Learning Objectives:Know the 6 steps in buyer decision processUnderstand a firm’s motivationKnow 4 steps in product developmentKnow population trendsIdentify 4 stages of household life cycleConsumer Behavior  the buying behavior of consumers—the individuals, families, and households who buy goods and services for personal consumptionBuying Process:Pre-Purchase1. Assessing need2. Searching for information3. Evaluating alternatives4. SelectingPurchase5. BuyingPost-Purchase6. EvaluatingPre-purchase  the consumer tries to determine how much pleasure or pain will be derived from a product or service1. ASSESSING NEED (VS. WANT)Consumers sense a discrepancy between current state and desired stateNeeds and individuals’ relationships with their goods1. Self-concept attachment  products establish user’s identity2. Nostalgic attachment  link to one’s past3. Interdependence  part of daily routine4. Love  product elicits strong emotion2. SEARCHING FOR INFORMATIONInvolves sorting behaviorInformation either internally or externally is accessedInternal  go over in your mindExternal  looking at outside information (say yes to dress)In the economic theory of choice, the assumption is that the consumer has perfect informationInformation makes choice meaningful. Consumers cannot make a good decision unless they have adequate informationChallenges to obtaining information:1. Number of products or varieties is overwhelmingDeregulation has brought with it more choices as well as increased competitionIt is a sign of a healthy economy to have a larger number of products and services but this diversity may create confusion for consumers (Telephone services, airlines)2. Complexity of goodsAssessment becomes difficultNew technology is more complex therefore assessment is more complex and the information is either more complex or not available3. Time costs are greatIt takes time to find informationThat time has to come from somewhere4. Consumers have high expectationsIncreased levels of education translate into consumers who demand more information and accurate information5. False sense of securityConsumers assume that they are protected in the marketplace, and do not practice caveat emptor (Let the buyer beware)6. Some information is useless or inaccurateUseless InformationOn sears hair dyer  “do not use while sleeping”On packaging for Rowenta iron “do not iron clothes on body”On Nytol sleep aid  “warning, may cause drowsiness”Inaccurate InformationSometimes info that is given may be inaccurateIt then is up to the consumer to be wary and judge whether the info is correctConsumer information should be:ObjectiveNon-biased, source of information is not making a profitConsumer Reports is a good source of objective infoDoes not accept advertisementsValid & credibleInformation comes from reliable sourcesCredible research has been doneInformation could be proven to be correctUnderstandableIf seller desires to provide the consumer with info, then the info should be written so that a consumer can understand what the words meanNo double-speak nor too technicalCompleteIncomplete information may actually mislead the consumerStating only the good points about a product and leaving out the problems gives consumers the impression that the product is without flawsUp-to-dateInformation about a product should be relevant for nowConsumer Reports sometimes reports info on a model that has been discontinued; hence, information may not be relevant anymore6th grade levelBenefits of Information Search1. Lower tag price2. Lower full price or consumer cost3. Satisfaction from shopping (retail therapy)4. Knowledge of what is availableCost of Information Search1. Time costs2. Cost of gasoline or public transportation3. Cost of obtaining info4. Emotional CostsWhen should you search more for information?1. Expensive product2. Something you will have a long time3. When there is a large price dispersion in the market4. When there is a large variation in qualityInformation search RuleConsumers will search as long as the cost of the search is less than the expected savings from the searchCS < ESRule of Thumbs1. Using seals of approval (label)2. Buying top-of-the-line merchandise3. Buying high priced goods4. Buying brand names5. Buying the large size because think it has a lower unit priceTypes of goods1. Search  product or service with features and characteristics easily evaluated before the purchaseconsumer can gather relevant and pertinent information before purchaseMost products fall into this category:Appliances, cars, clothing, furnitureStores will cluster to lower consumers’ information search costs (think Lowes and Home Depot being close to each other)2. Experience  consumer obtains the relevant information after purchaseTwo examples are: (1) food & (2) entertainmentFood  you need to tasteEntertainment  You can’t preview the entire event (sports/movie)Cents off coupons, taste tests, and previews are intended to lower search costs3. Credence  term used in economics for a good whose utility impact is difficult/impossible for the consumer to ascertainConsumer never obtains relevant informationTypical consumer does not have the expertise to evaluate information with certain complex goods or servicesExamples:Prescription and over-the-counter drugsLegal servicesMechanic servicesThe gov’t helps consumers by policing credence goods more than others, e.g. licensing of service providers, drug regulationPassive Information  encountered when one is doing something elseBanner ads, billboards, ads on bathroom doors (Stall Street Journal)Actively Acquired Information  information sought for its own sake:Test driving a car, internet search, reading literature, asking friends3. EVALUATING ALTERNATIVESBased on information search, the person weighs alternativesLikes/dislikes, price, availability, serviceEvaluation procedure depends on the consumer and the buying situationMost buyers evaluate multiple attributes each of which is weighed differentlyAt the end of the evaluation stage, purchase intentions are formed4. SELECTINGTwo factors intercede between purchase intentions and the actual decisions:1. Attitudes of others2. Unexpected situational factors5. BUYINGUltimately a choice is made to “purchase,” including where, when, and howWhich store to patronize?Timing matters…post holiday salesHow to pay for goods? Cash vs. credit6. EVALUATING POST PURCHASEHow a