W9: Decision Making

Question 1

What are the stages in consumer decision making?

Answer 1

1. Problem recognition
2. Information search
3. Evaluation of alternatives
4. Product choice
5. Outcomes

Question 2

What is the ‘economics of information’ perspective?

Answer 2

1. Consumers consider costs and benefits of search.
   - By gathering information about as many brands as possible, as long as search costs are lower than perceived benefits of larger search.
2. However, for many product categories, consumers ‘satisfice’
   - Searching just enough to get a ‘good choice’ although they know that if they look longer, there might be an even better choice
   - The internet decreases the cost of search greatly.

Question 3

What are the different factors affecting the level of problem-solving? (e.g. routine vs extensive problem solving)

Answer 3

1. Cost of Product
2. Frequency of Purchase
3. Consumer Involvement
4. Familiarity of Class/Brands
5. Thought/Search/Time given to purchase

CFCFT

Question 4

Why don’t consumers consider all brands?

Answer 4

1. Evoked set (brands that are spontaneously evoked from internal search esp when they have high uncued recall)
2. Consideration set (brands that are consciously considered before purchase, including brands from the evoked set)
   - in some retail settings, the consideration set is influenced/determined by the retailer.

Question 5

What effects are created by consideration sets?

Answer 5

1. Attraction Effect
2. Compromise Effect
3. Trade-Off Contrast Effect

Question 6

How to classify decision-making rules?

Answer 6

Brand-based vs attribution-based 
1. Brand-Based: 
Compensatory vs non-compensatory
- compensatory: multiattribute models 
- non-compensatory: conjunctive (and, all must be at least 5/10) vs disjunctive (or, at least one is 10/10)

2. Attribution-based:
   Non-compensatory attribute-processing model
   - lexicographic: start with the most important attribute and pick best on that
   - lexicographic semi-order: similar to lexicography but small differences in attributes ignored

Question 7

How to decide how to decide?

Answer 7

• Decision-making rules/processes

- Heuristics

Question 8

What is a heuristic?

Answer 8

Often simple rules of thumb are used almost subconsciously to make a choice.

• May be recalled from memory as a schema
• May be constructed on the spot.

Question 9

When do heuristics apply?

Answer 9

1. Search Heuristic (asking a friend vs finding review website)
2. Choice Heuristics (buying what a salesperson says is popular)
3. Evaluation Heuristics
   - country of origin
   - product signals
   - market beliefs

Question 10

What are the basic types of heuristics?

Answer 10

1. Availability (ignoring base-rate info)
2. Representativeness (evaluation based on irrelevant similarity)
3. Anchoring and Adjustment

Question 11

What are additional marketing-related heuristics?

Answer 11

1. Zipf’s Law: the tendency to prefer the number one brand to the competitor
2. Consumer inertia: buying out of habit because it takes less effort
3. Brand loyalty: repeat purchasing behaviour that reflects a conscious decision to continue buying the same brand
4. Variety Seeking: buying something that is different from what was bought.