LESSON 2: DECISIONS,

6.53
BEHAVIORS AND
INTERACTIONS
Course Instructor: Aliemar Villasin
LEARNING OBJECTIVES
At the end of the lesson,
students should be able to:

• Describe the role of consumers,

decision, behaviors and
interactions in their purchase;
and
• Identify the different decision-
making models and their role in
consumer purchase decision.

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DECISION-MAKING USING GOALS

 Sometimes goals will conflict. In these

circumstances, the strongly active goal will inhibit
competing goals until the stronger goal has been
achieved, at which point the weaker or less
active goal will re-emerge (Brendl et al., 2002).

 In practice, marketers have little influence over

consumers’ main goals, since these often derive
from basic values.

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EXAMPLES OF PURCHASE END GOALS

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 DECISION MAKING MODELS
Consumer Decision Process (CDP) developed by
Engel, Kollat and Blackwell or known as EKB
model of consumer behavior.
Seven stages of CDP:
1. Need recognition. The individual recognizes
that something is missing from his or her life.
2. Search for information. This information
search may be internal or external.
a) Internal: remembering facts about products, or
recalling experiences with them as a result of
services.
b) External: reading about possible products,
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surfing the internet or visiting shops.
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 3. Pre-purchase evaluation of alternatives.
The individual considers which of the possible
alternatives might be best for fulfilling the need.
4. Purchase. The act of making the final
selection and paying for it.
5. Consumption. Using the product for the
purpose of fulfilling the needs.
6. Post-consumption evaluation. Considering
whether the product actually satisfied the need or
not and whether there were any problems arising
from its purchase and consumption.
7. Divestment. Disposing of the product, or its
packaging, or any residue left from consuming
the product.
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 Dewey’s model - People do not buy unless
they feel they have a need. A need is felt
when there is a divergence between the
person’s actual state and their desired state.

• Two possible reasons for a divergence

between the desired and the actual states:
 one is that the actual state changes,
the other is that the desired state
changes.
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Causes of shift of the actual state might be taken from the following
list (Onkvisit and Shaw,1994):
1. Assortment depletion. Consumption, spoilage, or wear and tear
on the stock of goods or, products within the individuals
assortment.
2. Income change. This can be upwards, through a salary increase
or windfall, or downwards through, for example, redundancy.

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Psychology of Complication and Psychology of
Simplification
1. Psychology of complication
says that people complicate
their lives deliberately by
seeking new products, even
though they are fairly satisfied
with the old one.

2. Psychology of simplification,
which says that consumers try
to simplify their lives by making
repeat purchases of a familiar
brand (Hoyer and Ridgway,
1984). Pitch deck title 9
ASSORTMENT ADJUSTMENTS
 Assortment adjustment is the act of entering the market to replenish or
exchange the assortment of products the consumer owns.

Forms of Assortment adjustment

• Assortment replenishment- that is, replacing worn-out or consumed
products.
-will usually require very little information searching or risk, since the
product is already known.
• Assortment extension, adding to the range of products owned. Assortment
extension is more likely to lead to an extensive problem-solving pattern.

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FOUR CATEGORIES OF IMPULSE BUYING

Pure Reminder Suggestion Planned

Impulse Impulse Impulse Impulse

Based on the Relates to a Products that Happen when

novelty of a product that fulfil a customers are
product. has been left previously prepared to be
off the unfelt need swayed by
shopping list. special offers
11
INTERRUPTS
Sometimes the buying process cannot be followed exactly because events
occur that force the individual to rethink the situation. These events are called
interrupts, and they fall into four categories:

1. Unexpected information that is inconsistent with established beliefs.

2. Prominent environmental stimuli.

3. Affective states.

4. Conflicts.

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PRE-PURCHASE ACTIVITIES
Having recognized the need, the consumer will undertake series of pre-
purchase activities.
 The information search comes from two sources an internal search (from
memory) and an external search (from outside sources). In both cases
most of the information originates from seller-based sources, and is
therefore readily available and low-cost.
Sources of information
• marketer dominated (advertising, blogs, vlogs, brochures, product
placements in films and TV shows, websites, salespeople retail displays,
Twitter campaigns).
• non-marketer dominated (friends, family, influential journalists, opinion
leaders, consumer organizations, government and industry reports, news
stories, and so forth).
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Word of mouth/mouse (Sethna et al., 2013) communications are
generally more powerful than any marketer generated communications,
for the following reasons:
• Word of mouth/mouse is interactive, because it involves a discussion
between two or more parties (online or offline). This forces those
involved to think about the communication.
• It allows for feedback and confirmation of the message in a way that
one-way communications like advertising do not.
• Because the source is a friend/family member, or indeed a trusted
peer review, who has no profit motive (unlike the marketer) the
communication is more credible.

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THE SEARCH EFFORT

It is common for people with

limited information to base their
decisions on price, simply
because they lack the
necessary understanding to
make a judgement based on
other features of the product.

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Search efforts are not very extensive under most circumstances, even for major
purchases such as houses, because of the amount of time and effort that has
to be expended. Usually consumers will continue to search until they find
something that is adequate to meet their need, and will then not look any
further – with comparison websites carving out a niche for themselves.

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INVOLVEMEN
T
Involvement is the perceived relevance of the object based on the person’s
inherent needs, values and interests (Zaichowsky, 1985).

FOUR TYPES OF INVOLVEMENT

1. Message-response involvement
2. Purchase situation involvement
3. Ego involvement
4. High product involvement

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1. Message-response involvement or advertising involvement in
which they become eager to process information obtained from
advertising (Batrra and Ray, 1983).
2. Purchase situation involvement is about the different contexts in
which purchase take place.
3. Ego involvement is about the importance of the product to the
individual’s self-concept making a mistake in purchase could lead to a
high social risk-the individual’s sett concept might be damaged, to
embarrassing effect.
4. High product involvement is driven by the degree to which the
individual feels that the products attributes are linked to end goals or
values.

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LOYALTY IN BUYER BEHAVIOR
 Involvement with a brand should in the vast majority of cases, lead to feelings
of loyalty. In recent years, marketers have taken the view that it is better to
generate loyalty and therefore retain customers than it is to keep recruiting new
customer.
AREAS USE TO MEASURE BEHAVIORAL LOYALTY
1. Repeat-purchase rate (Colombo et al., 2000; Fader and Schmittlein, 1993).
2. Tenure (length of time a buyer remains a buyer) (East et al., 2001, Reichheld
and Teal, 1996).
3. Share of category requirements (Bhattacharya et al., 1996; Jung et al., 2010
Pare and Dawes, 2011).
4. Repertoire size (Banelis et al., 2013; Uncles and Ehrenberg, 1990).
5. Purchase frequency (Morrison, 1966; Sharp and Sharp, 1997).
6. Proportion of buyers who are solely loyal (Raj, 1985).

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 NOTE THIS!!!
 Satisfaction is not necessarily
enough to generate loyalty, however
East et al. (2006) found no evidence
that satisfaction breeds loyalty, but
have found evidence that satisfaction
leads to personal recommendations
and therefore to recruitment of new
customers.

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 QUESTIONS???

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 THANK YOU 

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CLASSIFICATION OF HUMAN
ACTS
1. Acts of Will -refer to actions that human performs freely or with their free
will.
2. Acts of Reason - are actions conceived by reason as morally good or
morally bad
 MARKET COMPARISON

$3B $2B $1B

OPPORTUNITY TO FREEDOM TO FEW
BUILD INVENT COMPETITORS

Addressable market Serviceable market Obtainable market

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 OUR COMPETITION

CONVENIENT
Contoso
A

EXPENSIVE AFFORDABLE

C
D

B
E
INCONVENIENT

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 GROWTH STRATEGY
How we’ll scale in the future

FEB 20XX MAY 20XX OCT 20XX

Roll out drafts to local companies Release the drafts to the general Gather feedback from architectural
in the region to help establish the public and monitor press and firms and commercial business
product regional market trends owners to expand availability of
the product

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 GROWTH STRATEGY
How we’ll scale in the future

MAY 20XX OCT 20XX

Release the drafts to the general Gather feedback from architectural

public and monitor press and firms and commercial business
regional market trends owners to expand availability of
the product

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 TRACTION
Forecasting for success

KEY METRICS REVENUE BY YEAR

$40,000

Gross
Clients Orders Net revenue
revenue
$30,000

20XX 10 1100 $10,000 $7,000

$20,000
20XX 20 200 $20,000 $16,000

20XX 30 300 $30,000 $25,000

$10,000

20XX 40 400 $40,000 $30,000

$0
20XX 20XX 20XX 20XX

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TWO-YEAR ACTION PLAN

Draft plans Run focus groups Gather feedback

Feb 20XX May 20XX Oct 20XX

20XX JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

20XX JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Test with businesses Regional launch Deliver to client

Feb 20XX July 20XX Dec 20XX

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FINANCIALS
YEAR 1 YEAR 2 YEAR 3

Income

Users 50,000 400,000 1,600,000

Sales 500,000 4,000,000 16,000,000

Average price per sale 75 80 90

Revenue @ 15% 5,625,000 48,000,000 216,000,000

Gross profit 5,625,000 48,000,000 216,000,000

Expenses

Sales & marketing 5,062,500 38,400,000 151,200,000 70%

Customer service 1,687,500 9,600,000 21,600,000 10%

Product development 562,500 2,400,000 10,800,000 5%

Research 281,250 2,400,000 4,320,000 2%

Total expenses 7,593,750 52,800,000 187,920,000

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MEET THE TEAM

Takuma Hayashi Mirjam Nilsson Flora Berggren Rajesh Santoshi

President Chief Executive Officer Chief Operations Officer VP Marketing

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MEET THE FULL TEAM

Takuma Hayashi Mirjam Nilsson Flora Berggren Rajesh Santoshi

President Chief Executive Officer Chief Operations Officer VP Marketing

Graham Barnes Rowan Murphy Elizabeth Moore Robin Kline

VP Product SEO Strategist Product Designer Content Developer

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FUNDING

PROPERTIES ANGEL CASH SHARES

INVESTMENTS
$12,000 $14,000 $32,000 $82,000
Revenue obtained from Amount obtained through Liquid cash we have on Number of shares
property rentals other investors hand converted into USD

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 SUMMARY

At Contoso, we believe in giving 110%. By using

energy efficient building methods, we help
commercial businesses grow and foster a consumer
first mindset. We thrive because of our market
knowledge and a great team behind our product. As
our CEO says, "Efficiencies will come from
proactively transforming how we do business."

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 THANK YOU
Mirjam Nilsson​
206-555-0146
mirjam@contoso.com
www.contoso.com

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