Notes: Chapter 6 – Consumer Behavior (McGraw Hill)

The Consumer Decision Process

• The consumer decision process has five stages:

  • Need recognition

  • Information search

  • Evaluation of alternatives

  • Purchase and consumption

  • Post-purchase outcomes

• Need recognition

  • Needs are essential; wants are desires (e.g., ice cream).

  • Functional needs: product performance/utility (e.g., car for transport).

  • Psychological needs: personal/social gratification (e.g., luxury car for status).

• Information search

  • Internal search: memory, past experiences.

  • External search: friends, ads, reviews.

  • Influenced by perceived benefits vs. costs.

  • Internal locus of control: more search activities.

  • External locus of control: less search, relies on fate.

• Perceived risk

  • Types: Psychological, Performance, Financial, Physiological/Safety, Social.

• Evaluation of alternatives: Attribute sets

  • Universal set: all possible options.

  • Retrieval set: easily remembered brands/stores.

  • Evoked set: brands/stores considered for purchase.

  • Consumers evaluate options based on evaluative criteria (important features).

• Evaluation of alternatives: decision rules

  • Compensatory multi-attribute model: evaluates alternatives by weighting attributes.

  • Overall Score = (Attribute 1 Score x Attribute 1 Weight) + (Attribute 2 Score x Attribute 2 Weight) + ... + (Attribute n Score x Attribute n Weight

  • Example: Cheerios (Overall Score = 8.2), Post (7.1), Kashi (7.2).

• Choice architecture (Determinants of choice in shopping environments)

  • Includes impulse products, nudges, defaults, and stocking strategies.

  • E.g., placing products on left/right can influence attention.

• Purchase and consumption

  • Marketing goals:

  • Increase conversion rate.

  • Reduce abandoned carts.

  • Expand product line.

  • Enhance customer service.

• Post-purchase outcomes

  • Components: Postpurchase satisfaction, Cognitive dissonance, Customer loyalty.

• Post-purchase: Customer satisfaction

  • Set realistic expectations.

  • Demonstrate correct product use.

  • Offer guarantees/warranties.

  • Encourage feedback.

  • Thank and maintain contact with customers.

• Post-purchase: Cognitive dissonance

  • More likely for expensive, infrequently purchased, high-risk, or faulty products.

  • Firms reduce it via return policies, thank-you notes, etc.

• Post-purchase: Customer loyalty

  • Firms use analytics and CRM programs to build long-term relationships.

  • E.g., Amazon/Whole Foods loyalty programs for data-driven offers.

• Undesirable consumer behavior: Negative word of mouth (WOM)

  • Spreads via blogs, social media.

  • Companies monitor sentiment and respond to reduce spread of complaints.

Factors Influencing the Consumer Decision Process

• Psychological factors

  • Motives: needs/drives (Maslow's hierarchy: Physiological, Safety, Love/belonging, Esteem, Self-actualization).

  • Perception: how we select, organize, interpret info.

  • Learning and memory: influences attitudes and perceptions.

  • Lifestyle: how people spend time and money.

• Social factors

  • Family: influences purchase decisions.

  • Reference groups: friends, coworkers, celebrities.

  • Culture: shared meanings, beliefs, values.

• Purchase situation

  • Situational factors: purchase context, sensory input, temporal state.

  • Sensory situation: visual, auditory, olfactory, tactile, taste cues.

  • Temporal state: mood, time of day affects decisions.

Involvement and Consumer Buying Decisions

• Involvement and processing of advertising

  • High involvement: deep processing, strong attitudes, strong purchase intent.

  • Low involvement: less attention, peripheral processing, weaker attitudes, relies on cues.

• Types of buying decisions (involvement levels)

  • Extended problem solving: high involvement, extensive search/evaluation.

  • Limited problem solving: moderate effort and time.

  • Impulse buying: unplanned, instant purchase.

  • Habitual decision making: low involvement, little conscious effort.

Glossary (Key Terms with Definitions)

• Attitude: Person’s enduring evaluation of feelings toward an object/idea.

• Consumer decision rules: Criteria used to quickly select alternatives.

• Determinant attributes: Important features where brands differ.

• Evaluative criteria: Salient attributes about a product.

• Evoked set: Brands/stores considered for purchase.

• Extended problem solving: Purchase needing much effort/time.

• Functional needs: Relate to product performance.

• Habitual decision making: Little conscious effort in purchase.

• Impulse buying: On-the-spot buying.

• Involvement: Consumer’s interest in product/service.

• Limited problem solving: Moderate effort/time for purchase.

• Perception: How we select, organize, interpret information.

• Psychological needs: Personal gratification from product/service.

• Retrieval sets: Brands/stores easily remembered.

• Situational factors: Factors specific to the situation.

• Universal sets: All possible choices for a product.

Real-world implications and connections

• CRM and loyalty programs: Use data (loyalty cards) for targeted marketing.

• Marketing strategy: Tailor info, reduce risks, enhance satisfaction, build loyalty.

• Ethical considerations: Transparency in data, avoiding manipulation, responding to complaints.