consumer decision-making

Question 1

what is the buyer’s black box?

Answer 1

a model that describes the internal thought process influencing consumers’ buying decisions

Question 2

what are the 5 stages of the consumer decision making process?

Answer 2

1. need recognition
2. information search
3. compare alternatives
4. purchase
5. post-purchase evaluation

Question 3

what is maslow’s hierarchy of needs?

Answer 3

1. self-actualization
2. personal
3. social
4. safety
5. physiological

Question 4

list of physiological needs? (6)

Answer 4

1. food
2. water
3. sex
4. oxygen
5. shelter
6. clothing

Question 5

list of safety needs? (4)

Answer 5

1. security
2. protection
3. health
4. employment

Question 6

list of social needs? (3)

Answer 6

1. friendship
2. belonging
3. love

Question 7

list of personal needs? (2)

Answer 7

1. self esteem
2. status

Question 8

list of self-actualization need? (1)

Answer 8

self fulfillment RAHHH

Question 9

utility function (describe formula)

Answer 9

utility = sum of product of weighted attributes and product levels on said attributes

Uj = sum of Ba times xja

Question 10

what 4 situations do consumers skip steps in buying process?

Answer 10

1. when product is low involvement
2. when the consumer has a lot of prior information
3. when brands provide incentives to skip stages
4. if consumers don’t pay attention

Question 11

economics vs. psychology dilemma?

Answer 11

rational consumer vs. behavioral consumer

Question 12

rational consumer???

Answer 12

consumers are rational beings who maximize utility & perform cost-benefit analysis

Question 13

behavioral consumer???

Answer 13

consumers are limitedly rational beings who use rules of thumbs instead & do not calculate optimal solutions

Question 14

anchoring bias

Answer 14

setting an initial value as a reference point, influencing consumers’ perception & eventually decision-making

Question 15

decoy effect

Answer 15

the tendency to prefer X over Y increases by adding a third “decoy product” that is clearly inferior to X but not to Y

Question 16

how is the decoy effect contrary to economics’ view?

Answer 16

irrelevant alternatives: if A > B, then given A, B, C, A > B still

Question 17

compromise effect

Answer 17

intermediate/compromise brands are more frequently chosen, seeming like safe bets to many consumers

Question 18

example of compromise effect

Answer 18

if high priced option is offered, consumers choose the moderately priced option over low-cost alternative

Question 19

what is mental accounting?

Answer 19

money has labels when it comes from a different mental account, even if it all belongs to the same bank account

Question 20

how is mental accounting different to economics’ view?

Answer 20

economist view: money is fungible/interchangeable

Question 21

example of mental accounting?

Answer 21

one person may spend $200 at a fancy restaurant, but will not spend $50 at a mediocre restaurant

Question 22

how would rational consumers & behavioral consumer respond to the situation below?
“70% chance to win $10 & 30% chance to lose $100”

Answer 22

rational consumer: (0.710) - (0.3100) = -$23 < $0 → not accept

behavioral consumer: feel the vibes and avoid pain of potential loss

Question 23

endowment effect

Answer 23

the cognitive bias that causes individuals to value an object they own higher than if they didn’t own it

Question 24

loss aversion

Answer 24

the cognitive bias that causes people to perceive losses as more significant than gains

Question 25

prospect theory

Answer 25

a behavioral theory that explains how people make decisions when faced with risk & uncertainty

Question 26

implications of prospect theory?

Answer 26

1. separate gains 2. aggregate losses