Consumer Behavior and Decision Making

Foundations of Value Management - Value management for customers

• Lecture: Winter term 2024/25
• Lecturer: Prof. Dr. Manfred Schwaiger (Institute for Market-based Management), Prof. Dr. Marko Sarstedt (Institute for Marketing)

Aim of the Lecture

• Understand the stages of the consumption process and their importance for managerial decisions
• Fully grasp the concept of market segmentation
• Understand the relevance of consumer-brand relationships
• Identify the attitude-behavior gap
• Comprehend the construction of consumer preferences
• Analyze the role of choice set composition, choice framing, and decision environment
• Examine the role of sensory stimuli in consumer behavior
• Comprehend context effects

Agenda

• Part 1: Introduction - Consumers as stakeholders, consumer brand relationships
• Part 2: Preferences and preference construction, context factors, choice set composition, choice framing, and decision environment

What is Consumer Behavior?

• The study of processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires.
• Consumers may take the form of groups and organizations
• Consumer behavior is not limited to the point of purchase
• The purchaser might not be the same consumer

Stages in the Consumption Process (Prepurchase, Purchase, and Postpurchase Issues)

• Prepurchase Issues (Consumer's Perspective): How a consumer decides they need a product, what sources of information they use to learn about choices.
• Prepurchase Issues (Marketer's Perspective): How are consumer attitudes toward products formed, what cues used to infer which products are superior.
• Purchase Issues: Acquisition process, stress/pleasure of experience.
• Postpurchase Issues: Product performance, disposal, impact on decision-making about future purchase

Consumer Behavior Influences

• Consumer-Specific Factors: Needs, wants, demographics (income, lifestyle, and personality).
• Product-Specific Factors: Consumer-brand relationships, anthropomorphism, brand image
• Context Factors: Choice set composition, choice framing, and decision environment (compromise effect, choosing the middle option)

Marketers' Understanding of Consumer Segments

• Marketers have to understand the wants and needs of different consumer segments.
• Consumers within a same product category have different needs.
• Market segmentation involves viewing a heterogeneous market as smaller markets with differing preferences.

Ways to Segment, Target and Position the Brand

• Choose clustering variables
• Develop segment profiles
• Validate segment structure
• Choose segment
• Develop marketing strategy
• Position the brand in the segment
• Develop brand communication strategy

Consumer-Brand Relationships

• Love/Passion: Emotional bonds, positive brand perception, irreplaceable/unique.
• Self-Connection: Establishing identity, past, current, and future self, maintenance of relationships.
• Interdependence: Part of consumer's daily routine, frequent interaction, variety of brand-related activities, high intensity of individual events.
• Commitment: Intention to build a long-lasting relationship, high brand loyalty, high personal dedication, strong emotional bond.
• Intimacy: Intimate knowledge structure developed around brands, personalized/stored memory, belief in superior product performance, more durable relationship bonds.
• Brand Partner Quality: Positive orientation, dependability, reliability, fulfilment of relationship contract, accountable for actions).

Consumer Decision-Making

• Constructive Process: Multiple options and information, limited processing resources.
• Context Dependence: Goals, task complexity, how one is asked, choice set representation.

Classification of Context Factors in Consumers' Decision-Making

• Choice set composition: Influence of actual choice, attraction/compromise effect.
• Choice framing: Influence of framing, message /common attribute effect, Single/Phantom decoy effect.
• Decision environment: Influence of external cues, sensory stimul (visual, sound, smell, touch, taste), social stimuli (utilitarian/value expressive/informational influence).
• Context Effects: How the presentation format changes how a customer decides to purchase

Effects of Choice Set Composition on Consumer Choice, Compromise effects, Attraction Effect

• Basic principle: Proportion of consumer choosing a product from a set depends on set composition.
• Compromise effect: Adding an extreme decoy option increases the target option's choice.
• Attraction effect: Asymmetrically dominated option boosts the target.
• Empirical Example: Illustrate these effects with choice scenarios and percentages.

Sensory Marketing

• Engage consumers' senses to impact perception, judgment, and behavior.
• Sensory marketing activities can influence product associations (quality, elegance, sophistication).

Foundatons of Sensory Marketing: Sensation and Perception

• Sensation: Simple response of sensory receptors to basic stimuli
• Perception: Selecting, organizing, interpreting sensations

Olfaction (Smell)

• Ambient scent: Impacts mood, time spent in locations.
• Long-term effect: Influence of ambient smells

Auditory (Sound)

• Sound design: Fosters distinctiveness from other brands, enhances memorability.
• Music: Creates a positive experience

Taste

• Sensory cues: influence taste perception.
• Cognitive cues: external factors like marketing and social context.

Vision

• Visual elements: vital in advertising, store design, packaging.
• Visual cues: differentiates products from competitors.