LESSON 35: DECISION MAKING PROCESS

Introduction
We as consumes are interested in the purchase of goods and services to satisfy our personal, social, and environmental needs. In this lesson we are considering the various levels of decisionmaking and then go ahead to explain the process of consumer decision-making. We will be explaining the various models, which signify the consumer decision-making process. The most important aspect here is that we consider consumers decisions not as the end point but rather as the beginning point of a consumption process.

UNIT IV CONSUMER DECISION-MAKING CHAPTER 12 : CONSUMER DECISION-MAKING

Qualis Retail Level Type of Retail Outlet I. Company Showroom II. Exclusive Brand dealer outlet III. Dealer outlet with own service facility IV. Dealer outlet closest to home V. Dealer outlet recommended by friend

CONSUMER BEHAVIOUR

Learning Objectives
After reading this lesson you should be able to:

Identify the different levels of consumer decision-making Explain the process of consumer decision-making

1. Levels of Consumer Decisions

As a buyer or consumer you are all the time making decisions such as what product to buy (a book or a shirt as a birthday present for your friend), which brand (Lux, Liril, Dove, Palmolive) from where (Departmental store, corner shop, chemist), etc. The process by which a person is required to make a choice from various alternative options is referred to as decision-making. Fig. 13.1 below presents a summary of the different levels of purchase related decisions most commonly encountered by consumers. The table highlights the broad range of choices the consumers have to select from when making a decision, starting from the generic product category level to the brand level and the retail outlet level.
Level of Decision Generic Product category level Brand Level Alternative Two wheel or Four wheel vehicle Power Driven I. Scooter II. Motorcycle Scooter I. Bajaj II. Kinetic Motorcycles I. Yamaha II. Hero Honda I. Car II. SUV Car I. Maruti Car II. Santro Xing SUV I. Tata Sumo II. Toyota Qualis

Fig 13.1 Levels of purchase related consumer decisions for personal transport

2. Decision making Process

Customer decisions are those decisions customers make in the marketplace as users, payers and buyers. Decisions are often guided by mental budgeting.Customer sets a budget for a particular product or service. The most basic and important requirement for the marketer is to understand how consumers make choices. Making a decision is a rational and conscious process in which the consumer evaluates each of the available alternatives to select the best amongst them. 2.1 Consumer Information Processing Model Traditionally, consumer researchers have approached decisionmaking process from a rational perspective. This dominant school of thought views consumers as being cognitive (i.e., problem-solving) and, to some but a lesser degree, emotional.1 Such a view is reflected in the stage model of a typical buying process (often called the consumer information processing model) depicted in Figure 13.2.
Problem Recognition

Information Search

Evaluation and Selection of Alternatives

Decision Implementation

Post-purchase Evaluation

Retail Level

Type of Retail Outlet

Figure 13.2 The Consumer Information Processing Model

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Source: Adopted from Kotler (1997), Schiffman and Kanuk (1997), and Solomon (1996) In this model, the consumer passes through five stages: problem recognition, information search, evaluation and selection of alternatives, decision implementation, and postpurchase evaluation.
Step 1-Problem Recognition
Evoked set (Brands recalled)

CONSUMER BEHAVIOUR

Awareness Set (all the brands in the awareness)

Brands not recalled

A customer problem could be any state of deprivation, discomfort or wanting, both physical and psychological e.g. Were out of milk and bread and Im hungry! Realisation by customer that he/she needs to buy something to get back to normal state of comfort both physically and psychologically could be the recognition of problem. e.g. Id better get to the store before it closes! In this information-processing model, the consumer buying process begins when the buyer recognizes a problem or need. For example, Deepak may realize that his best suit doesnt look contemporary any more. Or, You may recognize that your personal computer is not performing as well as you thought it should. These are the kinds of problem that we as consumers encounter all the time. When we found out a difference between the actual state and a desired state, a problem is recognized. When we find a problem, we usually try to solve the problem. We, in other words, recognize the need to solve the problem. But how? Stimuli for problem recognition The different stimuli, which leads to the recognition of problems are:

Consideration set (Brands considered)

Fig 13.3 Awareness, evoked and consideration sets

Brands not considered

Fig 13.3 Awareness, evoked and consideration sets As illustrated in the diagram above, customers search for information about alternative ways of solving their problems and they consider only a select subset of brands.

Awareness set all brands that the customer is aware of Evoked set all those brands that the customer remembers at decision-making time Consideration set those brands in the evoked set that the customer will consider buying

Sources of Information

Internal stimuli may include perceived states of physical or psychological discomfort such as hunger or boredom External stimuli may include marketplace information e.g. the smell of freshly baked bread Primary versus secondary demand Primary demand is for a product category while secondary demand is for a specific brand within the category

Marketer sources Advertising Salespersons Product/service brochures Store displays Company web sites

Non-marketer sources Personal sources Friends and other acquaintances Past experience Independent sources Public information like news report in media, government publications, India Today magazine Product or service experts like pharmacists, house appraisers Internet

Step 2-Information Search

When a consumer discovers a problem, he/she is likely to search for more information. You may simply pay more attention to product information of a personal computer. You become more attentive to computer ads, computers purchased by your friends, and peer conversations about computers. Or, you may more actively seek information by visiting stores, talking to friends, or reading computer magazines, among others. Through gathering information, the consumer learns more about some brands that compete in the market and their f e a t u r e sa n dc h a r a c t e r i s t i c s .T h e o r e t i c a l l y ,t h e r e total i sa set of brands available to you, but you will become aware of only a subset of the brands (awareness set ) in the market. Some of these brands may satisfy your initial buying criteria, such as price and processing speed (consideration set ). As you proceed to more information search, only a few will remain as strong candidates (choice set ).

Fig 13.4 Sources of information for customers

Search Strategies

Search strategies are the patterns of information acquisition customers use to solve their decision problems. 1. Routine, extended and limited problem solving: Routine no new information considered

Extended extensive search and deliberation Limited limited time and effort invested Systematic comprehensive search and evaluation Heuristic quick rules of thumb and shortcuts

2.

Systematic versus heuristic search:

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3. Strategies to deal with missing information:

Interattribute inference value inferred from another attribute Evaluative consistency missing attribute assumed to conform to overall evaluation Other-brand averaging use of average value from evaluation of attribute for other brands Negative cue avoid option with missing information or assign it low or negative value

Amount of Search

The amount of time spent searching is determined by:

Perceived risk: performance, social, psychological, financial and obsolescence risk Involvement: perceived importance of product Familiarity and expertise: based on previous information acquisition and personal experience Time pressure: customers increasingly time poor Functional versus expressive nature of product: bought for performance or social value Information overload: too much information

Figure 13.5 Hierarchical View of Needs, Benefits, and Attributes From this figure and the preceding discussion, you might recognize that the product attributes are relevant and important only to the extent that they lead to a certain set of benefits. Likewise, benefits are meaningful only if they can address the problem and be instrumental to satisfy the underlying need. As the underlying need is often personal, consumers differ as to their beliefs about what product benefits and attributes are more (or less) important and relevant in satisfying their needs. Based on their personal judgment on importance of benefits and attributes, consumers develop a set of attitudes (or preferences) toward the various brands. One may express his/ her preferences of the brands in terms of ranking, probability of choice, and so forth. Models The specific manner in which customers select one of the alternatives could be either through: 1 Compensatory model

CONSUMER BEHAVIOUR

All attributes are evaluated with mental trade-off of perceived weaknesses and strengths. Conjunctive minimum cut-offs set for relevant attributes Disjunctive tradeoffs between aspects of choice alternatives made Lexicographic attributes are ranked in order of importance Elimination by aspects attributes are rated in order of importance and cutoff values defined

Non-compensatory models

Step 3-Evaluation and Selection of Alternatives

How does the consumer process competitive brand information and evaluate the value of the brands? Unfortunately there is no single, simple evaluation process applied by all consumers or by one consumer in all buying situations. One dominant view, however, is to see the evaluation process as being cognitively driven and rational. Under this view, a consumer is trying to solve the problem and ultimately satisfying his/her need. In other words, he/she will look for problem-solving benefits from the product. The consumer, then, looks for products with a certain set of attributes that deliver the benefits. Thus, the consumer sees each product as a bundle of attributes with different levels of ability of delivering the problem solving benefits to satisfy his/her need. The distinctions among the need, benefits, and attributes are very important. One useful way to organize the relationships among the three is a hierarchical one (Figure 13.5). Although simplified, Figure 13.5 is an example of how a bundle of attributes (i.e., a product or, more specifically, personal computer) relates to your benefits and underlying needs.

How and when models used Two-stage choice process: For important decisions might use noncompensatory first and then compensatory Rapid heuristics: Simple rules of thumb used for low-risk/ involvement decisions

Satisficing: Selecting an acceptable alternative rather than searching for best alternative

Underlying Needs

Helps Me Survive Rai University MBA Pogram

Benefits

Portability

Doesnt Brea k down

Economy

Computational Horse Power

Warranty Attributes Size Brand Reputation Software Bundle CPU Speed

Price

Hard Drive Size GlobeNet Ready

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Step 4 Purchase Decision Implementation

CONSUMER BEHAVIOUR

To actually implement the purchase decision, however, a consumer needs to select both specific items (brands) and specific outlets (where to buy) to resolve the problems. There are, in fact, three ways these decisions can be made: 1) simultaneously; 2) item first, outlet second; or 3) outlet first, item second. In many situations, consumers engage in a simultaneous selection process of stores and brands. For example, in your personal computer case, you may select a set of brands based on both the products technical features (attributes) and availability of brands in the computer stores and mail-order catalogs you know well. It is also possible; that you decide where to buy (e.g., Computer world in your neighborhood) and then choose one or two brands the store carries. Once the brand and outlet have been decided, the consumer moves on to the transaction (buying).
Choice Identification
Fig 13.6

Post-purchase Dissonance Elaborate Evaluation

Dissatisfaction

Purchase

Product Use

Disposition

Repeat Purchase Motivation

Figure 13.8 Elaborate Post-purchase Evaluation Source: Adopted from Hawkins, Best, and Coney (1983) According to the research, the likelihood of experiencing this kind of dissonance and the magnitude of it is a function of:

The degree of commitment or irrevocability of the decision, The importance of the decision to the consumer, The difficulty of choosing among the alternatives, and The individuals tendency to experience anxiety.

Purchase intent

Purchase implementation

Because dissonance is uncomfortable, the consumer may use one or more of the following approaches to reduce it:

Customer behaviour at the purchase step

Increase the desirability of the brand purchased. Decrease the desirability of rejected alternatives. Decrease the importance of the purchase decision. Reject the negative data on the brand purchased.

Step 5-Post-purchase Evaluation

The type of preceding decision-making process directly influences post-purchase evaluation processes. Directly relevant here is the level of purchase involvement of the consumer. Purchase involvement is often referred to as the level of concern for or interest in the purchase 2 situation, and it determines how extensively the consumer searches information in making a purchase decision. Although purchase involvement is viewed as a continuum (from low to high), it is useful to consider two extreme cases here. Suppose one buys a certain brand of product (e.g., Diet Pepsi) as a matter of habit (habitual purchase). For him/her, buying a cola drink is a very low purchase involvement situation, and he/she is not likely to search and evaluate product information extensively. In such a case, the consumer would simply purchase, consume and/or dispose of the product with very limited post-purchase evaluation, and generally maintain a high level of repeat purchase motivation (Figure 13.7).

If the dissonance about the purchase is not reduced, the anxiety may transform into a dissatisfaction (general or specific). Certainly, this negative experience leads to a new problem recognition (Figure 1), and the consumer will engage in another problem solving process. The difference, however, is that in the next round of process, memory of the previous negative experience and dissatisfaction will be used as part of information. Therefore, the probability for the unsatisfactory brand to be re-selected and repurchased will be significantly lower than before.

Future response *Exit *Voice *Loyalty

Purchase

Product Use

Disposition

Simple Evaluation

Repeat Purchase Motivation

Satisfaction/dissatisfaction

Figure 13.7 Low Involvement Purchase Source: Hawkins, Best, and Coney (1983) However, if the purchase involvement is high and the consumer is involved in extensive purchase decision making (e.g., personal computer), he/she is more likely to be involved in more elaborate post-purchase evaluation often by questioning the rightness of the decision: Did I make the right choice? Should I have gone with other brand? This is a common reaction after making a difficult, complex, relatively permanent decision. This type of doubt and anxiety is referred to as postpurchase cognitive dissonance (Figure 13.8).

Experience evaluation

Decision confirmation
Fig 13.9 Steps in the post-purchase phase

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Decision confirmation:

Need to confirm wisdom of decision Cognitive dissonance: post-purchase doubt

Reduced by seeking more information or validation from others Experience evaluation:

2.2 The Hierarchy of Effects model Another widely used model in marketing that attempts to explain consumer decision-making process is called the hierarchy of effects model . Although different researchers developed slightly different models, the basic idea is the same: people experience a sequence of psychological stages before purchasing a product. Such a model is provided in Figure 13.10.

CONSUMER BEHAVIOUR

Is product consumed routinely or while being consciously evaluated?

Purchase

Satisfaction/dissatisfaction:

Usage outcome Role of pre-purchase expectations Exit: dissatisfied customers may never purchase the brand againVoice: dissatisfied customers complain
Conviction

Future response

Preference

Likelihood of complaining depends on: Dissatisfaction significance Attributions of the marketer Customers personality traitsLoyalty: satisfied customers purchase the brand repeatedly
Activity 2 Reflect on how you might choose each of the following products or services: An airline for a holiday to Switzerland Toothpaste during a trip to a country where none of your usual brands is available A car. For each, indicate whether you would use: A two-phase or single-phase decision strategy A compensatory or a noncompensatory model, or both A heuristic, and what this might be. Think again about each product or service in the previous question. What sources of information in each category (e.g. internal, external, marketer or nonmarketer) would you be likely to use? Would some of these be more useful to you during the later rather than earlier stages in the decision process? Explain your answer. For which of these decisions are you likely to have experienced cognitive dissonance? Why or why not? What actions are you likely to have taken to reduce that dissonance? What can a marketer do, in each case, to help overcome that dissonance?

Liking

Knowledge

Activity 2

Awareness

Unawareness

Figure 13.10 A General Model of the Hierarchy of Effects Source: Adopted from Delozier (1976) Originally conceived to explain how advertising affects consumers purchase decisions, the hierarchy of effects (HOE) model focuses on consumer learning that takes place as he/she processes information from the external world. The HOE model begins with the state where a consumer has no awareness about the brand (unaware) then develops awareness triggered by external stimuli, such as advertising message or word of mouth. As he/she obtains and processes more information, the consumer develops more specific knowledge about the brand. The knowledge, then, is used as basis to form a liking (or disliking), leading to a preference of brand(s) relative to the others. However, people need to be pushed beyond the preference stage to actually buy the brand of preference. The preference stage, after all, simply means that the consumer has formed a preference psychologically . Now it takes conviction for him/her before actually buying the brand. By now, you might have realized at least two points. One, it seems reasonable that not all the consumers are at the same stage. For example, you may be in the unawareness stage relative to Wrangler Jeans, but Lee may be in the preference stage. Two, it also seems reasonable that not all people at one stage move onto the next stage. For example, some consumers who have formed preference to Maggi Tomato Sauce may not form any conviction to buy the product. Furthermore, some people may need more time before moving onto the next stage than others.

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The HOE model is quite similar to the consumer informationprocessing model because it also assumes that people are cognitively driven, thinking information processors. Controversy exists, of course, as to whether that is necessarily true. Some may claim that they often form liking and preference (emotional response or feeling ) toward brands before developing cognitive judgment (knowledge or thinking ) on them. Others argue that people form preference and knowledge simultaneously. Although each argument has its own support, the general model (cognition first, preference second) seems to be valid especially in relatively complex or high-involvement decision making situations (e.g., cars, computers), providing a conceptual framework for thinking about the sequence of events, which begins from the initial awareness to the final action (i.e., purchasing). 2.3 The Implications We have reviewed two of the most widely accepted models of consumer decision-making process. These are based on theories and research of social psychology, consumer behavior, and marketing. As managers rather than academics, however, we have several more tough questions to ask. Here are some of them:

Activity 3
a) Consider the case of a consumer durable that you may have recently purchased. Try to recall the actual process you might have undergone in buying that. Write down the specific activities you undertook at each stage of the decision-making process.

CONSUMER BEHAVIOUR

The idea of the information-processing model seems reasonable. But, we know that we as individuals are not living in a vacuum. That is, when we are making a purchase decision, we are constantly influenced by other factors than just information, such as family, friends, cultural values, social class, or subculture. Oh, what about physiological needs, such as sex, hunger, safety? Might these also affect which brand we choose and buy? How and where do these factors play roles in the informationprocessing model? What would be some of the practical implications of the information-processing model for a marketing manager who is trying to market, say, mountain bikes? If he/she knows about the information-processing model, what could he/she do differently in, for example, the new product introduction? What would be the implications of the HOE model for marketing managers? For example, what should an advertising manager measure to know the effectiveness of his/her advertising campaign? Should he/she measure sales? Under what circumstances consumers are more likely to develop liking (feeling) first, knowing (thinking) second? What would be some of the products/services in those situations? Why?

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b) Do you find any difference in the approach described above and the approach that you may have followed? What could be the difference for these differences?

NOTES

CONSUMER BEHAVIOUR

(Endnotes)
1

See also Schiffman, Leon G. and Leslie Lazar Kanuk (1997), Consumer Behavior, Upper Saddle River, New Jersey: Prentice Hall. and Solomon, Michael R. (1996), Consumer Behavior: Buying, Having, and Being, Englewood Cliffs, New Jersey: Prentice Hall. For more detailed discussions and paper citations, refer to Engel, James F., Roger D. Blackwell, and Paul W. Minard (1993), Consumer Behavior, 7th ed., Fort Worth, Texas: Dryden Press. and Wilkie, William L. (1990), Consumer Behavior, 2nd ed., New York, New York: John Wiley & Sons. Hawkins, Del I., R. J. Best, and K. A. Coney (1983), Consumer Behavior: Implications for Marketing Strategy, Plano, Texas: Business Publications Inc.

Key Terms

Generic Product level Brand level Retail Level Consumer Information Processing Model Awareness Set Evoked Set Consideration Set Systematic Search

Points To Remember

Levels of Consumer Decisions

Generic Product category level Brand level Retail level

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CONSUMER BEHAVIOUR

INPUT/ EXT. INFLUENCE

LEVELS OF DECISION MAKING

Extensive Problem Solving
PROCESS/ C.D.M.

FIRMS MARKETING EFFORTS 4 PS

SOCIOCULTURAL ENVIRONMENT FAMILY INFORMATION SOURCES OTHERS SOCIAL CLASS SUBCULTURE

Limited Problem Solving Routinized Response Behavior

NEED RECOGNITION PREPURCHASE SEARCH EVALUATION OF ALTERNATIVES

PSYCHOLOGICAL FIELD MOTIVATION PERCEPTION LEARNING PERSONALITY ATTITUDES

EXPERIENCE OUTPUT/ P.D.B.

PURCHASE 1. TRIAL 2. REPEAT PURCHASE

POST PURCHASE EVALUATION

MODELS OF CONSUMERS: Four views of consumer decision making Economic view Passive view Cognitive view Emotional view

CONSUMER GIFTING BEHAVIOUR RELATIONSHIP MARKETING

The firm provides: The customer provides:

Products / services Individual attention Continuous information Price offers Service, perks , extras

Trust and Promises

Repeat purchase Increased loyalty Goodwill Positive word of mouth

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CONSUMER BEHAVIOUR
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Decision making Process

Consumer Information Processing Model The Hierarchy of Effects Model

The Hierarchy of Effects model

Unawareness Awareness Knowledge Liking Preference Conviction Purchase

Consumer Information processing Model

Step 1: Problem recognition Step 2: Information Search Step 3: Evaluation and Selection of Alternatives Step 4: Purchase Decision Implementation Step 5: Post-Purchase Evaluation

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