Decision Making 1

16.04.2024
Lets Meet RichardJ 2
What is our problem? 3

• Every consumer decision we make is a response to a problem

• Hyperchoice dilemma-too much to choose
• Consumer hyperchoice forces us to make repeated decisions that
may drain psychological energy while decreasing our abilities to
make smart choices
• Constructive processing-how much effort should we spend?
• Mental Budget
The 3 Categories of Consumer Decision 4
Self-Regulation 5

• The buckets of decision

making don’t necessarily
work independently of one
another.
• A person’s efforts to
change or maintain his or
her actions over time,
whether these involve
dieting, living on a budget,
or training to run a
marathon, involve careful
planning that is a form of
self-regulation.
Cognitive Decision Making 6

• A cognitive purchase decision is the

outcome of a series of stages that
results in the selection of one product
over competing options
• Traditionally, consumer researchers
approached decision making from a
rational perspective
Problem Recognition 7

• Problem recognition occurs when we experience a significant

difference between our current state of affairs and some state we
desire
• The Marketing Funnel
• Ford Fusion Hybrid Vehicle
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Information Search 9

• Once a consumer recognizes a problem, he or she needs the 411 to

solve it. Information search is the process by which we survey the
environment for appropriate data to make a reasonable decision
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Evaluate Alternatives 11

• Much of the effort we put into a purchase decision occurs at the

stage where we have to put the pedal to the metal and actually
choose a product from several alternatives
• Hard job
• Evoked Set
• Consideration Set
Product Choice 12

• Once we assemble and evaluate the relevant options in a category,

eventually we have to choose one. Recall that the decision rules
that guide our choices range from simple and quick strategies to
complicated processes that require a lot of attention and
cognitive processing
• Too much options our task is not easy
Postpurchase Evaluation 13

• the proof of the pudding is in the eating

• Postpurchase evaluation closes the loop
Online Decision Making 14

• Cybermediary describes a Web site or app that helps to filter and

organize online market information so that customers can identify
and evaluate alternatives more efficiently
• Intelligent agents are sophisticated software programs that use
collaborative filtering technologies to learn from past user
behavior to recommend new purchases
• Search Engines
• Search Engine Optimization (SEO)
How do we put products in categories? 15

• Strategic implications of product Categorization

• Position a product-orange juice a morning drink?
• Identify Competitors; competing alternatives
• Create an exemplar product-if a product is a really good
example of a category, then it is more familiar to consumers
and they more easily recognize and recall it
• Locate products in a Store
Levels of Categorization 16
 Evaluative Criteria 17

• Evaluative criteria are the

dimensions we use to judge
the merits(deserve a
recognition) of competing
options
• Determinant attributes are
the features we actually use
to differentiate among our
choices
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Habitual Decision Making 19

• Habitual decision making describes the choices we make with

little or no conscious effort
• Malcolm Gladwell Blink
• (https://www.youtube.com/watch?v=ZQab-yN7IXw)
• Loyalty-Habit-Inertia
• Brand loyalty describes a pattern of repeat purchasing behavior
that involves a conscious decision to continue buying the same
brand.
Priming and Nudging 20
• When people see pictures of “cute” products, they are more likely
to engage in indulgent behavior such as eating larger portions of
ice cream.
• In a field study in a wine store, researchers played either
stereotypically French or German music on alternate days. On the
days when French music was in the background, people bought
more French versus German wine and the reverse happened on
German music days. Follow-up questionnaires indicated customers
were not aware of the impact of the music on their choices.
• https://www.youtube.com/watch?v=ydAyvvDQrgY
• Much of the current work in behavioral economics demonstrates
how a nudge—a deliberate change by an organization that intends
to modify behavior—can result in dramatic effects.
• https://www.youtube.com/watch?v=LF4ETgw29BA
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Heuristics: Mental Shortcuts 22

• we often are quite content to exert less mental effort and simply
receive an adequate outcome—a satisficing solution. This “good
enough” perspective on decision making is called bounded
rationality.
• These “mental rules-of-thumb” range from the general (“higher-
priced products are higher-quality products” or “buy the same
brand I bought last time”) to the specific (“buy Domino, the brand
of sugar my mother always bought”)
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Heuristics: Mental Shortcuts 24

• Covariation- clean used car has good mechanics

• Country of Origin
• Familiar Brand Names
• Higher Prices
 Collective Decision Making 25

• Marketers often need to understand consumers’ behavior rather than a

consumer’s behavior.
Diferent Roles :
• Initiator—The person who brings up the idea or identifies a need.
• Gatekeeper-The person who conducts the information search and controls the
flow of information available to the group. In organizational contexts, the
gatekeeper identifies possible vendors and products for the rest of the group to
consider.
• Influencer—The person who tries to sway the outcome of the decision. Some
people may be more motivated than others to get involved, and participants also
possess different amounts of power to get their point across.
• Buyer—The person who actually makes the purchase. The buyer may or may not
actually use the product.
• User—The person who actually consumes the product or service.
B2B Decision Making 26

• The decision-making process differs when people choose what

to buy on behalf of an organization rather than for personal use.
• Roughly $2 trillion worth of products and services change hands
among organizations, which is actually more than end consumers
purchase.
 Let’s summarize the major differences between organizational and
industrial purchase decisions versus individual consumer decisions 27
• The purchase decisions that companies make frequently involve many people, including those
who do the actual buying, those who directly or indirectly influence this decision, and the
employees who will actually use the product or service.
• Organizations and companies often use precise technical specifications that require a lot of
knowledge about the product category.
• Impulse buying is rare(industrial buyers do not suddenly get an“urge to splurge”on lead pipe
or silicon chips). Because buyers are professionals, they base their decisions on past
experience and they carefully weigh alternatives.
• Decisions often are risky, especially in the sense that a buyer’s career may ride on his
judgment.
• The dollar volume of purchases is often substantial; it dwarfs most individual consumers’
grocery bills or mortgage payments. One hundred to 250 organizational customers typically
account for more than half of a supplier’s sales volume, which gives the buyers a lot of
influence over the supplier.
• B2B marketing often emphasizes personal selling more than advertising or other forms of
promotion. Dealing with organizational buyers typically requires more face-to-face contact
than when marketers sell to end consumers.
Buying Center & BuyClass Theory of
Purchasing 28

• What is buying center?

• The classic buyclass theory of purchasing divides organizational
buying decisions into three types that range from the least to the
most complex. Three decision-making dimensions describe the
purchasing strategies of an organizational buyer: 80

• 1 The level of information he or she must gather prior to the decision.

• 2 The seriousness with which he or she must consider all possible
alternatives.
• 3 The degree to which he or she is familiar with the purchase.
BuyClass Theory of Purchasing 29
Family Decision Making 30

Families make two basic types of decisions:

• Consensual purchase decision members agree on the desired

purchase; they disagree only in terms of how they will make it
happen

• Accommodative purchase decision however, group members have

different preferences or priorities and can’t agree on a purchase
that satisfies everyone’s needs.
 Some factors that cause family conflict 31
• Interpersonal need—(a person’s level of investment in the group): A teenager
may care more about what her family buys for the house than will a college
student who lives in a dorm.
• ● Product involvement and utility—(the degree to which a person will use
the prod- uct to satisfy a need): A mother who is an avid coffee drinker will
obviously be more interested in the purchase of a new coffeemaker than will
her teenage son who drinks Coke by the gallon.
• ● Responsibility—(for procurement, maintenance, payment, and so on):
People are more likely to have disagreements about a decision if it entails
long-term conse- quences and commitments. For example, a family decision
about getting a dog may involve conflict over who will be responsible for
walking and feeding it.
• ● Power—(or the degree to which one family member exerts influence over
the others): In traditional families, the husband tends to have more power
than the wife, who in turn has more than the oldest child, and so on
Family Decision Making 32

• Marketers needs to who makes the decisions in the family

• FFO(Family Financial Officer)
• The synoptic ideal calls for the husband and wife to act as joint
decision makers.
• Room mates