CONSUMER DECISION MAKING (LECTURE9/H11)

CONSUMER DECISION MAKING (LECTURE9/H11)

1. RATIONAL CHOICE THEORY

   • PRINCIPLE: MAXIMIZATION OF BENEFITS-LOSS
   • ASSUMPTIONS
     • 1. COMPLETE AND TRANSITIVE PREFERENCES
     • 2. FULL INFORMATION AVAILABLE
     • 3. PROCESSING CAPACITY (TIME AVAILABLE)
     • 4. OUTCOME REPRESENTATION AND INTEGRATION
   • EXPECTED VALUE APPROACH
     • CHOOSE OPTION WITH HIGHEST EXPECTED VALUE (USE DECISION TREE)

2. PEOPLE DO NOT BEHAVE RATIONALLY

   • 1. REFERENCE POINTS
     • COMPARE VALUE/PRICE TO HISTORICAL VALUE/ COMPETITOR VALUE
   • 2. LOSSES LOOM LARGER THAN GAINS
     • ENDOWEMENT EFFECT
   • 3. PEOPLE PREFER TO STATUS QUO
     • IF THE CHOICE IS DIFFICULT WE TEND TO CHOICE NOTHING AND FOLLOW THE DEFAULT OPTION (I.E. ORGAN DONATION
   • 4. PEOPLE ARE INFLUENCED BY SUNK COST
     • ALS WE RELATIEF VEEL BETALEN WILLEN WE ER OOK OPTIMAAL GEBRUIK VAN MAKEN (I.E. THEATRE SHOW)
   • 5. PEOPLE ARE INFLUENCED BY COUNTERFACTUALS
     • EVALUATE YOUR HAPPINESS WITH IT IN COMPARISON WITH SOMETHING YOU OTHERWISE COULD HAVE WON/BUY (IE. OLYMPIC MEDAILLES)
   • 6. PEOPLE ARE INFLUENCED BY THE CONSIDERATION SET
     • ATTRACTION EFFECT: Adding to a consideration set of two alternatives a third alternative that is dominated by one of the two alternatives (but not the other one) increases the attractiveness of the asymmetrically dominating alternative.
     • COMPROMISE EFFECT: Brands tend to gain market share when they become compromise alternatives in a consideration set.
   • 7. PEOPLE ARE INFLUENCED BY ATTRIBUTE FRAMING
     • POSITIVE FRAMING: HIGHER SATISFACTION; NEGATIVE FRAMING: LOWER SATISFACTION (I.E. 25% FAT OR 75% LEAN)

3. CHOICE

   • CHOICE CREATES ATTENTION
   • WITH TOO MUCH CHOICE PEOPLE CANNOT CHOOSE. THEREFORE THE ARE NOT GOING TO BUY.