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Lecture 7

Management and Organizational Studies 3321F/G Lecture Notes - Lecture 7: Decision-Making, Representativeness Heuristic, Availability Heuristic

10 pages29 viewsWinter 2018

Department
Management and Organizational Studies
Course Code
Management and Organizational Studies 3321F/G
Professor
Beth Lee
Lecture
7

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CB LEC 7 NOV 14
INDIVIDUAL DECISION MAKING
DECISION MAKING
Decision making: The outcome of mental processes leading to a selection
from one or more alternatives
Traditional economics model (Rational perspective) : Consumers are rational
decision makers:
Newer models: Consumer do not involve a detailed evaluation of alternatives
but are based on overall evaluations of the product
PERSPECTIVES ON DECISION MAKING
Rational perspective - consumers:
o Integrate as much information as possible with what they already
know about a product
o Weigh pluses and minuses of each alternative
o Maximize their satisfaction by using rules of logic
Other newer models of decision-making:
o Purchase momentum: Occurs when consumers buy beyond needs
o Behavioural influence perspective: Consumers buy based on
environmental cues, such as a sale
o Experiential perspective: Consumers buy based on totality of
products appeal
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LEVELS OF CONSUMER DECISIONS
Extensive problem solving
o Initiated by a motive that is central to the self-concepts
o Elaborate decision-making process: Internal and external search
o Careful evaluation of brand attributes (one at a time)
Limited problem solving
o Consumers are not motivated to search for information; using simple
decision rules (cognitive shortcuts)
Routinized-response behavior
o Automaticity: Choices made with little/no conscious effort
o Efficient decisions: minimal time/energy
o Habitual decision making
STAGE IN CONSUMER DECISION MAKING
1. PROBLEM RECOGNITION
- Jeff realizes that he needs to buy a birthday gift for Jane
- The process that occurs whenever the consumers see
significant differences between their actual state and ideal
state
Actual State: the way things actually are
Ideal state: the way consumers would like a situation to
be
Need recognition: The quality of the consumers actual stage can move
downward
o Occurs when:
Actual state diminished by running out of product; by buying a
product not satisfying needs; by creating new needs
Opportunity recognition: The consumers ideal stage can move upward
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o Occurs when:
When consumers exposed to better-quality product
When major changes in personal circumstances
2. INFORMATION SEARCH
- Jeff remembers Jane like cooking books and searches Amazon
- The process in which the consumer surveys his or her
environment for appropriate information about products that
will help satisfy the need
- Internal search: The process of recalling stored information
from memory
Consumers attempt to recall more information when
felt involvement, perceived risk, need for cognition are
high
Consumers with a greater degree of knowledge and
experience have a greater ability to search internally
- External search: The process of collecting information from
outside sources
o Do consumers always search rationally?
External searches are surprisingly low
Low income shoppers search less
Satisficing v maximizing
Personalized product recommendations
Brand switching: Select familiar brands when decision
situation is ambiguous
Variety seeking: Desire to choose new alternatives over more
familiar ones
o How much search occurs?
Search is greater when…
Purchase is important
There is a need to learn more about purchase
Relevant info is easily obtained/utilized
One is younger, is better-educated, and enjoys
shopping/fact-finding
One is female (compared to male)
One places greater value on own style/image
o Recall of brands
Evoked set (Consideration set): The set of brands that the
consumer considers while making a choice
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