Psychology of Decision-Making: Judgements, Heuristics, and Models

Judgements

Evaluation of an object or estimate of likelihood of an outcome or event

Decision-Making

Making a selection among options or courses of action

Estimation of likelihood

Judging how likely it is that something will occur

Judgements of goodness/badness

Evaluating the desirability of something

Anchoring and adjustment process

Starting with an initial evaluation and adjusting it with additional information

Imagery

Multi-sensory mental representation (image) of a stimulus or an event

Mental Accounting

Categorizing spending and saving decisions into "accounts" mentally designated for specific consumption transactions, goals, or situations

Emotional accounting

The intensity of positive or negative feelings associated with each mental "account" for saving or spending

Inept Set

Options that are unacceptable when making a decision

Inert Set

Options toward which consumers are indifferent

Attraction Effect

When the addition of an inferior brand to a consideration set increases the attractiveness of the dominant brand

Decision Framing

The initial reference point or anchor in the decision process

Cognitive decision-making model

The process by which consumers combine items of information about attributes to reach a decision

Affection decision-making models

The process by which consumers base their decision on feelings and emotions

Compensatory Model

A mental cost-benefit analysis model in which negative features can be compensated for by positive ones

Noncompensatory Model

A simple decision model in which negative information leads to rejection of the option

Cutoff levels

For each attribute, the point at which a brand is rejected with a non compensatory model

Brand processing

Evaluating one brand at a time

Multiattribute expectancy-value model

A type of brand-based compensatory model

Conjunctive model

A noncompensatory model that sets minimum cutoffs to reject "bad" options

Disjunctive Model

A noncompensatory model that sets acceptable cutoffs to find options that are "good"

Attribute Processing

Comparing brands, one attribute at a time

Lexicographic model

A noncompensatory model that compares brands by attributes, one at a time in order of importance

elimination-by-aspects model

Similar to the lexicographic model but adds the notion of acceptable cutoffs

Endowment effect

When ownership increases the value of an item

Affective forecasting

A prediction of how you will feel in the future

Non Comparable decisions

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

Alternative-based Strategies

Making a non comparable choice based on an overall evaluation

Attribute-based strategy

Making a non comparable choice by making abstract representations of comparable attributes

Extremeness aversion

Options that are extreme on some attributes are less attractive than those with a moderate level of those attributes

Compromise effect

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

Attribute balancing

Picking a brand because it scores equally well on certain attributes rather than faring unequally on these attributes

Metacognitive experiences

How the information is processed beyond the content of the decision

Problem Recognition

The perceived difference between an actual and an ideal state

Ideal State

The way we want things to be

Actual State

Current state, the way things actually are

Internal State

The process of recalling stored information from memory

Consideration or evoked set

The subset of top-of-mind brands evaluated when making a choice

Diagnostic Information

That which helps us discriminate among objects

Salient (prominent) attributes

Attribute that is "top of mind" or more important

Attribute Determinance

Attributes that are both salient and diagnostic

Online Processing

When a consumer is actively evaluating a brand as he/she views an ad for it

Confirmation Bias

Tendency to recall information that reinforces or confirms our overall beliefs rather than contradicting them, thereby making our judgement or decision more positive than it should be

Inhibition

The recall of one attribute inhibiting the recall of another

External Search

The process of collecting information from outside sources, for example, magazines, dealers, ads.

Prepurchase Search

A search for information that aids a specific acquisition decision

Ongoing Search

A search that occurs regularly, regardless of whether the consumer is making a choice

Representativeness Heuristics

Making a judgement by simply comparing a stimulus with the category prototype or exemplar

Availability Heuristics

Basing judgments on events that are easier to recall

Bse-rate information

How often an event actually occurs on average

Law of Small Numbers

The expectation that information obtained from a small number of people represents the larger population

Traditional hierarchy of effects

sequential steps used in decision making involving thinking, then feeling, then behavior

Hierarchy of effects for low-effort situations

sequence of thinking-behaving-feeling

Satisfice

Finding a brand that satisfies a need even though the brand may not be the best brand

Choice tactics

Simple rules of thumb used to make low-effort decisions

Operant conditioning

A process of learning drive by the use of rewards to reinforce desired behavior and punishment to discourage objectionable behavior

Performance-related Tactics

Tactics based on benefits, features, or evaluations of the brand

Habit

A learned behavior that involves regular performance of the same act repeatedly over time. Behaviors are often performed unconsciously and may be difficult to discontinue.

Shaping

Leading consumers through a series of steps to create a desired response

Brand Loyalty

Buying the same brand repeatedly because of a strong preference for it

Multi Brand Loyal

Buying two or more brands repeatedly in the same product category

Brand Extension

Using the brand name of a product with a well-developed image on a product in a different category

Price-related Tactics

Simplifying decision heuristics that are based on price

Zone of acceptance

The acceptable range of prices for any purchase decision

Deal-prone consumers

A consumer who is more likely to be influenced by price

Normative choice tactics

Low-elaboration decision making that is based on others' opinions

Affect

Low-level feelings

Affect-related tactics

Tactics based on feelings

Affect Referral

A simple type of affective tactic whereby we simply remember our feelings for the product or service

Brand Familiarity

Easy recognition of a well-known brand

Co-branding

an arrangement by which the two brands form a partnership to benefit from the power of both

Unity

When all the visual parts of a design fit together

Variety Seeking

Trying something different

Optimal Stimulation Level (OSL)

The level of arousal that is most comfortable for an individual

Sensation Seekers

A consumer who actively looks for variety

Vicarious Exploration

Seeking information simply for stimulation

Impulse Purchase

An unexpected purchase based on a strong feeling

Hypothesis Testing

Comparing prior belief or expectations with new information, such as evidence from experience

Hypothesis Generation

Forming expectations about the product or service and its consumption

Exposure to evidence

Actually experiencing the brand, product, or service while consuming it

Encoding the Evidence

Processing information from consumption experiences.

Integrate the Evidence

Combining new information from the consumption with stored knowledge

Ambiguity of information

When information from consumption experiences is insufficiently clear or precise to evaluate brand, product, or service performance.

Top Dog

A market leader or brand with a large or the largest market share

Underdogs

A lower-share brand that is perceived to be doing well in spite of the odds against it

Satisfaction

The feeling that a purchase decision, consumption experience, or disposition decision meets or exceeds one's expectations

Dissatisfaction

The feeling that a purchase decision, consumption, or disposition decision falls short of one's expectations

Disconfirmation

When expectations do not match the actual brand, product or service performance, because performance is either better or worse than expected

Expectations

A prediction (hypothesis) about the performance of a brand, product, or service and about the outcomes of acquiring, consuming, or disposing of it

Performance

How well a brand, product, or service does on objective criteria, such as fuel efficiency, battery life, and on subjective criteria, such as style or taste

Delighted

Intense positive emotion, beyond satisfaction, that consumers experience when the superior performance of a company, brand, products, or service confirms or exceeds their expectations

Attribution Theory

A theory of how individuals find explanations for events

Regret

The negative emotion that consumers experience upon perceiving that they could have made a better decision than they did.

Pride

The positive emotion that consumers experience upon perceiving that they themselves rather than others or luck are responsible for obtaining positive, hard to get outcomes.

Equity Theory

The extent to which the balance of exchanges between consumers and companies and among consumers is perceived to be fair

Loyalty

Repeated patronage of a company, brand, product, or service based on positive attitudes from earlier and expected future consumption experiences

Disloyalty

Reduced or discontinued patronage of a company, brand, product, or service based on negative attitudes from earlier consumption experiences

Opportunity Costs

The value to the consumer of the best alternative not chosen. The opportunity costs of choosing an option are low when there are few good alternatives and none are better than the chosen option.

Behavioral Costs

The money, time, effort, and emotional discomfort needed to implement one's intentions or urges to act.

Negative word-of-mouth communication

The act of consumers sharing negative information about a brand, product, or service with other consumers