Chapter 8: Judgment and Decision-Making Based on High Effort

mostly definitions

Judgement

Evaluation of an object
or estimation of the likelihood of an outcome, or an event

Decision Making

Making a selection amoung options or activities

Judgement vs. Decision Making

Judgment evaluates - no decision is made yet

Decision Making - you make a decision/choice

2 Complex Judgement Process in High Effort situations:

1. Estimation of Likelihood

2. Judgment of Goodness or Badness

Estimation of Likelihood

Judging how likely it is that some thing will occur.

Ex) when we buy a good or service, we may attempt to estimate the likelihood that it will break down or the likelihood that others will like it or the likelihood that it will satisfy our needs.

Judgments of Goodness and Badness

Evaluating the desirability of something.
- can be affected by the attributes of a product and/or how we feel.

Ex) if you are planning a trip, you might judge whether the fact that Europe is cold this time of year or the fact that European travel can be expensive is good or bad.

2 essential concepts in high effort judgment

1. Anchoring and Adjusting

2. Imagery

Anchoring and Adjustment

consumers start with an initial evalution, and then adjust it as they recieve additional information

Imagery

Imagining an event in order to make judgments about it

Mental Accounting

process of categorizing spending and saving decisions into mental accounts designated for specific consumption transactions, goals, or situations.

Emotional Accounting

Closey related to Mental Accounting

The intensity of postive or negative feelings associated with each mental account for saving.

Ex) Money recieved under negative circumstances (like an inheritance) is more likely to be spend on a utilitarian purchase like tuition.

7 Types of Bias

1. Confirmation Bias

2. Self-positivity Bias

3. Negativity Bias

4. Mood Bias

5. Prior Brand Evaluations

6. Prior Experiance

7. Difficulty of mental calculations

Confirmation Bias

Consumesr focuses more on judgments that confirm what they know and believe in

Self-Positivity Bias

Consumers tend to believe that bad things are more likely to happen to other people than to themselves

Negativity Bias

consumers give more weight to negative information than positive information when forming judgments

When do consumer NOT engage in negativity bias?

when a consumer is already commited to a brand

Ex) if you love the school ur attending, you are unlikely to think much about or even discount any negative information you hear about it.

3 things Mood can do:

1. Can serve as an initial anchor for a judgment

2. Can reduce consumers’ search for and attention to negative information

3. Can make consumers overconfident about the judgments they are reaching

Prior Brand Evaluations

when consumers judge a brand to be good based on their past exposure to it

What is the result of Prior Brand Evaluations?

consumers fail to learn information about the brands attribute that affects its actual quality. It blocks learning about quality and other product attributes that affect quality.

Prior Experiance

consumers learn from their previous experiances

Difficulty of mental calculations

The ease or difficulty of caluculating the difference will affect consumer judgment.

Ex) A $50 discount on a $500 item vs. A $20 discount on a $100 item

Even though the percentage savings is the same (10%), the $50 feels bigger and is easier to notice. So you might overestimate how good that deal is, just because the math is simpler or the number looks bigger.

5 Types of Decisions Consumers Face in High Effort Situations

1. Deciding Which brands to consider

2. Deciding What is important to the choice

3. Deciding What brand to choose

4. Deciding whether to make a decision now

5. Deciding when alternatives cannot be compared

When “Deciding which brands to consider”, the options fall under 3 sets. What are they?

1. Inept set

2. Inert set

3. Consideration set

Inept set

unacceptable/wont buy set

Inert set

“dont care”/indifferent set

Consideration set

might buy set

What effect commonly occurs in the consideration set?

The attration effect

Attraction Effect

when the addition of an inferiour brand increases the attractiveness of dominant brands

Ex) Amazon promotes and offers high priced models. Even if the highe priced models arent the best sellers, their lower priced options looks better in comparison

Decision Framing

inital reference point or anchor in purchasing decision process

what 3 things must you consider when “deciding what is important to the choice”

1. goals

2. time

3. decision framing

What are the 2 desicion making models when “Decising what brand to choose”?

1. cognitive decision making model

2. addective decision making model

is the Cognitive decision making model thought based or feeling based?

Thought based

is the Affective decision making model thought based or feeling based?

Feeling based

Cognitive Decision making model

Consumers combine items of information about attributes to reach a decision

Affective Decision making model

consumers base their decision on feelings and emotions

2 main types of Cognitive models

1. Compensatory model

2. Non-compensatory model

Compensatory Model

a mental cost-benefit analysis model where positive features can compensate for negative ones

Ex) consumer might choose a more expensive car if it offers superior safety features that compensate for the higher price

Non-compensatory Model

a simple decision model where negative information leads to the rejection of the option

“straight foward” decision rules

What is the main difference between compensatory vs. non-compensatory?

The main difference is how they handle trade-offs between attributes

One is more strict, the other is more leaniant

Non-compensatory requires less cognitive effort than compensatory

True

Cutoff levels

the point at whcih a brand is rejected

Brand Processing

Evaluating one brand at a time

what are the 3 Brand Processing Models?

1. Multi-attribute expectancy- value

2. conjunctive model

3. disjunctive model

Mutli-attribute expectancy-value

Type of brand based compensatory model

Theory of Reseasoned Action (TORA) falls intro this model

Consumers tend to give more weight to attributes that are compatible with their…?

Goals

What are some cons of multi-attribute models

can be emotionally and cognitively taxing

Conjunctive model

Non-compensatory
sets minimum cutoffs to reject bad options

Disconjunctive model

Non compensatory model

sets “acceptable” cutoffs to find options that are good

Attribute Processing

comparing brands, one attribute at a time

there are 3 Attribute processing models

1. Additive Difference Model

2. Lexicographic Model

3. Elimination by aspects model

Additive difference model

brands are compared by attribute, two brands at a time

ex: when choosing between two smartphones, a consumer might consider factors like camera quality, battery life, and price. They would then compare these features between the two phones, adding up the positive and negative differences to decide which phone is better

Lexicographic Model

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

If a tie occurs, consumers compare the remaining brands based on the second most important attribute

Elimination -by- aspects model

Similar to the lexicographic model, it just adds the notion of acceptable cutoffs.

process:
- starts with the most important attribute and eliminates brands that don’t meet the minimum cutoff

-The remaining brands are then evaluated again until one brand remains

Prospect Theory

Suggsts that losses have more influence than gains

Prospect theory leads to a phenomena called

The Endownment Effect

The Endownment Effect

when ownership increases the value of an item

Prospect theory may explain why consumers have strong reactions to price increases compared to price decreases. True or False?

True

2 types of goals that impracts decision making process

1. Prevention Focused Goals

2. Promotion Focused Goals

Prevention Focused Goals

Where consumers preserve the status quo and avoid change → avoids losses

Promotion Focused Goals

consumers are more willing to try new things if it helps acheive thei foal of growth and development

Consumers tend to be more staisfied after making a ______ based decision

Feeling

Emotions can help consumers make _____ based decisions

Thought

Brands can be associated with ______ or ______ emotions

Positive or Negative emotions

Hedonic

Pleasant

Appraisal Theory

explains how emotions are determined by how one appraises the situation and how certain emotions can affect future judments and choices.

what are the 2 essential concepts in Affective Decision Making?

1. Affective Forecasting

2. Imagery

Affective Forecasting

predicts how one will feeling in the future

_____ plays a keyrole in emotional decision making

Imagery

Decision Delay

occurs when decision is risky uncertain or involves an unpleasant task

Noncompareable decision

The process of making a decision about products or services from different categories

Ex)choosing between going to a nice restaurant, going to the movie, renting a video, or going to a party

When making a non compareable decision, consumers may adopt either ______ based strategy or ______ based strategy

1. Alternative-based strategy

2. Attribution-based strategy

Alternative-based strategy

AKA: Top-down processing
Choice based on overall evaluation

Ex) you evaluate each options pros and cons independantly, then choose the one you like the best.

Attribution-based strategy

AKA: Bottom-up Processing
choice based on abstract representations of compareable attributes

Ex) constructing abstract attributes like “fun” or “likelihood of impressing a date”

When Consumers lack well-defined goals , they tend to use ________ based processing

Attribute Based Processing

Expert consumers have more _________ prior experience and knowledge and, as a result, tend to use _______ decision strategies.

Brand Base

Expert Consumers know how to what?

identify relevant information and ignore irrelevant attributes in their decision-making.

When consumers consider complex information, they may simplify the processing task by focusing more on…?

brand effects, especially if they face more than one complex choice task

5 Consumer Characteristics that can influence decision making

1. Expertise

2. Mood

3. Extremeness Aversion

4. Time Pressure

5. Metacognitive Experiances

Expertise

allows consumers to have more detailed consumetion vocab; They can articulate why they like and dont like a brand

Good mood

Can allow for better information processing and take more decision making time

consumers are more willing to try new products because they perceive lower probabilities of incurring losses.

Time Pressure

Can lead to consumers’ failure to make intended purchases.

Extremeness aversion

where extreme options are less attractive

This tendancy is the reason that people find _____ priced options more attractive than options that are either ________________ or _______________

1. moderately

2. Very expensive

3. Very inexpensive

Compromise effect

A brand will gain share when it is seen as the intermediate (or compromise) choice.

Attribute Balancing

Picking a brand because it scores equally well on certain attributes

Metacognitive Experiances

How information is processed beyond the content of the decision

3 decision characteristics that can affect how consumers make their choices are:

1. Information Availablility

2. Information Format

3. Trivial Attributes

Information Availability

Having more information will lead to making a better choice only up to a point, however; after that, the con sumer will experience information overload

Information Format

the way that it is organized or presented in the external environment

If information is organized by brand, consumers will likely employ a

brand-based decision-making strategy such as a compensatory, conjunctive, or disjunctive model.

If infor mation is organized by attribute or in a matrix, consumers can use an

attribute-processing strategy

Consumers sometimes finalize decisions by looking at

trivial attributes

Individual-alone goals

Goals attained by an individual’s action alone

Individual-group goals

Goals achieved based on the actions of an individual and a group

In a group, consumers face 3 types of individual group goals

1. Self-presentation

2. minimizing regret

3. information gathering

Self Presentation

Consumers seek to convey a certain image through the decisions they make in a group context; this results in uniformity

Minimizing Reget

Consumers who are risk-averse will tend to make choices that are similar to those made by the rest of the group, leading to uniformity at the group level

Information Gathering

Consumers can learn more about the different choices each has made through interaction with other group members; can still result in group uniformity