Consumer Behavior MT 2

5 stages of decision making

problem recognition, information search, evaluation of alternatives, purchase, and post purchase

WOM

product information transmitted by individuals to individuals, powerful when we are unfamiliar with a product category

Weight of WOM

negative > positive

consumer reactions to consumption

customer satisfaction and dissatisfaction, response to failures, post-decision dissonance and regret

consequences of customer satisfaction

repeat purchase intentions, increased positive WOM, positive emotional connection to brand and brand loyalty

consequences of customer dissatisfaction

voice response to the firm, private response to friends (negative WOM), third party (take legal action)

Model of satisafaction

satisfaction = actual performance - product expectations

two paths to satisfaction

manage outcome and manage expectations

attribute theory

when something goes wrong, people want to blame someone

three factors that influence dissatisfaction level

stability, focus, and controllability

post-decision dissonance

anxiety experience post-purchase when a consumer wonders whether they made the right choice

reducing dissonance

make customers feel good (thank you notes) and confident (warranties) about a purchase

post-decision regret

an unfavorable comparison between chosen and unchosen alternatives, you never know the outcome of the unchosen

routine problem solving

low involvement, minimal time spent, low typical cost, internal info search only, one alternative considered

limited problem solving

low to moderate involvement, minimal to moderate time spent, low to moderate typical cost, mostly internal info search, and few alternatives considered

extended problem solving

high involvement, long time spent, high typical cost, internal and external info search, and many alternatives considered

decision rules/processes

compensatory, non-compensatory, and heuristics

compensatory decision process

a mental cost-benefit analysis model used, good attributes compensate for bad attributes, (pros and cons, multiattribute)

non-compensatory decision process

simpler decision models, being bad on one dimension can not be made up for

conjunctive rule — non-compensatory model

set minimum cutoffs in multiple dimensions, start with all items and reject the bad options

lexicographic rule — non-compensatory model

rank attributes by importance and compare one at a time

elimination by aspect rule — non-compensatory model

rank attributes by importance, eliminate brands based on dimension (from most to least important) until you are left with one brand

Heuristics decision process

very simple decisions, short-cuts/rules of thumb

satisficers

don’t search for the perfect solution

maximizers

have more regret, less satisfaction, less optimism, more depression

low-effort decision making short cuts

performance based, habit/loyalty, variety seeking, reluctance to choose an unknown brand

heuristics

rule of thumb, makes life easier

bias

overuse of a heuristic

how heuristics lead us astray (system 1)

our fast, automatic, intuitive, and largely unconscious mode

how heuristics lead us astray (system 2)

our slow, deliberate, analytical, and consciously effortful mode of reasoning about the world

how system 1 can cause trouble

jumps to an intuitive conclusions based on a heuristic

how system 2 can cause trouble

lazily endorses this heuristic answer without bothering to scrutinize whether its logical

positive decision making

how people make decisions, based on psychology and consumer behavior, assume people satisfice, assumes bounded rationality

normative decision making

how people should make decisions, based on economics, assumes people maximize, assumes full information, rationality, and consistent preferences

base-rate fallacy neglect

prior probability is ignored when making a judgment, place too little or no weight on the base rate of possibility

availability heuristic

when you make a judgment about something based on how available examples are in your mind, has a lot to do with your memory of specific instances and what you’ve been exposed to

routes to availability heuristic

repeat exposure and one vivid memory

representative heuristic

when decisions are based on how similar an example is to something else typical or representative the particular case in question is

representative heuristic in marketing

we compare category members to the prototype and overestimate the similarity

sunk cost effect

costs that have already been incurred and which can’t be recovered, do not influence our decisions

how do marketers use sunk cost effect

get people to make a number of small and easy commitments and when they try to pul out, remind them of the total commitment they have already made

how can consumers avoid falling prey to the sunk cost effect

when thinking of stopping or switching, focus on future costs and benefits rather than past investments

halo effect

the tendency to assume that if something is good on one attribute then it is good on all others

self positivity bias

thinking bad things happen to other people but not to us

social marketing implications of self positivity bias

have to convince people that they are at risk

out-group homogeniety bias

you feel people in the out-group are more like each other than they themselves feel they are

egocentric bias

you think people are more likely to be like you than they actually are

marketing implications of egocentric bias

you are not the average customer, in most cases you do not represent the target market you are trying to reach

hinsight bias

tendency to look back at past events and believe that you correctly predicted the outcome

marketing implications of hingsight bias

can lead to overconfidence in future decisions and over reliance on intuition rather than data