MOS 3321 Final Exam Notes (Chapters 9 - 14)

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Management and Organizational Studies
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Management and Organizational Studies 1021A/B
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Phills

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Chapter 9: Individual Decision Making November-29-13 5:40 PM Consumers As Problem Solvers Stages in Consumer Decision Making CONSUMER HYPERCHOICE: A condition where the large number of available options forces us to make repeated choices that may drain psychological energy while decreasing our abilities to make smart decisions - Too much choice can lead consumers to be less satisfied with the purchase experience and less likely to choose within the product category Perspectives on Decision Making RATIONAL PERSPECTIVE: People calmly and carefully integrate as much information as possible with what they already know about a product, painstakingly weigh the pluses and minuses of each alternative, and arrive at a satisfactory decision (collect the most valuable units of information first) Stages in Consumer Decision Making PURCHASE MOMENTUM: Occurs when these initial impulses actually increase the likelihood that we will buy even more (instead of less as our needs are satisfied) - People differ in terms of their cognitive processing style:  Rational system of cognition that processes information analytically and sequentially using rules of logic  Experiential system of cognition that processes information more holistically and in parallel BEHAVIORAL INFLUENCE PERSPECTIVE: Under these circumstances managers must concentrate on assessing the characteristics of the environment, such as physical surroundings and product placement, that influence members of a target market — for decisions made under conditions of low involvement EXPERIENTIAL PERSPECTIVE: Stresses the gestalt, or totality, of the product or the service. Marketers focus on measuring consumers' affective responses to products or services and develop offerings that elicit appropriate subjective reactions — for decisions made under conditions of high involvement Types of Consumer Decisions Habitual Decision Making - Decisions that are made with little or no conscious effort - Choices characterized by automaticity are performed with minimal effort and without conscious control Limited Problem Solving - Somewhat straightforward and simple, but does require some cognitive processing - People instead use simple decision rules to choose among alternatives Extended Problem Solving - Correspond most closely to the traditional decision-making perspective - Usually initiated by a motive that is fairly central to the self-concept and the eventual decision is perceived to carry a fair degree of risk - Internal search and external search Problem Recognition PROBLEM RECOGNITION: Occurs when we experience a significant difference between our current state of affairs and some state we desire - Problems arise in one of two ways: 1) Actual state-need recognition 2) Ideal state-opportunity recognition Problem Recognition: Shifts in Actual or Ideal States Exam Notes - Final Page 1 Information Search INFORMATION SEARCH: The process in which the consumer surveys his or her environment for appropriate data to make a reasonable decision Types of Information Search - Explicitly search the marketplace for specific information after a need has been recognized (called a pre-purchase search) - Like to maintain current information for future use (ongoing search) Internal Versus External Search - Internal search by scanning our own memory banks to assemble information about different product alternatives - External search in which information is obtained from advertisements, friends, or people-watching Deliberate Versus "Accidental" Search - Directed learning, wherein on a previous occasion we had already searched for relevant information or experienced some of the alternatives - Incidental learning, wherein mere exposure over time to conditioned stimuli and observations of others results in the learning Online Search Do Consumers Always Search Rationally? MAXIMIZING: A decision strategy that seeks to deliver the best possible result SATISFICING: A decision strategy that simply tries to yield an adequate solution BOUNDED RATIONALITY: Settling for a solution that is just good enough (this commonly happens because we rarely have the resources or time to weigh every possible factor into a decision) VARIETY SEEKING: In which the priority is to vary one's product experiences (perhaps as a form of stimulation to reduce boredom) Mental Accounting: Biases in the Decision-Making Process MENTAL ACCOUNTING: Where decisions are influenced by the way a problem is posed (called framing) and by whether it is put in terms of gains or losses - Sunk-cost fallacy — having paid for something makes us reluctant to waste it - Hyperopia — (the medical term for being far-sighted) describes people who are so obsessed with preparing for the future that they can't enjoy the present - Loss aversion — where people put much more emphasis on loss than they do gain PROSPECT THEORY: A descriptive model of choice, finds that utility is a function of gains and losses, and risk differs when the consumer faces options involving gains versus those involving losses How Much Search Occurs? - As a general rule, search activity is greater when the purchase is important, when there is a need to learn more about the purchase, and when the relevant information is easily obtained and used Amount of Information Available - Shoppers consider only partial information, because there are just too many combinations of all the attributes to take into short-term memory and process effectively The Consumer's Prior Expertise - Search tends to be greatest among those consumers who are moderately knowledgeable about the product The Relationship Between Amount of Information Search and Product Knowledge - Experts tend to engage in selective search - Novices are more likely to rely on the opinions of others and upon "non-functional" attributes, they may also process information in a "top-down" fashion - The less we know about something the easier it is to persuade ourselves that we like it PERCEIVED RISK PERCEIVED RISK: The belief that the product has potentially negative or uncertain consequences - May be present if the product is expensive or is complex and hard to understand - May be present when a product choice is visible to others Five Types of Perceived Risk Evaluation of Alternatives Identifying Alternatives EVOKED SET: The group of alternatives actively considered that comprises those products already in memory (the retrieval set) plus those prominent in the retail environment - Inept set — the alternatives that you are aware of but would not consider buying Exam Notes - Final Page 2 - Inept set — the alternatives that you are aware of but would not consider buying - Inert set — the alternatives that do not come to mind at all Identifying Alternatives: Getting in the Game How Do We Put Products into Categories? - They evaluate its attributes in terms of what they already know about the item or other similar products - Our classifications of brands are derived from different product attributes; including appearance, price, or previously learned connections - When faced with a new product, consumers refer to their already existing knowledge in familiar product categories to form new knowledge - It is important to understand how this knowledge is represented in consumers' "cognitive structure" — their body of factual knowledge about products and the way it is organized in their minds Levels of Categorization - Typically, a product is represented in a cognitive structure at one of three levels Strategic Implications of Product Categorization PRODUCT POSITIONING - The success of a positioning strategy often hinges on the marketer's ability to convince the consumer that his or her product should be considered within a given category IDENTIFYING COMPETITORS - The comparison process is easier when consumers can derive an overlapping category that encompasses both items and then rate each alternative in terms of that superordinate category EXEMPLAR PRODUCTS: RHUBARB VERSUS APPLES, ECT - Brands that are strongly associated with a category get to "call the shots" by defining the criteria that should be used to evaluate all category members LOCATING PRODUCTS - If products do not clearly fit into categories, consumers' ability to find them or make sense of them may be affected Product Choice: Selecting Among Alternatives FEATURE CREEP: Spiral of complexity when choosing between possible product features - Making choices in public, where consumers' preferences are displayed to others, encourages feature-seeking behavior - In contrast, the anticipation of having to actually use a complicated product in front of others enhances the attractiveness of a simpler, feature-poor product Evaluative Criteria EVALUATIVE CRITERIA: The dimensions used to judge the merits of competing options DETERMINANT ATTRIBUTES: The specific attributes that are actually used to differentiate among choices - Procedural learning — in which a person undergoes a series of cognitive steps before making a choice - In order for a marketer to recommend a new decision criterion effectively, his or her communication should convey three pieces of information that: 1) Point out that there are significant differences among brands on the attribute 2) Supply the consumer with a decision-making rule; "If [deciding among competing brands], then [use the attribute as a criterion]" 3) Convey a rule that can be easily integrated with the way the person has made this decision in the past Neuromarketing: How Your Brain Reacts to Alternatives NEUROMARKETING: Uses functional magnetic resonance imaging (fMRI), a brain-scanning device that tracks blood flow as we perform mental tasks - Hope to harness this technology to measure consumers' reactions Cybermediaries CYBERMEDIARY: An intermediary that helps to filter and organize online market information so that customers can identify and evaluate alternatives more efficiently - Cybermediaries take different forms:  Directories and portals are general services that tie together a large variety of different sites  Website evaluators reduce the risk to consumers by reviewing sites and recommending the best ones  Forums, fan clubs, and user groups offer product-related discussions to help consumers sift through options THE LONG TAIL: The basic idea that we no longer need to rely solely on big hits (such as blockbuster movies or bestselling books) to find profits. Companies can also make money if they sell small amounts of items that only a few people want (if they sell enough different items)  Intelligent agents are sophisticated software programs that use collaborative filtering technologies to learn from past user behavior to recommend new purchases ELECTRONIC RECOMMENDATION AGENT: A software tool that tries to understand a human decision maker's multi-attribute preferences for a product category by asking the user to communicate his or her preferences BRAND ADVOCATES: Customers who supply customer reviews Heuristics: Mental Shortcuts HEURISTICS: Mental rules of thumb that lead to a speedy decision Relying on a Product Signal - One frequently used shortcut is the tendency to infer hidden dimensions of products from observable attributes PRODUCT SIGNAL: The visible attributes of products that display underlying qualities Market Beliefs: Is it Better if I Have to Pay More For it? MARKET BELIEFS: Beliefs about relationships in the marketplace that become shortcuts that guide consumer decisions - The assumption of a price-quality relationship is one of the most pervasive market beliefs Exam Notes - Final Page 3 - The assumption of a price-quality relationship is one of the most pervasive market beliefs Country of Origin as a Heuristic - A product's country of origin in some cases is an important piece of information in the decision-making process - Country-of-origin effects can function as a stereotype STEREOTYPE: A knowledge structure based on inferences across products ETHNOCENTRISM: The tendency to prefer products or people of one's own culture over those from other countries Choosing Familiar Brand Names: Loyalty or Habit? ZIPF'S LAW: People spend roughly twice as much of their product budget on the top choice than on the second-ranked brand, and about twice as much on the number two brand as on the third-ranked brand - Brands that dominate their markets are as much as 50 percent more profitable than their nearest competitors Inertia: The Fickle Consumer INERTIA: When a brand is bought out of habit merely because less effort is required Brand Loyalty: A "Friend", Tried and True BRAND LOYALTY: A form of repeat-purchasing behavior reflecting a conscious decision to continue buying the same brand - For brand loyalty to exist, a pattern of repeat purchasing must be accompanied by an underlying positive attitude toward the brand - Brand parity — consumers' beliefs that there are no significant differences among brands Decision Rules - One way to differentiate among decision rules is to divide them into those that are compensatory versus those that are non-compensatory Non-Compensatory Decision Rules NON-COMPENSATORY: A product with a low standing on one attribute cannot make up for this position by being better on another attribute THE LEXICOGRAPHIC RULE - Lexicographic rule — the brand that is the best on the most important attribute is selected THE ELIMINATION-BY-ASPECTS RULE - Elimination-by-aspects rule — specific cut-offs for judging attributes are imposed THE CONJUNCTIVE RULE - Conjunctive rule — a brand is chosen if it meets all the cut-offs, while failure to meet any one cut-off means rejection THE DISJUNCTIVE RULE - Disjunctive rule — the consumer develops acceptable standards for each attribute and if a choice alternative exceeds the standard for any attribute, it is accepted (usually the standards are higher than the shopper's minimum cut-offs for attributes) Compensatory Decision Rules COMPENSATORY RULES: Gives a product a chance to make up for its shortcomings - Two basic types: 1) Simple additive rule —the consumer merely chooses the alternative with the largest number of positive attributes 2) Weighted additive rule — the consumer also takes into account the relative importance of positively rated attributes, essentially multiplying brand ratings by importance weights Exam Notes - Final Page 4 Chapter 11: Group Influence and Social Media November-30-13 6:45 PM Reference Groups REFERENCEGROUP:An actual or imaginaryindividual or group conceived of as having significant relevance upon an individual's evaluations, aspirations, or behavior - Reference groups influence consumers in three ways: 1) Informational influence— the individual seeks information from them 2) Utilitarian influence— the individual's decision to purchase a particular brand is influenced by their preferences 3) Value-expressiveinfluence— the individual feels that the purchase or use of a particular brand will enhance the image others have of him or her Typesof ReferenceGroups - The term referencegroup is often used a bit more loosely to describe any external influence that provides social cues NORMATIVEINFLUENCE:Reference group helps to set and enforce fundamental standards of conduct IN CONTRAST COMPARATIVEINFLUENCE:The process whereby a reference group influences decisions about specific brands or activities Formal Versus Informal Groups - Marketers tend to be more successful at influencing formal than informal groups because they are more easily identifiable andaccessible - Small, informal groups exert a more powerful influence on individual consumers Brand Communities BRANDCOMMUNITY:A set of consumers who share a set of social relationships based on usage or interest in a product - Meet only for brief periods at organized events calledbrandfests - These community members become emotionally involved in the company's welfare, and they often serve as brand missionaries by carrying its marketing message to others Membership Versus Aspirational Reference Groups ASPIRATIONALREFERENCEGROUPS:Comprise idealized figures, such as successful businesspeople, athletes, or performers - The likelihood that people will become part of a consumer's identified reference group is affected by several factors:  Propinquity (physical nearness)  Mere exposure  Group cohesiveness Positive Versus Negative Reference Groups - In some cases, a consumer may try to distance him- or herself from other people or groups that function as dissociative reference groups DISSOCIATIVEREFERNCEGROUPS:Groups (or group members) the consumer wants to avoid association with Anti-Brand Communities ANTI-BRANDCOMMUNITIES:Groups that are united by their disdain for a celebrity, store, or brand - They tend to attract social idealists who advocate non-materialistic lifestyles WhenReferenceGroupsAre Important - The purchase of products that are not very complex, that are low in perceived risk, and that can be tried prior to purchase are less susceptible to personal influence Relative ReferenceGroup Influence on Purchase Decisions The Powerof ReferenceGroups SOCIAL POWER:The capacity to alter the actions of others Referent Power - Consumers voluntarily change behaviors to please of identify with a referent Information Power - Able to influence consumer opinion by virtue of their (assumed) access to the "truth" Legitimate Power - By virtue of social agreements, such as that given to police officers and politicians - The legitimate power conferred by a uniform is recognized in many consumer contexts Expert Power - Consumers are often influenced by experts who are assumed to be able to evaluate products in an objective, informed way Reward Power - When a person or group has the means to provide positive reinforcement, that entity will have power over a consumer to the extent that this reinforcement is valued or desired Coercive Power - Using threats or force is effective in the short term, but it does not tend to produce permanent attitudinal or behavioral change Conformity CONFORMITY:A change in beliefs or actions as a reaction to real or imagines group pressure NORMS:Informal rules, that govern behavior FactorsInfluencingthe Likelihood of Conformity  Cultural pressures Exam Notes - Final Page 5  Cultural pressures  Fear of deviance  Commitment  Group unanimity, size, and expertise  Susceptibility to interpersonal influence Social Comparison SOCIAL COMPARISONTHEORY: Consumers will often compare themselves to others in ways that increase the stability of one's self-evaluation, especially when objective evidence is unavailable - People tend to choose aco-oriented peer, or person of equivalent standing, when undergoing social comparison Tactical Requests - Foot-in-the-doortechnique — wherein the consumer is first asked a small request and then is hit up for something bigger - Low-ball technique — in which a person is asked for a small favor and is informed, after agreeing to it, that it will be more costly than they first anticipated - Door-in-the-facetechnique — wherein a person is first asked to do something extreme (a request that is usually refused) and then is asked a smaller, more reasonable request Group Effects on Consumer Behavior DEINDIVIDUATION:Individual identities get submerged within a group RISKYSHIFT:Group members show a greater willingness to consider riskier alternatives following group discussion than they would if each member made his or her own decision with no discussion - Several explanations:  Diffusion of responsibility— as more people are involved in a decision, each individual is less accountable for the outcome  Value hypothesis — riskiness is a culturally value characteristic, and social pressures operate on individuals to conform to attributes valued by society DECISIONPOLARIZATION:Whichever direction the group members were leaning toward before discussion began becomes even more extreme after discussion - Even shopping behavior changes when people do it in groups SOCIAL LOAFING:The fact that people do not devote as much effort to a task when their contribution is part of a larger group effort HOME SHOPPINGPARTIES:Capitalize on group pressures to boost sales ("Tupperware party") - Pressures to conform may be particularly intense and may escalate as more and more group members begin to "cave in" - One way groups can influence decisions is via the roles they play within the group itself:  INITIATOR: The person who brings up the idea or identifies a need  GATEKEEPER:The person who conducts the information search and controls the flow of information available to the group  INFLUENCER: The person who tries to sway the outcome of the decision  BUYER:The person who actually makes the purchase  USER: The person who actually consumes the product or service ResistingConformity REACTANCE: The emotional state a person experiences when they are threatened with a loss of freedom and they try to overcome this loss Opinion Leadership The Nature of Opinion Leadership OPINIONLEADERS:A person who is knowledgeable about products and is frequently able to influence others' attitudes or behaviors - Difficult to identify specific opinion leaders in a large market, so researchers aim to identify the profile of a representative opinion leader and then generalize these insights to a larger market The Extent of an Opinion Leader`s Influence - Monomorphic — experts in a limited field - Polymorphic — experts in several fields TYPES OF OPINION LEADERS - The original framework is called the two-step flow model of influence TWO-STEPFLOW MODEL OF INFLUENCE:Proposes that a small group ofinfluencersare responsible for dissemination of information, since they can modify the opinions of a large number of other people INFLUENCE NETWORK:Influence is driven less by influentials and more by the interaction among those who are easily influenced  These conversations create cascadesof information CASCADES: Occurs when a piece of information triggers a sequence of interactions MARKETMAVEN:A consumer category of people who are actively involved in transmitting marketplace information of all types SURROGATECONSUMER:A class of marketing intermediaries in which a professional is hired to evaluate or make purchases on behalf of a consumer IdentifyingOpinionLeaders The Self-Designating Method - The most commonly used technique to identify opinion leaders is simply to ask individual consumers whether they consider themselves to be opinion leaders, this is called the self-designating method - For someone to be considered a bona fide opinion leader, his or her advice must actually be heard and heeded by opinion-seekers - An alternative to self-designation is to select certain group members (key informants) who are then asked to identify opinion leaders Sociometry SOCIOMETRICMETHODS:Trace communication patterns among group members which allows researchers to systematically map out interactions that take place among group members - Most precise but it is very hard and expensive to implement - Used to better understand referral behavior and to locate strengths and weaknesses in terms of how one's reputation is communicated through a community - Network analysis focuses on communication in social systems; it considers the relations among people in areferral network and measures the tie strength (the nature of the bond between people) among them Word-of-Mouth Communication WORD-OF-MOUTHCOMMUNICATION(WOM):Product information transmitted by individuals to individuals - It's estimated to influence two-thirds of all consumer-goods sales FactorsEncouragingWOM - WOM is especially powerful when the consumer is relatively unfamiliar with the product category - Product-related conversations can be motivated by a number of factors:  A person might be highly involved with a type of product or activity Exam Notes - Final Page 6  A person might be highly involved with a type of product or activity  A person might be knowledgeable about a product  A person might initiate such a discussion out of a genuine concern for someone else Negative WOM NEGATIVEWORD OF MOUTH: The passing on of negative experiences involved with products or services by consumers to other potential consumers - Weighted more heavily by consumers than are positive comments BuzzBuilding BUZZ MARKETING:Activities undertaken by marketers to encourage consumers to spread WOM about the brand Crowd Power WISDOMOF CROWDS: A perspective that argues that under the right circumstances groups are smarter than the smartest people in them Guerrilla Marketing GUERRILLAMARKETING:A promotional strategy that uses unconventional locations and intensive word-of-mouth campaigns to push products Viral Marketing VIRALMARKETING:The strategy of getting consumers to sell a product on behalf of the company that creates it Social Media and Consumer Behavior COMMUNITY:A unified body of individuals, unified by interests, location, occupation, common history, or political and economic concerns CYBERPLACE:Where people connect online with kindred spirits, engage in supportive and sociable relationships with them, and imbue their activity online with meaning, belonging, and identity Social Networks SOCIAL NETWORK:A set of socially relevant nodes connected by one or more relations NODES:Members of the network TIES: The connections between members within a social network SOCIAL GRAPHS:Another name for social networks that refers to a diagram of the interconnections of units in a network FLOWS:Occur between nodes and are exchanges of resources, information, or influence among members of the network MEDIAMULTIPLEXITY:The situation in social media in which flows of communication may travel in many directions and across multiple platforms, at any single point of time SOCIAL OBJECT THEORY: Suggests that social networks will be more powerful communities if there is a way to activate relationships among people and objects OBJECT SOCIALITY:The extent to which an object can be shared in social media and is clearly related to an audience's unique interests Virtual Communities VIRTUALCOMMUNITYOF CONSUMPTION:A collection of people who interact online to share their enthusiasm for and knowledge about a specific consumption activity - These communities often start organically as consumers create forums to identify people who share a similar passion LURKERS:Surfers who like to watch but don't participate Characteristics of Online Communities - Participants experience a feeling of membership, a sense of proximity to one another, and in most cases some interest in thecommunity's activities - Communities help members meet their needs for affiliation, resource acquisition, entertainment, and information - Interactive platforms enable online communities to exhibit these basic characteristics:  Conversations  Presence PRESENCE:The effect that people experience when they interact with a computer-mediated or computer-generated environment  Collective interest  Democracy MEDIA DEMOCRATIZATION:The members of social communities, not traditional media publishers like magazines or newspaper companies, control the creation, delivery, and popularity of content  Standards of behavior  Level of participation Exam Notes - Final Page 7 Chapter 12: Income, Social Class, and Family Structure November-30-13 11:06 PM It's Not Just Money To Spend or Not to Spend: That is the Question DISCRETIONARY INCOME: The money available to a household over and above that required for a comfortable standard of living Individual Attitudes Toward Money - Two types of frugal consumers: 1) SPENDTHRIFTS: Spend cautiously because they enjoy saving money 2) TIGHTWADS: For whom spending money is an unpleasant experience - Men are more likely than women to be tightwads, as are older people, and those with more education - Frugality is driven by a pleasure of saving, as compared with tightwaddism, which is driven by a pain of paying - Walmart organizes it's products around the shopper groups it identified, and a separate team services each group across five so-called "power" product categories: food, entertainment, apparel, home goods, and pharmaceuticals. The three groups are as follows: 1) Brand aspirationals: People with low incomes who are obsessed with brand names 2) Value-price shoppers: Those who like low prices and cannot afford much more 3) Price-sensitive affluents: Wealthier shoppers who love deals Consumer Confidence BEHAVIORAL ECONOMICS: Also known as economic psychology, is concerned with the "human" side of economic decisions - Studies how consumers' motives and their expectations about the future affect their current spending, and how these individual decisions add up to affect a society's economic well being CONSUMER CONFIDENCE: Reflects the extent to which people are optimistic or pessimistic about the future health of the economy and how they predict they'll fare down the road SAVINGS RATE: Influences by (1) consumers' pessimism or optimism about their personal circumstances, (2) national and world events, and (3) cultural differences in attitudes toward saving Social Class SOCIAL CLASS: A consumer's standing in society which is determined by a complex set of variables that include income, family background, education, and occupation - Is an important determinant not just of how much money is spent but also how it is spent Picking a Pecking Order - Sociologists have developed ways to describe meaningful divisions of society in terms or people's relative social and economic resources HOMOGAMY: The tendency to marry people similar in social class to ourselves, also known as "assortative mating" SOCIAL STRATIFICATION: The process in a social system by which scarce and valuable resources are distributed unequally to status positions that become more or less permanently ranked in terms of the share of valuable resources each receives Achieved Versus Ascribed Status - Some of these resources may have gone to people who earned them through hard work or diligent study or achieved status - Such good fortune that one is born into reflects ascribed status STATUS HIERARCHY: A structure in which some members are somehow better off than other Social Mobility SOCIAL MOBILITY: The passage of individuals from one social class to another - Horizontal mobility occurs when a person moves from one position to another that is roughly equivalent in social status - Downward mobility a movement down to a lower social status that is undesirable - Upward mobility occurs because the upper and middle classes reproduce less than the lower classes (differential fertility), so positions of higher status over time must be filled by those of lower status Class Structure in Canada - In theory, does not have a rigid, objectively defined class system - Tend to maintain a somewhat stable class structure - What does change are the groups (ethnic and religious) that occupy different positions within this structure at different times Class Structure Around the World CHINA - An economic boom is rapidly creating a middle class of about 100 to 150 million peop
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