Judgement and Decision Making Based on High/Low Effort Flashcards
Define judgement.
Judgement: evaluation of an object or estimate of likelihood of an outcome or event
Define anchoring and multiple unit pricing and give example.
Anchoring: We rely too often on the first piece of information we are given, the “anchor” when making decisions.
Multiple Unit Pricing: Sale Value is exactly the same but we think we are getting more because they are lumped in a sum together.
Selling toilet paper and it says 4 rolls for $2. WE see the number 4 instead of the fact that it is 50 cents per roll. 4 is the anchor and pricing them together works better for consumers to buy MORE instead of single unit pricing.
What role does mental accounting play in retail setting?
Mental accounting: Categorizing spending and saving decision into categories based on specific transactions, goals, or situations.
Example: Vacation decisions. Eating decisions. Kid decisions.
Define framing and provide example in marketing context.
Framing: Initial reference point or anchor in making decision.
How you frame a certain situation. Example: 200 people will be saved versus 400 people will die versus 2/3 of people will have a fatality
Compensatory vs Noncompensatory decision rules. Give examples.
Compensatory: Consumer compensates one characteristic against another.
Swap one bad characteristic for a better good characteristic.
(Ex: May be expensive BUT has the best technology)
Noncompensatory: Selecting a product/service because of ONE characteristic that to you outweighs all the others.
(Ex: Made in the USA regardless of price or slave labor)
Describe elimination by aspects. How is it related to non compensatory decision rules?
Elimination by Aspects: Attributes ordered by importance and then eliminated based on lowest scores.
Relation to Non-Compensatory: Based on what customer sees as important regardless of other pros/cons.
Prospect Theory define/example.
Losses have more influences than gains, consumers have a much stronger reaction to increasing prices (losing money) than price decreases (gaining more money.)
Example: Limited time offers or money-back guarantees. These both make people consider their losses.
What role does endowment effect play on value of an item?
Ownership increases value (& loss) associated with owning product.
You find yourself more opt to buy a car if you get in it, fix the mirrors, change the stations, fix the seat, etc.
When something becomes yours you feel more attached if it is lost. Think sister’s with clothes. I don’t think anything of it when it is someone else’s but the moment it is mine I find myself CARING.
2 Decision characteristics that affect high-effort decision making.
- Expertise
- Mood
- Time pressure
How will customer decide between 2 products that cannot be compared directly?
A: Alternative Based (top-down processing): overall evaluation, uses pros and cons
B: Attribute Based (bottom-up processing): Consumers form abstract representation to help compare. “What is fun?” “What would impress my date?” Thinks of something else.
How does decision in group context differ from person being alone?
Group: Self-Presentation (how you will look) , try to minimize risk, group unity (make everyone happy)
Self: Satisfies one’s tastes and has no one to answer to
Representative heuristic and example.
Heuristic: Is a “Rule of thumb”
representative heuristic: comparing a stimulus with the category prototype
Base-Rate information
How often an event really occurs on average.
Ex: Man is wearing black gothic clothing, how likely is it that he is christian or satanist?
Law of small numbers and provide example.
information of small number of people represents the larger population.
Ex: person travels through a town and sees 10 kids and no one else. He assumes the town is all kids because of the small numbers of data.
What is satisficing? Example of a company that seems to do well when customers use satisfying as a decision making tool.
Satisficing: Selecting a brand that satisfies a need even though it may not be the best brand.
Choosing a generic product over the best brand name product. It gives you the same feel but it is cheap
