Individual decision making

Question 1

Perspectives on Decision-Making

Answer 1

Rational perspective - consumers:
-Integrate as much information as possible with what they already know about a product
-Weigh pluses and minuses of each alternative
-Arrive at a satisfactory decision

Question 2

Other models of decision-making:

Answer 2

Purchase momentum:
Occurs when consumers buy beyond needs
-rational system of cognition
-experiential system of cognition

Question 3

Types of Consumer Decision Making

Answer 3

*Limited problem solving:
-Buyers not as motivated to search for information or to evaluate rigorously.
-Buyers use simple decision rules to choose.
*Habitual decision making:
-Choices made with little to no conscious effort.
*Extended problem solving:
-Initiated by a motive that is central to self-concept.
-Consumer feels that eventual decision carries a fair degree of risk.

Question 4

Other types of decision-making:

Answer 4

*Behavioural influence perspective When a person decides to buy something on impulse that is promoted as a “surprise special” in a store.
*Experiential perspective
Consumers buy based on totality of product’s appeal.

Question 5

Problem Recognition

Answer 5

When we experience a significant difference between our current state of affairs and some state we desire.
Problems arise two ways:
-actual state–need recognition
-ideal state-opportunity recognition

Question 6

Information search

Answer 6

Process by which consumer surveys the environment for appropriate data to make reasonable decision.
-Internal versus External Search
-Deliberate versus “Accidental” Search

Question 7

Internal search

Answer 7

Scanning memory to assemble product alternative information

Question 8

External search

Answer 8

Obtaining information from ads, retailers, catalogs, friends, family, people-watching, Consumer Reports, etc.

Question 9

Deliberate search

Answer 9

Existing knowledge of a product may be the result of directed learning.
Frequently, however, our own existing state of knowledge is not satisfactory to make an adequate decision and we must go outside ourselves for more information.
One type of deliberate search involves searching on the Internet for information.

Question 10

Accidental Search

Answer 10

we may have acquired information in a more passive manner known as incidental learning

Question 11

Do Consumers Always Search Rationally?

Answer 11

-External searches are surprisingly low
-Low income shoppers search less
-Satisficing v maximizing
-Personalized product
-recommendations
-bounded rationality
-Brand switching: Select familiar brands when decision situation is ambiguous
-Variety seeking: Desire to choose new alternatives over more familiar ones

Question 12

Mental accounting:

Answer 12

Framing a problem in terms of gains/losses influences our decisions
-Hyperopia
*describes people who are so obsessed with preparing for the future that they can’t enjoy the present.
Sunk-cost fallacy
*Reluctant to waste something we have paid for.

Question 13

Prospect theory:

Answer 13

Risk differs when consumer faces options involving gains versus those involving losses.
Theory has four key parts:
-reference point
-loss averse
-risk averse concerning gains, & risk - seeking concerning losses
-overweight small probabilities

Question 14

How Much Search Occurs?

Answer 14

Search activity is greater when…
-Purchase is important
-There is a need to learn more about purchase
-Relevant info is easily obtained/utilized
-One is younger, is better-educated, and enjoys shopping/fact-finding
-One is female (compared to male)
-One places greater value on own style/image

Question 15

Consumer’s Prior Expertise

Answer 15

-Moderately knowledgeable consumers tend to search more than product experts and novices
-Experts: Selective search
-Novices: others’ opinions, “nonfunctional” attributes, and “top down” processing

Question 16

Perceived Risk

Answer 16

Belief that product has negative consequences
-Expensive, complex, hard-to understand products
-Product choice is visible to others (risk of embarrassment for wrong choice)
-Risks can be objective (physical danger) and subjective (social embarrassment)

Question 17

Evaluation of Alternatives

Answer 17

-Choosing from the often very many available alternatives
-Extended problem solving
Occurs when choice conflicts arouse negative emotions (involving difficult trade-offs)
-Habitual decision
Consider few/no brand alternatives
-Evoked set versus consideration set
We usually don’t seriously consider every brand we know about.
In fact, we often include only a surprisingly small number of alternatives in our evoked set.

Question 18

How Do We Put Products into Categories?

Answer 18

-We evaluate products in terms of what we already know about a (similar) product
-Evoked-set products usually share similar features
-When faced with a new product, we refer to existing product category knowledge to form new knowledge
-Marketers want to ensure that their products are correctly grouped in knowledge structures

Question 19

Strategic Implications of Product Categorization (Production Positioning)

Answer 19

Product positioning
-Convincing consumers that product should be considered within a given category
-Identifying competitors
-Products/services different on the surface can actually compete on super-ordinate level

Question 20

Strategic Implications of Product Categorization (Exemplar Products)

Answer 20

-Exemplar products
Brands strongly associated with a category “call the shots” by defining evaluative criteria
But “moderately unusual” products stimulate more information processing and positive evaluations.
-Locating products
Products that do not fit clearly into categories confuse consumers (e.g., frozen dog food)

Question 21

Product Choice: Selecting Among Alternatives

Answer 21

Selecting among alternatives
-Once we assemble and evaluate relevant options from a category, we must choose among them
-Decision rules for product choice can be very simple or very complicated
*Prior experience with (similar) product
*Present information at time of purchase
*Beliefs about brands (from advertising)

Question 22

Evaluative Criteria

Answer 22

-dimensions used to judge merits of competing options.
-Procedural Learning
-Determinant attributes
Features we use to differentiate among our choices
*Criteria on which products differ carry more weight
*Marketers educate consumers about (or even invent) determinant attributes.

Question 23

Neuromarketing

Answer 23

Uses functional magnetic resonance imaging, fMRI, a brain-scanning device that tracks blood flow as we perform mental tasks
-Marketers measure consumers’ reactions to movie trailers, choices about automobiles, the appeal of a pretty face, and loyalty to specific brands

Question 24

Cybermediaries

Answer 24

This term describes a website or app that helps to filter and organize online market information so that customers can identify and evaluate alternatives more efficiently.
-comparison-shopping sites
-directories and portals
-online reviews
-the long tail

Question 25

Post-purchase Evaluation

Answer 25

-Post-purchase evaluation closes the loop
-This occurs when we consume the product or service we selected and decide whether it meets (or maybe even exceeds) our expectations.
the process called social scoring, both customers and service providers increasingly rate one another’s performance

Question 26

Decision Rules

Answer 26

-Noncompensatory: Shortcuts via basic standards
*Lexicographic rule
*Elimination-by-aspects rule
*Conjunctive rule
-Compensatory:
*Simple additive rule
*Weighted additive rule

Question 27

Habitual Decision Making

Answer 27

-Habitual decision making describes the choices we make with little or no conscious effort.
many purchase decisions are so routine we may not realize we’ve made them
-When a person buys the same brand over and over, does this mean it’s just a habit or is he or she truly loyal to that product?
The answer is, it depends:

Question 28

Market Beliefs

Answer 28

-Consumer assumptions about companies, products, and stores that become shortcuts for decisions
-Price-quality relationship: We tend to get what we pay for
-Other common marketing beliefs
*All brands are basically the same
*Larger stores offer better prices than smaller stores
*Items tied to “giveaways” are not a good value

Question 28

Heuristics: Mental Shortcuts

Answer 28

Heuristics: Mental rules-of-thumb that lead to a speedy decision
-Examples: Higher price = higher quality, buying the same brand your mother bought
Can lead to bad decisions due to flawed assumptions(especially with unusuallynamed brands)

Question 29

Country-of-Origin as a Heuristic

Answer 29

-We rate our own country’s products more favorably than do people who live elsewhere
-Industrialized countries make better products than developing countries
-Attachment to own versus other *cultures
*Nationalists
*Internationalists
*Disengaged

Question 30

Choosing Familiar Brand Names: Loyalty or Habit?

Answer 30

-Zipf’s Law: Our tendency to prefer a number one brand to the competition
*Brands that dominate the market are sometimes 50% more profitable than their nearest competitors
-Consumer inertia: Tendency to buy a brand out of habit merely because it requires less effort
-Brand loyalty

Question 31

Inertia vs Brand Loyalty

Answer 31

-Many buy the same brand every time
-We buy out of habit because it requires less effort
-Little/no underlying commitment
-Brand switching can frequently occur (cheaper price, original brand out-of-stock, point-of-purchase displays)

Question 32

Brand Loyalty

Answer 32

-Repeat purchase behaviour reflecting a conscious decision to continue buying the same brand
*Repeat purchase + positive attitude toward brand
*Endorsing brands personally online and by WOM
*Emotional attachment and commitment
-We are often less picky about where we buy our favourite brands
*Think about it: How can retailers compete if we believe we can get the same brands everywhere?

Question 33

AI: Who’s Calling the Shots?

Answer 33

-AI applications will revolutionize how consumers interact with products
-Innovative companies are already experimenting with AI personal shoppers