CHAPTER FOUR

1. CHAPTER FOUR CONSUMER DECISION MAKING Prepared by Jack Gifford Miami University (Ohio) 2001 South-Western College Publishing

2. THE IMPORTANCE OF UNDERSTANDING CONSUMER BEHAVIOR • CONSUMER BEHAVIOR describes how consumers make purchase decisions and how they use and dispose of the purchased goods and services • Knowing how consumers make decisions helps marketers have the right product or service at the right place at the right price using the right promotion 2001 South-Western College Publishing

3. THE CONSUMER DECISION-MAKING PROCESS Cultural, social, individual, and psychological context NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES POSTPURCHASE BEHAVIOR PURCHASE 2001 South-Western College Publishing

4. STEP ONE: NEED RECOGNITION • Occurs when consumers are faced with an imbalance between actual and desired physical or mental states • Is always triggered by an internal or external stimulus • A WANT exists when someone has an unfulfilled need and has determined that a particular good or service will satisfy it. • Marketers try to provide these stimuli to fulfill these wants with their products or services ONE HUNGRY STUDENT PLUS ONE HAMBURGER COMMERCIAL = ONE MORE FAST FOOD SALE! + = 2001 South-Western College Publishing

5. STEP TWO: INFORMATION SEARCH • Can occur internally, externally, or both • Internal = memory • External from marketing-controlled sources (promotion) or non-marketing controlled (family/friends) sources • The extent of external search depends upon: • Perceived risk (Performance, Financial, Physical, Social, Psychological, Time-loss) • Knowledge • Prior experience • Level of interest in the good or service • Confidence level in internal decision-making ability 2001 South-Western College Publishing

6. STEP TWO: INFORMATION SEARCH (continued) • INTERNAL SEARCH • Memory • Physiological needs • All past experiences • Values, attitudes and beliefs EXTERNAL SEARCH Marketing-controlled sources Non-marketing controlled sources EVOKED SET 2001 South-Western College Publishing

7. STEP TWO: INFORMATION SEARCH (continued) • CONSIDERATION SET • Establish minimum and maximum cutoffs • Limiting parameters, based upon knowledge, importance, risk, and confidence level EVOKED SET 2001 South-Western College Publishing

8. STEP THREE: EVAUALTION OF ALTERNATIVES • Key attributes required • Minimum levels of need satisfaction • Importance of brand name • Possible limitations to selection [availability, price, physical limits (headroom in a car)] • Weigh internal and external information against purchase decision criteria 2001 South-Western College Publishing

9. STEP FOUR: PURCHASE DECISION • ACQUIRE THE USE OR OWNERSHIP OF THE PRODUCT OR SERVICE • Ability to buy • Willingness to buy • Authority to buy 2001 South-Western College Publishing

10. STEP FIVE:POSTPURCHASE BEHAVIOR • Depends upon the quality of match between expectations and outcomes • A positive match reinforces the correctness of the decision and provides future motivation to repeat the purchase decision under similar circumstances. • A negative match between expectations and actual outcomes will result in cognitive dissonance; if strong, they are unlikely to make the same “mistake” in the future. • Marketers try to reduce cognitive dissonance by producing products and service expectations that will be met by their offerings • Marketers also send follow up letters to reduce any lingering dissonance 2001 South-Western College Publishing

11. CONTINUUM OF CONSUMER BUYING DECISIONS 2001 South-Western College Publishing

12. FACTORS DETERMINING THE LEVEL OF CONSUMER INVOLVEMENT • Previous experience • Level of interest • Perceived risk of negative consequences • Specific situation • Social visibility of outcome MARKETING IMPLICATIONS ??? 2001 South-Western College Publishing

13. FACTORS INFLUENCING CONSUMER BUYING DECISIONS • CULTURAL FACTORS • Culture & values • Subculture • Social class • INDIVIDUAL FACTORS • Gender • Age / Family Life Cycle • Personality, self-concept, lifestyle • SOCIAL FACTORS • Reference groups • Opinion leaders • Family • PSYCHOLOGICAL FACTORS • Perception • Motivation • Learning • Benefits & Attitudes 2001 South-Western College Publishing

14. CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS • Values • Language • Myths • Customs • Rituals • Laws • Material artifacts • Exert the broadest influence over a person’s consumer behavior • The underlying elements of every culture include… 2001 South-Western College Publishing

15. CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS • What people eat, how they dress, what they think and feel, what language they speak, are all dimensions of culture • Culture gives order to society • Marketer’s actions must be consistent with the culture and values of its target customers to be successful 2001 South-Western College Publishing

16. CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS • Culture is learned • Culture is dynamic, not static • The most important element of a culture is its shared values • Culture gives order to society • Examples of shared American values include... • Success • Materialism • Freedom • Progress • Youth • Capitalism 2001 South-Western College Publishing

17. CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS • As more companies expand their operations globally, the need to understand the cultures of foreign countries becomes increasingly important. BECAUSE OF RELIGIOUS BELIEFS, MOST INDIANS DO NOT EAT BEEF HAMBURGER IN U.S.A. MADE WITH BEEF 2001 South-Western College Publishing

18. CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS: SUBCULTURES • A SUBCULTURE is a homogeneous group of people who share elements of the overall culture as well as cultural elements unique to their own group • Subculture may be based upon any meaningful commonality, such as geographic regions, political or religious beliefs, national or ethnic background, use of leisure time, etc. • Membership may greatly influence what and how you consume, something of vital interest to marketers 2001 South-Western College Publishing

19. A social class is a group of people who: are nearly equal in status regularly socialize among themselves share behavioral norms …and most importantly for marketers, consume similar goods and services for similar reasons Upper classes Upper middle class Middle classes Working class Working poor Underclass Defined partially by occupation, income, education, and wealth CULTURAL INFLUENCES ON CONSUMER BUYING DECISIONS: SOCIAL CLASS 2001 South-Western College Publishing

20. SOCIAL INFLUENCES ON CONSUMER BEHAVIOR • Consumer interact with reference groups, opinion leaders and family members to obtain product information and decision approval to.. • Reduce risk of making a “wrong” decision • Reduce search time • Reduce uncertainty • To conform to subculture “Right” brand of tennis racket, shoes and tennis apparel. 2001 South-Western College Publishing

21. All formal or informal groups that influence the buying behavior of an individual are that person’s reference groups SOCIAL INFLUENCES ON CONSUMER BEHAVIOR: REFERENCE GROUPS 2001 South-Western College Publishing

22. Direct Primary Groups Family Friends Coworkers Direct Secondary Groups Clubs Professional groups Religious groups Indirect reference groups Aspirational reference groups Nonaspirational, disassociative reference groups SOCIAL INFLUENCES ON CONSUMER BEHAVIOR: REFERENCE GROUPS “I want to be like Mike” “If I buy one of those cars, people will think I’m a yuppie” 2001 South-Western College Publishing

23. SOCIAL INFLUENCES ON CONSUMER BEHAVIOR: OPINION LEADERS • Opinion leaders are persons who try “new things” first; if they are part of our positive reference group, we then may emulate their behavior. “That new two finger graphite bowling ball certainly works for Marti. Maybe I should buy one.” 2001 South-Western College Publishing

24. Gender differences Physiological Roles Psychological Shopping behavior Age and Family Life Cycle differences Tastes in food, clothing, cars, furniture, and recreation often change with age Consumption patterns of single and married individuals are different. The presence of young children again influences consumption patterns INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS 2001 South-Western College Publishing

25. INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS • Personality, self-concept and lifestyle • Personality: underling disposition, dominant characteristics, and how people react in interact • Self-concept: how consumers perceive themselves (ideal or real self image) • Lifestyle: a mode of living, as identified by a person’s activities, interests, and opinions 2001 South-Western College Publishing

26. INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS • Psychological dimensions include those factors that consumers use to interact with their world, to recognize their feelings, gather and analyze information, formulate thoughts and opinions, and take action. • Psychological dimensions are individual, environment and situation specific. 2001 South-Western College Publishing

27. INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS: PERCEPTION • The process by which we select, organize, and interpret stimuli into a meaningful and coherent picture is called perception • Selective exposure? • Cues? • Selective distortion? • Selective retention? • Subliminal perception? 2001 South-Western College Publishing

28. INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS: MOTIVATION SELF ACTUALIZATION NEEDS • MOTIVES are the driving forces that cause a person to take action to satisfy specific needs. • One popular theory is Maslow’s Hierarchy of needs ESTEEM NEEDS SOCIAL NEEDS SAFETY NEEDS PHYSIOLOGICAL NEEDS DISCUSS 2001 South-Western College Publishing

29. LEARNING Experiential Conceptual Reinforcement and repetition boost learning Concept of stimulus generalization and discrimination BELIEFS & ATTITUDES A BELIEF is an organized pattern of knowledge that an individual holds to be true An ATTITUDE is a learned tendency to respond consistently toward a given event INDIVIDUAL INFLUENCES ON CONSUMER BUYING DECISIONS: LEARNING, BENEFITS AND ATTITUDES MARKETER’S OBJECTIVES? 2001 South-Western College Publishing

30. CULTURAL FACTORS • Culture & values • Subculture • Social class • INDIVIDUAL FACTORS • Gender • Age / Family Life Cycle • Personality, self-concept, lifestyle • SOCIAL FACTORS • Reference groups • Opinion leaders • Family • PSYCHOLOGICAL FACTORS • Perception • Motivation • Learning • Benefits & Attitudes An understanding of consumer behavior and the factors that influence it will help marketers successfully identify target markets and design effective marketing mixes! 2001 South-Western College Publishing