layout: true background-image: url(figs/tcb-logo.png) background-position: bottom right background-attachment: fixed; background-origin: content-box; background-size: 10% --- class: title-slide .row[ .col-7[ .title[ # Consumer Behavior ] .subtitle[ ## Decision Making ] .author[ ### Dennis A.V. Dittrich ] .affiliation[ ] ] .col-5[ ] ] --- class: practice-slide # For Reflection .col-8[ Why can “mindless” decision making actually be more efficient than devoting a lot of thought to what we buy? ] ??? Sometimes the decision-making process is almost automatic; we seem to make snap judgments based on very little information. At other times, coming to a purchase decision begins to resemble a full-time job. A person may literally spend days or weeks thinking about an important purchase such as a new home, even to the point of obsession. Mindless decision-making is more efficient because we do not waste time seeking information when the decision is not as important, or we have previously made the decision. --- ## Consumers make decisions in different ways .row[ .col-6[ Categories of consumer decision-making * cognitive, * habitual, and * affective. ![](img12/091.png) ] .col-6[ ### Problems? **Consumer hyperchoice**: too many choices forces --- us to make repeated decisions that may drain psychological energy while decreasing our abilities to make smart choices. **Constructive processing** argues that we evaluate the effort we’ll need to make a particular choice and then tailor the amount of cognitive “effort” we expend to get the job done. **Mental budget** that helps us to estimate what we will consume over time so that we can regulate what we do in the present. ]] --- # Self-Regulation .row[ .col-6[ A person’s efforts to change or maintain his or her actions over time, whether these involve dieting, living on a budget, or training to run a marathon, involve careful planning that is a form of **self-regulation**. **Implementation intentions**: “if-then” plans may dictate how much weight we give to different kinds of information (emotional or cognitive) * a timetable to carry out a decision * how we will deal with disruptive influences that might interfere with our plans (like a bossy salesperson who tries to steer us to a different choice). Two types of motivation: * **Promotion motivation** encourages people to focus on hopes and aspirations * **Prevention motivation** focuses on responsibilities and duties as it prompts people to think about avoiding something negative. ] .col-6[ **Counteractive construal**: when they exaggerate the negative aspects of behaviors that will interfere with the ultimate goal. **Feedback loop**: when we provide people with information about their actions in real time, and then give them a chance to change those actions so that you push them to improve. **Morning Morality Effect**:people are more likely to cheat, lie, or even commit fraud in the afternoon than in the morning. **Executive control center** that we use for important decision making, including moral judgments, can be worn down or distracted even by simple tasks like memorizing numbers. ]] --- class: participation-slide # For Reflection .col-8[ Provide an example when the feedback loop was used on you. ] ??? Consider purchases you’ve made that reflect the five kinds of risk. --- # Information processing .col-7[ Traditionally, consumer researchers have approached decision-making from an **information-processing** perspective. * people calmly and carefully integrate as much information as possible with what they already know about a product, * weigh the pluses and minuses of each alternative, and * arrive at a satisfactory decision. The **economics of information** perspective assumes that we collect just as much data as we need to make an informed decision. ] --- .row[ .col-5[ .col-12[ ![](img12/092.png) ]] .col-7[ ### Cognitive purchase decision ...is the outcome of a series of stages that results in the selection of one product over competing options. 1. **Problem recognition** occurs when we experience a significant difference between the current state of affairs and some state we desire. 2. **Information search** is the process by which we survey the environment for data to make a reasonable decision. 3. **Evaluation of alternatives**: consumer evaluates the alternatives. 4. **Product choice**: the choice may be from among product choices as well as to buy or not. ] ] --- ## Stage 1: Problem Recognition .row[ .col-7[ Occurs when consumer sees difference between current state and **ideal state** ] .col-5[ * Need recognition: Actual state declines * Opportunity recognition: Ideal state movesupward ]] .row[.col-10[ ![](img12/093.png)] .col-2[#### Shifts in Actual or Ideal States ] ] ??? Problem recognition is the first stage. It can occur when a consumer’s state of being declines (which then triggers a desire to return to normalcy) or when a consumer recognizes an ideal state he or she wishes to achieve. illustrates the two causes of problem recognition. The person experiences a decline in the quality of his actual state or an increase in the desire for his ideal state. --- class: practice-slide # For Reflection .col-8[ Think of a product you recently shopped for online. Describe your search process. How did you become aware that you wanted or needed that product? How did you evaluate alternatives? Did you wind up buying online? Why or why not? What factors would make it more or less likely that you would buy something online versus in a traditional store? ] --- # Stage 2: Information Search .row[.col-7[ The process by which we survey the environment for appropriate data to make a reasonable decision. ]] .row[ .col-6[**Prepurchase** or * we know we have a problem, we search out how we can solve the problem ] .col-6[**ongoing** search * searching information even if a purchase is not immediately forthcoming ] ] .row[ .col-6[**Internal** or * based on our own memory ] .col-6[**external** search * other (external) sources ] ] .row[ .col-6[ **Online** search * Search engines have made vast amounts of information available * But, a **filter bubble** occurs when the broadcast media, websites, and social media platforms we consult serve up answers based upon what they “think” we want to see. ] ] ??? Once we know we have a problem, we search out how we can solve the problem. These searches will typically take place before purchase (prepurchase). However, many people just enjoy searching information and they conduct ongoing searches even if a purchase is not immediately forthcoming. Internal searches are based on our own memory banks while external sources come from other sources. Search engines have made vast amounts of information available to us as we search out product information. We may rely on cybermediaries to help narrow and filter the options that are available. Intelligent agents are sophisticated software programs that use collaborative filtering technologies to learn from past user behavior in order to recommend new purchases. --- ### Amount of Information Search and Product Knowledge .row[ .col-7[ ![](img12/094.png) ] .col-5[ People with very **limited expertise** may not feel they are competent to search extensively. **Novice** consumers tend to process information in terms of the big picture instead of detailed information. **Experts** have a better sense of what information is relevant so they engage in **selective search**. Moderately knowledgeable consumer search the most ]] ??? There is an inverted-U relationship between knowledge and external search effort. People with very limited expertise may not feel they are competent to search extensively. Experts have a better sense of what information is relevant so they engage in selective search. Novice consumers tend to process information in terms of the big picture instead of detailed information. Who searches the most? Moderately knowledgeable consumers. --- # Step 3: Evaluate Alternatives .col-7[ **Evoked Set**: alternatives a consumer knows about **Consideration Set**: alternatives actually considered ] ??? The alternatives a consumer knows about is the evoked set. The ones actually considered make up the consideration set. --- class: practice-slide # For Reflection .col-8[ “Marketers need to be extra sure their product works as promised when the first introduce it.” How does this statement relate to what we know about consumers’ evoked sets? ] ??? People are more likely to add a new brand to the evoked set than one that we previously considered but passed over, even after additional positive information has been provided for that brand. For marketers, consumers’ unwillingness to give a rejected product a second chance underscores the importance of ensuring that it performs well from the time it is introduced. --- # Step 4: Product Choice .col-7[ **Feature creep** is the complexity of features that products provide. ] --- # Step 5: Postpurchase evaluation .col-7[ ...closes the loop; it occurs when we experience the product or service we selected and decide whether it meets our expectations. **Social scoring**: both customers and service providers increasingly rate one another’s performance. ] ??? **Neuromarketing** uses functional magnetic resonance imaging (or fMRI), * a brain-scanning device that tracks blood flow as we perform mental tasks to take an up-close look at how our brains respond to marketing messages and product design features. --- # Online Decision Making .row[ .col-7[ **Cybermediaries** * Web site or app that help narrow and filter the options that are available * organize online market information so that customers can identify and evaluate alternatives more efficiently **Intelligent agents**: sophisticated software programs * use collaborative filtering technologies to learn from past user behavior in order to recommend new purchases. **Search engine optimization** (SEO): procedures companies use to design the content of Web sites and posts to maximize the likelihood that their content will show up when someone searches for a relevant term. **Long tail**:we no longer need to rely solely on big hits (such as blockbuster movies or best-selling books) to find profits. ] .col-5[ ![](img12/095.png)]] --- class: practice-slide # For Reflection .col-8[ It’s increasingly clear that many postings on blogs and product review websites are fake or are posted there to manipulate consumers’ opinions. How big a problem is this if consumers increasingly look to consumer-generated product reviews during the stage of information search? What steps, if any, can marketers take to nip this problem in the bud? ] ??? Increasingly many of us rely on online reviews to steer us toward and away from specific restaurants, hotels, movies, garments, music, and just about everything else. A survey of 28,000 respondents in 56 countries reported that online user ratings are the second-most trusted source of brand information (after recommendations from family and friends). We usually put a lot of stock in what members of our social networks recommend. Unfortunately, user ratings don’t link strongly to actual product quality that objective evaluation services like Consumer Reports provide. And, there’s evidence that mobile reviews may be less helpful than desktop reviews, even when the same reviewer writes both. Comments posted via mobile devices are more emotional and more negative. Regardless of their accuracy, customer product reviews are a key driver of satisfaction and loyalty. Another advantage these reviews provide is that consumers learn about other, less popular options they may like as well, and at the same time products such as movies, books, and CDs that aren’t “blockbusters” are more likely to sell. (20 minutes, Chapter Objective 9-2, AACSB: Ethical understanding and reasoning) --- ## How Do We put products into Categories? ![](img12/096.png) ??? Consumers cognitively represent product information in a knowledge structure. This term refers to a set of beliefs and the way we organize these beliefs in our minds. Typically, a product is represented in a knowledge structure at one of three levels. (Figure) * Basic level category – most useful for classifying products * Superordinate category – more abstract * Subordinate category – more specific Product categories are the building blocks of a market, but sometimes companies like to play with them; they create new ones when they introduce hybrid products that feature characteristics from two distinct domains. --- ## Strategic Implementation of Product Categories .col-7[ The way we categorize products has strategic implications for marketers. **Position a Product**: The success of a positioning strategy hinges on the marketer’s ability to convince the consumer to consider its product within a given category. **Identify Competitors**: At the abstract, superordinate level, many different product forms compete for membership. **Create an Exemplar Product**: If a product is a really good example of a category, then it is more familiar to consumers and they more easily recognize and recall it. * The characteristics of category exemplars tend to exert a disproportionate influence on how people think of the category in general. **Locate Products in a Store** Product categorization also can affect consumers’ expectations regarding the places where they can locate a desired product. ] ??? --- class: practice-slide # For Reflection .col-8[ What is an example of an exemplar product? ] ??? If a product is a good example of a category, it is more familiar to consumers and they more easily recognize and recall it. Judgments about category attributes tend to be disproportionately influenced by the characteristics of category exemplars. --- ## Evaluative Criteria |Attribute | Importance ranking | Prime Wave | Precision | Kamashita | |---|---|---|---|---| |Size of screen| 1| Excellent| Excellent| Excellent| |Stereo broadcast capability| 2 |Poor| Excellent| good| |Brand reputation| 3| Excellent| Excellent| Poor| |Onscreen programming| 4| Excellent| Poor| Poor| |Cable-ready capability| 5 |good| good| good| |Sleep timer| 6| Excellent| Poor| good| .row[ .col-6[ ### Compensatory Decision Rules **Simple additive** rule leads to the option with the largest number of positive attributes **Weighted additive** rule allows consumer to take in to account the relative importance by weighting. ] .col-6[ ### Noncompensatory Rules **Lexicographic rule**: consumers select the brand that is the best on the most important attribute **Elimination-by-aspects rule**: must have a specific feature to be chosen **Conjunctive rule**: entails processing by brand ] ] ??? When evaluating alternatives, consumers may focus on one or two product features while ignoring others. This helps us narrow down our options. **Evaluative criteria** are the dimensions we use to judge the merits of competing options. **Determinant attributes** are the features that we actually use to differentiate among our choices. Marketers often educate consumers about which criteria they should use as determinant attributes. When we need to use more consideration before making a decision (an extensive problem), we can categorize our decision rules into compensatory and noncompensatory. **Noncompensatory** decision rules suggest that a product that is low on one attribute cannot compensate for that weakness with a strength on another attribute. The lexicographic rule says, “select the brand that is the best on the most important attribute.” The elimination-by-aspects rule is similar to the lexicographic rule because the buyer evaluates brands on the most important attribute. In this case, though, s/he imposes specific cut-offs. The conjunctive rule entails processing by brand. As with the elimination-by-aspects procedure, the decision maker establishes cut-offs for each attribute. However, here s/he chooses a brand if it meets all the cutoffs, but rejects a brand that fails to meet any one cut-off. --- # Habitual decision making .col-7[ ...describes the choices we make with little or no conscious effort. Why does a person buy the same brand over and over? **Inertia**: it involves less effort to pick a familiar brand. **Brand loyalty**:a pattern of repeat purchasing behavior that involves a conscious decision to continue buying the same brand. ] --- class: practice-slide # For Reflection .col-8[ Think of some of the common country of origin effects (e.g., watches, wine). Which ones affect your consumer choices? What could brands from other countries do to compete such effects? ] --- ### We often rely on rules-of-thumb to make routine decisions. .row[ .col-5[ **Heuristics**: Mental Shortcuts * **Maximizing solution**: We want to arrive at the best result possible outcome. * **Satisficing solution**: We seek simply to receive an adequate outcome. * This “good enough” perspective on decision making is called **bounded rationality**. ] .col-7[ **Covariation**: infers hidden dimensions of products from attributes we observe. * The signal communicates an underlying quality. * Someone selling a used car will try to make the car look clean because cleanliness may be associated with reliability. **Country of origin** is often a determinant attribute in the decision-making process. * Consumers think of * Switzerland for precision in watches, * Italy for leather goods, and * France for wine. **Familiar brand** names can serve as a shortcut for quality **Higher prices**: consumers may assume suggest higher quality. ]] ??? **Country of origin** - where a product is produced – matters. Consumers strongly associate certain items with specific countries. Conversely, **ethnocentrism** refers to the belief that products from other places are inferior to local versions. We sometimes witness consumer **animosity** toward a brand due to an intense dislike for the manufacturer. --- class: practice-slide # For Reflection .col-8[ When have you made a high involvement decision on the basis of affect? Were you in a maximizing mode or satisficing mode? ] --- # Behavioral Economics .row[ .col-7[ The way information about a product choice is **framed** can prime a decision even when the consumer is unaware of this influence. **Cognitive decision** making seeks a **maximizing** solution but often times consumers are happy to exert less energy for decisions in exchange for a **satisficing** solution. Biases in Decision-Making Process * **Default bias**: we are more likely to stick with the default than to make the effort to change. * **Mental accounting**: framing a problem in terms of gains/losses influences our decisions * **Sunk-cost fallacy**: We are reluctant to waste something we have paid for * **Loss aversion**: We emphasize losses more than gains * **Prospect theory**: risk differs when we face gains versus losses ] .col-5[ **Context effects** subtly influence how we think about products we encounter. **Priming**: Cues in the environment that make us more likely to react in a certain way even though we’re unaware of these influences. **Nudge**: a deliberate change by an organization that intends to modify behavior ]] ??? A **prime** is a stimulus that encourages people to focus on some specific aspect of their lives. --- class: practice-slide # For Reflection .col-8[ Technology has the potential to make our lives easier as it reduces the amount of clutter we need to work through to access the information on the Internet that really interests us. However, perhaps intelligent agents that make recommendations based only on what we and others like us have chosen in the past limit us, in that they reduce the chance that we will stumble on something (e.g., a book on a topic we’ve never heard of or a music group that’s different from the style we usually listen to) through serendipity. Will the proliferation of “shopping bots” make our lives too predictable by only giving us more of the same? If so, is this a problem? ] ??? Responses will vary by student. Intelligent agents are sophisticated software programs that use collaborative filtering technologies to learn from past user behavior to recommend new purchases. When you let Amazon.com suggest a new book, the site uses an intelligent agent to propose novels based on what you and others like you have bought in the past. The biggest problem Web surfers face these days is to narrow down their choices, not to beef them up. In cyberspace, simplification is key. If we Google a term, most of us are only likely to look at the first few results at the top of the list. Indeed, that’s one reason why search engine optimization (SEO) is so important today; this term refers to the procedures companies use to design the content of Web sites and posts to maximize the likelihood that their content will show up when someone searches for a relevant term. Our goal is to persuade people to access our content. Just like an expert fisherman chooses his spot and carefully selects the right lure to catch a fish, SEO experts create online content that will attract the attention of the search algorithms, or mathematical formulas, that companies like Google use to determine which entries will turn up in a search. The algorithm will hunt for certain keywords, and it also will consider who uses them. --- # Review .col-7[ 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. We often rely on rules-of-thumb to make decisions. The way information about a product choice is framed can prime a decision even when the consumer is unaware of this influence. ]