Week 2 Decision-Making Notes PDF

Week 2: Decision-Making, Involvement, and the Customer Journey Introduction to Decision-Making and Involvement In the world of consumer behaviour, decision-making is a complex process influenced by many factors, including personal involvement and the journey that customers undertake when making cho...

Week 2: Decision-Making, Involvement, and the Customer Journey Introduction to Decision-Making and Involvement In the world of consumer behaviour, decision-making is a complex process influenced by many factors, including personal involvement and the journey that customers undertake when making choices. In this session, we will explore how different levels of involvement affect decision-making, understand the stages of the decision-making process, and analyse how consumers navigate choice situations. We will also look at various shopping behaviours and consumer motivations, identifying how these factors shape the way people shop, buy, and engage with products and services. Market Segmentation and Consumer Behaviour One of the key strategies in marketing is market segmentation—the process of dividing a broad market into smaller, more defined sub-markets of consumers with similar needs and wants. The aim is to predict customer needs more accurately and improve profitability by tailoring products and services to these specific groups. Segmentation can be based on various factors, such as: Demographics (age, gender, income, education, etc.) Psychographics (lifestyles, attitudes, personalities) Behavioural factors (usage frequency, benefits sought, user status) Geography (where consumers live) For example, a company may segment its market by targeting health-conscious individuals with a product like Diet Coke, while also offering energy drinks to those who are physically active, such as athletes. However, segmentation is not without its challenges. Using only one variable (e.g., age or income) can result in crude generalisations that fail to capture the nuances of consumer behaviour. This is why multi-dimensional segmentation is often more effective, combining demographic, psychographic, and behavioural factors to create a more complete picture of the target audience. For example, a young male buyer with 1 a limited budget might be a first-time car owner, prioritising style on a budget—a consumer segment defined by multiple dimensions. Understanding Consumer Personas To develop a deeper understanding of consumers, marketers often create customer personas—detailed profiles that represent their ideal customers. These personas include demographics, shopping habits, lifestyle choices, and even fears or pain points. For example, a travel company might develop a persona for a family looking for budget-friendly holiday options, focusing on their concerns about affordability and family activities. Creating personas helps marketers to tailor their strategies more effectively, addressing specific needs and motivations within different consumer groups. Advantages of Market Segmentation There are several advantages to segmenting the market, including: 1. Better understanding of customer needs – Marketers can use segmentation to develop profiles of their target consumers, leading to more effective marketing strategies. 2. Tailoring the marketing mix – With a clearer understanding of the target audience, companies can adjust their product, price, promotion, and placement to meet the needs of different segments. 3. Identifying new opportunities – Segmentation can reveal unmet needs in the market, allowing companies to develop new products or enter new markets. 4. More efficient use of resources – By focusing on specific segments, companies can allocate their marketing budgets more effectively. The Consumer Decision-Making Process Consumer decision-making is not a straightforward process. It involves several stages that guide the consumer from recognising a need to evaluating their satisfaction after making a purchase. The process can be broken down into five key stages: 1. Problem recognition – This is the first step, where consumers realise they have a need or a problem to solve. Marketers aim to create awareness of 2  problems and present their product as the solution. For example, fashion companies frequently create new ideal states by introducing new styles, making consumers feel dissatisfied with their current wardrobe. 2. Information search – Once a problem is recognised, consumers search for information to solve it. This search can be internal (drawing on past experiences) or external (seeking advice from friends, experts, or online reviews). The rise of digital platforms like Yelp or Google has made external information more accessible than ever. 3. Evaluation of alternatives – After gathering information, consumers compare different options. They may use heuristics—mental shortcuts like brand loyalty or country of origin—to help with their decision. Alternatively, they might rely on product signals, such as price or reviews, to infer quality. 4. Purchase decision – Based on their evaluation, consumers make a purchase decision. However, this is not always the final step. Situational factors, such as stock availability or the opinions of others, can influence whether the purchase is completed. 5. Post-purchase evaluation – After buying a product, consumers evaluate their satisfaction. This is where the Expectancy-Disconfirmation Model comes into play. If the product performs better than expected, the consumer experiences positive disconfirmation (or delight). If the performance matches expectations, they are satisfied. However, if it falls short, negative disconfirmation leads to dissatisfaction. Challenges in Consumer Decision-Making Consumers face several challenges when making decisions. One of these is the paradox of choice—having too many options can overwhelm consumers, making it harder for them to decide. In these situations, consumers might adopt strategies like satisficing (choosing a “good enough” option) or maximising (trying to make the best possible choice). Both approaches have their pros and cons, but maximising can be especially difficult when there are endless alternatives to consider. 3 Decision-making is also influenced by the number of available alternatives, the amount of information available, and the uncertainty surrounding a product’s performance. The internet has made more information available, but this can sometimes make the decision process even more complex. Too much information – The vast amount of product information available online can make it difficult for consumers to process everything, leading to confusion. Uncertainty about product performance – Even with reviews and expert opinions, consumers often remain uncertain about whether a product will meet their needs. Post-Purchase Dissonance After making a purchase, consumers may experience post-purchase dissonance— a feeling of regret or discomfort that arises from uncertainty about whether they made the right choice. This is common in high-involvement purchases, such as buying a car or an expensive electronic device. Marketers aim to reduce post-purchase dissonance by reinforcing the consumer’s decision, offering reassurances like warranties or testimonials from other satisfied customers. Disposal of Goods Consumers not only make decisions about what to buy, but also what to do with products once they no longer need them. The disposal process can involve recycling, selling second-hand goods, or giving items away to charity. With growing concerns about sustainability and environmental impact, disposal decisions are becoming more important. Marketers should understand the entire consumer journey, from acquisition to disposal, to anticipate how consumers will interact with their products long-term. Fast vs. Slow Thinking in Decision-Making Consumers use two main types of thinking when making decisions: fast thinking and slow thinking. Fast thinking is unconscious, automatic, and used for everyday decisions. It relies on habits, instincts, and emotional responses. Slow thinking, on the other hand, is more deliberate and effortful. It is used for complex decisions where consumers need to weigh options carefully. Both types of thinking influence consumer behaviour, and marketers need to understand when their customers are likely to rely on each. 4 Different Types of Buying Situations Consumers face different types of buying situations depending on their level of involvement and the complexity of the purchase. These include: 1. Routine problem solving – For low-involvement purchases that are habitual, such as buying toothpaste, consumers apply minimal effort. 2. Limited problem solving – When a consumer is somewhat familiar with a product but wants to compare a few options, they engage in limited problem solving. An example would be choosing a smartphone by comparing different models. 3. Extended problem solving – For high-involvement purchases like buying a car or a house, consumers invest significant time and effort in researching and evaluating options. Techniques to Increase Involvement (Assael, 2004) To encourage more thoughtful engagement from consumers, marketers can employ several strategies to increase involvement: 1. Link the product to an important issue – Associating a product with a larger social or environmental cause can make it more personally relevant to consumers. For example, brands that focus on sustainability often appeal to eco-conscious buyers. 2. Create a problem and solve it – Highlighting a problem that consumers were not aware of and positioning the product as the solution is a common marketing strategy, especially in industries like beauty or health. 3. Link the product to personal situations or activities – Showing how a product fits into everyday life helps consumers see it as essential. For instance, advertisements for smartphones often demonstrate how the device improves organisation and connectivity. 4. Use involving advertising – Advertising with emotional appeal, strong visuals, or celebrity endorsements can capture consumer attention and create a deeper connection to the product. 5  5. Change the importance of product attributes – Marketers can shift consumers’ perceptions by emphasising certain product features, such as safety or convenience. 6. Add a new attribute – Introducing a unique feature, like gluten-free options in food products, can appeal to a niche market and create a competitive advantage. The Social Customer Journey The consumer decision journey is increasingly influenced by social factors. In today’s digital age, consumers rely on social media, online reviews, and recommendations from friends and family when making purchase decisions. The social customer journey acknowledges that decision-making is not always linear and is shaped by social interactions and external influences at every stage. The Twelve Shopper Journey Archetypes Researchers have identified twelve shopper journey archetypes that describe different shopping behaviours: 1. Classic – A straightforward and deliberate shopper journey. 2. Entertainment – Shopping for fun or leisure. 3. Impulsive – Making spontaneous purchases. 4. Retail therapy – Shopping to relieve stress or improve mood. 5. Required – Shopping out of necessity, such as for groceries. 6. Routinised habit – Following a habitual shopping pattern. 7. Learning – Shopping to gain knowledge about new products. 8. Social network – Shopping influenced by social interactions or communities. 9. Opportunistic – Taking advantage of discounts or sales. 10. Joint – Shopping with others, such as family members or friends. 11. Gifting – Shopping specifically for gifts. 6  12. Outsourced – Using services like personal shoppers to make purchases on behalf of the consumer. Motivation and Needs in the Shopping Journey Consumers are driven by different needs, including: Need for cognition – The desire to engage in information-seeking and thoughtful decision-making. Need for control – A preference for having control over the purchasing process. Need for touch – The importance of physically interacting with products before making a purchase. These needs influence how consumers engage with the shopping experience, such as spending more time in physical stores or conducting thorough research online. The Role of Culture in the Consumer Journey Cultural factors significantly shape consumer behaviour. In collectivist cultures, consumers tend to prioritise group opinions and holistic thinking, perceiving products as interconnected with their social identity and environment. Understanding how culture impacts each stage of the consumer journey is crucial for marketers targeting international markets, as cultural norms and values influence decision-making. Summary The decision-making process is central to understanding consumer behaviour. It involves recognising a need, searching for information, evaluating alternatives, making a purchase decision, and finally assessing satisfaction post-purchase. Along the way, consumers face challenges such as too many choices, uncertainty, and potential regret after buying. Understanding how consumers navigate these challenges, as well as the factors that influence their decisions—such as personal involvement, heuristics, and emotional versus rational thinking—allows marketers to tailor their strategies more effectively. Through market segmentation, the creation of customer personas, and the analysis of decision-making processes, companies can better align their products and services 7 with the needs and desires of their target audience, ultimately leading to more successful and satisfying consumer experiences. The consumer decision-making process is intricate and influenced by various factors, from personal involvement and cognitive biases to social and cultural influences. By understanding how consumers navigate the stages of decision-making—problem recognition, information search, evaluation of alternatives, purchase decision, and post-purchase evaluation—marketers can tailor their strategies to effectively engage and satisfy their target audiences. Techniques such as increasing involvement, creating compelling personas, and recognising the social and cultural context of consumer behaviour help marketers guide consumers through their journey, from awareness to post-purchase satisfaction. 8