CONSUMER DECISION MAKING

MODULE 3
TOPICS TO COVER IN MODULE 3

LEARNING OUTCOME –
Learning to develop
marketing strategy based on
understanding of consumer
decision process and buying
roles

Book – 11th Edition of

Consumer Behaviour – By
Schiffman
ACTIVITY

List any 5 products you have bought in the last 6-12

months
Explain your decision making process
Rank the difficulty in your decision making from 1 to 5
with 1 being the easiest decision
LEVELS OF CONSUMER DECISION MAKING
 LEVELS OF CONSUMER DECISION MAKING
 Extensive Problem Solving
 Customers have not yet established a set of criteria for evaluation
 They haven’t yet narrowed the brands to be considered
 High Involvement as a Customer
 Limited Problem Solving
 Consumers have a basic criteria for product evaluation but may need fine tuning
 They haven’t fully established brand preferences
 Routinized Problem Solving
 Have some experience with the category
 Well Established set of criteria for product evaluation
 May search for small amounts of information or may purchase out of habit
 Low involvement by a customer
LEVELS OF CONSUMER DECISION MAKING
ACTIVITY

Classify your existing examples into these categories

with an explanation
In case you don’t have one from any of the categories –
give an additional example
FOR ME

 Extensive Decision Making – College (how) for doing my Phd, What should my Son
do after 10th,
 Limited Decision Making – Buying a new apartment, Changing my Son’s school
within Bangalore, Where to go for a family Holiday, Buying curtains for my house
 Routinized Decision Making – Groceries, Salon for a regular hair cut, Where to order
in from, Who to call for deep cleaning of house, where to fill petrol from
DISCUSS

 AS A MARKETER WHAT SHOULD YOU DO IF YOUR PRODUCT IS USUALLY

 AN EXTENSIVE BUYING PRODUCT
 A LIMITED BUYING PRODUCT
 ROUTINISED BUYING PRODUCT

(Make notes of discussion as no slides available on this)

HOW CONSUMERS HANDLE RISK
What are the “perceived risks” of making a decision
PERCEIVED RISK
AS A CONSUMER HOW DO YOU TRY TO REDUCE RISK?

WHAT SHOULD A MARKETER DO?

HOW CONSUMERS HANDLE RISK

 Information search
 Brand Loyalty
 Well known brand
 Endorsed Brand
 Extrinsic clues – expensive, image
 Seeking assurances through warranties and guarantees
BUYING SITUATIONS

 It is not only that products differ.

 Even the buying situation differs.
 Each time the buyer is to take a purchase decision, it may or may not be the same as the previous one.
 Absence of any one of the following factors (or all) might change the decision
 Awareness about competing brands
 Customer has a decision criteria
 Customer is able to evaluate and decided on his choice
ELABORATION LIKELIHOOD METHOD (ELM)
DIFFERENT STRATEGIES FOR DIFFERENT BUYING TYPES – CENTRAL/PERIPHERAL ROUTE
DIFFERENT BUYING TYPES

Level of Involvement reflects how personally important or interested you are in consuming a product and how much
information you need to make a decision
 Low Involvement Products – typically products that are relatively inexpensive and pose a low risk to the buyer.
Often adopt Routine Response Behaviour, Impulse buying
 High Involvement Products – Higher risk to buyers if they fail, are complex decisions and have a higher price. Not
purchased often and have high price tags. Typically Characterised by Extensive Problem Solving and customers
may experience a great deal of post purchase Dissonance
How does your decision making change when you are looking for a high
involvement/low involvement product

In your list – Mark off what are high and low involvement products for you
WHAT DOES A MARKETER DO FOR DIFFERENT BUYING
STRATEGIES

 https://www.youtube.com/watch?v=Nd6jveosFCE
THE THE ELABORATION
ELABORATION
LIKELIHOOD
MODEL
LIKELIHOOD
MODEL
DIFFERENT METHODS OF PERSUASION

 https://www.youtube.com/watch?v=QCzV9UN7yGw
 https://www.youtube.com/watch?v=eD9ajBA8nyw
CENTRAL PROCESSING
High
Motivation Ability to Behavioural Desired
Involvement
to process process Intent Action
message

High
Motivation Ability to Behavioural Desired
Involvement
to process process Intent Action
message

Low involvement Message

process failure
TYPES OF PERIPHERAL MESSAGES

 Great Ads
 Jingles
 Themes
 Humour
 Taglines
 Atmospherics
 Endorsement/Authority
 Scarcity
 Consistency/Relatability/Slice of life
CONSUMER DECISION MAKING PROCESS
5 STEPS AND INCLUDES CONSUMER DECISION MAKING RULES
 Black Box
CONSUMER DECISION MAKING PROCESS

Input Process Output

Stimuli to the
consumer Need
Recognition Purchase

Internal
Pre-Purchase
influences like search
motivation,
perception, Evaluation of Post Purchase
personality and brands
attitude wil be
covered in
Module 4
STEP 1: NEED/PROBLEM RECOGNITION
STEP 1:
NEED/PROBLEM RECOGNITION
Problem Recognition
 Can be due to internal/external stimuli Implication to marketer
 Putting “prospective customers” into a
 Motivation to resolve depends on 2
state of problem recognition – this
factors
may lead to acquisition,
 Magnitude of discrepancy between
consumption/disposition of product
ideal and your desired/actual state (DS
vs AS)  Techniques to stimulate problem
 Importance of problem recognition
 Attempt to create a new ideal state
 Actual state – when consumers
perceive they have a problem when a  Create dissatisfaction with current state
product fails to perform satisfactorily
 Desired state – desire for something
Without problem recognition –
new may trigger decision process marketing efforts are futile
STEP 2: PRE-PURCHASE SEARCH
INCLUDES 3 “THEORIES” TO UNDERSTAND CONSUMER BEHAVIOUR ESPECIALLY SEARCH
BEHAVIOUR
STEP 2:
PRE-PURCHASE SEARCH

 Sometimes customer’s recall past purchases and this provides them with adequate information to make the
present choice. Past experience is an internal source of data
 However when a customer has no previous experience he/she “may” engage in an extensive search for useful
information on the basis of which to make a choice.
 Consumers usually search memory (Psychological field) before seeking external sourcs of information. However
consumer decisions are a combination of past data and marketing/other communication
 Greater the relevance of the past data less the search.
 The act of shopping is an important form of external information. Internet has changed the way pre-purchase
search is done. Retailers can help with pre-purchase and eliminate “research regret”
STEP 3: EVALUATION OF BRANDS
ALSO INCLUDE CONSUMER DECISION MAKING “RULES”
EVALUATION OF ALTERNATIVES

Brand Awareness
matters
RESULT OF SEARCH AND EVALUATION : BRAND-SETS

Awareness (brands known to consumer)

Consideration set ( brands consumer willing
to consider)
Evoked set (comes to mind in a particular
situation)
Inept set (unacceptable)
Inert set ( indifferent or overlooked )
IMPLICATIONS FOR MARKETERS

 Marketing used to be driven by companies – “pushed” on consumers through traditional advertising. At each
point in the funnel, as consumers whittled down their brand options, marketers would attempt to sway their
decisions.
 Today consumers seize decision making in their own hands
 75% of information during “active evaluation” comes consumer driven activities as well as store interactions
 Hence marketers should try to “influence” consumer driven touch points such as word of mouth and internet
search
 Companies like GM – strong sales incentive, in dealer programs, - however asian companies like tayota, Honda
dominate with brand strength and product quality- positive experiences with these brands have made purchasers
loyal to them and this generates positive WOM and works better than incentives
What are your criteria for choosing a B school
 Alumni what are they doing - Faculty
 Placement report - Hostels
 Specialization – Courses, Course outline
 Location
 fees vs salary – ROI
 Rankings – Economic times,
 Accreditation
 Scholarship
 Fees
 Former Students
 Campus – how it looks like,
 Extra curriculars
 Citizenship, PR
EVALUATION TECHNIQUES USED BY CONSUMERS

 Information processing strategies by consumers are called decision rules.

 They can be used to evaluate various options and reduce risk involved in the decision

Two categories of decision rules:

 Compensatory Model/Decision Making Rules

 Non Compensatory Model/Decision Making Rules

COMPENSATORY MODEL/NON COMPENSATORY MODEL

Compensatory Model Non Compensatory Model

 Brands are evaluated in terms of each  Certain preference attributes are not
relevant criteria and the best brand (or compensatory in nature and cant be
the highest score) is chosen traded off/compensated by other
 Alternative good attributes and/or attributes
acceptable bad attributes can be  Positive Evaluations do not trade of for
traded off or compensated with or by negative evaluations
during decision making  Models
 Models
 Conjunctive Models
 Expectancy Value Model
 Disjunctive Models
 Affect Referral
 Lexicographic Models
COMPENSATORY MODELS

EXPECTANCY VALUE MODEL –

 1) Ask consumers what are the relevant attributes,
2)what weights he wishes to give to each attribute
(out of 100 ),
 3) ask Consumer to rate each brand ( on scale of 1-
10) on each attribute
 4) Consumer arrives at summated score for each
brand by multiplying 2and 3

AFFECT REFFERAL RULE

Consumers will not analyze any brand attributes but will
go by overall ratings given by others to choose a brand
with best ratings
 NON COMPENSATORY DECISION MODELS

Conjunctive Decision Rule (and rule )

• Consumer sets a minimum standard for each attribute and a brand has to pass on all the
attributes ,else will be dropped
• Reduces a large consideration set to a manageable size.
• Often used in conjunction with another decision rule.

Disjunctive Decision Rule (or rule )

• Sets a minimum acceptable standard ( higher than in conjunctive ) as the cutoff point for
every attribute--a brand that exceeds the cutoff point on any attribute , is accepted.
 Reduces large consideration set to a more manageable number of alternatives.

Lexicographic Decision rule

• The consumer decides to select that brand which has the highest rating on most imp
attribute
• If there is a tie, then he compares brands on next most important attribute and so on and
so forth
STRATEGIES TO TACKLE EVALUATION

 Modify the brand – real positioning

 Alter beliefs about the brand
 Alter beliefs about competitors brands
 Alter importance weights
 Call attention to neglected attributes
 Shift Buyers ideals
STEP 4: PURCHASE
OUTPUT PART OF THE PROCESS
TYPES OF PURCHASE

 when a consumer purchases a product but buys a smaller quantity than usual, the purchase is called a trial. This is
the exploratory phase in which consumers evaluate a product through direct use.
 Consumers can be encouraged into such purchases through promotional activities like a coupon, sale prices, free samples
 Not feasible for all products like durables etc
 When a product is in an established category is found by trial to be more satisfactory or better than other brands,
consumrs are likely to repeat the purchase – this represents brand loyalty.
STEP 5: POST PURCHASE
OUTPUT PART OF THE PROCESS
POST PURCHASE

 Post purchase evaluation occurs after consumers have used the product and evauate it in context of their
expectations.
 Positive disconfirmation of purchase occurs when product’s performance > expectations and Negative
disconfirmation occurs when performance < expectations.
 Cognitive dissonance occurs when consumers try to reassure themselves that they made wise choices. In doing
so they rationalize their decisions being wise – seeks ads to support their choice, avoid competitive brands,
attempt to persuade others or turn to others satisfied purchasers for reassurance.
 degree of post purchase analysis depends on the importance of the product decision and the experience acquired
in using the product.
CONSUMER BEHAVIOUR –BLACK BOX
STAGES OF CONSUMER DECISION MAKING

 Need recognition – Internal or external

 Pre-purchase information search for criteria and brands
 Evaluation of alternatives
 Purchase Decision (trial and adoption)
 Post purchase Behaviour