consumer decision making

consumer decision making

1. theories

   • utility
     • Neumann and Morgenstern 1944 consumers make rational decisions based on the likely outcome of their decision.
     • example: you evaluate every available car against all the relevant variables (cost, size, male etc.)  and select the one with highest score on all these variables.
   • satisficing
     • Simon 1956 consumers getting "approximately where they wanted to go" and tehn stopping the descision making process
     • example: look at a few cars and stop at one that is "good enough"
   • prospect
     • Kahneman and Tversky  1970s they added 2 new concepts value  endowment (when an item is more precious when owned than when owned by someone else)
     • suggests that individuals value gains and losses in different ways and are more likely to base their decisions on perceived likelihood of gains rather than perceived likelihood of losses.  
     • example: we buy a lottery ticket because we might win not because we are highly likely to lose.  investments are presented in terms of likely gains

2. strategies

   • Green and Wind 1973
   • compensatory
     • a consumer may allow the value of one attribute to compensate for another.
     • example: you might decide that a very low mileage (low fuel consumption in the same distance ) compensate for the fact that this was not your first choice of make or your preferred color.
     • equal weight strategy
       • Richarme 2005 attributes we use for our decision making have equal weights
     • weighted additives
       • Richarme 2005 attributes we use for our decision making have different weights
       • example: someone might value low mileage on a car much more highly than its color or the make.
   • non compensatory
     • each attribute is evaluated individually rather than allowing 1 variable to compensate for another. 
     • example: however a car scores on variables such as make, mileage, price it would be immediately eliminated if it was not the correct color
     • satisficing
       • the first product that meets basic requirements is chosen and no further consideration takes place.
       • example: if an essential piece of house hold equipment fails such as a kettle someone might simply purchase the first kettle they see
     • elimination by aspects
       • it sets a cut off value for the most important attribute and then allows everything that meets that attribute to remain under consideration, remaining items are assessed against the next attribute and so on. 
     • lexigraphic
       • the most important attribute is evaluated and if one item is superior in that attribute the item is chosen and decision making stops.
   • partially compensentory
     • majority of conforming dimensions
       • an individual would evaluate 2 products against all relevant attributes and retain the one that does best and compares it to the next product and so on till there is only one product left
     • frequency of good and bad features
       • all products are compared to appropriate cut off values and the product that has the most positive features exceeding the cut-off values will be chosen 

3. heuristics

   • mental short cuts that help us make decisions and judgements  quickly without analyzing information. they sometimes lead to errors in judgement
   • this is in a different part of this lesson
   • availabilty
     • based on how easy it is to bring something to mind. (often based on inacurrate information or faulty thinking) 
     • can be useful by making us more cautious in dangerous situations and can be beneficial by making us more cautious when it comes to dangerous situations because we can easily come up with negative outcomes
     • example: Hoyer et al. 2009 suggest that if you buy a DVD player that kept breaking down you 'available' perception of that brand is likely to be negative even though this might be an isolated instance. communication with others might also create an availability heuristic
   • representativeness
     • making comparison with the best known (most representative) example of a category
     • example: we are likely to assume that a product is a quality product if it appears similar to the market leader. 

4. marketing theories

   • consideration
     • forming an initial subset of items to consider. the more complex the decision the more stages in the decision making process. we'll reduce them to all the cars we can afford and all the cars nearby and so on. so we focus our cognitive effort on final subset that might be considered
   • involvment
     • it examines what determines amount of cognitive effort applied to the decision making process. the more important a decision is the more we put cognitive effort. (more effort in choice of a car than a sandwich) price does not necessarily determine the level of involvement in a decision. it can be determined by the preceived impact on the quality of life of the consumer.

5. EVALUATION

   • individual and situational factors
     • utility theory and other models assume that consumers think a certain way but itll be useful to understand how consumers differ in terms of their decision making
     • situational factors may influence decision making (type of product, store, or website) example: people might make more rational, compensatory strategies for household items rather than luxury items such as handbags or shoes
   • cultural differences
     • cultural differences of shopping experience should be taken into considersation
   • applications
     • understanding consumer decision making can be applied to shopping experience. the next study strongly suggests understanding decision making can improve shopping experience
     • study
       • Jedelski et al. 2002 participants first understood what compensatory and non compensatory strategies were
       • they told them to purchase specific items from: website 1: allowed customers to choose attributes and compare items side by side. and they could sort items into different criteria website 2: exactly the same info but comparisons were diificult
       • particpants used compensatory strategies more when using website 1