Understanding Consumer Decision

MakingManitoba Home Builders Association

2013 Housing Forum

November 6, 2013

Malcolm C. Smith, Ph.D.Department of Marketing

I.H. Asper School of BusinessUniversity of Manitoba

Agenda

• Exercise• Types of decisions• Involvement• Easy/quick decisions• Complex decisions• Implications for you• Questions

Think about something you have bought lately that was a fast decision.–What was it that you bought?– Describe the purchase process:

• When did you decide to buy it?• How did you realize you needed it?• Describe the actions you took when buying it.• How and when did you evaluate the product?• Why was it a fast decision?

Think about something you have bought lately that took a lot of time to make the decision.–What was it that you bought?– Describe the purchase process:

• When did you decide to buy it?• How did you realize you needed it?• Describe the actions you took when buying it.• How and when did you evaluate the product?• Why was it a slower decision?

Involvement

• Purchases vary in the level of consumer involvement

• The level of involvement with a purchase is often determined by the amount of risk involved

• The higher the risk, the more the consumer is involved with the purchase

Types of Risk

• Financial• Social• Ego• Safety

Types of Decisions

Decisions can be classified according to the “effort” a consumer puts into the decision1. Low-Involvement Decisions– Fast, little searching for information

2. High-Involvement Decisions– Slow, much searching for information

These types of decisions are on a continuum Low-Involvement High-Involvement Decisions Decisions

Low Involvement Decisions

• Low risk• Few external influences from others• Evaluation takes place after the

purchase• Strengths of one feature do not make

up for weaknesses in other features

Extended Decision Making

• Usually occurs under high involvement

• Also known as “complex” decision making

• Consumers are motivated to process information and critically evaluate it to reduce risk

Steps in Extended Decision Making

Problem Recognition

Information Search

Evaluation of Alternatives

Purchase

Post-Purchase Evaluation

Step 1: Problem Recognition

• Also known as “Need Arousal”• Occurs when there is a gap between

the consumer’s desired (or ideal) situation and the consumer’s actual situation

• The gap must be strong enough for the consumer to proceed with the decision-making process

Step 1: Problem Recognition

• How will this happen?– Consumers runs out of the product– Consumer’s needs/values/attitudes

change• E.g., children, work promotion

– Advertising can suggest a new “ideal”

Steps in Extended Decision Making

Problem Recognition

Information Search

Step 2: Information Search

• Search from various sources– Internal Sources– External Sources• Biased• Unbiased

• Do we maximize every decision?• Cost-Benefit trade-off– How long will the search last?– How much will the search cost?

Steps in Extended Decision Making

Problem Recognition

Information Search

Evaluation of Alternatives

Step 3: Evaluation of Alternatives

• Two sets of brand alternatives:– Awareness Set– Unawareness Set

• Three subsets in the Awareness Set:– Inept Set– Inert Set– Evoked Set

Awareness Set Unawareness Set

Inept Set Inert Set Evoked Set

Sets of Alternatives

Awareness Set Unawareness Set

Inept Set Inert Set Evoked Set

Sets of Alternatives

Step 3: Evaluation of Alternatives cont’d

• Consumers use evaluative criteria to help make a decision– Based on product features

• Compensatory evaluation is used– Strengths of one feature make up (or compensate) for weaknesses in other attributes• “I didn’t get feature A, but that’s OK since I

am getting feature B”

Steps in Extended Decision Making

Problem Recognition

Information Search

Evaluation of Alternatives

Purchase

Step 4: Purchase

• Two parts to the Purchase phase– Purchase decision• “I will buy brand A”

– Purchase act • “Where will I buy it?”• “When will I buy it?”• “How will I pay for it?”

Steps in Extended Decision Making

Problem Recognition

Information Search

Evaluation of Alternatives

Purchase

Post-Purchase Evaluation

Step 5: Post-Purchase Evaluation

• Post-purchase doubt– Cognitive Dissonance– Sometimes consumers search for more

information– Sometimes consumers ignore new

information

• Result is customer satisfaction or dissatisfaction

• Leads to feedback to previous steps for future decisions

Feedback in Extended Decision Making

Problem Recognition

Information Search

Evaluation of Alternatives

Purchase

Post-Purchase Evaluation

Feedback

• Problem Recognition– Did I correctly define the problem?

• Information Search– Did I use the correct information sources?– Did I use enough sources?

Feedback

• Evaluation of Alternatives– Did I use the correct evaluative criteria (features)?– Did I assess the evaluative criteria correctly?

• Purchase– Did I purchase at the right time?– Did I purchase from the right place?

Who Buys?

Decision Making Unit (DMU):• Initiator• Influencer• Decider• Buyer• User

(Gatekeeper plays an indirect role in the DMU)

How can you use this information?

Implications

• Understand the needs and wants of your consumers

• You are offering a solution to a problem• 3 levels of a product:– Tangible product– Core product– Augmented product

Implications

• Understand who plays what role in the Decision Making Unit

• Understand where the consumer is in the decision making process

• Reduce post-purchase doubt

Questions?