MARK1012 Lecture Notes - Lecture 3: Financial Risk, Determinant, Reference Group
Chapter 5 – Consumer Behaviour
The Consumer Decision Process
Need Recognition
• Consumers notice they have an unsatisfied need – want to go from actual, needy state
to different, desired state (greater difference = greater need recognition)
• Functional needs – pertain to the performance of a product (e.g. BMW car)
• Psychological needs – personal gratification consumers associate with a product/service
Information Search
• Internal search – buyer examines their own memory & knowledge about the product,
gathered through past experiences
• External search – talking with friends, family or a salesperson
Includes commercial media for hopefully ‘unbiased’ information
• Factors affecting consumers’ search processes:
Perceived benefits versus perceived costs of search – is it worth time & effort?
Locus of control – internal locus implies consumers believe they have some control
over the outcomes of their actions (engage in more search activities)
Actual or perceived risk
(a) Performance risk – poorly performing products
(b) Financial risk – monetary outlay (initial cost, recurring costs)
(c) Social risk – fears consumers suffer when worrying about others’ opinions
(d) Safety risk – whether product can do actual harm (e.g. used car safety ratings) &
health risk (e.g. McDonald’s being unhealthy)
(e) Psychological risk – associated with the way people feel if product does not
convey the right image
Evaluation of Alternatives
• Attribute sets – consumer’s mind organizes & categorises alternatives to aid his or her
decision process
Universal sets include all possible choices for a product category
Retrieval sets – brands or stores that a consumer can readily remember
Evoked set – alternative brands or stores that consumer states they would consider
when making a purchase decision
• Evaluative criteria – consist of salient or important attributes about a product (e.g.
price, fit, materials, construction quality, brand reputation)
• Determinant attributes – features important to buyer & that competing stores differ on
• Consumer decision rules – set of criteria that consumers use to quickly & effectively
select from among several alternatives
Compensatory – consumer trades off one characteristic for another (such that good
characteristics compensate for bad characteristics)
Non-compensatory – choose product on basis of one characteristic, disregarding others
Purchase & Consumption
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Document Summary
Internal search buyer examines their own memory & knowledge about the product, gathered through past experiences: external search talking with friends, family or a salesperson. Includes commercial media for hopefully unbiased" information: factors affecting consumers" search processes: Locus of control internal locus implies consumers believe they have some control over the outcomes of their actions (engage in more search activities) Evaluation of alternatives: attribute sets consumer"s mind organizes & categorises alternatives to aid his or her decision process. Universal sets include all possible choices for a product category. Retrieval sets brands or stores that a consumer can readily remember. Compensatory consumer trades off one characteristic for another (such that good characteristics compensate for bad characteristics) Non-compensatory choose product on basis of one characteristic, disregarding others. Purchase & consumption: conversion rate percentage of people who buy a product after viewing it (e. g. number of abandoned virtual shopping trolleys on store"s website) Click-frenzy sales, special online deals, reminder emails about abandoned carts.
