Chapter 9 🥰 Flashcards
Classical Economics Perspective:
Consumers are rational and make decisions to maximize their utility.
Consumer Behaviour Perspective:
Consumers are mostly irrational and make decisions based on desires, psychological needs, emotions, cognitive biases, social influences etc.
Prospect theory:
A theory to understand how people make decisions involving gains and losses.
Consumers hate losing what they have (people are more “loss”- averse). They are risk seeking for losing things (people take greater risks to mitigate loss).
Ex: Losing $100 feels worse than gaining $100.
People are risk averse for gains - they’ll take the safe bet.
Prospect theory: Reference dependence:
Individuals evaluate gains and losses relative to a reference point.
Problem recognition:
When an individual perceives a difference between their current state and an ideal state.
Problem recognition: Opportunity recognition:
There’s a difference between one’s actual state and ideal state.
Becomes a problem that one tries to buying a product/ service, for example.
Problem recognition: Need recognition:
One needs something (like being hungry, battery is low) that is below their “normal” state and solving it by buying a product/ service.
Stages in Consumer Decision Making
(1) Problem recognition: Gap between one actual state and ideal state.
(2) Information search: Scanning memory (internal search) or environment (external search) for appropriate information to make a reasonable decision. Amount of information one looks for depends on their product involvement (how much they care about the product they are buying).
(3) Evaluation of alternatives: Comparing various alternatives (consideration set, inert set, inept set, decoy effect/ assymetric dominance effect).
(4) Product choice: Choosing the product one wants based on their evaluation (what seems best for them).
(5) Consumption and learning: Learning is where the consumes decides whether they’ll buy the product again or not.
Product Choice: Assymetric dominance effet (decoy effect):
An introduction of a third, less attractive option (the decoy) influences the preference between two other option. To make one of the options that “dominates” the decoy more appealing when it wasn’t appealing without the decoy before. Changes the decision context, influencing consumer choices (by nudging towards one), changes perception of the original options’ attributes and value.
Make the less attractive option between the two original one, more attractive/ the more attractive one (seems like it has better value now).
Information search: Maximizer
Finds the best option by thoroughly evaluating alternatives.
Information search: Satisficer
Finds the option that is “good enough” (meet their criteria for acceptability), doesn’t necessarily seek the absolute best choice.
Country of Origin Heuristic:
A mental shortcut of evaluating products/ brands based on their country of origin.
Mentioning the place of origin in logo, in the tagline or putting the flag in the logo, choosing a name for a brand in another language.
May automatically infer certain qualities or characteristics based on strereotypes of certain countries (Italian = luxury).
Evaluation of alternatives: Considerations set:
Alternatives/ brands that a consumer is actively considering. Willing to evaluate further before making a decision.
Evaluation of alternatives: Inert Set:
Alternatives that don’t come to mind at all (don’t know they exist).
Evaluation of alternatives: Inept set:
Alternatives that the consumer is aware of but won’t consider.
