Consumer Behaviour Final Exam Review.docx
Consumer Behaviour Final Exam Review.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2181A/B
Angela White

Consumer Behaviour Final Exam Review 04/19/2014 Chapter 9: Individual Decision Making Consumers as Problem Solvers Want to make a purchase and go through a series of steps to do so: 1) problem recognition 2) information search, 3) evaluation of alternatives and 4) product choice focuses on three of the steps in the decision process: 1) how consumers recognize the problem or need for a product, 2) their search for information about product choices and 3) ways in which they evaluate alternatives to arrive at a decision. Ironically, for many modern consumers one of the biggest problems is not having too few choices, but too many. We can think of this profusion of options as “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. - Perspectives on Decision Making consumer researchers have approached decision makers from a “rational perspective.” In this view, 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. Relates the economics of information approach to the search processes; assumes that we collect just as much data as we need to make an informed decision. This process implies that steps in decision making should be carefully studied by marketing managers to understand how information is obtained, how beliefs are formed, and what product choice criteria are specified by consumers. Some of our buying behaviours simply don’t seem ‘rational.’They don’t serve a logical purpose (e.g. collecting red shoes). Other purchases are made with virtually no advance planning at all. Still other actions are actually contrary to those predicted rational models. Example: “purchase momentum” occurs when these initial impulses actually increase the likelihood that we will buy even more, almost as if we get ‘revved up’and plunge into a spending spree. Some of us tend to have a rational system of recognition that processes information analytically and sequentially using rules of logic, while others rely on experiential system of cognition that processes information more holistically and in parallel. Concentrating on these types of decisions can be described as the ‘behavioural influence perspective.’ Managers must concentrate on assessment of characteristics of the environment. The “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. - Types of Consumer Decisions one helpful way to characterize the decision making process is to consider the amount of effort that goes into the decision each time it must be made. In terms of a continuum, which is anchored at one end by “habitual decision making” and at the other by “extended problem solving.” Many decisions fall somewhere in the middle and are characterized by “limited problem solving.” Extended Problem Solving The extended problem solving process is 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. Limited Problem Solving Limited problem solving is usually more straightforward and simple. People instead use simple decision rules to choose among alternatives. Habitual Decision Making Decisions that are made with little or no conscious effort. Choices characterized by automatic are performed with minimal effort and without conscious control. Problem Recognition Problem recognition occurs whenever the consumer sees a significant difference between his or her current state of affairs and some desired or ideal state. There is a problem to be solved, which may be small, large, simple or complex. Aproblem can arise in two ways: the quality of the consumers actual state can move downward (need recognition). On the other hand, the consumers ideal state can move upward (opportunity recognition). A gulf occurs between the actual state and the ideal state. Information Search Information search is the process in which the consumer surveys his or her environment for appropriate data to make a reasonable decision. - Types of Information Search a consumer may explicitly search the marketplace for specific information after a need has been recognized (a process called prepurchase search.) many consumers also hunt information and keep track of developments for pleasure, and because they like to maintain current information for future use (they engage in ongoing search.) Internal vs. External Search Internal search; scanning our own memory banks to assemble information about different product alternatives. External search; where information is obtained from advertisements, friends, or people watching. Deliberate Vs.Accidental Search Directed learning; wherein on a previous occasion we had already searched for relevant information or experienced some of the alternatives. Incidental learning; mere exposure over time to conditioned stimuli and observations of others results in the learning of much material that may not be needed for some time after the fact. - Online Search the proliferation of powerful online search engines creates a new breed of consumers – one research company labels these the new info shopper. This term refers to people who almost automatically search for information online before they buy just about anything. “Search Engine Optimization (SEO)” – the small army of consultants to help companies to ‘game’the search engines, ensuring that their links turn up near the top of the list. Do consumers always search rationally? Tendency to avoid external search is less prevalent when consumers consider the purchase of symbolic items, such as clothing. Consumers are often observed to engage in brand switching, even if their current brand satisfies their needs. They are interested in variety seeking, in which the priority is to vary one’s product experiences, perhaps as a form of stimulation to reduce boredom. MentalAccounting: Biases in Decision Making Analysis of people’s responses to this situation and to others illustrates principles of mental accounting: where decisions are influenced by the way a problem is proposed (framing) and by whether it is put in terms of gains or losses. This decision making bias is called the sunk cost fallacy, having paid for something makes us reluctant to waste it. The condition of hyperopia describes people who are so obsessed with preparing for the future that they cant enjoy the present. Another bias is known as loss aversion. People place 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 consumers face options involving gains vs those involving losses. Research in mental accounting demonstrates that extraneous or characteristics of the choice situation can influence our selections, even though they shouldn’t if we were totally rational decision makers. - How much Search Occurs 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 InformationAvailable The Consumer’s Prior Experience Search tends to be greatest among those consumers who are moderately knowledgeable about the product. There is an inverted U shaped relationship between knowledge and external search effort. Blissful ignorance effect apparently occurs because we want to feel like we’ve bought the right things – and if we know precisely how the product performs, its not as easy to rationalize away any shortcomings. - Perceived Risk purchase decisions that involve extensive search also entail some kind of “perceived risk” or the belief that the product has potentially negative consequences. Perceived risk may be present if the product is expensive or is complex and hard to understand. Risk can be a factor when a product choice is visible to others and we run the risk of embarrassment if the wrong choice is made. There are also: montetary risk, functional risk, physical risk, social risk, psychological risk. Monetary risk – money and property. Those with relative little income and wealth are most vulnerable. Ex – high ticket items Functional risk – means of performing the function or meeting the need. Practical consumers are most sensitive. Ex – products that require buyer’s commitment and preclude redundancy are more sensitive Physical risk – vigour, health, and vitality. Elderly, frail, or in ill health are most vulnerable. E – mechanical or electrical goods (drugs, medical treatment) Social risk – Self-esteem and self-confidence. Ex – those who are insecure, uncertain Ex – clothes, jewelery, cars Psychological risk – affiliations and status. Those lacking self-respect or attractiveness to peers are most sensitive. Ex – expensive personal luxuries that may engender guilt Evaluations ofAlternatives Much of the effort that goes into a purchase decision occurs at the stage at which a choice must be made from the available alternatives. - IdentifyingAlternatives a consumer engaged in extended problem solving may carefully evaluate several brands, while someone making a habitual decision may not consider any alternatives to his or her normal brand. The alternatives actively considered during a consumers choice process are his or her consideration or “evoked set.” The evoked set comprises those products already in memory plus those prominent in the retail environment. Two are acceptable possibilities and one is not. The alternatives that you are aware of but wouldn’t consider buying are your inert set, while those not entering the game at all compose the inept set. An advertising campaign for Hyundai illustrates how hard a company sometimes has to work to get its brand into consumers “consideration sets.” - Product Categorization the products in a consumers evoked set are likely to be those that share some similar features. This process of categorizing products can either help or hurt a product, depending on what people compare it to. Levels of Categorization Not only do people group things into categories, but these groupings also occur at different levels of specificity. Typically, a product is represented in a cognitive structure at one of three levels. The middle level, known as basic level category, the most useful in classifying products, since items group together at this level tend to have a lot in common with each other but still permit a range of alternatives to be considered. The first level, the broader superordinate category, is more abstract, while the third, more specific subordinate category often includes individual brands. 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: At the abstract, superordinate level, many different product forms compete for membership. Products and services that are quite different actually compete with each other at a broad level, often for consumers’discretionary dollars. Exemplar Products: if a product is a really good example of a category, its more familiar to consumers, and, as a result, is more easily recognized and recalled. Judgements about category attributes tend to be disproportionately influenced by the characteristics of category exmplars. Being a bit less than prototypical isn’t always a bad thing. Locating Products: product categorization can also affect consumers’expectations regarding the places they can locate a desired product. If products don’t clearly fit into categories, consumers’ability to find them or make sense of them may be affected. - Product Choice “feature creep” - Evaluative Criteria evaluative criteria are the dimensions used to judge the merits of competing options. Another important point is that criteria on which products differ carry more weight in the decision process. If all brands being considered rate equally well on one attribute, consumers will have to find other attributes to use in making a choice.Attributes that are actually used to differentiate choices are “determinant attributes.” The decision about which attributes to use is the result of 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 3 pieces of information. 1. It should point out that there are significant differences among brands on the attribute. 2. It should supply the consumer with a decision making rule. 3. It should convey a rule that can be easily integrated with the way the person has made this decision in the past. Neuromarketing Neuromarketing uses functional magnetic resonance imaging, a brain scanning device that tracks blood flow as we perform mental tasks. Fusiform face area, which governs facial recognition. - Cybermediaries an intermediary that helps to filter and organize online market information so that customers can identify and evaluate alternatives more efficiently. Example: directories, portals, forums, fan clubs and user groups. This aspect of online marketing customer review is one important factor that’s fuelling a new way of thinking that one writers calls “the long tail.” The basic idea is that we no longer need to rely solely on big hits to find profits. Intelligent agents are sophisticated software programs that use collaborative filtering technologies, to learn from past user behaviour to recommend new purchases. An electronic recommendation agent is 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. These agents do appear to influence consumers’decision making, though some evidence indicates they’re more effective when they recommend a product based on utilitarian attributes (functionality) than hedonic attributes (design or taste.) About 80% of online shoppers rely on customer reviews before they buy. We call the people who supply these reviews “brand advocates.” Heuristics: Mental Shortcuts Consumers often employ decision rules that allow them to use some dimensions as substitutes for others. Consumers often fall back on heuristics, or mental rules of thumb that lead to a speedy decision. Sometimes these shortcuts may not be in consumers best interest. Relying on a product signal One frequently used shortcut is the tendency to infer hidden dimensions of products from observable attributes. “product signal.” When product information is incomplete, judgements are often derived from beliefs about covariation, or associations among events. Market Beliefs Consumers often form specific market beliefs about relationships in the market place. These beliefs then become the shortcuts, whether or not they are accurate, that guide their decisions. The assumption of a price quality relationship is one of the most pervasive market beliefs. Country of Origin asAHeuristic. Aproducts “address” matters. Aproducts country of origin can be an important factor in decision making process. Can function as a “stereotype” – a knowledge structure based on inferences across products. The tendency to prefer products or people of one’s own culture over those from other countries is called ethnocentrism. Ethnocentric consumers are likely to feel its wrong to buy products from other countries, particularly because of the negative effect this may have on the domestic economy. - Choosing Familiar Brand Names: Loyalty or Habit? Branding is a marketing strategy that often functions as a heuristic. Our tendency to prefer a number one brand to the competition is so strong that it seems to mimic a pattern scientists find in other domains from earth quakes to linguistics. Zipf’s law describes this pattern. “the” – the most used English word, occurs nd rd twice as often as “of” (2 place) about 3 times as much as “and” (3 ) etc. Brands that dominate their markets are as much as 50% more profitable than their nearest competitors. Inertia: Where a brand is bought out of habit merely because less effort is required. If another product comes along that is for some reason easier to buy, the consumer will not hesitate to do so. Brand loyalty: brand loyalty is a form of repeat-purchasing behavior reflecting a conscious decision to continue buying the same brand. This concept thus refers to a pattern of purchases over time where actual decision making occurs.Apattern of repeat purchasing must be accompanied by an underlying positive attitude toward the brand. Marketers struggled with the problem of “brand parity” which refers to 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. Compensatory rules imply that one good attribute can compensate for other poorer attributes. Non compensatory rules, where some poor attributes may eliminate the choice despite its strength in other attributes. Non-Compensatory Decision Rules Simple decision rules are non-compensatory, and a product with a low standing on one attribute cannot make up for this position by being better on another attribute. The Lexicographic Rule: when the lexicographic rule is used, the brand that is the best on the most important attribute is selected. Elimination-By-Aspects Rule: brands are evaluated on the most important attribute under the elimination by aspects rule. Specific cut offs are imposed. Conjunctive Rule: entails processing by brand.As with the elimination by aspects procedure, cut offs are established for each attribute.Abrand is chosen if it meets all the cut offs, while failure to meet any one cut off means rejection. Disjunctive Rule: the consumer develops acceptable standards for each attribute. Usually the standards are higher than the shoppers minimum cut offs for attributes. If a choice alternative exceeds the standard for any attribute, its accepted. Compensatory Decision Rules Give a product a chance make up for its shortcomings. Consumers who employ these rules tend to be more involved in the purchase and thus are willing to exert the effort to consider the entire picture in a more exacting way. Two basic types of compensatory rules have been identified. When using the simple additive rule, the consumer merely chooses the alternative with the largest number of positive attributes. This choice is most likely to occur when their ability to process info is limited. The more complex version is known as the weight additive rule. When using this rule, the consumer also takes into account the relative importance of positively rated attributes, essentially multiplying brand ratings by importance weights. Chapter 10: Buying and Disposing Situational Effects on Consumer Behaviour Aconsumption situation is defined by factors over and above characteristics of the person and the product. Another reason to take environmental circumstances seriously is that the role a person plays at any time is partly determined by his or her situational self image, where one basically asks “who am I right now?” Marketers can develop market segmentation strategies to position products that will meet the specific needs arising from these situations. - Physical and Social Surroundings a consumers physical and social environment can make a big difference in motives for product usage and also affect how the product is evaluated. The sheer presence or absence of other patrons (co-consumers) in a setting can function as product attribute, such as when an exclusive resort of boutique promises to provide privacy to privileged customers. The presence of other people creates a state of arousal, the consumers actual experience depends on his or her interpretation of the arousal. Its important to distinguish between density and crowding for this reason. Density refers to the actual number of people occupying a space, while crowding exists only if a negative affective state occurs as a result of this density. - Temporal Factors time is one of consumers’most limiting resources. Economic Time Time is an economic variable; it’s a resource that must be divided among activities.An individuals priorities determine his or her timestyle. Many consumers believe they are more pressed for time than ever before. This feeling, called ‘time poverty’is more perception than fact. With the increase in time poverty, researchers are also noting a rise in polychromic activity, wherein consumers do more than one thing at a time. Psychological Time Our experience of time is subjective and is influenced by our immediate priorities and needs. Flow time, occasion time, deadline time, leisure time, time to kill. 4 dimensions of time the social dimension – refers to an individuals categorization of time, ‘time for me’or ‘time for others’ temporal orientation dimension – depicts the relative significance individuals attach to past, present, or future planning orientation dimension – which alludes to different time-management styles varying on a continuum from analytic to spontaneous polychromic orientation dimension – which distinguishes between people who prefer to do one thing at a time from those who have multitasking timestyles time is a: pressure cooker, map, mirror, river, feast. Linear separable time: events proceed in an orderly sequence and different times are well defined. Antecedent States Aconsumers mood can have a big impact on purchase decisions. Two dimensions determine whether a shopper will react positively or negatively to a store environment are: pleasure and arousal.Aspecific mood is some combination of these two factors. Shopping:AJob of anAdventure? Shopping is a way to acquire needed products and services, but social motives for shopping are also important. Shopping is an activity that can be performed for either utilitarian, or hedonic reasons. Reasons for shopping: hedonic shopping motives can include the following Social experience, sharing of common interests, interpersonal attractions, instant status, the thrill of the chase. Consumers can be segmented in terms of their shopping orientation: general attitudes about shopping. Economic Consumer: rational, goal oriented shopper who is primarily interested in maximizing the value of his or her money. Personalized consumer: shopper who tends to form a strong attachments to store personnel. Ethical Consumer: shopping who likes to help out the underdog Apathetic Consumer: don’t like to shop and see it as a chore Recreational Shopper: person who views shopping as a fun social activity. - Retailing as Theatre The quest to entertain means that many stores are going all out to create imaginative environments that transport shoppers to fantasy worlds or provide other kinds of stimulation. This strategy is called “retail theming.” Innovative merchants today use four basic kinds of themes Landscape themes: rely on associations with images of nature, the earth Marketscape themes: building on associations with human made places. Cyberspace themes: are built around images of information and communications technology. One popular theming strategy is to convert a store into a being space. Resembles a commercial living room where consumers can go relax, be entertained, hangout with friends, escape the everday, or even learn. Other spaces cater to the needs of minipreneurs as they offer work centered being spaces. -Store Image Stores may be thought of as having ‘personalities.’This personality, or store image, comprises many different factors. Consumers evaluate stores in term of both their specific attributes and a goal evaluation, or a gestalt. Atmoshperics: because a store’s image is now recognized to be a very important aspect of the retailing mix, attention is increasingly paid to atmospherics, or the ‘conscious designing of space and its various dimensions to evoke certain effects in buyers.’These dimensions include colours, scents and sounds. - In Store Decision Making despite all their efforts to ‘pre-sell’consumers through advertising, marketers are increasingly recognizing the significant degree to which many purchases are influenced by the store environment. Spontaneous Shopping Unplanned buying may occur when a person unfamiliar with a store’s layout is under some time pressure. Impulse buying occurs when the person experiences a sudden urge that they cannot resist. Planners (tend to know the products they are going to buy before hand), partial planners (know they need certain products but have no decided on the brands until they are in the store), and impulse purchasers (do no advance planning whatsoever) Point of Purchase Stimuli: can be an elaborate product display or demonstration. The importance of POP in shopper decision making explains why product packages increasingly play a key role in the marketing mix as they evolve from the functional to the fantastic. - The Salesperson one of the most important in store factors is the salesperson, who attempts to influence the buying behaviour of the customer. This influence can be understood in terms of “exchange theory” which stresses that every interaction involves an exchange of value; each participant gives sometime to the other and hopes to receive something in return. PostPurchase Satisfaction Consumer satisfaction/dissatisfaction is determined by the overall feelings or attitude, a person has about a product after it has been purchased. Companies that score high in customer satisfaction often have a big competitive advantage. - Perceptions of Product Quality Consumers use a number of cues to infer quality, including: brand name, price, etc. Expectancy disconfirmation mode: consumers form beliefs about product performance based on prior experience with the product and /or on communications about the product that imply a certain level of quality. This perspective underscores the importance of managing expectations. Customer dissatisfaction is usually due to expectations that exceed the company’s ability to deliver. When confronted with unrealistic expectations about what it can do, the firm can either accommodate these demands by improving the range or quality of products it offers, attempt to alter the expectations, or perhaps even choose to abandon the customer if its not feasible to meet his or her needs. -Acting on Dissatisfaction if a person isn’t happy with a product or service, a consumer has three different courses of action available. 1. Voice response 2. Private Response 3. Third-Party Response consumers who are usually satisfied with a store are more likely to complain when they have a bad experience. Marketers should encourage people to complain to them. Total Quality Management. The Japanese approach to total quality management (TQM) , which is a complex set of management and engineering procedures aimed at reducing errors and increasing quality, has influenced this perspective. The “gemba” means the one true source of information. Its essential to send marketers and designers to the precise place where the product and service is being used, rather than ask consumers to interact with it in a simulated environment. Product Disposal - Disposal Options when a consumer decides that a product is no longer of use, they can: 1) keep the item, 2) temporarily dispose of it and 3) permanently dispose of it. - Lateral Cycling: Junk vs. Junque interesting consumer processes occur during lateral cycling, where already purchased objects are sold to others or exchanged. Many purchases are second hand rather than new. Divestment rituals, practice where they take steps to gradually distance themselves from things they treasure so they can give them away. Iconic transfer ritual (taking pictures and videos of objects before selling them), transition-place ritual (putting items in an out of the way location, such as a garage before disposing of them), ritual cleansing (washing, ironing, and/or meticulously wrapping the item). Lateral cycling is literally a lifestyle for some people with an anticonsumerist bent who call themselves freegans. Freegans are modern day scavengers who live off discards. Chapter 11: Group Influence and Opinion Leadership Reference Groups AReference group is “an actual or imaginary individual or group conceived of as having significant relevance upon an individuals evaluations, aspirations, or behaviour.” – informational, utilitarian or value expressive. - Types of Reference Groups normative influence: the reference group helps to set and and enforce fundamental standards of conduct. Comparative influence: where decisions about specific brands or activities are affected. Formal Vs. Informal Brand Communities and Tribes Brand community is a set of consumers who share a set of social relationships based on usage or interest in a product. Don’t live near each other and meet only for brief periods at organized events called ‘brandfests.’ The notion of a consumer tribe is similar, because this refers to a group or people who share a lifestyle and who can identify with each other because of a shared allegiance to an activity or product. The challenge of tribal marketing is to link ones product to the needs of a group as a whole. Membership vs. Aspirational The likelihood that people will become part of a consumers identified reference group is affected by several factors such as: propinquity, mere exposure, group cohesiveness. Anti-Brand Communities These groups are calesce around a brand, but united by their disdain for it. These antibrand communities provide a meeting place for those who share a moral stance, a support network to achieve common goals, a means for coping with workplace frustrations. - When Reference Groups are Important two dimensions that influence the degree to which reference groups are important are whether the purchase is to be consumer publicly or privately and whether it is a luxury or necessity. Reference groups effects are more robust for purchases that are 1) luxuries and 2) items that are socially conspicuous to others. - The Power of Reference Groups social power refers to ‘the capacity to alter the actions of others.’The degree that you are able to make someone else do something, you have power over that person. Referent Power – if a person admires the qualities of an individual or group, they will try to imitate those qualities by coping the referent’s behaviours Information Power – person may know something others want to know Legitimate Power – conferred by a uniform is recognized, this form may be borrowed by marketers Expert Power – derived from possessing a specific knowledge or skill – objective, informed Reward Power – when the group has means to provide positive reinforcement Coercive Power – often effective in short term, that’s it. Rarely employed in marketing situations – fear appeals, intimidation in personal selling Conformity Conformity refers to a change in beliefs or actions as a reaction to real or imagined group pressure. In order for a society to function, its members develop norms, or informal rules, that govern behaviour. - Factors Influencing the Likelihood of Conformity Cultural Pressures, Fear of Deviance, Commitment, Group unamity size and expertise, Susceptibility to Interpersonal Influence. - Social Comparison social comparison theory occurs as a way to increase the stability of ones self evaluation, especially when physical evidence is unavailable. Although people often like to compare their judgement
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