Decision Making Flashcards
Describe the decisionmaking process
- Information (brands/products/attributes) available to consumer.
- Problem recognized by consumer.
- Consumer motivated to search for solution to problem.
- Consumer makes judgement on best solution → Decision made.
What/who are the main influences of consumers’ decisions?
- Who: Firms, friends, families, reviewers, celebs, ourselves.
- What: Experiences, advertising, store design, price, branding.
Distinguish between high-effort and low-effort decisions
What are the pros & cons of using Theory of Reasoned Action (TORA) to explain cognitive high-effort decisionmaking.
Describe cognitive high-effort decisionmaking process
- Brand-Attribute Matrix: Collect info wrt products/brands + their attributes.
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Decision Rule: Consumers undergo mental process to form an attitude towards each brand based on utilities of their attributes.
- Consumer lists brands’ attributes.
- Consumer rates Pi & Ii on their own standards, using Ii as a weight for Pi, to form consumer’s Ui
- Consumer considers all U’s to form A.
- Brand w/ highest A most likely chosen.
Distinguish between Compensatory & Non-Compensatory Decision Rules.
- Compensatory Decision Rule: Weakness in 1 attribute can be compensated by strength on a diff attribute.
- Non-Compensatory Decision Rule: Weakness in 1 attribute can’t be compensated by strength on a diff attribute → attribute cutoffs.
Compare Conjunctive and Disjunctive Decision Rules.
- Both are non-compensatory decision rules used in high-effort decisions.
- Conjunctive: Min attribute cutoffs are all high → consumer chooses “last standing” brand.
- Disjunctive: Min attribute cutoffs vary in I → consumer chooses brand with most qualified attributes.
Give examples of affective high-effort decision-making being used.
- Point-Of-Sale (POS): Product trial/sampling allow consumers to use product to form feelings towards product/brand.
- Affective Forecasting: Forming consumers’ predictions/estimations wrt value of product/brand.
What process do consumers undergo in low-effort decisions?
Choice Heuristics: Shortcuts taken to make judgements quickly. Consumers form rules between 2 ideas wrt choice of product/brand
(if x, then y).
- Cognitive: Shortcuts taken based on thoughts.
- Affective: Shortcuts taken based on feelings.
What senses do marketers prefer to stimulate?
- Smell, Hearing & Vision is unavoidable → marketers more control.
- Touch & Taste requires consumer effort → marketers less control.
Why is smell such a powerful decision influencer?
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Biology: Smell processing closest to memory in the brain.
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Define Subliminal Decision-Making
Subliminal Decision-Making
Choices influenced by communication below sensory perception threshold.
Has “subliminal decisionmaking” been proven?
- Nobody has successfully repeated experiment “proving” this.
- Now incorporated into “striking when iron is hot”:
Increased choice of flashed brand ONLY if other specific criteria met.
What are the implications of high/low effort decisionmaking to marketers & managers?
- Managers should survey consumers to measure brand attitude & compare them to competitors’ attitudes.
- Advertise attributes w/ high I and P.
- Develop/change beliefs wrt attributes w/ high I and low P.
- Add new attributes if consumers believe they’re needed.
- Marketers should highlight cutoffs that favor their brand.
(usually numerical cutoffs like price, warranty, etc.). - Marketers should only market 1/few attributes for low-effort offerings as consumers lack effort/motivation in low-effort decisions.
Realistically, how do consumers approach high effort decisions?
Non-Compensatory Decision Rule preferred when lots of info present as:
- Cutoffs reduce info in consideration set
- Counting mentally easier than multiplication.
Compensatory Decision Rule preferred when little info present or to distinguish “surviving brands” left from non-compensatory decision rule.
When do consumers recognize a problem?
When consumers perceive a gap between actual & ideal states.
How do brands motivate people to buy their offering?
Brands attempt to move people from passive → active state of buying by extending gap between actual & ideal state perceived by consumer:
- Convince people their actual state is lower than perceived.
- Convince people their ideal state is higher than perceived & that firm can provide this higher state.
- Contrast difference between actual & ideal states.
How do medium ideal states work?
- They’re higher than actual state.
- They’re a relatively lower state than what other brands portray
→ perceived as more “authentic” + “realistic”. - Brand stand out for being “different” → catches consumers’ attention.
- Culture influences ideal states & thus success of this strategy.
- Works via decoy heuristics.
How do consumers search for a solution?
Internal Search
Consumers use memorable/familiar brands to solve problem.
External Search
Consumers research/compare (un)known brands to solve problem.
e.g. Search engines, reviews, product websites, consumer reports, WOM.
Define Judgement
Judgements
Estimates of liking/risk/amount that influence our decisions on G/S.
Define Judgement Heuristics
Judgement Heuristics
Shortcuts taken to make judgements easier/quicker.
Describe 4 types of Judgement Heurstics
- Availabilty Heuristic: Memorable info has a greater weight in our judgements as it biases our perceptions.
- Anchoring Heuristic: Reference points have greater weight in our judgements than other info.
- Decoy Heuristic: More expensive 3rd option makes middle option more attractive.
- Framing Heuristic: (–) info has a greater weight in our judgements as losses more significant than equivalent gains.
Define Judgement Bias
Judgement Bias
Gap between rational + actual judgement created by judgement heuristics.
Describe 6 types of Judgement Bias
- Confirmation Bias: Focusing on later info that confirms our initial expectations.
- Sunk Cost Bias: Escalating commitment to action because you’ve already made substantial commitments.
- Overconfidence Bias: Being more confident in ourselves than warranted by facts.
- Status Quo Bias: General preference to stick with what we already have/do.
- Fear of Missing Out (FOMO): Overestimating regret and loss.
- Peak-End Bias: Troughs & peaks remembered more than avg experiences.
How to reduce personal Individual Biases
- Knowledge of heuristics + biases, use knowledge in daily life.
- Review past decisions + note bias examples (use availability bias).
- Receive feedback from others.
- Establish good decision-making habits.
How to reduce managerial individual biases
- Self-Interested Bias: Any reason to suspect motivated errors?
- Love-Trap: Has recommending party fallen in love with decision?
- Caution-Trap: Has recommending party been overly cautious with decision?
- Past Self: Is recommending party overly attached to past decisions?
- Future Self: If decision made in future, what info would you need & how/can you get it?
- Base Case: Is base case overly optimistic?
- Worst Case: Is worst case bad enough?
- Dissenting Opinions: Are their dissenting opinions within recommending party?
- Salient Analogies: Could peoples’ views been overinflated by salient analogies?
- Alternatives: Have credible alternatives been considered?
- True or False: Are the numbers/words fact & can you verify them?
- Halo Effect: Is an impression created in one area influencing opinion in another area?
