Week 3 MKTG501 - Consumer Decision-Making
Consumer Decision-Making Process
Key Steps:
Need Recognition
Information Search
Alternative Evaluation
Purchase
Post-Purchase
Need Recognition
Occurs when there's a difference between current and ideal states.
Information Search
Types:
Internal Search: Memory recall of product options.
External Search: Gathering info from ads, friends, reports, etc.
Perceived Risk
Consumers may fear negative consequences from purchases.
Types of perceived risks:
Monetary, Functional, Physical, Social, Psychological
Decision-Making Systems
System 1: Fast, unconscious, error-prone.
System 2: Slow, conscious, effortful, reliable.
Heuristics
Mental shortcuts for quick decisions.
Examples: Brand loyalty, popularity as quality indicator.
Post-Purchase Outcomes
Customer satisfaction linked to expectation quality:
Quality < expectations = dissatisfaction
Quality > expectations = satisfaction
Quality = expectations = satisfaction
Cognitive Dissonance
Psychological tension or anxiety post-purchase.
Influencing Factors
Marketing Mix: Product, Price, Place, Promotion.
Personal Factors: Family, culture, motives, attitudes, perceptions, learning, lifestyle.
Social & Situational Factors: Social influences, shopping conditions.
Consumer Decision-Making Process
Key Steps:
Need Recognition: This is the first step in the decision-making process where the consumer identifies a gap between their current situation and their desired state. This recognition can be triggered by internal stimuli (such as hunger or thirst) or external stimuli (such as advertising or peer influence).
Information Search: After recognizing a need, consumers engage in information search to fill that gap. This search can be categorized into two types:
Internal Search: The consumer taps into their memory to recall past experiences and knowledge of product options relevant to their need.
External Search: Consumers seek information from various sources such as advertisements, friends, online reviews, and expert opinions to gather insights and broaden their understanding of available choices.
Alternative Evaluation: In this stage, the consumer assesses different products to determine which best meets their needs. Factors considered may include product features, prices, brand reputation, and reviews. This involves comparing alternatives against individual criteria to make an informed decision.
Purchase: This step involves the actual transaction where the consumer decides to buy the selected product. Several factors can influence the final decision, including perceived value, promotional offers, and the consumer’s budget.
Post-Purchase: After the purchase, consumers evaluate their decision based on the performance of the product. Their assessment can lead to satisfaction or dissatisfaction, impacting future purchasing behavior.
Need Recognition
Need recognition occurs when there's a discernible difference between the current state and the ideal state. This gap propels the consumer to seek solutions, often influenced by emotional triggers or market stimuli that suggest improvements in lifestyle or fulfillment.
Information Search
Types:
Internal Search: Involves recalling previous purchases or experiences with products, a crucial step for brand loyal customers who may prioritize familiar brands.
External Search: Involves gathering information from multiple channels, thereby increasing the options and alternatives considered. This can include both digital platforms like online reviews and physical channels such as family or friend recommendations.
Perceived Risk
Consumers often experience perceived risks associated with their purchases, which can deter them from decision-making. Understanding these risks is crucial for marketers to reassure potential customers.
Types of perceived risks:
Monetary: Concern over the cost and value received.
Functional: Worry that the product will not perform as expected.
Physical: Potential harm resulting from the product.
Social: Fear of being judged by others for the purchase.
Psychological: Anxiety about satisfaction and self-esteem linked to the product.
Decision-Making Systems
System 1: This is a fast and automatic decision-making system driven by heuristics and experiences but prone to errors.
System 2: This involves a more deliberate and analytical approach, which, although slower, tends to yield more reliable outcomes based on thorough evaluation of facts.
Heuristics
Heuristics are mental shortcuts that ease the cognitive load when making decisions, enabling quicker choices while managing the perceived risks. Examples include:
Brand loyalty: Choosing a product based on previous positive experiences.
Popularity as a quality indicator: Assuming a widely used product is of high quality due to its popularity.
Post-Purchase Outcomes
Customer satisfaction is directly linked to the quality of the product in relation to expectations:
Quality < expectations = dissatisfaction
Quality > expectations = satisfaction
Quality = expectations = satisfaction
This outcome can influence repurchase intentions and brand loyalty significantly.
Cognitive Dissonance
Cognitive dissonance refers to the psychological tension experienced when a consumer questions their purchase decision. This dissonance often arises when consumers feel they may have made a poor choice or when feedback contradicts their beliefs about the product.
Influencing Factors
Marketing Mix: Key elements that influence consumer behavior include Product, Price, Place, and Promotion. Each element must be strategically managed to ensure effective consumer engagement.
Personal Factors: These can include family obligations, cultural backgrounds, personal motives, attitudes, perceptions, prior learning experiences, and lifestyle choices. Each factor can significantly shape an individual's decision-making process.
Social & Situational Factors: These encompass broader influences such as social groups, societal norms, shopping conditions (e.g., store ambiance), and situational contexts that can alter consumer decisions at any point in time.