Consumer Decision Making

Making Consumer Decisions

• Consumer decision-making is a complex process ranging from structured to automatic.
• Consumer involvement, cognitive information processing, decision-making shortcuts/biases, and affective decision-making explain the process.

Consumer Involvement

• Consumer involvement is a person's perceived relevance of an object based on inherent needs, values, and interests (Zaichowsky, 1985).
• It is the degree of attachment felt toward a product or brand.
• Consumer involvement includes both cognitive and affective elements.
• Involvement determines motivation to seek, attend to, comprehend, and elaborate on related information.
• Purchase decisions that are important are generally high-involvement decisions.

Types of Consumer Involvement

• Ego-involvement concerns the perceived relevance of products or brands to personal interest.
• Involvement increases when product image and values align with personal values.
• Involvement can reflect identity or social connections, such as iPhone vs. Samsung user communities.
• Product involvement refers to the perceived personal relevance of a product based on needs, values, or interests.
• Generally, involvement increases with perceived risk and the availability of more alternatives.
• Monetary risk refers to the potential for financial stress from a purchase.
• Purchases like insurance policies are high-involvement for lower-income groups but low-involvement for affluent consumers.
• Functional risk is the fear a product will fail to deliver promised functions.
• Physical risk refers to the fear that a product might cause bodily harm.
• Social risk means buying a product/service might demean one's status.
• Psychological risk - purchase might contradict one's self-concept.
• Co-creation, like self-assembly furniture, increases product involvement, which is known as the IKEA effect.
• Situational involvement is the perceived personal relevance of the consumption context.
• It is associated with the immediate social or physical surroundings.
• This type of involvement is short-lived and changeable, relying on the situation and event.
• Message involvement involves the customer's interest in media messages.
• Attention-catching techniques boost involvement, such as novel stimuli, celebrity endorsements or community presence.

Cognitive Decision-Making Process

• The traditional model focuses on information processing to understand consumer decision-making, assuming rational, careful, and benefit-maximizing thinking.
• Consumers are viewed as problem-solvers.
• Step 1: Problem recognition occurs when there is a disparity between what we have and what we want.
• Opportunity recognition is to reach ideal state.
• Need recognition is to repair the actual state.
• Step 2: Information search is when environment is surveyed for data to make a rational decision.
• An internal search scans memory to assemble information about product alternatives.
• An external search obtains information from external sources like advertisements and friends.
• We search more when more involved when greater risk is perceived, and information is accessible.
• Information search avoids post-purchase dissatisfaction.
• Step 3: Evaluation of Alternatives involves using product data, stored in relation to existing knowledge.
• Knowledge structure organizes beliefs broken down as the superordinate, basic and subordinate level:
  • Superordinate category - abstract concepts
  • Basic level category - subsets of superordinate, common and distinctive items
  • Subordinate level – specific, individual brands and typical items
• The evoked set refers to all brands a consumer is aware of which might meet needs.
• The consideration set refers to those a consumer might actually consider buying.
• An inept set is one which a consumer would exclude from buying because it is unacceptable.
• An inert set is one where a consumer is indifferent towards.
• Overlooked brands exist but are not widely known.
• Evaluative criteria, ingredients make a difference on products which consumers consider.
• Determinant attributes are features used to differentiate choices from one another.
• Step 4: Product choice is guided by decision rules:
  • Compensatory rule- the chosen option is the highest ranked.
  • Simple additive rule – choosing an option based on the most positive attributes.
  • Weighted additive rule – choosing the option that has the most important attributes.
  • Non-compensatory rule
    • Lexicographic rule is when the best option on the most important attribute is chosen.
    • Regardless of position in other less important attributes.
    • Individual differences are expected.
    • Elimination-by-aspect rule - options are evaluated and rejected, if the most important attribute is not met.
    • Conjunctive rule - the option meets with all the key attributes.
• Step 5: Post Purchase Evaluation occurs after the product is purchased:
  • to decide if expectations are met.
  • If performance meets expectation, this results in neutral response.
  • If performance surpasses the expectation, this results in positive disconfirmation and consumer satisfaction.
  • If the performance does not meet the expectations, this results in a negative disconfirmation and consumer dissatisfaction.
• Post-purchase cognitive dissonance can motivate consumers to reassure themselves that they have made the right choice.

Habitual Decision-Making

• This occurs with little to no conscious effort and is typical for low-involvement purchases.
• Strategies are used to deliver the best results or an adequate solution.
• A lack of resources can cause consumers to settle for a good enough choice.

Decision-Making Shortcuts

• Consumers use heuristics or 'rules of thumb' to reduce decision-making effort, often subconsciously.
• This most often occurs when interest, ability, or information is lacking.
• Heuristics can be efficient, but can also cause errors due to using limited info.

Prediction Heuristics

• Representativeness heuristic judges probability by how similar something is to a typical case.
• Availability heuristic judges probability by easily relevant information which comes to mind.
• Familiar brands are judged to be more reliable through availability heuristic.
• The simulation heuristic judges probability by how easy it is to imagine.
• The anchoring-adjustment heuristic - decision makers form initial judgment and adjust it around.
• Covariation is when there is an assumption certain attributes covary.

Persuasion Heuristics

• Length-implies-strength occurs when long messages filled with facts and figures indicate higher quality.
• Liking-agreement is when we agree with people we like more.
• Celebrity endorsements are an example, as they encourage buying.
• Consensus-implies-correctness is the concept when majority opinion is validated.

Decision-Making Biases

• Default bias is a tendency to comply rather than making alternate arrangements.
• Loss aversion is when people prefer to avoid losses.
• Sunk-cost fallacy is when having paid for something makes us reluctant to waste it.

Priming and Nudging

• Priming describes how environmental cues impact reactions.
• Nudging is influencing choice by shaping the environment.

Affective Decision-Making

• Consumer decisions are influenced by both thinking and emotions.
• Positive affect is when consumers embrace happiness, and pleasant feelings can inform satisfaction.
• Negative affect, involves negative emotion and unpleasant feelings, which leads to disliking and repels consumption.
• Emotions can be a source of information and can impact choices.

Decision-Making by Technology

• Software programs use collaborative filtering to recommend new purchases based on past user behavior.
• Innovative companies experiment with Al as personal shoppers.