Consumer Behavior Exam 2

• What is problem (need) recognition?

the perceived difference between an ideal state and the actual state.

• 1st step in the decision making process

• when only perform problem recognition when there is an initial problem (conflict of some sort, feeling stressed, off-feeling, etc.)

• What are actual states?

the consumers perception of the situation that currently exists. (compared to how consumers would like the state to be in)

ex. Dr. J in the car driving, realizing he needed flowers for mothers day, so thought he was fine but then needed to buy flowers last minute.

• What determines actual states?

simple factors, consumers needs, and external stimuli (mothers day ex.)

• What are ideal states?

a perception of how consumers would like things to be for a specific consumption context.

• when something feels off it is not ideal.

• ex. getting sleep like the ideal amount of sleep someone wants to get every night

• What determines ideal states?

expectations, past experiences, goals and aspirations

• How do actual states and ideal states relate to problem recognition?

when a discrepancy between actual and ideal states occur, consumers may be motivated to resolve it by engaging in decision making. thus kicking off the decision making process.

• How do marketers influence consumer problem recognition? Why?

marketers can point out problems that then consumers think about and want to resolve even though maybe they don’t have to totally be resolved, but they convince consumers they need to solve a problem. Kind of like commercials that ask questions to point out problems.

• What is internal search?

once problem recognition has been stimulated consumers usually lick-start the search process. Recalling stored info from the memory

• ex. resisting what choice or decision you made previously

• revisting memory to see what we did in the past

• recall of products and brand names you like

• recall of info. experiences, and feelings (MAO)

• more search when involvement is high

• What do consumers recall as part of internal search?

• recall of products and brand names you like

• recall of info. experiences, and feelings (MAO)

• What are the types of internal search? What examples did we discuss?

brands → ex logos and what visuals we see and associate with a brand ex. groundhogs day

attributes→ facts we remember about product/ service

evaluations→ surveys that ask how was your experience/ reflecting on purchases( test drive a car)

experiences→ ex. Dr. J eating a worm on accident and calling the granola bar company and is never gonna eat them again

• o What is recall of brands?
  

brands we can remember due to a decision that was made

0. What is recall of evaluations? What do consumers tend to remember?

easier to remember than specific attribute information

• we have a limited ability to store info so focus on takeaways from experiences

0. What is recall of experiences? What do consumers tend to remember?

recall of info from autobiographical memory; personal experiences and associated emotions.

• experiences that are more vivid, salient, or frequent are the most likely to be recalled

0. What impact do salient experiences have on consumer recall?

they are more likely to be recalled by consumers

• What is external search?

search that involves interacting with other sources or people that can provide the information we are looking for that we can’t gain from our own experiences

• What are the types of external search? What examples did we discuss?

retailer(get info from employees at the Apple Store ), media (social media ads/ online reviews), interpersonal(asking others opinions/ experiences), independent (using 3rd party sources, magazines, books, etc), and experiential (trials)

What is retailer search?

search that involves interacting with firms retail channels of distribution

• get info from employees or going to the store in person

What is media search?

Search involving ads, company websites, company social media & other company sponsored and/or produced communications and information

• involves ads, websites, any content produced by the brand

• market stimulus (ex. Lulu lemon)

0. What is interpersonal search?

Search involving interpersonal interactions with other people, such as family members, friends, neighbors, classmates, coworkers, or other personal connections

What is independent search?

Search involving books, non-brand sponsored sites or magazines, or other objective, third-party resources

0. What is experiential search?

Search involving extensive hands-on experience with products or services, in which offerings can be tried and evaluated in real consumption situations or over longer periods of time.

• ex. Dr. J honda car dealer: take it for the long weekend bring it back Tuesday!

• What types of situations lead to external search?

If we do not have the proper information within ourselves, we must search elsewhere

• What are the implications of external search for Marketers?

Products/brandsneedto perform well on attributes that are frequently searched.

Marketers need to ensure that the info consumers want is readily available.

• What are the formal steps of the full decision making process?

1. problem recognition

2. information search

3. information evaluation and integration

4. commitment and action

5. post-purchase evaluation and satisfaction

• What types of situational decision making factors impact our selections?

• prior knowledge and experience

• what others are selecting

• what you selected last time

• what to choose based on the current circumstances ( friends going out to dinner with food restrictions)

• What are the most common decision making goals? When are they active?

• being accurate

• saving effort

• being consistent

• and justifying choices

• What is a consideration set in decision making?

the gathering, integrating, and evaluating of info to help make a decision which involves Multi-attribute utility model process

• What is the relationship between accuracy and effort goals in decision making?

The more effort a consumer puts into a decision making situation the more accurate they will be.

• How does decision making change based on motivation, ability, and opportunity (MAO)

If MAO is high, consumers typically engage

The “Be Accurate” goal is very active

• Post-purchase Evaluation & Satisfaction

• When sufficient information is obtained, they move to evaluation and integration

• How does decision making work when MAO is high?

If MAO is high, consumers typically engage in lots of search to optimize outcomes

• What is the Multi Attribute Utility Model (MAUM)?

A tool used to calculate and help make decisions in a statistical manner (Reeses’s vs. baby ruth vs. 3 musketeers)

o What are the characteristics of MAUM as a decision making model?

• origins from economics

• The most important (highly rated) attributes have significant impact on the choice

• Predictive of actual choices

• Considered the “normatively accurate” choice

What are the theoretical components of MAUM?

importance weights and product evaluations

How do we use importance weights and product evaluations to calculate utility and predict choices when using MAUM?

there is a heavy emphasis on the fact that the more important an attribute is, the more significance it holds in making the final decision thats why there are importance weights for the different attributes summing up to 100%

o What are some of the problems or limitations with using MAUM in everyday situations?

• Even simple choices require complex mental calculations

• Can consumers effectively evaluate product attributes? (Whatisa“6”?)

• Does context matter?

  • Selfmonitoring?
  • Publicchoices?
  • PeerPressure?

• Choices often involve uncertainty and/or missing information

• if there is missing data it can mess up the entire process

• extra info can come along and mess up the process

• How does decision making work when MAO is low?

If MAO low, consumers use heuristics(shortcuts and simple rules of thumb) for

many choices.
- the “save effort” goal is very active

• What happens to the standard decision making process when heuristics are used?

• Instead of going through all 5 stages in the choice process, consumers take shortcuts.

• Some consumers even skip steps by going from information search straight to to commitment.

• so in the model of decision making process we go from info search to commitment/ action

• What are the 3 main categories of heuristics discussed in class?

• attitude based

• attribute based

• alternative based

• Note: use of heuristics involves trade off between accuracy and effort

• What is an attitude based heuristic? What examples did we discuss?

using attitudes and feelings to evaluate an experience

• Under this form of processing, existing attitudes drive decision making.

• ex. eating at a restaurant and knowing what you already want

• how I met your mother example

• picking something because you like it best

What is the stored attitude heuristic?

• Simply use attitudes stored in memory to make the choice

• Involves selecting the option the consumer likes best (based on the stored attitude)

• ex. if you were to go to a restaurant and get the same thing every time

What is the frequency heuristic?

• Evaluate whether a product is “good”in isolation (not relative to other brands)

• Simply count good versus bad features

• No adjustments for importance of features

What limitations do these types of heuristics have?

existing attributes drive the decision making process which is something to take note of

• What is an attribute based heuristic? What examples did we discuss?
  

Compare alternatives side by side, attribute by attribute ( Simpler version of MAUM)

• o What is the lexicographic heuristic?
  

• Compare alternatives by most important attribute

• The option with highest level of the most important attribute is selected

• o What is the elimination by aspects heuristic?
  

Order attributes by importance (using weights)
• Compare options beginning with most important

• Options below acceptable cutoff are eliminated

• Process continues until only 1 option remains

• o How do we apply these heuristics using real information or data?

• Set cutoffs for all attributes

•  Begin with most important feature

• Eliminate alternatives systematically

• What limitations do these types of heuristics have?

Under this form of processing, the attribute(s) drive decision making.

• also must look at order of which we go about things in the simplified MAUM process

• What is an alternative based heuristic? What examples did we discuss?

Sequentially evaluate each alternative
- Start with the first option you encounter ( flawed because it is whatever you run into first, just fate/ luck)

• Determine whether it satisfies the need

• talked about eye level and what you see first based on what eye level we are all at individually.

• o What is the conjunctive heuristic?
  

Set the minimum acceptable levels for each feature and select the first one that meets the minimum levels

ex. finding the perfect jeans or the friend that tried to find the perfect man

• o What is satisficing?
  

Select the first option encountered that satisfies the need, even though it is not guaranteed to be the best choice

• Under what conditions is satisficing more likely?

Decisions that are not important like the example in class of buying an extension chord.

0. How do we apply these heuristics using real information or data?

we use the heuristics with decisions with very few suitable options like shopping for jeans and decisions that are really not that important.

0. What limitations do these types of heuristics have?

the alternative(s) drive decision making.

• What are other types of simplifying heuristics used in decision making? What examples did we discuss?

brand loyalty, habitual (detergent we buy), representativeness ( knockoff vs apple iPad), reliance on norms (ex. black friday shopping everyone going after the same things), Reliance on affective response (eliminate negative emotions)

0. What is brand loyalty?
   

Make decisions based on strong preferences from past consumption experiences; reduces perceived risk

0. What is the habitual heuristic?
   

• Make decisions based on habit to save effort or to be consistent; no strong preference ( detergent your family always buys )

0. What is the representativeness heuristic?
   

• Make decisions based on comparison to a category prototype; perception of similarity leads to assumption of similar quality across offerings (ex. Dr. J buying the knock off iPad versus the apple one)

0. What is reliance on norms?
   

• Make decisions based on what everyone else is buying (ex. Black Friday and picking something up and then everyone wants what others are picking up and looking at)

0. What is reliance on affective responses?
   

• Make decisions based on feelings; typically used to reduce or to avoid negative emotions (eliminate negative emotions)

• What are decision making biases? How do heuristics and biases differ from one another?

• When evaluating options, consumers engage in heuristics (intentionally)(save time and effort)

• Oftentimes, consumers also engage in biased information processing (unintentionally)

• Even with high levels of MAO, it is still possible for certain decision biases to enter choice processes

• What is framing? How does framing alter decision making?

• The same information can take on different meanings based on the way the information is presented

• alters the decision making process and imposes boundaries on how we think about a problem and how we gather additional info

• reason behavioral economics exists

• What is the representative bias? What specific example did we examine?

• People judge the probability of something by considering how much it resembles (representative of ) available data.

• People neglect relevant base rates.

• Stereotyping

• example is Steve (In studies, most people think Steve is a librarian. The study’s description of Steve is not very compatible with the mental image we have of salespeople or teachers.

• What is the availability bias? What specific example did we examine?

• Occurs due to salience

• The more readily we can bring to mind instances of something, the

  more probable we think it is of occurring.

• ‘r’ does appear rd more frequently in the 3 position than the 1st position, we tend to base our frequency estimates on the ease with which we can generate instances.

• letter example Suppose we were to sample a word of 3 letters or more atrandomfromanEnglishtext. Isitmorelikelythat the word starts with the letter ‘r’ or that ‘r’ is the third letter?

• How many said starts with “R” is more likely?

• How many said “R” as the 3rd letter is more likely?

• What is mental accounting? What specific example did we examine?

• We have different mental accounts for different types of purchases.

  • We spend money differently for different categories of purchases (such as vacation versus everyday spending)

  • What do we learn?

  • We should be aware of how we compartmentalize things!

  • We should be consistent in how n we spend across categories.

• Situation A (Lost Ticket)

  • 60% willing to buy another ticket (40% unwilling).

  • $75 is compartmentalized as a “lost ticket” so the ticket price becomes $150.

• Situation B (Lost Cash)

  • 85% willing to buy another ticket (15% unwilling).

  •  $75 is compartmentalized as “lost cash” without having

    the “ticket” tag. More willing to buy another ticket because money is coming out of a different mental account.

• What is prospect theory? What specific example did we examine?

• Our utility function differs depending on whether we are

  in a ‘gain’ or ‘loss’ frame of mind.

•  We are more willing to accept risks in an attempt to escape losses (we are more risk seeking with losses).

•  We prefer safety when faced with certain gains (we are more risk averse with gains).

• Simply stated, “Losses loom larger than gains.”

• What do we learn?

•  Would we make the same decision if it were framed as a

  gain versus a loss? We should consider both options!

•  Ideas like this earn you the Nobel Prize in Economics!

• Situation A ( Jobs saved)

  • People tend to prefer option 1, the conservative no-risk option, when we frame the decision in terms of jobs saved.

• Situation B (Jobs lost)

  • People tend to prefer option 2, the more risky uncertain option, when we frame the decision in terms of jobs lost.

• What is the selecting and rejecting bias? What specific example did we examine?

Selecting&Rejecting (Shafir,Simonson,&Tversky,1993)

• There are differences in making the same choice if we are rejecting an option as opposed to selecting an option.

•  When we are selecting(awarding custody)and we have to justify our choice, we focus our attention on the positive dimensions of the 2 options to determine which is better

  • – Parent B is better on positive dimensions.

  •  However ,if our decision involves rejecting (denying custody) and we have to justify our choice, we focus on the negative aspects of the options

  • – Parent B has more negative options than Parent A.

• Interestingly, parent B is both more likely to be awarded and denied custody, depending on the way the question is framed.

• What is the discounting discrepancy bias? What specific example did we examine?

Discounting Discrepancies (Thaler, 1980)

• How we measure things matters!

• How do we measure success?

• Relative terms or absolute terms?

• Decide in advance how we will

evaluate our spending!

• Make appropriate conversions

• Be consistent in how we measure

example:

• situation watch → 90% travel for it

• camera→ 50% travel for the camera

• What is the anchoring and adjustment bias? What specific example did we examine?

• Anchoring & (Insufficient) Adjustment

• We tend to anchor on guesses and we don’t sufficiently adjust away.

• The “guess” anchors the estimates of the individual trying to make an intelligent estimate.

• The anchor prevents people from moving very far away from the initial guess, as a reference point.

•  There are times when we limit ourselves (and what we think is possible) based on anchors imposed by ourselves or others.

• We should try to generate multiple decision scenarios that are plausible.....This can help us to break free from being anchored!

How many kilometers of highway (both paved and unpaved) were in Hungary in 2004?

• Situation A
  - My guess (and it is a pure guess) is 50,000

• Situation B
  - My guess (and it is a pure guess) is 600,000

real answer: 188,203 km

• What is the attraction effect? What specific example did we examine?

Attraction Effect (Decoy Effect)

• Preference changes when 3rd option that is asymmetrically dominated is introduced.

• example of the apartments and their rent costs and distance from campus

• What is asymmetric dominance?

An option is asymmetrically dominated when it is inferior in all (or almost all) respects to one option, but when compared to the other option, it is inferior in some respects and superior in others.

• example: Consider the following: Apt A is 25 minute walk from school and costs $450, Apt B is 12 minute walk and costs $700.

• happens all the time with small, medium, and large options

• What is the compromise effect? What specific example did we examine?

• When a brand gains share because it is an intermediate option, rather than an extreme option.

• When the choice is hard, we may pick the middle option because it is the easiest to justify.

• more people drawn to option c because it is a compromise between A and B

• What do we learn about decision making from each of the decision making biases outlined above?

we learn about how they impact our everyday decisions and how often we use those biases like shown in our responses to the survey

• What is satisfaction?

the feeling that results when consumers make a positive evaluation or feel happy with their decision.

• Which industries have the highest satisfaction levels? Which have the lowest satisfaction levels?

Pet food has the highest satisfaction and airlines have the lowest

• Why does satisfaction matter so much to firms and to Marketers?

costs MUCH more to acquire a new customer, than it does to keep an existing customer!

• What are the characteristics and behaviors of satisfied customers?

because satisfied customers are more likely to

• pay higher prices

• repeat purchases

• be brand and store loyal

• and tell others about their experiences

• What is post decision dissonance? What examples did we discuss?

• is a feeling of anxiety concerning whether the correct decision was made.

• we try to make ourselves feel by saying things like “it is not that bad”

• How do consumers deal with feelings of dissonance?

they try to make it seem like it is not that bad or think about the options they should have or could have made.

• What is post decision regret? What examples did we discuss?

• a feeling that one should have decided upon a different option

• Occurs when consumers perceive an unfavorable comparison between the performance of the chosen option and the performance of the options not chosen

• What are the 3 main theoretical frameworks for understanding satisfaction? Examples?

disconfirmation paradigm, equity theory, attribution theory

• What is the disconfirmation paradigm? What examples did we discuss?

evaluations of a performance based on feelings, performance, and expectations ex. of will ferell and people having expectations for his movies to be funny

• What are the theoretical components of the disconfirmation paradigm?

expectations, performance, then those go to disconfirmation and that can then lead to either satisfaction (positive disc.) or dissatisfaction( negative disc.)

0. What is positive disconfirmation?
   

If the consumer finds the outcome to be better than expected, positive disconfirmation occurs and consumers are satisfied (better then expected)

ex. all the returns to Costco, Nordstrom, scheels

0. What is negative disconfirmation?
   

when there is dissatisfaction and feelings involved or outcome is worse than expected

0. How does positive/negative disconfirmation impact satisfaction?

it impacts satisfaction and dissatisfaction directly especially when combined with feeling.

0. What role do feelings play in the decision making model?

(emotions experienced during the purchase experience) can also affect satisfaction/dissatisfaction which can affect the entire experience.

• How do firms attempt to manage customer satisfaction using the disconfirmation paradigm? Examples?

The examples of Nordstrom taking back the snow tires even though they do not sell tires, Costco taking back a half eaten cake to keep those customers because it is more work and money to obtain new customers, so they keep people satisfied with positive disconfirmation

• What is attribution theory? What examples did we discuss?

Explains how individuals find explanations for events
- In marketing contexts, when a product or service does not

fulfill needs, consumers will attempt to explain why

• prius example with the brakes

• What are the theoretical components of attribution theory?

stability, locus of causality, and controllability ( Think Netlfix with the servers not working but them giving back the money and day that the consumer would have used Netflix)

0. What is Stability?
   

the occurrence of something happening, often, never? prius ex. is it just one cars or many?

0. o What is Locus of Causality?
   

is the problem accounted to the company or the consumer? ex. Toyota knew about the brakes and it was the companies fault.

0. o What is Controllability?
   

How the situation can be handled. ex. Could Toyota prevent this problem? yes

• What are self-serving biases?

Individuals take credit for successes and deny responsibility for failures

• Result: Consumersalmostalwaysblame the firm when things go wrong

0. What is fundamental attribution error?
   

People tend to attribute another person’s negative behavior to his or her disposition (stable traits or personality)

0. What is actor-observer asymmetry?
   

• People tend to attribute the cause of their own negative behavior to the situation

• Observers tend to attribute the cause of others’ negative behavior to their disposition (stable traits or personality)

0. What are the Marketing implications of consumer self-serving biases?

ex. watching someone walking and they trip, we assume they are just clumsy, but then if we trip we realize or blame it on a rock or loose brick

• What is equity theory? What examples did we discuss?

• Focuses on the nature of exchanges between entities and their perceptions of these exchanges.

• Compares inputs vs. outputs for consumers and firms

• For ————to occur, the buyer must perceive fairness in the exchange – typically the perception that their inputs are equal to their outputs.

• What are the theoretical components of equity theory?

consumer inputs, consumer outputs, equity

0. What are consumer inputs (what do consumers put into the process) and What are consumer outputs (what do consumers get out of the process)?
   

inputs are Info search, decision making effort, anxiety, and money.

outputs are Satisfactory car that does what you expect

0. How is equity determined by consumers? How is equity determined by firms?

consumers- getting a good deal firm- getting rid of the car

however equity can be seen as a fair exchange, but if we in a way rob the firm then we see the exchange as equitable but the firm does not then there is a flaw