Decision making and group influence (3+4)

Consumer decision making

Process of solving a consumption-related problem

5 steps to consumer decision making

Problem, info, alternatives, decision, evaluation

Problem recognition, information research, evaluation of alternatives, purchase decision and post-purchase evaluation

Problem recognition - step 1

Gap between ideal state and actual state (need or opportunity)

Information search - step 2

Internal and external

Memory/experience vs ads, reviews, recommendations

Bounded rationality - satisficing

Consumers seek a good enough solution, not always optimal

3 types of decision making

Habitual, limited and extended

5 types of perceived risk

Monetary, functional, physical, social, psychological

3 types of alternative sets

Evoked, inept and inert

Evoked set - alternative sets

Brands considered

Inept set - alternative sets

Rejected brands

Inert set - alternative sets

Ignored brands

Heuristics

$$$ = better quality, familiarity = better choice

Prospect theory

People value losses more than gains

Loss aversion

Psychological pain of loss is 2x the pleasure of a same gain

Risk aversion in gains

Risk-averse, like small gain over risky big gain

Risk-seeking in losses

Prefer risk to avoid a sure loss

Non-compensatory decision rules (lexicographic, elimination-by-aspects, conjunctive and disjunctive)

Weakness in one attribute can’t be offset

Lexicographic rule

Rank attributes by importance and choose what performs best on top-ranked attribute

Elimination-by-aspects rule

Set cutoffs on the most important attributes and eliminate any option that doesn’t meet them

Conjunctive rule

Minimum acceptable cutoff level for each attribute

Disjunctive rule

High standards for many key attributes and choose option that meets any

Compensatory decision making rules (simple or weighted additive)

Strengths can offset weaknesses

Weighted additive rule

Measure relative importance of each attribute by assigning it a weight

Simple additive rule

Choose option with the most + attributes

Post-purchase evaluation

Expected vs actual performance (expectancy disconfirmation model)

Importance of groups in consumer behavior

Shape expectations, evaluations, aspirations and purchasing behavior

Reference group

Inf on behavior/attitudes, even if not a member

Aspirational group - reference group

Group a person wants to join or be associated with

Associative group - reference group

Group of peers with similar status (friends, coworkers)

Dissociative group - reference group

Group to avoid being associated with

Formal group

Structured organizations

Informal group

Casual, social circles

Membership vs. aspirational groups

You belong to vs you admire

Positive vs negative groups

Attract or repel behavior (ex. anti-brand communities)

Brand community

Group of consumers connected by shared interest tied to a brand

Informational influence - reference groups

Seeking knowledge, expert advice

Utilitarian influence - reference groups

Conforming to expectations of others

Value-expressive influence - reference groups

Enhancing self-image and identity

3 factors of group influence

Proximity, exposure and cohesiveness

Product influence is strongest when…

Consumption is public and luxury contexts (less for private necessities)

6 types of power

Referent (admiration), legitimate (authority), information (access), expert, rewards (incentives) or coercive (punishment)

Conformity

Adjusting behavior to align with group norms

Anti-conformity and reactance

Resistance when freedom feels threatened

Deindividuation - group effects

Loss of individual identity in a group

Risky shift - group effects

Groups make riskier decisions than individuals (diffusion of responsibility!)

Polarization - group effects

Group decisions become more extreme

Social loafing - group effects

Individuals contribute less in a group

5 roles in group decision making - IGIBU

Initiator, gatekeeper, influencer, buyer, user

Opinion leaders

Influence others’ purchase decisions (knowledgeable, socially connected, early adopters, similar to consumers)

Marketing maven

Consumer who shares marketplace knowledge widely

The power of word of mouth

Highly trusted, influences sales, faster if negative

Digital influence

Faster spread, greater reach, anonymity, viral effects