Consumer involvement and decision making ppt

Marketing Powerpoint Presentation

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

CHAPTER

Understanding Consumer Behavior

4

*

This chapter is about individual consumer buyer behavior. Next chapter (chapter 5) is about organizational buying.

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LO1

Involvement

LO3

LO5: TBD

LEARNING OBJECTIVES

Internal Influence

External Influence

LO4

*

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DISTINGUISH among THREE variations of purchase decision process: routine, limited, and extended problem solving.

LO2

LEARNING OBJECTIVES

LO1

DESCRIBE the stages in the consumer purchase decision process.

IDENTIFY major situational influences on consumer behavior.

LO3

LO4

IDENTIFY major psychological influences on consumer behavior.

LO5:TBD

IDENTIFY major sociocultural influences on consumer behavior.

*

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Definition of Consumer Behavior

The actions a person takes in purchasing and using products and services, including the mental and social processes that come before and after these actions.
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Consumer Behavior
CONSUMER PURCHASE DECISION PROCESS

PROBLEM RECOGNITION

LO1

Purchase Decision Process
*

Try to differentiate these two definitions

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Scenario: Buying a vehicle

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Q1: What do you need a vehicle mostly for?

Q2: Do you usually search information before purchasing a vehicle?

Q3: How many options do you usually consider after initial search?

Q4: Which factor can be the deal breaker?

Q5: Are you often 100% sure that you make the right decision?

Problem Recognition

Information Search

Alternative Evaluation

Purchase Decision

Postpurchase behavior

You should be able to identify fives stages in the consumer purchase decision process.

*

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FIGURE 4-1 The purchase decision process consists of five stages

*

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CONSUMER PURCHASE DECISION PROCESS

Stage 1: PROBLEM RECOGNITION

LO1

Stage 1: Problem Recognition (perceiving a need)
Starts with the difference between
Consumer’s ideal situation
Consumers’ actual situation
*

Perceiving a difference between a person's ideal and actual situations that is big enough to trigger a decision is called problem recognition.

During the consumer purchase decision process, an individual at the “problem recognition” stage will perceive differences between his or her ideal and actual situations big enough to trigger a decision

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CONSUMER PURCHASE DECISION PROCESS

Stage 2: INFORMATION SEARCH

LO1

Stage 2: Information Search (seeking value)
INTERNAL SEARCH: scanning memory

EXTERNAL SEARCH:

Personal Sources, Marketer-Dominated Sources, Public Sources

Point-of-purchase Display

Personal Sources

Salespeople

Public sources

*

Information search: scanning memory of previous experiences and also exploring the external environment represent “information search” stage in the consumer purchase decision process

Please differentiate internal from external search.

Internal search (example)

Casey's girlfriend will celebrate her birthday next week, so he needs to buy her a gift. He remembers the brand of watch that she wears and considers if she would like a new one by the same maker. This is an example of what part of the consumer purchase decision process? This is information search. Is this internal or external search? This is internal search (i.e., scanning memory)

Relatives and friends whom the consumer trusts are known as “personal sources” of external information in the consumer purchase decision process.

When conducting an information search, various product-rating organizations, such as government agencies and TV consumer programs, are known as “public sources”.

External search:

When do consumers use external search?

An external search for information is needed when 1) past experience or knowledge is insufficient, 2) the risk of making a wrong purchase decision is high, and 3) the cost of gathering information is low.

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CONSUMER PURCHASE DECISION PROCESS

Stage 3: ALTERNATIVE EVALUATION

LO1

Stage 3: alternative evaluation (assessing value)
Why do you evaluate alternatives?
Scenario: buying a phone

Phone A

Phone B

Suggesting evaluative c riteria to use for the purchase

Yielding brand names that might meet criteria (consideration set)

Developing consumer value perception

*

The alternative evaluation stage clarifies the problem for the consumer in part by suggesting criteria to use for the purchase.

Key term definition: Evaluative criteria - the objective (e.g., display) and subjective attributes (e.g., prestige) of a brand that consumers use to compare different products and brands.

Consumers often have several criteria for evaluating brands. Knowing this, companies seek to identify the most important evaluative criteria that consumers use when judging brands.

When purchasing a tablet device, factors like brand image, price, and battery life that a consumer considers prior to purchase are called “evaluative criteria”.

A consideration set refers to the group of brands a consumer would consider acceptable from among all the brands in the product class of which he or she is aware.

Slide 4-*

*

The figure above shows the recent ratings from independent rating agencies for selected smartphone brands and models. A number of factors are listed, such as price, display, audio quality, and text messaging. These factors are the typical evaluative criteria for smartphones

Slide 4-*

CONSUMER PURCHASE DECISION PROCESS

Stage 4: PURCHASE DECISION

LO1

Stage 4: Purchase Decision (buying value)
Decide from WHOM to buy
Decide WHEN to buy
*

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Stop for a short review…

What is Consumer Behavior?
What is consumer purchase decision making process?
What are the five stages of the consumer decision making process?
What is problem recognition? Is it about assessing value?
What is information search? Two types of search? When to use external search?
What is alternative evaluation? How does it help consumers?
Would you be able to recognize a set of evaluative criteria?
*

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CONSUMER PURCHASE DECISION PROCESS

Stage 5: POST-PURCHASE BEHAVIOR

LO1

Stage 5: Post-purchase Behavior: Realizing Value
Example: What can make you regret for purchasing a laptop?

When you are using the computer, you may find…..

Better Alternatives

Service ?

Performance falls short of expectation

Better Price

*

At the “postpurchase stage” of the consumer purchase decision process, a consumer compares the product with his or her expectations and is either satisfied or dissatisfied.

After buying a product, a consumer compares it with his or her expectations and is either satisfied or dissatisfied. This occurs at the postpurchase stage of the consumer purchase decision process.

Why is the postpurchase stage about ‘realizing value’?

It is because that sensitivity to consumers' consumption or use experience, whether they are satisfied or dissatisfied, is extremely important in their value perceptions. In the postpurchase stage, firms focus their attention on postpurchase behaviour to maximize customer satisfaction and retention in part by offering training to handle complaints, answer questions, and solve consumer problems.

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CONSUMER PURCHASE DECISION PROCESS

POST-PURCHASE BEHAVIOR

LO1

Post-purchase Behavior (Realizing value)
Customer Satisfaction Studies
Satisfied Customers Tell 3 People
Dissatisfied Customers Tell 9 People
*

Customer satisfaction is an important focus for marketers because the financial value of a satisfied, loyal customer over time can be significant.

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MARKETING MATTERS
How Much Is a Satisfied Customer Worth?

Q: HOW MANY POUNDS of SNACK CHIPS do you eat A YEAR?

Q: HOW MUCH $$ do you spend on GAS a YEAR?

Over time, the financial value of a satisfied, loyal customer can be significant, as shown by the customer lifetime value figures in the textbook for Frito-Lay, Exxon, Kimberly-Clark, and Ford. Research shows that a 5 percent improvement in customer retention can increase a company's profits by 70 to 80 percent. See Marketing Matters in the textbook.

See the next slide for the $.

Slide 4-*

Over time, the financial value of a satisfied, loyal customer can be significant, as shown by the customer lifetime value figures in the textbook for Frito-Lay, Exxon, Kimberly-Clark, and Ford. Research shows that a 5 percent improvement in customer retention can increase a company's profits by 70 to 80 percent. See Marketing Matters in the textbook.

In sum, customer retention is very very important for a successful business. So, marketers are motivated to understand how to make satisfied customers.

Slide 4-*

MARKETING MATTERS
How Much Is a Satisfied Customer Worth?

75%Profit$$

5% improvement in Customer Retention

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CONSUMER PURCHASE DECISION PROCESS

POST-PURCHASE BEHAVIOR

LO1

Post-purchase Behavior: Realizing Value
Cognitive Dissonance
Marketers: Reassure your purchases
HOW?
*

The feeling of postpurchase psychological tension or anxiety consumers may experience when faced with two or more highly attractive alternatives is referred to as cognitive dissonance.

Slide 3-*

Stop for a short review…

What is postpurchase behavior?
Why marketers care postpurchase process?
What is cognitive dissonance?
Would you be able to identify a scenario in which firms do to reduce consumers’ cognitive dissonance? You can provide some examples.
*

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Question

Do you think ALL FIVE stages of the decision process will occur in ALL PURCHASES?

*

The answer is no. How many stages actually occur depends on how much consumers are INVOLVED in the purchase.

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CONSUMER PURCHASE DECISION PROCESS

CONSUMER INVOLVEMENT & PROBLEM SOLVING

LO2

Extended Problem Solving
Limited Problem Solving
Routine Problem Solving
Consumer Involvement

Problem Solving

INVOLVEMENT

HIGH

LOW

*

Involvement refers to the personal, social, and economic significance of the purchase to the consumer

High-involvement purchases typically have the following characteristics: The item is 1) expensive, 2) can have serious personal consequences, or 3) could reflect on one's social image. Could you give examples here for high-involvement purchase?

Consumers spend little time and effort evaluating alternatives in the purchase of flour and soap. The consumer purchase decision process for such staples involves “routine problem solving”, which is virtually a habit and typifies low-involvement decision making.

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Q; If you are buying toothpaste, how likely you think you may spend 30 mins evaluating alternatives?

1- very unlikely

10- very likely

Q; If you are buying a car (40k budget), how much time do you think you will spend on information search?

You are very unlikely to spend 30 mins or above on evaluating options of toothpaste. (i.e., a low involvement purchase)

You are very likely to spend a significant amount of time on searching information if you needed to buy a car. (i.e., a high involvement purchase)

The contrast gave you an idea why consumers’ different levels of involvement in different purchases determines whether all fives stages of a decision making process will occur.

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Q: Which are Low or High involvement purchases?

EXTENDED problem solving

HIGH involvement

LIMITED problem solving

ROUTINE problem solving

Moderate involvement

Low involvement

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FIGURE 4-3 Comparison of problem-solving variations: extended, limited, and routine.

# of BRANDS examined

# of SELLERS examined

# of PRODUCT ATTRIBUTES evaluated

# of external information sources used

HIGH

LOW

INVOLVEMENT

IMPLICATIONs: DIFFERENT MARKETING PROGRAMS

Time spent on searching

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CONSUMER PURCHASE DECISION PROCESS

INVOLVEMENT & MARKETING STRATEGY

LO2

Low Involvement Purchase

Q: Do you think that buying Cereals is a HIGH-involvement purchase?

*

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CONSUMER PURCHASE DECISION PROCESS

INVOLVEMENT & MARKETING STRATEGY

LO2

Low Involvement Purchase

High Involvement Issues

Why Do Post Cereals Display Heart-Healthy Claims on Packaging?

*

It is a strategy used by marketers who market low-involvement products such as cereal products. Marketers link low involvement products to high involvement issues such as heart health in order to get consumers to pay attention to the unique product health attributes that the brand offers.

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Stop for a short review…

Are all five stage of the decision making process always going to occur in all purchases?
What is involvement?
How is involvement related to three types of problem solving? What are three types of problem solving? Provide examples.
*

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Psychological Influences

LO3

*

In the psychological influences, we only focus on motivation. But you need to understand which factors are also psychological influences such as personality, values, perception, lifestyle, attitudes.

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Psychological Influences

MOTIVATION

LO3

FIGURE 4-5 Maslow’s Hierarchy of needs

https://www.youtube.com/watch?v=z03lwK8NaBQ

*

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Psychological Influences:

MOTIVATION

LO3

*

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Situational Influences

LO4

*

You only need to be able to NAME several situational influences here. Do not forget that the factors above in the slide are about SITUATIONAL Influences NOT PSYCHOLOGICAL influences.

In the next few slides, I will use some examples to help your understanding. The explanations about this part in your textbook are very limited. So, I used some examples I felt helpful.

Slide 4-*

LO4

Purchase Task

$$$$

$

*

Depending on the purchase task (buying chocolates for important others vs. for yourself), consumers will feel comfortable with different budgets for buying the same products (such as chocolate candies). For example, in most cases, consumers tend to have a bigger budget for buying chocolates as gifts to others than for buying chocolate candies as snacks for themselves.

Slide 4-*

LO4

Physical Surroundings

Levav and Zhu, 2009

*

Physical surroundings are different than social surroundings.

In the study, researchers found that larger aisle space in grocery stores get nire consumers to stick to their preferred flavor of crackers rather than choose a variety pack of crackers. Space reduces variety seeking. Space is an example of “physical surrounding’ factor which is part of situational influences.

Slide 4-*

LO4

Social Surroundings

Larger

Smaller

NO DIFFERENCE

McFerran et al. 2010

“The other”

NO EFFECT

*

The research shows that college students tended to choose different sizes of packs of chip products depending on which size that the other student (the girl above) who lined up before the college student chose as a function of the body type of the girl. E.g., If the girl’s body type is larger and chose a smaller pack, college students tend to choose a bigger pack. If the “larger” other chose a bigger pack, college students tended to choose a smaller pack. The reasons for college students to choose the opposite size of pack to what the larger “other” chose are because that college students tend to distance themselves from possibly negative social groups.

So, the other is part of social surroundings. Social surroundings will influence consumers’ decision making.

Slide 4-*

LO4

Temporal Effect

SELF-CONTROL STRENGTH

SELF-CONTROL STRENGTH

MORNING

NIGHT

Ego Depleting Activities

Performance declines as

Willpower depleted

Q: When should you take a challenging take-home exam if you had a choice?

*

You have more self-control internal strength usually in the morning. The willpower will deplete when many “ego depleting activities’ occur during the day and thus, make you less likely to focus on the exam if you chose to take the exam towards the end of the day. “ego depleting activities” include, for example, exercising in the gym, choosing among several products, reevaluating your dental insurance.

Slide 4-*

LO4

Antecedent states

*

One of antecedent states is mood. Mood may influence how much you are motivated to watch a movie.

Slide 3-*

Stop for a short review…

Explain the pyramid of needs. Which needs have to satisfied before other needs to be activated?
Identify which consumer needs that some specific products are designed to satisfy. E.g., what consumer needs that insurance products are mostly for satisfying
Name a few psychological influences
Name a few situational influences
*

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Consumer Behavior

Consumer behavior consists of the actions a person takes in purchasing and using products and services, including the mental and social processes that come before and after these actions.

*

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Purchase Decision Process

The purchase decision process consists of the five stages a buyer passes through in making choices about which products and services
to buy: (1) problem recognition,
(2) information search, (3) alternative evaluation, (4) purchase decision,
and (5) postpurchase behavior.

*

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Involvement

Involvement is the personal, social, and economic significance of the purchase to the consumer.

*

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Motivation

Motivation is the energizing force that stimulates behavior to satisfy a need.

*

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Personality

Personality is a person’s consistent behaviors or responses to recurring situations.

*

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Perception

Perception is the process by which an individual selects, organizes, and interprets information to create a
meaningful picture of the world.

*

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Perceived Risk

Perceived risk is the anxiety
felt because the consumer cannot anticipate the outcomes of a purchase but believes that there may be negative consequences.

*

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Learning

Learning consists of those behaviors that result from
(1) repeated experience and
(2) reasoning.

*

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Brand Loyalty

Brand loyalty is a favorable attitude toward and consistent purchase of a single brand over time.

*

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Attitude

An attitude is a learned predisposition to respond to an object or class of objects in a consistently favorable or unfavorable way.

*

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Beliefs

Beliefs are a consumer’s subjective perception of how a product or brand performs on different attributes based on personal experience, advertising, and discussions with other people.

*

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Opinion Leaders

Opinion leaders are individuals who exert direct or indirect social influence over others.

*

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Word of Mouth

Word of mouth involves the influencing of people during conversations.

*

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Reference Groups

Reference groups consists of people to whom an individual looks as a basis for self-appraisal or as a source of personal standards.

*

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Family Life Cycle

A family life cycle consists of
the distinct phases that a family progresses through from
formation to retirement, each phase bringing with it identifiable purchasing behaviors.

*

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Subcultures

Subcultures are the subgroups within the larger, or national, culture with unique values, ideas, and attitudes.

*

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Evaluative Criteria

Evaluative criteria are the factors that represent both the objective attributes of a brand and the subjective ones a consumer uses to compare different products and brands.

*

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Consideration Set

A consideration set is the group of brands that a consumer would consider acceptable from among all the brands in the product class of which he or she is aware.

*

Slide 4-*

Cognitive Dissonance

Cognitive dissonance is the feeling of postpurchase psychological tension or anxiety consumers may experience when faced with two or more highly attractive alternatives.

*

Slide 4-*

Perception

Perception is the process by which an individual selects, organizes, and interprets information to create a meaningful picture of the world.

*

Slide 4-*

Motivation

Motivation is the energizing force that stimulates behavior to satisfy a need.

*

Slide 4-*

Attitude

An attitude is a learned predisposition to respond to an object or class of objects in a consistently favorable or unfavorable way.

*

Slide 4-*

Opinion Leaders

Opinion leaders are individuals who exert direct or indirect social influence over others.

*

Slide 4-*

Word of Mouth

Word of mouth involves the influencing of people during conversations.

*

Slide 4-*

Reference Groups

Reference groups are people to whom an individual looks as a basis for self-appraisal or as a source of personal standards.

*

Slide 4-*

Brand Community

A brand community is a specialized group of consumers with a structured set of relationships involving a particular brand, fellow customers of that brand, and the product in use.

*

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Consumer Socialization

Consumer socialization is the process by which people acquire the skills, knowledge, and attitudes necessary to function as consumers.

*

Slide 4-*

Family Life Cycle

A family life cycle consists of the distinct phases that a family progresses through from formation to retirement, each phase bringing with it identifiable purchasing behaviors.

*

*

This chapter is about individual consumer buyer behavior. Next chapter (chapter 5) is about organizational buying.

*

*

*

Try to differentiate these two definitions

You should be able to identify fives stages in the consumer purchase decision process.

*

*

*

Perceiving a difference between a person's ideal and actual situations that is big enough to trigger a decision is called problem recognition.

During the consumer purchase decision process, an individual at the “problem recognition” stage will perceive differences between his or her ideal and actual situations big enough to trigger a decision

*

Information search: scanning memory of previous experiences and also exploring the external environment represent “information search” stage in the consumer purchase decision process

Please differentiate internal from external search.

Internal search (example)

Casey's girlfriend will celebrate her birthday next week, so he needs to buy her a gift. He remembers the brand of watch that she wears and considers if she would like a new one by the same maker. This is an example of what part of the consumer purchase decision process? This is information search. Is this internal or external search? This is internal search (i.e., scanning memory)

Relatives and friends whom the consumer trusts are known as “personal sources” of external information in the consumer purchase decision process.

When conducting an information search, various product-rating organizations, such as government agencies and TV consumer programs, are known as “public sources”.

External search:

When do consumers use external search?

An external search for information is needed when 1) past experience or knowledge is insufficient, 2) the risk of making a wrong purchase decision is high, and 3) the cost of gathering information is low.

*

The alternative evaluation stage clarifies the problem for the consumer in part by suggesting criteria to use for the purchase.

Key term definition: Evaluative criteria - the objective (e.g., display) and subjective attributes (e.g., prestige) of a brand that consumers use to compare different products and brands.

Consumers often have several criteria for evaluating brands. Knowing this, companies seek to identify the most important evaluative criteria that consumers use when judging brands.

When purchasing a tablet device, factors like brand image, price, and battery life that a consumer considers prior to purchase are called “evaluative criteria”.

A consideration set refers to the group of brands a consumer would consider acceptable from among all the brands in the product class of which he or she is aware.

*

The figure above shows the recent ratings from independent rating agencies for selected smartphone brands and models. A number of factors are listed, such as price, display, audio quality, and text messaging. These factors are the typical evaluative criteria for smartphones

*

*

*

At the “postpurchase stage” of the consumer purchase decision process, a consumer compares the product with his or her expectations and is either satisfied or dissatisfied.

After buying a product, a consumer compares it with his or her expectations and is either satisfied or dissatisfied. This occurs at the postpurchase stage of the consumer purchase decision process.

Why is the postpurchase stage about ‘realizing value’?

It is because that sensitivity to consumers' consumption or use experience, whether they are satisfied or dissatisfied, is extremely important in their value perceptions. In the postpurchase stage, firms focus their attention on postpurchase behaviour to maximize customer satisfaction and retention in part by offering training to handle complaints, answer questions, and solve consumer problems.

*

Customer satisfaction is an important focus for marketers because the financial value of a satisfied, loyal customer over time can be significant.

Over time, the financial value of a satisfied, loyal customer can be significant, as shown by the customer lifetime value figures in the textbook for Frito-Lay, Exxon, Kimberly-Clark, and Ford. Research shows that a 5 percent improvement in customer retention can increase a company's profits by 70 to 80 percent. See Marketing Matters in the textbook.

See the next slide for the $.

Over time, the financial value of a satisfied, loyal customer can be significant, as shown by the customer lifetime value figures in the textbook for Frito-Lay, Exxon, Kimberly-Clark, and Ford. Research shows that a 5 percent improvement in customer retention can increase a company's profits by 70 to 80 percent. See Marketing Matters in the textbook.

In sum, customer retention is very very important for a successful business. So, marketers are motivated to understand how to make satisfied customers.

*

The feeling of postpurchase psychological tension or anxiety consumers may experience when faced with two or more highly attractive alternatives is referred to as cognitive dissonance.

*

*

The answer is no. How many stages actually occur depends on how much consumers are INVOLVED in the purchase.

*

Involvement refers to the personal, social, and economic significance of the purchase to the consumer

High-involvement purchases typically have the following characteristics: The item is 1) expensive, 2) can have serious personal consequences, or 3) could reflect on one's social image. Could you give examples here for high-involvement purchase?

Consumers spend little time and effort evaluating alternatives in the purchase of flour and soap. The consumer purchase decision process for such staples involves “routine problem solving”, which is virtually a habit and typifies low-involvement decision making.

You are very unlikely to spend 30 mins or above on evaluating options of toothpaste. (i.e., a low involvement purchase)

You are very likely to spend a significant amount of time on searching information if you needed to buy a car. (i.e., a high involvement purchase)

The contrast gave you an idea why consumers’ different levels of involvement in different purchases determines whether all fives stages of a decision making process will occur.

*

*

It is a strategy used by marketers who market low-involvement products such as cereal products. Marketers link low involvement products to high involvement issues such as heart health in order to get consumers to pay attention to the unique product health attributes that the brand offers.

*

*

In the psychological influences, we only focus on motivation. But you need to understand which factors are also psychological influences such as personality, values, perception, lifestyle, attitudes.

*

*

*

You only need to be able to NAME several situational influences here. Do not forget that the factors above in the slide are about SITUATIONAL Influences NOT PSYCHOLOGICAL influences.

In the next few slides, I will use some examples to help your understanding. The explanations about this part in your textbook are very limited. So, I used some examples I felt helpful.

*

Depending on the purchase task (buying chocolates for important others vs. for yourself), consumers will feel comfortable with different budgets for buying the same products (such as chocolate candies). For example, in most cases, consumers tend to have a bigger budget for buying chocolates as gifts to others than for buying chocolate candies as snacks for themselves.

*

Physical surroundings are different than social surroundings.

In the study, researchers found that larger aisle space in grocery stores get nire consumers to stick to their preferred flavor of crackers rather than choose a variety pack of crackers. Space reduces variety seeking. Space is an example of “physical surrounding’ factor which is part of situational influences.

*

The research shows that college students tended to choose different sizes of packs of chip products depending on which size that the other student (the girl above) who lined up before the college student chose as a function of the body type of the girl. E.g., If the girl’s body type is larger and chose a smaller pack, college students tend to choose a bigger pack. If the “larger” other chose a bigger pack, college students tended to choose a smaller pack. The reasons for college students to choose the opposite size of pack to what the larger “other” chose are because that college students tend to distance themselves from possibly negative social groups.

So, the other is part of social surroundings. Social surroundings will influence consumers’ decision making.