Chapter 7: Deciding

Question 1

What are the steps in the rational decision-making process

Answer 1

1. problem recognition: occurs when consumers see difference between current state and ideal state (need recognition & opportunity recognition)
2. information search: the process by which we survey the environment for appropriate data to make a reasonable decision. (pre-purchase or ongoing search, internal or external search, online search and cybermediaries)
3. evaluation of alternatives: we call the alternatives a consumer knows the “evoked set” and the ones they seriously consider the “consideration set”
4. product choice: once we assemble and evaluate the relevant options in a category, eventually we must choose one (feature creep, too much choice)
5. post purchase evaluation: occurs when we experience the product or service we selected and decide whether it meets our expectations

Question 2

What is an evaluative criteria

Answer 2

The dimensions we use to judge the merits of competing options

Question 3

What is a determinant attribute

Answer 3

The features we use to differentiate among our choices

Question 4

Explain the compensatory rule

Answer 4

Allows a product to make up for its shortcomings in one dimension by excelling in another.

Two basic types of compensatory rules
- simple additive rule: leads to the option with the largest number of positive attributes
- weighted additive rule: allows consumer to take into account the relative importance by weighting

Question 5

Explain the noncompensatory decision rule

Answer 5

We make habitual or emotional decisions, and this means that if an option doesn’t suit us on one dimension we just reject it and move on.

Types of non-compensatory rules
- lexiographic: consumer select the brand that is the best on the most important attribute
- elimination by aspects: must have a specific feature to be chosen
- conjunctive: entails processing by brand

Question 6

Define social scoring

Answer 6

Both customers and service providers increasingly rate one another’s performance

Question 7

What are the different types of fast thinking

Answer 7

• habitual decision-making or fast decision-making: describes the choices we make with little or no conscious effort
• inertia: means that it involves less effort to throw a familiar package into the cart
• brand loyalty: describes a pattern of repeat purchasing behavior that involves a conscious decision to continue buying the same product

Question 8

Explain the different behavioral biases

Answer 8

Homo economicus: regards us as ideal decision makers with complete rationality and access to the information

Homo ludens: recognizes the emotional and more light hearted aspects of consumption that result in joy, fantasy and creativity

Question 9

Differentiate between the different heuristics

Answer 9

• availability: selecting an option based on the information most easily available to our mind
• representativeness: selecting an option that is closest to the most representative example in the category
• price: selecting an option solely based on its price (higher price, better quality)
• anchoring heuristic programming: using the first information received about an option to decide about it
• variety seeking: selecting an option that is different from previous choices, for the sake of variety
• risk aversion: selecting the safest option in a set
• familiarity: selecting the most familiar option in a set

Question 10

What options do we have for online decision-making

Answer 10

• search engine optimization (SEO): refers to the tactics companies use to design websites and posts to maximize the likelihood that their content will show up when someone searches for a relevant term
• the power of customer reviews
• the long tail: we no longer need to rely solely on big hits to find profits, companies can also make money if they sell small amounts of items that only a few people want (if they sell enough different items)
• cyber mediaries: a website or app that helps to filter and organize online market information so that customers can identify and evaluate alternatives more efficiently

Question 11

Explain regret and how to avoid it

Answer 11

When we do not select a certain option and this foregone option now seems better than the option that we choose, we may end up experiencing regret.

Regret is likely when (1) the decision consumers made created a lot of change from how things were prior to this decision (2) the decision cannot be undone (3) the outcome of a choice is negative

Question 12

Define heuristics

Answer 12

This refers to the “mental rules of thumb” that we use when making decisions