Consumer Behavior Exam 3

Consumer's Decision-Making Processes

1, Problem Recognition 2. Information Search (Internal and external) 3. Judgment 4. Decision-making (High and Low effort) 5. Shopping Experience 6. Post-Purchase Processes

Low Effort Affective Decision-Making

Affect/Emotions may also play a part in consumers' decision making ◦Affect referral -Emotions from an ad attached to brand -Brand extensions: emotions tied to brand attached to new product category -Co-branding -Associate with a popular cause Variety Seeking ◦Sometimes consumers seek variety for some product categories ◦Way to avoid boredom/stimulate sensations ◦Vicarious exploration: window shopping ◦Use innovativeness: new ways to use existing products -Salt used to get red wine out of white carpet Impulse Purchases ◦Consumers may suddenly want to purchase something they had not planned on ◦Conflict between control and indulgence ◦Can be stimulated by marketing: -POP displays -Infomercials -Store design

Cognitive High-Effort Decision-Making

Again, based on the Elaboration Likelihood Model, decision-making processes are either through the central route (high effort) or peripheral route (low effort) Noncompensatory Decision-Making: If a brand scores low on an important attribute, it will immediately be put in the inept set. There may be cutoff levels in a noncompensatory model. Compensatory Decision-Making: if a brand scores low on an important attribute, this can be made up for (compensated for) by high scores on other attributes Processing by Brand Processing by Attribute

Imagery

Also called visualizing Consumer image what it would be like to own and use the product Imagine driving a convertible sports car along the Maui coast... Marketers try associate positive images with their brands

Ideal State (Where we want to be)

Based on: §Simple expectations §Function of aspiration or goals §Changes in life situations Ideal state is not objectively measured

Attraction Effect

By changing the alternatives, marketers can influence which alternative consumers will choose. For example, you have started a new job where you must wear a uniform. You have to buy a pair of black wool pants from Land's End Adding the more expensive alternative makes the $25 pair of pants look cheap, and thus some consumers will be more attracted to the $45 pair of pants than they would have if there were only the options in Scenario 1

Cognitive High-Effort Decision-Making Models

Compensatory processed by brand -Multiattribute Model (Theory of Reasoned Action) Compensatory processed by attribute -Additive Difference Model Noncompensatory processed by brand -Conjunctive Model Noncompensatory process by attribute -Lexicographical Model -Elimination by Aspects Model Compensatory processed by brand -Multiattribute Model (Theory of Reasoned Action) -With very important decisions, consumers may look at several attributes -Attributes that are consistent with the consumers goals are more likely to be weighted more heavily For example: Buying a cell phone, consumers may look at these attributes: -Price -Battery life -Camera quality -Screen size -Memory -Durability Multiattribute models are both cognitively and affectively taxing. It may be difficult to trade off conflicting attributes. For example, may want a phone that has a great camera and a very long battery life, but not willing to pay a high price Multiattribute models are useful to marketers, as they: -Show which attributes your brand scores high on -Show attributes where other brands score higher -An understanding of the tradeoffs consumers make in determining which brand to purchase Compensatory processed by attribute Additive Difference Model -Consumers by attribute two brands at a time. Consumers compare differences of brands on each important attribute, and then develop an overall preference. -Usually fewer attributes are considered than in multiattribute models -The consumer then compares two other brands until all brands in the consideration set have been compared against each other -Allows tradeoffs between attributes Noncompensatory processed by brand: Conjunctive Model -Consumers set minimum levels for each attribute, example, may want to pay less than $1,200 for a phone. -Consumer examine each brand to determine if the cutoff levels are met. If not, brand goes from consideration set to inept set. Noncompensatory process by attribute: Lexicographical Model -Consumer order attributes in order of importance, compares brands one attribute at a time. -If one brand comes out ahead on most important attribute, that brand is chosen. -If there is a tie, consumers moves to next most important attribute until there is a winner. Elimination by Aspects Model -Similar to Lexicographical Model, but includes acceptable cutoff levels -Not as strict as Lexicographical Model, and more attributes may be considered

Biases in Judgement Processes

Confirmation bias: Consumers may make judgments based on prior beliefs, and only pay attention to new information that confirms those beliefs and discount information that is contrary to those beliefs Self-positivity bias: Consumers feel that bad things are more likely to happen to other people than themselves. Negativity bias: Consumers give negative information more weight than positive information when making a judgment if object of judgment is very important to them Mood: Mood can act as an anchor for judgments. Being in a positive mood can reduce searching for negative information. Positive mood can make consumers over-confident in judgments. Prior brand evaluations: If a consumer has a strong good evaluation of a brand, they may fail to learn new information that is negative about the brand (and vice versa) Prior experience: Consumers prior experiences can bias judgments if there have been changes in a product Difficulty of mental calculations: Consumers may have difficulty in calculating sales/prices when products have different attributes or are of different sizes

High Effort/Affective Decision-Making

Consumer makes a choice because it feels right -Consumers who make affective choices (based on feelings) tend to be more satisfied than those who only use cognitive models Appraisal Theory: Emotions can change how consumers perceive (or appraise) a situation -Fearful: perceive more risk in new situations -Angry: perceive less risk in new situations -Disgusted: disposition is an opportunity to get rid of current possessions Sad: disposition is a chance to change the situation Affective forecasting: -Predicting how the decision will make us feel/ -How intense will that feeling be? -How long will we have that feeling? -Not always accurate/may lead to inaccurate optimism/pessimism Imagery: Consumer can image self using the product -Marketers may make it easier for consumer to imaging good outcomes

Multiattribute Model

Consumers decide how important an attribute is to them (different for different consumers) Consumer determines how each brand scores on each attribute Consumer mentally multiplies importance of attribute and how brand scores on that attribute. Consumer adds up these calculations to give the brand an overall score. Consumer then compares each brands score to determine choice.

Estimates if Likelihood

Consumers estimate the likelihood of many event when they are judging a potential purchase -Likelihood of the product performing as promised -Likelihood of others approving of the purchase -Likelihood that product solving problem/meeting needs

Estimates of Goodness and Badness

Consumers evaluate the desirability of a product's features Given the likelihood of events, are those outcomes good or bad? Thus a judgment is basically an attitude based on the product's attributes

Decision Criteria

Consumers need to decide which decision criteria (attributes of brands) are important to them. These are influences by: -Consumer's goals -Timing: buy/do right now or in the future? -Framing: avoiding a loss versus acquiring a gain?

Mental Accounting

Consumers often divide spending & saving into accounts for specific purposes -Travel account -Household account -Entertainment account -Credit card account -Rainy day account -Retirement account Consumers may base their judgements on which account the offering fits into.... Have you ever been reluctant to spend $100 on a necessity, only to then spend $100 on an evening out? My most dangerous account: Costco account!!!

Low Effort Judgments/Decisions

Consumers purchase most products without careful thought or elaboration. ◦Peripheral route processing ◦Products that are bought routinely and alternatives are known by the consumer ◦Few product differences perceived ◦Distractions ◦Convenience/distribution

Recall of Attributions

Consumers will only be able to access some of the information stored in long term memory Factors that influence which attributes are recalled: §Information is accessible/available (repetition is key) §Information is diagnostic (used to differentiate one brand from another) §Information is salient §Information was presented vividly §Information is congruent to consumer's goals

Marketers want to stimulate problem recognition by:

Creating a new ideal state §New iPhones with new features every year §New fashions in clothing and interior design §Specialized athletic shoes for every sports/activity Creating dissatisfaction with consumer's actual state §Often use fear appeals

Other High Effort Decisions

Decision Delay: Consumers may view some decisions as too risky, and thus decide to delay the decision. -Often involves an unpleasant task -Or may be result of uncertainty where to get credible information Noncomparable alternatives: Sometimes alternatives do not have the same attributes, and this makes them difficult to do a direct comparison -What do consumers do? How do they compare noncomparable alternatives? Alternative-based strategy (top down): choose the alternative that you have the best overall evaluation of (without really considering the attributes) Attribute-based strategy (bottom up): Use abstract attributes that pertain to both alternatives, such as fun, educational, good for career, meets social needs, etc.

Judgements

Estimate of likelihood Estimate of goodness or badness Anchoring and Adjustment Imagery Mental Accounting Emotional Accounting

Recall of Brands

Evoked Set/Consideration Set: Brands that are recalled when consumer is internally searching for information...usually 2 to 8 brands Brands that are recalled are more likely to be chosen Factors that influence which brands are recalled: §Prototypicality §Brand familiarity §Brand is congruent to consumer's usage situation §Brand preference §Retrieval cues

Actual State

External Stimuli §Advertising/reminders §Comparison to others/peer pressure

Internal Information Search

First consumers engaged in internal information search by searching memory for: §Past experiences §Marketing messages §Information from other people §Attributes §Evaluations MAO makes a difference in how extensive internal search will be: Motivation: §How important is purchase? §How expensive is purchase? §Is the consumer involved with the purchase? §Does the consumer perceive risk in the purchase? Ability: §Can the consumer afford the purchase? §Does the consumer have the experience/knowledge of the product? Opportunity: §Is there time pressure associated with the purchase? §Are there distractions that reduce opportunity to search memory? Aspects of a product that consumers may recall include: §Brands §Attributes §Evaluations §Experiences (autobiographic memory)

Gains versus Losses

Is the consumer motivated to seek gains or avoid losses? According to Prospect Theory, losses loom larger than gains Also, sellers will often as for a price higher than buyer is willing to pay. Endowment effect: ownership of an item increases its value Consumers react more to price increases than to price decreases Prospect Theory: Consumers are risk averse (avoiding losses) They will react well to money back guarantees, warranties

Difference Between Judgments and Decisions

Judgments: An evaluation or an estimate of likelihood of events An important part of the decision-making process, but not a decision Decision: Actually making a choice among alternatives (choice could be not choosing any alternative)

Other Information Recalled in Internal Information Search

Overall evaluations of brands §Whether consumer likes/dislikes the brand §Evaluations are easier to recall than attributes Experiences §Autobiographical memory will recall actual experiences you may have had with the product §Consumers usually recall especially good/bad experiences

Two Types of External Search

Pre-purchase search §Situation involvement Ongoing search §Enduring involvement

High-Effort Decisions

Sets in consumer decision-making -Consideration Set: brands being considered -Inept Set: brands that are unacceptable -Inert Set: brands that are unknown or neutral

External Information Search

Sometimes internal information search is enough for the consumer to make a decision. However, if the consumer feels he/she needs additional information, he/she will engage in external information search The extent to which a consumer engages in external search depends on MAO: §Involvement (situational/enduring) and perceived risk §Perceived costs/benefits of the search §The number of products in the consideration set §Attitude toward the search §Discrepancy of information §Consumer's ability to process information §Objective knowledge §Subjective knowledge §Inverted U-shape relationship between knowledge and external search §Attitude toward the search §Discrepancy of information §Consumer's ability to process information -Objective knowledge -Subjective knowledge -Inverted U-shape relationship between knowledge and external search §Consumer's cognitive abilities §Consumer's demographics -Income -Age §Consumer's time pressure §Consumer's distractions §Information amount/format What kind of information do consumers search for? §Brand name: activates related information §Price §Other attributes depending on the product and consumer's goals Is external information search accurate? §Probably more accurate than internal information search §Confirmation bias §Democracy of the Internet (may get varied opinions/ratings) Consumers search for information in two ways: §By brand: learn all they can about one brand and then go on to the next brand §By attribute: Compare one attribute across brands. Example: price comparison shopping Where do consumers search for information: §Retailers/manufacturers marketing communications §Media §Interpersonal -Normative/informational influence (family, friends) -Ratings of brands by other consumers -Opinion leaders

Emotional Accounting

The accounts may often have intense positive or negative emotions linked to them Example: Inheriting money from a loved one....more likely to spend that money on a utilitarian purchase then on a frivolous/fun purchase to counteract negative emotion linked to the money

Actual State (where we are now)

Two kinds of stimuli can influence consumers' perceptions of their actual state §Simple Physical Functions -Depletion or wear out -Product malfunction -Ailments

Complex Decisions

What does a consumer do when he/she has a very complex decision to make, one where he/she is considering a lot of different alternatives? First uses a noncompensatory model to eliminate the unacceptable alternatives (into inept set) Then may use a compensatory model to determine between the remaining alternatives

Anchoring and Adjustment

When consumers are making a judgment, they often use an anchoring and adjustment process Anchor is based on prior knowledge and experience with brand Anchor can be adjusted positively/negatively as new information is learned Research has shown that consumers will usually stay fairly close to their original anchors Strategy of artificially setting anchor may be used by some salespeople and manufacturers (MSRP) Another reason why a brand extension might be successful Mt Everest example

Low Effort Judgments

When consumers are using peripheral route processing to make judgments, two main heuristics are used: ◦Representativeness heuristic: compare to the product category prototype ◦Can lead to bias as products may share some characteristics of the prototype, but not all as assumed by consumer ◦Availability heuristic: more accessible or vivid events are brought to mind -Past experiences -Word of mouth -Tend to ignore base-rate information -Law of small numbers ◦Marketers portray brand in the most positive/vivid way ◦Marketers also try to create positive WOM -Trials/free samples (free movie Friday nights with college id at theater near University of Arizona campus.... -May provide base-rate information

Internal Search Bias

§Confirmation bias §Inhibition: recall of certain information may inhibit recall of other information §Mood Congruency

Problem/Opportunity Recognition

§Consumer realizes he/she has a problem (or an opportunity) when the his/her actual state is different from his/her ideal state §Example: My actual state may be that I have a car that guzzles gasoline. My ideal state would be to have a car that gets better MPG to help environment and reduce costs. §The amount of tension between actual and ideal states determines if consumer searches for information on how to solve problem

Information Search

§Internal Information Search §External Information Search

Choice Tactics

◦Always buy locally if possible ◦Buy "green" products Buy national brands versus store brands (or vice versa)

◦How would you entice consumers who are brand loyal to another brand?

◦Answer: You wouldn't as if a consumer is truly brand loyal, it will be too hard to get consumer to try another brand ◦Instead, focus efforts on habitual consumers and consumers new to the product category

Difference between judgments and decisions?

◦Judgment = an evaluation, estimate of likelihood ◦Decision = a choice (even if that choice is to not purchase a product now)

Low Effort Cognitive Decision-Making

◦Passive/incidental learning: -Pick up and retain marketing messages without much effort/attention ◦Satisficing: rather than optimizing, consumers pick an alternative that is "good enough." -Combined word from satisfy and suffice Performance-based strategies: ◦Based on overall evaluation of the brand ◦Or on a specific attribute emphasized by marketer such as rich aroma/taste of Folgers Coffee, strength of Reynold's plastic wrap ◦Key is to get consumer to try the product How do marketers get consumer to try product? ◦Sales promotions, especially those posed as gain rather than loss ◦Recipes/other uses for product ◦Others? Operant Conditioning/consumer learning: ◦Consumer develops hypothesis about brand ◦Consumer buys and uses brand ◦Consumer hypothesis is either positively reinforced or punished ◦Consumer decides whether or not to buy brand again ◦Important to note that what takes place during brand consumption makes a difference about repurchase Habit versus brand loyalty: ◦Many things humans do are merely out of habit ◦Simple repeat purchase, no strong brand preference ◦Simplifies decisions ◦Reduces risk ◦Distribution very important in maintaining habit....what happens if there is a stock out/or store does not carry brand? May lead to brand switching ◦Habit: Marketer wants to instill habit to buy brand in consumers ◦Shaping: free sample, large coupon to purchase brand, series of smaller coupons to repurchase brand and thus forming a habit ◦Brand loyalty: repeat purchase with a strong preference included -If store out of brand, will not purchase another brand, but instead go to another store -Substitutes will not be accepted -Consumer may have multibrand loyalty -Best way to create brand loyalty is to have a high-quality product at a fair price -Sales promotions may also be used: -Customer loyalty program -Games/contests -Collectibles -Redeemable box tops Price-Related Strategies: ◦When is a consumer looking for the least expensive alternative? -When few brand differences are perceived -When consumer has very little money ◦Consumer is more likely looking for value -Product benefit/prices ◦Consumer's zone of acceptance (reference price) -Will not consider if price is too high or too low ◦Discount pricing -What happens if marketer discounts prices too often? -Discount prices becomes the actual price -Consumer will not buy brand unless on sale ◦Prestige Pricing: An especially high price that usually denotes exceptional quality or scarcity -Reverse demand curve: when prices rises, so does demand

Low Effort Decision-Making

◦Spend very little time/effort deciding which brand to buy ◦Think of usual grocery shopping list of maybe 10 items -If you spend 10 minutes on each decision, would be in store 1 hour and 40 minutes!!!! ◦High effort product: Thinking, buying, feeling ◦Low effort product: Feeling, buying, thinking or maybe even Buying, thinking, feeling Choice Tactics: ◦Price ◦Preference ◦Performance ◦Normative influence ◦Habit ◦Brand loyalty ◦Variety seeking Consumers may use different choice tactics for different product categories: ◦May use the same laundry detergent as your parents ◦But use toothpaste you think works best ◦Choose wine based on variety seeking ◦Use shampoo recommended by hair stylist ◦Brand loyalty to Heinz ketchup