Summary chapter 7 : Judgements and decision-making

Cogni&ve decision-making process

Step 3: Evalua-on of alterna-ves

Evalua&on of alterna&ves: A choice must be made from the available alterna4ves.

1. Iden'fying alterna'ves

How do we decide which criteria are important and how do we narrow down product alterna&ves?
• A consumer engaged in EXTENDED PROBLEM-SOLVING may carefully evaluate several brands
• Whereas someone making a HABITUAL DECISION may not consider any alterna4ves to their normal
brand.
We do more extended processing in situa4ons that arouse nega4ve emo4ons due to conflicts among the
available choices.

2. Product categoriza'on

Categoriza&on is a crucial determinant of how a product is evaluated.

Þ These classifica4ons derive from different product aSributes, including appearance, price, or
previously learned connec0ons.

3. Levels of categoriza'on

Not only do people group things into categories;

Grouping occurs at different levels of specificity.

• Superordinate category:
§ High degree of generality
§ Provide very abstract informa4on
§ Superordinate categories display a low degree of inclusion and include basic level categories.
Ex: VEHICLE

• Basic level category:

§ The most useful in classifying products.
§ The items we group together tend to have a lot in common with each other, but s4ll permit us to
consider a broad enough range of alterna4ves.
Ex: TRAIN, PLANE, CAR, BOAT, TANK,...

• Subordinate category:
§ It oYen includes individual brands.
§ Low degree of generality and a low degree of class inclusion.
§ They have clearly iden4fiable and higly individua4ng specific features.
Ex: STRATION CAR, SPORTS CAR, LIMO, VAN, MINI BUS

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 4. Strategic implica'ons of product categorisa'on

3 things: Posi4oning of a product, Iden4fy compe4tors and Loca4on of products in a store

• Posi&oning of a product
The success of a posi4oning strategy oYen hinges on the marketer’s ability to convince the consumer
that their product should be considered within a given category.

• Iden&fy compe&tors
At the abstract superordinate level, many different products compete for membership.
Products and services that on the surface are quite different, however, actually compete with each
other at a broad level for consumers’ discre4onary cash.

• Loca&on of products in a store

Product categoriza4on can affect consumers’ expecta4ons.If products do not clearly fit into categories,
this may diminish our ability to find them or work out what they are meant to do one we have found
them.

5. Evalua've criteria

CSR: A company’s reputa4on for corporate social responsibility (CSR) is emerging as one of the most important
determinant aSributes when people choose among brands.

6. Decision rules we use when we care

we use into two categories: compensatory and non-compensatory:

I. Non-compensatory decision rules: We use them when we feel that a product with a low standing on
one aSribute cannot compensate for this flaw by doing beSer on another aSribute.

a. The lexicographic rule: Consumers select the brand that is the best on the most important
aHribute selected.

b. The elimina&on-by-aspects rule: The buyer also evaluates brands on the most important
aSribute. In this case, though, they impose specific cut-offs → the person will choose the
prime as it need to have the 1st aSribute and poor 2* aSribute (as it is less important for me)

c. The conjunc&ve rule: The decision-maker establishes cut-offs (limits) for each aSribute. They
choose a brand if it meets all of the cut-offs, while failure to meet any one cut-off means they
will reject it. The conjunc4ve rule: all the criteria need to be good,

II. Compensatory decision rules: give a product a chance to make up for its shortcomings.

a. Simple addi4ve rule: the consumer merely chooses the alterna4ve that has the largest
number of posi4ve aSributes.=→ The op&on that has the highest score.

b. The weighted addi4ve rule: more complex version. The consumer also takes into account the
rela4ve importance of posi4vely rated aSributes, essen4ally mul4plying brand ra4ngs by
importance weights → if one aHribute is not as important, we will take into account a lower
score in that aHribute.

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Step 4: Product choice

When we assemble and evaluate the relevant op4ons in a category, we have to choose one.

The choice can be influenced by integra4ng informa4on from sources such as:
§ prior experience with the product or a similar one
§ informa4on present at the 4me of purchase
§ and beliefs about the brands that have been created by adver4sing.

This product choice cannot be as easy as it seems: Prolifera4on of features to evaluate.

Step 5: Post-purchase evalua-on

Post-purchase evalua4on closes the loop.

We evaluate things as we buy, use them and integrate them in our life.

Ac0ng on dissa0sfac0on → If a person is not happy with a product or service, what can be done?

1. Voice response: Appeal directly to the retailer for redress (for example, a refund).
2. Private response: express dissa4sfac4on about the store or product to friends and boycoS the store.
a. Careful with Word of Mouth (WOM) and retailer reputa4on.
3. Third-party response: legal ac4ons can be taken against the merchant, register a complaint with the
Ombudsman or, perhaps, write a leSer to a newspaper.

Habitual decision-making

Habitual decision-making is formed by all those choices that we make with liSle or no conscious effort.

Þ Purchase momentum: occurs when our ini4al impulse purchases actually increase the likelihood that we will
buy even more (instead of less as we sa4sfy our needs). As an impulse to keep on buying.
o Iner&a: it involves less effort to throw a familiar package into the cart.
o Brand loyalty: it describes a paSern of repeat purchasing behavior that involves a conscious decision
to con4nue buying the same brand.

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Behavioral economics: priming and nudging

• Priming : Cues in the environment that makes us more likely to react in a certain way even: though
we’re unaware of these influences. By playing classical music, vandalism decreased.

• Framing: How we pose the ques4on to people or what exactly we ask them to do.

• Nudging: Nudge theory is a concept in behavioral economics, decision making, behavioral policy, social
psychology, consumer behavior, and related behavioral sciences that proposes adap4ve designs of the
decision environment (choice architecture) as ways to influence the behavior and decision-making of
groups or individuals.

- This relates to the psychology of loss aversion, which means we emphasize our losses more than
our gains.

- The Psychology of Aversion (PLA) par4cularly helps to predict ‘opposite paSerns of staying and
switching between choices involving good and bad.

- Sunk-cost fallacy: if we’ve paid for something, we’re more reluctant to waste it. The no4on that
even subtle changes in a person’s environment can strongly influence the choices he or she makes
has emerged on center stage in the study of consumer behavior.

- Behavioral economics focuses on the effects of psychological and social factors on the economic
decisions we make –and many of these choices are anything but ‘ra4onal’.

- Nudge: is a deliberate change by an organiza4on that intends to modify behavior can result in
drama4c effects.

Heuris5cs: mental shortcuts

Heuris&cs: mental rules-of-thumb which range from:

• The very general
• The very specific

I. Most prevalent heuris&cs we commonly use:

a. Co-varia&on: relying on a product signal

Product signal: we infer hidden dimensions of products from aSributes we can observe.

b. Country of origin as a product signal → A product address maSers.

Ethnocentrism: is the tendency to prefer products or people of one’s own culture to those of
other countries.

c. Market beliefs: if I have to pay more for it? Do higher prices mean higher quality?

II. Familiar brand names

Branding is a marke4ng strategy that oYen func4ons as heuris4c. When you fall in love with a brand, it may be
your favorite for a life4me → Choosing a well-known brand name is a powerful heuris4c.

III. Affec&ve decision making

Many of our decisions are driven by our emo4onal

responses to products or services.
Þ Social scien4sts refer to these raw reac4ons as affect.