MKTG102 Choice and Context Effects

homoeconomicus

• fixed preferences

  • knows what they want/like the most

• more options = more likely to find the option they like

search cost

resources spent getting for about products

• ie. time getting to and from store, costs involved in looking for the item, time spent comparing items

buyers remorse

feelings of regret or anxiety after buying something

• involves giving up one thing for another → opportunity cost

• can be the money you would have saved by not buying

  • ie. wondering if you made the right choice of a phone

utility maximization

• seeking to achieve the highest level of satisfaction from their decision

• weighs the importance of each value and attributes it to a number form

compensatory decision making

• ‘more of this is less of those’

• high performing features offset weak ones

• all attributes need to be translated into a a comparable scale

  • ie. consumer buys a higher priced laptop because the processing speed is faster

non compensatory decision making

• increase in one attribute doesnt compensate for a decrease in another

  • ie. having no boba in your drink cannot be compensated by more milk tea

disjunctive decision rules

• sets minimum cut offs for at least one attribute

  • choosing the alternative that is the best on the most important attribute ie. choosing the house with the least rent

conjunctive decision rule

• applies minimum cut offs on all important attributes and eliminates alternatives

  • may adjust cut off or apply another decision rule if multiple alternatives are remaining

• ie. filtering out options that are above $100

lexicographic decision rule

• compares brands by attributes one at a time, in order of importance

  • if theres a tie → move on to next most important attribute

  • ie. distance to work > rent > area

elimination by aspects

• eliminates alternatives that do not meet the minimum cut off level on each attribute in order of the importance

  • ie. distance to work for house A is 10 km → eliminate

affect referral

• tactic where people remember their feelings for the product or derive

• results in low-effort decision making

• disregards info on attributes

alignable differences

corresponding aspects of a pair that differ

• ie. 10 hour battery size vs. 5 hour size

nonalignable differences

aspects of one object that have no correspondence with the other-

• ie. one phone flips, the other has a stylus

findings on differences

• alignable differences have a greater impact on choice

• nonalignables differences push people towards non compensatory rules

• if nonalignable attributes become quantifiable, its easier to trade them off (ie. battery lasts 15 minutes longer per day)

maximizer

• looks for best possible option

• compares with others and past decisions

• more likely to consider opportunity cost and engage in compensatory decision

satisfactor

• happy with ‘good enough’

• doesnt engage in social comparison or regret

• can move on after deciding

• faster decisions but might not get the best outcome

proportionality

• new offering takes in a proportion of the original shares from each brand

  • ie. new drink takes 20% of coke and pepsis shares

similarity

• new offering takes more shares from the one its more similar to

  • ie. sprite takes more of frescas then fantas shares

regularity assumption

• entry of an additional alternative will either reduce the share of an existing alternative or leave them unchanged

  • brand never gains more shares → can only lose them

asymmetric dominance effect

• adding a third option (decoy) that is inferior to the target makes the target more appealing and more likely to be chosen

compromise effect

• consumers tend to choose an option that is average when presented with two other extreme options

• most common when consumers are novices or unsure how to weigh attributes

similarity effect

• adding an option (decoy) that is slightly different but still equally attractive as an existing option (competitor) increases the probability that the dissimilar option (target) will be selected

  • ie. prices for coffee include

    • S - 3.50

    • M- 4.50

    • L - 7

  • people will choose the large

reason based choice

• when people choose an option that seems reasonable and justifiable

• easier to make choices that we can explain to others and ourselves

• not always optimal

  • attributes that seem more important given the context (but maybe not as much on their own) can get too much weight

    • decoys may also contribute too

  • reasons are frame dependent

framing choice: choosing and rejecting

• idea in which how something is framed or worded will impact decisions

  • ie.

    

• if asked which you would award sole custody → focuses on +

• if asked which you would deny sole custody → focuses on -