Decision Making

Question 1

Describe the decisionmaking process

Answer 1

• 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.

Question 2

What/who are the main influences of consumers’ decisions?

Answer 2

• Who: Firms, friends, families, reviewers, celebs, ourselves.
• What: Experiences, advertising, store design, price, branding.

Question 3

Distinguish between high-effort and low-effort decisions

Answer 3

Question 4

What are the pros & cons of using Theory of Reasoned Action (TORA) to explain cognitive high-effort decisionmaking.

Answer 4

Question 5

Describe cognitive high-effort decisionmaking process

Answer 5

• Brand-Attribute Matrix: Collect info wrt products/brands + their attributes.
• 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 P_i & I_i on their own standards, using I_i as a weight for P_i, to form consumer’s U_i
  • Consumer considers all U’s to form A.
  • Brand w/ highest A most likely chosen.

Question 6

Distinguish between Compensatory & Non-Compensatory Decision Rules.

Answer 6

• 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.

Question 7

Compare Conjunctive and Disjunctive Decision Rules.

Answer 7

• 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.

Question 8

Give examples of affective high-effort decision-making being used.

Answer 8

• 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.

Question 9

What process do consumers undergo in low-effort decisions?

Answer 9

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.

Question 10

What senses do marketers prefer to stimulate?

Answer 10

• Smell, Hearing & Vision is unavoidable → marketers more control.
• Touch & Taste requires consumer effort → marketers less control.

Question 11

Why is smell such a powerful decision influencer?

Answer 11

• Biology: Smell processing closest to memory in the brain.
  *

Question 12

Define Subliminal Decision-Making

Answer 12

Subliminal Decision-Making

Choices influenced by communication below sensory perception threshold.

Question 13

Has “subliminal decisionmaking” been proven?

Answer 13

• 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.

Question 14

What are the implications of high/low effort decisionmaking to marketers & managers?

Answer 14

• 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.

Question 15

Realistically, how do consumers approach high effort decisions?

Answer 15

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.

Question 16

When do consumers recognize a problem?

Answer 16

When consumers perceive a gap between actual & ideal states.

Question 17

How do brands motivate people to buy their offering?

Answer 17

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.

Question 18

How do medium ideal states work?

Answer 18

• 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.

Question 19

How do consumers search for a solution?

Answer 19

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.

Question 20

Define Judgement

Answer 20

Judgements

Estimates of liking/risk/amount that influence our decisions on G/S.

Question 21

Define Judgement Heuristics

Answer 21

Judgement Heuristics

Shortcuts taken to make judgements easier/quicker.

Question 22

Describe 4 types of Judgement Heurstics

Answer 22

• 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 3^rd option makes middle option more attractive.
• Framing Heuristic: (–) info has a greater weight in our judgements as losses more significant than equivalent gains.

Question 23

Define Judgement Bias

Answer 23

Judgement Bias

Gap between rational + actual judgement created by judgement heuristics.

Question 24

Describe 6 types of Judgement Bias

Answer 24

• 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.

Question 25

How to reduce personal Individual Biases

Answer 25

• 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.

Question 26

How to reduce managerial individual biases

Answer 26

• 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?