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Chapter 4

Management and Organizational Studies 2320A/B Chapter Notes - Chapter 4: Personal Knowledge Base, Elaboration Likelihood Model, Customer Relationship Management

Management and Organizational Studies
Course Code
MOS 2320A/B
John White

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model represents the steps that consumers go through before, during, and after making
Need recognition: begins when consumers recognize they have an unsatisfied need and
want to go from their needy state to a different, desired state.
The greater the discrepancy between these two states, the greater the need
recognition will be
Ex. When you’re hungry and your stomach growls
Functional needs: pertain to the performance of a product or service
Ex. Shoes to keep feet clean
Psychological needs: pertain to the personal gratification consumers associate with a product
and/or service.
Ex. Louboutins
vast majority of products and services are likely to satisfy both functional and
psychological needs
key to successful marketing is determining the correct balance of functional and
psychological needs that best appeals to the firm's target markets.
what can marketers do at the need recognition stage to influence consumer purchase
Researching and understanding what products and services customers need or want
and why, are the first steps in developing appropriate tactics.
using reminder advertising for their products
creating awareness about a new product and its capabilities
showing how a product could enhance consumers' image
altering the physical layout of a store or where products are placed in stores
length and intensity of the search are based on several factors, including the degree of
perceived risk associated with purchasing the product or service and the importance of
the product to the consumer.
Internal search for info: buyer examines his or her own memory and knowledge about
the product or service, gathered through past experiences.
Ex. Going to a restaurant you already went to
External search for info: the buyer seeks information outside his or her personal
knowledge base to help make the buying decision.

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Ex. Reviews, social media
Factors Affecting Consumers' Search Processes
The perceived benefits versus perceived costs of search.
Internal locus of control: believe they have some control over the outcomes of their
actions, in which case they generally engage in more search activities
External locus of control: consumers believe that fate or other external factors control
all outcomes.
they believe it doesn't matter how much information they gather; if they make a wise
decision, it isn't to their credit, and if they make a poor one, it isn't their fault.
Actual or perceived risk: The higher the risk, the more likely the consumer is to engage in an
extended search.
Performance risk: involves the perceived danger inherent in a poorly performing
product or service.
Ex. possibility that Brad's sports car does not start or breaks down on the day he is
supposed to take his girlfriend out for a drive to show off his new car.
Financial risk: risk associated with a monetary outlay and includes the initial cost of the
purchase, as well as the costs of using the item or service
ex. extended warranties help alleviate financial risk because consumers fear extensive
postpurchase repair costs
social risk: the fears that consumers suffer when they worry others might not regard
their purchases positively
physiological risk: could also be called safety risk. Whereas performance risk involves
what might happen if a product does not perform as expected, physiological (or safety)
risk refers to the fear of actual harm should the product not perform properly.
Ex. Buying a car, compare safety records
Psychological risk: associated with the way people will feel if the product or service
does not convey the right image
Ex. Brad looked up reviews of the various sports cars and asked his friends their opinions
because he wanted people to perceive his choice as a really good one.
sift through the choices available and evaluate the alternatives.
occurs while consumers are engaged in the process of information search.
Evaluative criteria: consist of a set of salient, or important, attributes about a particular
product that are used to compare alternative products
-ex. When consumers begin to evaluate different alternatives
determinant attributes: product or service features that are important to the buyer
and on which competing brands or stores are perceived to differ.
-To simplify the potentially complicated decision process,
-ex. Health and nutrition claims, psychological based
consumer decision rules: set of criteria that consumers use consciously or subconsciously to
quickly and efficiently select from among several alternatives.

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Compensatory decision rule: assumes that the consumer, when evaluating alternatives,
trades off one characteristic against another, such that good characteristics compensate
for bad characteristics.
-Ex. car is priced a little higher than Brad was planning to spend, the superb mileage
offsets, or compensates for, the higher price.
Non compensatory decision rule: choose a product or service on the basis of a subset of
its characteristics, regardless of the values of its other attributes
-ex. Brad might find a car with a lot of accessories and great mileage that costs
considerably more than he is willing to spend but rejects the car simply on the basis of
decision heuristics
Not everyone uses compensatory or non-compensatory decision rules.
decision heuristics: mental shortcuts that help them narrow down their choices
product presentation
- extent of alternative evaluation depends on several factors, such as the types of
products or services (specialty, shopping, or convenience), the importance of the
purchase, the perceived risks, and the expressive value of the purchase
- purchase of highly expressive products that carry greater risks and that are more
important to consumers involve more evaluation than the purchase of products that are
less expressive or that have lower perceived risks.
they don't always patronize the store or purchase the brand or item on which they had
originally decided
may not be available at the retail store or there may be some other stumbling block
Retailers therefore turn to the conversion rate to measure how well they have
converted purchase intentions into purchases
One method of measuring the conversion rate is the number of real or virtual
abandoned carts in the retailer's store or website.
Make items easier to purchase or make sure theres always stock
Ritual consumption: refers to a pattern of behaviours tied to life events that affect what
and how we consume.
tend to have symbolic meanings and vary greatly by culture.
Ex. Getting coffee every morning, brushing your teeth, holiday rituals-> hallmark
Situational factors can help facilitate purchases: ex. Multiple payment options, delivery,
Additional factors that affect whether the purchase decision is made immediately or
later, such as store atmospherics, shopping situation, and temporal states,
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