Chapter 5.docx

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Western University
Business Administration
Business Administration 3301K
John White

Chapter 5 • Why is it that people buy one good over another? Because they expect it to have more value than the other options - But this value, or benefit, can be very irrational. Aka people just buy shit even when it makes no sense to buy it. Like apple computers lol The consumer decision process Step 1: Need Recognition • Decision process begins when consumer has an unsatisfied need – they must go from unsatisfied to satisfied. The greater discrepancy between these 2 states, the greater is the need recognition and youll go to more extreme measures to satisfy yourself - Consumer needs can be classified as functional or psychological • Functional Needs - These pertains to the functionality, performance of a product. - Eg. North Face or Patagonia make very good functional outdoor products, having a 100% waterproof jacket from north face is better than the 20% jacket from walmart • Psychological needs - This is the personal gratification someone associates with a product - Beyond just value, a product can make a person feel special, more rich, associate them with grps of people • Marketers want to remind consumers about their needs, or create new needs for them, reminder ads, layout of the store, enhance consumer ideas of the product Step 2: Information Search • When a consumer recognizes the need, they search for info about the product. The limit of the research is bounded by how much the consumer associates risk with the product and how important it is to them • Internal search for info - Buyer examines his own knowledge and experiences about the product to get info • External search for info - Goes outside of their own knowledge and experiences. Talks to people about their thoughts, look at reports, internet reviews • Factors affecting Consumer Search Process: - The perceived benefit vs. Perceived cost of search: people weigh the benefit with the time they put in to search, large purchases tend to require alot more research - Locus of control: external is when people believe outside factors dictate their lives while internal believe they are in control of their lives. Therefore an external feels that regardless of their research, it wont affect the outcome of the purchase meaning he wont do any research at all - Actual or perceived risk: risk can delay and discourage purchases, and make a consumer engage in extended research – performance risk (fear that the product will not function), financial risk (fear of the price and monetary obligations), social risk (fear people wont view your purchase positively, physiological risk (better understood as safety risk, if the product fails like in performance risk, how does it affect my safety), psychological risk (risk that people feel when the product doesn’t convey the image they want it to) • Types of products - Speciality products: these products are unique, tend to be more expensive, and are heavily desired by the consumer, thus more research is involved prior to purchase - Shopping goods: products such as apparel, fragrances, stuff you get at an avg mall, fair amount of research - Convenience good: commodity items, everyday groceries, theres no research involved in this - Marketers can categorize their product in to these 3 groups and market accordingly. If its a speciality good, their ads might include alot of info on the good because thats what consumers want. - Marketers have tactics to reduce risks as well: offering guarantees, showing others that have bought the product etc Step 3: Alternative Evaluation • Now research is done, consumers are able to look at alternatives and weigh their options • They look for evaluative criteria which is attributes about a certain type of product. This can be too general depending on the product, so consumers narrow their search down by looking at determinant attributes which are the attributes important to the buyer • Consumer decision rule is the criteria a consumer uses consciously or unconsciously to quickly and effectively select among a bunch of options. They come in 3 forms - Compensatory decision rule: assumption is that one trades off one characteristic for another based on how important certain attributes are. Eg. When buying a car Ez likes styling, acceleration, and price. Even if the car is a bit higher in price, it has good styling and acceleration, therefore the increase in styling and acceleration compensates for the increase in price. The idea is that this decision is made rather efficiently, no formal process. Consumer assigns percentage weights to each attribute, and multiplies it by a scale of 1-10 depending on how important it is. Looks like a formal process to me -_- - Noncompensatory decision: pretty sure this means that, the one factor of the product that you don’t want cant be there. Nothing is good enough to compensate like the above situation. Eg. No matter how stylish or acceleration, the car is just wayyyy to expensive so i wont buy it. - Decision Heuristics: mental shortcuts that help narrow down options. Some examples are: Price (people believe higher price is better value, you get what you pay for), brand (people associate higher quality with certain brands even when sometimes its the exact same like advil vs. Lifebrand), product presentation (how the product is presented, like a house you will buy or the food at a restaurant - Generally shopping products are the most evaluated for alternatives Step 4 : Purchase Decision • Value is the major purchase decider • Companies try to offer as much options to purchase as possible: many forms of payment, delivery, warranties to reduce anxiety, return option Step 5: Post Purchase
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