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Chapter 8

Decision Making

CONSUMER BEHAVIOR, 9eMichael R. Solomon

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Chapter Objectives

When you finish this chapter, you should understand why:

• Consumer decision making is a central part of consumer behavior, but the way we evaluate and choose products varies widely.

• A decision is actually composed of a series of stages that results in the selection of one product over competing options.

• Decision making is not always rational.

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Chapter Objectives (continued)

When you finish this chapter, you should understand why:

• Our access to online sources is changing the way we decide what to buy.

• We often fall back on well-learned “rules-of-thumb” to make decisions.

• Consumers rely upon different decision rules when evaluating competing options.

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Figure 8.1 Stages in Consumer Decision Making

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Decision-Making Perspectives

• Are consumers rational when they make purchase decisions?

• What is purchase momentum?

• What cognitive processing styles affect consumer decision making?

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Figure 8.2 Continuum of Buying Decision Behavior

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Steps in the Decision-Making Process

Problem recognition

Information search

Evaluation of alternatives

Product choice

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Stage 1: Problem Recognition

• Occurs when consumer sees difference between current state and ideal state

• Need recognition: actual state declines

• Opportunity recognition: ideal state moves upward

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Figure 8.3 Problem Recognition

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Stage 2: Information Search

• The process by which we survey the environment for appropriate data to make a reasonable decision

• Prepurchase or ongoing search

• Internal or external search

• Online search

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Table 8.2 A Framework for Consumer Information Search

Prepurchase versus Ongoing Search

Prepurchase Search Ongoing Search

Determinants Involvement with purchase

Involvement with product

Motives Making better purchase decisions

Building a bank of information for future use

Outcomes Better purchase decisions

Increased impulse buying

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Deliberate versus “Accidental” Search

• Directed learning: existing product knowledge obtained from previous information search or experience of alternatives

• Incidental learning: mere exposure over time to conditioned stimuli and observations of others

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Do Consumers Always Search Rationally?

• Some consumers avoid external search, especially with minimal time to do so and with durable goods (e.g. autos)

• Symbolic items require more external search

• Brand switching: we select familiar brands when decision situation is ambiguous

• Variety seeking: desire to choose new alternatives over more familiar ones

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Biases in Decision-Making Process

• 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

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Figure 8.5 Amount of Information Search and Product Knowledge

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Minolta Understands Perceived Risk

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Figure 8.6 Five Types of Perceived Risk

Monetary risk

Functional risk

Physical risk

Social risk

Psychological risk

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An Appeal to Social Risk

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Discussion

• What risky products have you considered recently?

• Which forms of risk were involved?

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Alternatives

Evoked Set

Consideration Set

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Figure 8.7 Levels of Abstraction

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Discussion

• Using the levels of categorization tool, design three levels of categorization for fast food restaurants:

• What is the superordinate level?

• What choices are there for the basic level?

• What choices are there for the subordinate level?

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Strategic Implications of Product Categorization

• Position a product

• Identify competitors

• Create an exemplar product

• Locate products in a store

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Product Choice: How Do We Decide?

• Once we assemble and evaluate relevant options from a category, we must choose among them

• Decision rules for product choice can be very simple or very complicated

• Prior experience with (similar) product

• Present information at time of purchase

• Beliefs about brands (from advertising)

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Evaluative Criteria

• Evaluative criteria: dimensions used to judge merits of competing options

• Determinant attributes: features we use to differentiate among our choices

• Criteria on which products differ carry more weight

• Marketers educate consumers about (or even invent) determinant attributes• Pepsi’s freshness date stamps on cans

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Information Necessary for Recommending a New Decision Criterion

• It should point out that there are significant differences among brands on the attribute

• It should supply the consumer with a decision-making rule, such as if, then

• It should convey a rule that is consistent with how the person made the decision on prior occasions

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Neuromarketing

• Uses functional magnetic resonance imaging, a brain-scanning device that tracks blood flow as we perform mental tasks

• Marketers measure consumers’ reactions to movie trailers, choices about automobiles, the appeal of a pretty face, and loyalty to specific brands

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Cybermediaries

• The Web delivers enormous amounts of product information in seconds

• Cybermediary: helps filter and organize online market information

• Examples: Shopping.com, BizRate.com

• MySimon.com

• NextTag.com, PriceGrabber.com

• PriceSCAN.com

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Heuristics: Mental Shortcuts

• Heuristics: mental rules-of-thumb for efficient decisions

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Heuristics

Product Signals

Market Beliefs

Country of Origin

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Choosing Familiar Brand Names

• Zipf’s Law: our tendency to prefer a number one brand to the competition

• Consumer inertia: the tendency to buy a brand out of habit merely because it requires less effort

• Brand loyalty: repeat purchasing behavior that reflects a conscious decision to continue buying the same brand

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Noncompensatory Decision Rules

• Lexicographic rule: consumers select the brand that is the best on the most important attribute

• Elimination-by-aspects rule: the buyer also evaluates brands on the most important attribute

• Conjunctive rule: entails processing by brand

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Table 8.4 Hypothetical Alternatives for a TV Set

Brand Ratings

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

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Compensatory Decision Rules

• Simple additive rule: the consumer merely chooses the alternative that has the largest number of positive attributes

• Weighted additive rule: the consumer also takes into account the relative importance of positively rated attributes, essentially multiplying brand ratings by importance weights

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Chapter Summary

• Decision making is a central part of consumer behavior and decisions are made in stages

• Decision making is not always rational

• We use rules of thumb and decision rules to make decisions more efficiently