Notes on Consumer Decision Making and Psychology

Overview of Consumer Psychology

  • Consumer psychology asks: why do consumers do the things they do?
  • Professor Hill Cumming (aka Professor Hi C) teaches a consumer psychology elective at the higher level in the marketing division.
  • Topics covered in consumer psychology include:
    • how do we make decisions
    • sensory marketing
    • how we learn
    • the psychology of humor (what makes something funny)
    • motivation
    • identity and the self and how that plays a role in consumption experiences
    • gender roles and stereotypes in advertising
    • individual differences such as personality and psychographics
    • motivation
  • Today’s focus is on the first question: how do we make decisions?
  • Exercise prompt used in the lecture: think about how you decide what restaurant to go to; outline a step-by-step decision process for yourself.
  • Aimed takeaway: develop a structured understanding of the consumer decision making process and how various factors influence it.

The Consumer Decision Making Process (5 main steps)

  • Problem recognition: identify a problem in the environment (or recognize a new opportunity to reach), triggering the decision process.
  • Information search: seek information to solve the problem; can be internal or external.
  • Evaluation of alternatives: compare options using criteria that matter to the consumer to narrow choices.
  • Purchase decision: make the actual choice after evaluating alternatives.
  • Post-purchase evaluation: assess whether the decision met expectations; determine satisfaction vs. dissatisfaction.
  • Note: marketers should craft communications to create accurate expectations and ensure delivery aligns with those expectations.

Problem Recognition

  • Trigger that starts the decision process: recognizing that something is not right or that there is an opportunity to pursue.
  • This step may be about solving a problem or seizing an opportunity.
  • Sets the stage for information search in the next step.

Information Search

  • Information search can be:
    • Internal: memory, past experiences, or known solutions.
    • External: search of the environment, gathering data from outside sources.
  • The goal is to identify possible solutions or offerings that could solve the problem.

Evaluation of Alternatives

  • After identifying many potential solutions, consumers narrow choices by evaluating them against important criteria.
  • Criteria are personal and may include price, quality, features, convenience, brand reputation, etc.
  • Consumers contrast options to determine which best meets their needs.

Purchase Decision

  • Based on evaluation, consumers commit to a choice and take action to obtain or adopt the solution.
  • In marketing, purchase could be:
    • Buying a consumer good or B2B product/service
    • Supporting an idea or behavior change (e.g., recycling)
    • Influenced by a person (e.g., politician), a place, or an entity
  • Important distinction: a purchase can be a change in attitude or behavior, not just a monetary transaction.

Post-Purchase Evaluation

  • Consumers compare what they expected with what actually happened.
  • Satisfaction/dissatisfaction depends on this comparison:
    • If needs/expectations are met or exceeded, customers are satisfied (or delighted).
    • If not met, customers are dissatisfied.
  • Marketing implication: communications should set accurate expectations and product delivery should meet them.
  • Expressed relation (conceptual): Satisfaction∝Outcome−Expectation\text{Satisfaction} \propto \text{Outcome} - \text{Expectation}
    • Satisfaction occurs when the outcome meets or exceeds expectations; dissatisfaction occurs otherwise.

System 1 and System 2: Two Modes of Decision Making

  • System 2 (Reflective System):
    • Thoughtful, effortful processing
    • Evaluates pros and cons, weighs information, and is engaged when interest or involvement is high
    • Sensitive to message quality and valence
    • Typical in high-stakes or high-involvement decisions (e.g., choosing a college, buying a car)
  • System 1 (Automatic Processing):
    • Rapid, effortless processing
    • Uses cues and heuristics to make quick decisions
    • Does not require deep cognitive effort; useful when information is limited or involvement is low
    • Pros: faster and often reasonably accurate; cons: more prone to errors and biases
  • Heuristics (rules of thumb) used in System 1 processing:
    • Price–quality inference: higher price implies higher quality
    • Country of origin effect: beliefs about where a product comes from influence quality assumptions (e.g., Italian wine, cars from certain countries)
    • Brand familiarity: prior positive experience increases likelihood of repeating the choice
    • Labels and cues: Rotten Tomatoes freshness, Oprah's Book Club, organic labels, etc.
  • Important caveat: heuristics are cues that help quick decisions but are not always accurate; they work best when information is insufficient or involvement is low and can lead astray in some cases.

Why Heuristics Matter: When and Why We Use Them

  • We rely on heuristics when we have insufficient product category information or when motivation/involvement is low.
  • Cultural, personal, and contextual factors influence which heuristics people rely on; cues can differ by individual and culture.
  • Examples from everyday cues:
    • High price generally signals higher quality (price–quality inference).
    • Country-of-origin stereotypes affect perceived quality (e.g., good chocolate from certain countries).
    • Brand familiarity leads to repeat purchases.
    • Media cues and endorsements (e.g., Rotten Tomatoes, Oprah's Book Club) influence perceived quality.
    • Health or sustainability cues (e.g., organic labeling) influence perceptions of healthfulness or ethics.
  • Caution: cues can mislead, and relying on them too much can lead to dissatisfaction if expectations aren’t met.

Individual and Contextual Moderators of Decision Making

  • Family and reference groups/cultural groups influence decision patterns:
    • They can affect the degree of discrepancy between ideal self and actual state (e.g., buying a luxury car may be more important in some groups than others).
  • Personal characteristics can predict decision behaviors:
    • Motives
    • Learning style
    • Lifestyle
    • Personality
  • These factors can influence:
    • How much search is undertaken
    • Where search occurs
    • Whom to consult
    • The level of involvement in a decision
  • The marketing mix and context shape decision making:
    • Product, price, place (distribution), promotion create the evaluative criteria consumers use
    • Purchase situation (time pressure, setting, risk) can determine whether System 1 or System 2 processing is used
  • Marketers study these factors to understand and anticipate consumer decision pathways.

Marketing Mix and Purchase Context

  • Marketing Mix components as evaluative criteria:
    • Product: features, quality, design, benefits
    • Price: perceived value, affordability, discounting
    • Place: convenience, availability, distribution channels
    • Promotion: messaging, branding, information presented to the consumer
  • The purchase situation can influence processing depth:
    • High-risk, high-involvement situations tend to engage System 2 processing
    • Routine choices or familiar products often rely on System 1 processing
  • The integration of these factors helps explain variation in decision making across individuals and contexts.

Real-World Relevance and Implications

  • For consumers:
    • Awareness of decision processes can help manage cognitive load and avoid poor heuristics.
    • Recognize when you are relying on cues versus engaging in deep evaluation (e.g., expensive or high-stake purchases).
  • For marketers:
    • Craft communications that set accurate expectations to improve post-purchase satisfaction.
    • Align product- and brand cues with the intended quality and attributes to support appropriate heuristics.
    • Consider how cultural, family, and individual differences may alter decision-making patterns.
  • Practical nuance:
    • Some decisions are trivial and do not follow the full five-step process; others require thorough evaluation due to risk or personal importance.
  • Ethical and philosophical implications:
    • Marketers should avoid manipulating expectations; aim for accuracy and integrity in communications.
    • Recognize that advertising and messaging can shape identity-related perceptions and behavior.

Connections to Foundational Principles and Real-World Scenarios

  • The decision-making framework links to broader cognitive psychology concepts of attention, memory, and judgment under uncertainty.
  • Real-world example revisited: choosing a restaurant involves the five steps, influenced by personal preferences and external cues (price, brand, reviews, location).
  • Relationship to identity and self: decisions reflect how people want to present themselves (e.g., luxury purchases signaling status) and how closer alignment between ideal and actual self can drive choice.
  • The framework supports understanding of public behavior change campaigns (e.g., recycling): post-purchase evaluation can apply to whether individuals maintain new practices after initial adoption.