Chapter 9

Consumer
Consumer Decision Making

Decision Making
The Decision Process

 Every day we make numerous decisions

concerning every aspect of our daily lives
 Particularly in American society, we are rarely
put in a position where we have no choices
Rational decision-making
 In economic theory, consumers are portrayed
as making rational decisions
 Consumers attempt to maximize their utility
continuously within the constraints of limited
resources
 Consumers must
 Be aware of all available product alternatives
 Be capable of correctly ranking each in terms of
benefits and costs
 Be able to identify the one best alternative
 Consumers are limited in their skills
 Consumers are limited by their existing
values and goals
 Consumers are limited in the extent of their
knowledge
 Doesn’t take into account the impacts of
advertising and marketing
Effort Variation in Decision Making
 The amount of effort a consumer puts into a
decision varies depending on how involved
the consumer is with the purchase
 In low involvement purchases, consumers
view the purchase as unimportant and the
outcome of the decision inconsequential
 High involvement purchases are those that
are important from a financial, social or
psychological standpoint
Programmed decisions

 Decisions we make without much thought

(habitual)
 Brand loyalty is related because it is another
method to minimize effort
Non-programmed decisions
 Decisions that are new or occur infrequently enough
that consumers have to undertake more of an effort to
obtain information
 May involve extended problem solving where the
consumer has no established criteria for evaluating a
product category or specific brands in the category
 May involve limited problem solving where the
consumer has established the basic criteria but has
not yet established preferences among brands
 Impulse purchases require little or no cognitive effort
on the part of the consumer
A consumer decision-making model

 John Dewey identified five stages in the

decision-making process
1. Problem/need recognition
2. Search activity
3. Identifying and evaluating solutions
4. Purchase or commitment
5. Post-purchase considerations
1. Problem/Need Recognition

 Sometimes arises from changes in

circumstances
 Sometimes arises from marketing
 Two different need recognition styles
1. Desired state: consumers whose desire for
something new triggers the decision process
2. Actual state: consumers who believe they have a
problem/need when a product fails
2. Pre-purchase Search Activity
 Begins as soon as the problem/need is
identified
 Extent of search depends on degree of
involvement
 Nature of search depends on consumer’s
level of experience with the product
 Two types of searches
1. Internal
2. External
Internal search
 Consumer will search his/her memory before
seeking external sources
 The greater the past experience, the less
external information needed
 Many decisions are based exclusively or
primarily on internal information
 Level of risk perceived is a major factor in
determining extent of search
External search
 “Shopping” (in a very broad sense)
 Advertising and promotion
 including point of purchase and internet
 Store visits
 Objective sources (Consumer Reports, e.g.)
 Friends and family (word of mouth)
Interesting facts about shopping

 In general, women enjoy shopping and men

do not
 Even for high priced durables, many
consumers do minimal comparison shopping
 Low-income shoppers, who have more to
lose, search less before making a purchase
than do more affluent consumers
3a. Identifying alternatives

 Consumers consider only a limited number of

alternatives
 Referred to as the evoked set
 Small number of brands the consumer is
familiar with, remembers, and finds
acceptable
Implication for marketers

 They need to make sure their products are

 Positioned properly
 Advertised and promoted
 Readily available
 Supported by service, financing, etc.
 Building customer loyalty is critical
3b. Evaluating alternatives: Prospect
Theory
 Based on the notion that consumers have to
give up something in order to get something
back in the marketplace
 Proposes that people’s decisions are based
on how they value the potential gains and
losses that result from making choices
 Based on the “value function” theory, which reflects
consumers’ anticipation of the pleasure or pain
associated with a specific decision outcome
 Value function explains the difference between the
psychological valuation of gains and losses and the
actual value of those gains and losses
 the value function for losses is different for that for
gains
 In practical terms, this means that consumers resist
giving up things that they already own
Endowment effect

 This phenomenon is referred to as the

endowment effect
 This means, for example, that when
consumers are asked to name a selling price
for something they own, they often require
more money than they would pay to own the
same item
Framing

 Prospect theory predicts that preferences will

depend on how a problem is framed
 In other words, the same decision can be
framed from either a gain or loss perspective
 Marketers sometimes make use of
consumers’ differing perceptions about gains
and losses
4. Purchase or commitment: consumer
decision rules
 Purchase decision is the outcome of the
search and evaluation process
 In reaching a decision, consumers use a
number of decision rules
 Rules reduce the burden of making complex
decisions by providing guidelines or routines
 Rules have been broadly classified into two
major categories:
 Compensatory decision rules
 Non-compensatory decision rules
Compensatory decision rules

 A consumer evaluates brand options in terms

of each relevant attribute of the product and
computes a weighted or summated score for
each brand
 Presumably the consumer chooses the brand
with the highest score
 Allows a positive score/evaluation on one
attribute to cancel a negative score on
another
 Table 16.6 Hypothetical Ratings for Security Systems
FEATURE ST. LOUIS CLAYTON SECURITY MISSOURI
ALARM SYSTEM SERVICES BUGLARY
System Price 10 1 5
Monthly
4 6 5
monitoring fee
Number of entry
1 10 5
doors protected
Number of keypads
3 10 6
included
Price for each
3 10 6
additional keypad
Number of included
smoke detectors 3 2 1
wired to system
How home is
2 10 6
protected
27 56 34
Non-compensatory decision rules

 A negative evaluation in one category

eliminates the brand from consideration
Implication of decision rules for
marketers
 A marketer familiar with these rules will use
promotional messages that highlight product
attributes that consumers are most likely to
evaluate in deciding on what brand to
purchase
5. Post-purchase evaluation
 As consumers use a product, they evaluate its
performance in light of their expectations
 The extent of the evaluation depends on the
importance of the product decision
 The product may
 Meet expectations
 Exceed expectations
 Fall short of expectations
 Post-purchase evaluation becomes part of the
consumer’s experience and may affect future
related decisions
Instrumental vs. expressive performance
 Product performance is evaluated on a limited
number of product attributes
 These include:
 Instrumental performance: the utilitarian
performance of the physical product itself (a means
to a set of ends)
 Expressive performance: social or psychological
attributes of the product (an end in itself)
 Which aspect is dominant depends on the nature of
the product and its purchase