-confidence• Aggressiveness• Self-confidence

Personality TraitsPersonality Traits

• Failure controllable by the marketer• Marketer likely to repeat the failure• Redress is likely

• Failure controllable by the marketer• Marketer likely to repeat the failure• Redress is likely

Attribution to the MarketAttribution to the Market






Individual Customer Decision Making and the Three Customer RolesIndividual Customer Decision Making and the Three Customer Roles

Problem recognition Awareness of better price value from competitors causes payer role problem recognition.

Buyer dissatisfaction with service, convenience and personalization values can cause problem recognition. New delivery channels serve as solution stimuli to cause problem recognition by buyers.

Users are the most frequent problem-recognizers.

INDIVIDUAL DECISION MAKER

Role convergence sometime causes sacrifice in weak user values

With someone else as payer, users tend to consumer more; also user evaluation is less stringent.

User in control of buying role as well; strong user values rule over payer/buyer values.

DECISION PROCESS

CONCEPTS BUYERPAYERUSER






Individual Customer Decision Making and the Three Customer Roles (cont’d)Individual Customer Decision Making and the Three Customer Roles (cont’d)

Information search Inadequate buyer motivation to expend search efforts constrains user and payer desire for more information.

Payer role seeks information about competitors’ prices.

Information pertaining to user values is sought

Search determinants:

Perceived risk Buyers lean on trustworthy sources.

Payers willing to pay more to avoid user risks.

User-felt risk causes more information search.


Involvement Involved buyers do extensive information search.

User involvement may demand sacrifice in buyer/payer values.

Familiarity Familiarity lulls buyers into less search effort.

User familiarity enables greater use of available information.

Time pressure Time pressure affects buyers the most who seek efficient exchanges.

Users seek time-saving features in products/ services.






Alternative evaluation For parity products, buyer values become important criteria.

For parity products (i.e., with user indifference), payers seek to maximize price value.

Users’ values most important evaluation criteria.

Decision models:

Compensatory Users participate actively.

Noncompensatory To minimize cognitive effort, buyers like to use noncompensatory model.

Payer value may be exercised through use of some noncompensatory model.

One or the other role may play a major role.

Functional/expressive product

For expressive products, users must participate in evaluation.









Purchase This stage is most relevant to the buyer role.

Lack of agreement on financing may hinder purchase.

Post-choice processes:

Buyer’s remorse/decision confirmation

Buyer role subject to remorse; seeks more favorable information to ward decision confirmation.


Experience evaluation Product use experience by the user role.

Satisfaction Determined largely by satisfaction of user values.

Exit, voice, loyalty Loyalty simplifies buyer’s task.

User satisfaction leads to loyalty. Users spread word-of-mouth.

Complaint Buyer aggressiveness determines if complaint will be made.

User dissatisfaction motivates complaints.

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Copyright © 2002 All rights reserved. 1 CHAPTER 8 Individual Customer Decision Making