Session 1: Intro to Consumer Behaviour and the Consumer Decision-Making

Consumer Behaviour

What is Consumer Behaviour

“the study of the processes involved when individuals or groups select, purchase, use or dispose of products, services, ideas or experiences to satisfy needs and desires”

Consumer Behaviour vs consumer behaviour

Consumer Behaviour (CB) - the scientific field of study that researches consumer behaviour

consumer behaviour - the way consumers act or conduct themselves

What Encompasses Consumer Behaviour

Not only about buying physical products and interaction with brands but it is also about…

  • Identity

  • Experiences

  • Morality

  • Relationships

  • Technology

Consumer vs Customer

Consumer - a person who identifies a need or desire, makes a purchase, uses and the disposes of the product

Customer - buys the product, but does not necessarily use it

Why is it Necessary to Study Consumer Behaviour

  • Consumers are central to any business

  • There is a need to understand who consumers are and what they need/want in an ever-evolving environment

    • What drives consumers to make certain decisions/choices?

    • Who do they rely on to make the decision?

    • How do I communicate more efficiently and effectively with the consumer?

What Fields have shaped Consumer Behaviour

Economics

Micro and Macro Acquisition

Consumers as rational beings (homo-economicus) who aim to maximise their utility and minimise their costs

Psychology

Neuro, Cognitive, Personality, Behavioral, Socio-Cultural

Decision-Making, Preferences, Perception, Motivation, Needs, Memory, Attitude, Preferences, Biases
Cultural Anthropology

Society’s cultural beliefs, norms, practices, gift-giving, rituals, consumers myths, participant observation

Sociology

Role of social institutions, and social gropes, and social processes to understand consumption

Demography

Role of income, place of residence, age, marital status etc., on consumption

The CDMP

The Consumer Decision-Making Process

  1. Problem Recognition

  2. Information Search

  3. Evaluation of Alternatives

  4. Product Choice

  5. Outcomes

The Consumer Decision-Making Process Deconstructed

  1. Problem Recognition

Problem Recognition Progression

  • Problem Recognition starts when there is a discrepancy between a consumer’s actual state and their ideal state. At the beginning of the process, their need state is equal to their actual state. This is point of satisfaction in one’s circumstances, and no need to satisfy. Then when the states slightly diverge, the consumer recognizes a need but no immediate motivation to satisfy it. The difference to grows to opportunity recognition, where there is now a noticeable change in one’s ideal state. It finally ends in a need recognition where there is now a compulsion to satisfy the need.

Need vs. Opportunity

Marketer’s Role

  • Create a primary demand when a product is introduced

  • Promote their brand as the best one to solve an identified problem

Needs vs. Wants

  • A want is the particular form of consumption used to satisfy a need.

  • Dormant need = a need that has yet to be satisfied

Types of Needs

  • Biogenic Needs (food, water, shelter) vs Psychogenic Needs (money, status, affiliation)

  • Utilitarian Needs vs Hedonic Needs

  1. Information Search

Information Search doesn’t really happen with routine purchase

  • Involves gathering internal information (memory) to identify alternatives. If the internal search is not successful external information search starts

  • Here, marketing communication, especially branding and advertising play a crucial role

  • Results in the creation of an evoked set

    • An evoked set are the brands and products that a consumer is aware of is the set from which they will make their decision

The amount of information search is determined by the amount of previous knowledge

  1. Evaluation of Alternatives

  • (1) All the brands that exist in the world [All brands]

  • (2) The set of solutions to the problem that I am aware of [Awareness Set]

  • (3) Products or brands from which I will make my decision [Evoked Set]

  • (4) Final shortlist [Purchase Consideration Set]

Decision Models

Non-Compensatory Models

  • Lexicographic

  • Conjunctive

Compensatory Models

  • Developed by Fishbein

  1. Product Choice

The consumer chooses the product and buys the product

  • That results of evaluating alternatives (high involvement)

  • That results out of habits or loyalty (low involvement)

  1. Outcomes

Post Purchase Behaviours

  • Disappointment (unlikely to purchase again + negative WOM)

  • Satisfaction (status quo)

  • Delight (very likely to purchase again + positive WOM)

Cognitive Dissonance

  • We strive for consistency between our ideas, behaviour and feelings

  • If we experience inconsistency, dissonance arises and we will attempt to reduce it

When a consumer is psychologically uncomfortable about the product purchased

  • Ignores information undermining the issue

  • pays attention to supporting arguments

The Consumer Decision-Making Process Revised

Daniel Kahneman categorises thinking into 2 different systems. These systems differ in the way they process information and make decisions

System 1: Instinctive and Emotional. This system is designed to be quick, and often relies on heuristics (mental shortcuts)

System 2: Deliberate and Logical

  • System 2 is more costly so usually System 1 is preferred

  • System 2 gets triggered in case the costs are high

  • System 1 works fine for low cost purchases that one makes habitually, when tired or are seen as low cost

System 1 Decision Making

Heuristics are often used to make decisions, but they are not foolproof and can be prone to making mistakes

Affect Heuristic: If it feels good it must be good

  • when one’s emotional state drives decisions, even when those emotions have nothing to do with the decision being made

Availability Heuristic

  • we rely on information that comes to quickly and easily make decisions

  • grounded in our memory (memorable events come to mind even quicker)

  • news coverage often influences what comes to mind quicker

Anchoring Bias

  • Decisions made are influenced by an anchor or an influential piece of information. The anchor is often categorized as the first piece of information receive.

Loss Aversion

  • Pain or loss is felt more strongly than the pleasure of a gain of the same magnitude

The endowment effect

  • the value an individual assigns to an object appears to substantially increase when the individual in given the object

Textbook Notes