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Problem Recognition – Comes first- Types of Risk – Perceived negative outcomes associated with a course of action, and the uncertainty about which path to takeo Financial – Cost of the product itselfo Social – What will others think of the purchase?o Performance – Will the product perform as expected?o Physical – Safety concerns and likelihood of harmo Time – Time spent searching for the product, plus service/maintenanceRoutine problem solving- Low risk/cost- Frequently bought items- Low importanceExtensive problem solving- High risk/cost- Infrequently bought items- Very important- Unfamiliar with product- Consideration vs. Inert vs. Inept Set - Consideration: total set of alternatives considered (most important, typically 3-4)- Inert: Rejected options- Inept: Options not yet considered- Actual State – Can occur from depletion or change in situation- Ideal State – Can change without the actual state changing; comprised of expectations, aspirations, and life changesNeed perception occurs when there is a perceived difference between the ideal and actual states- Causes of Problem Recognition - Inventory runs out- Family life cycle (e.g. children may need different things)- Changing reference groups- Dissatisfaction- Boredom, novelty-seeking- New needs – Ads/new products can influence this- How Marketers Influence Problem Recognition - Educate consumers about the problem – products that are novel, complex, risky or durable- Remind consumers about the problem – products that are common, well-understood or frequently purchased- Exaggerate the problem – Non-risky products and products where the problem is underestimated by the consumerConsumer search goals: Optimizers search for the best solution to a problem, satisficers search for a solution that is “good enough”Information Search - Pre-Purchase Search – Situational involvement; problem specific, often temporary- Ongoing Search – Motivational involvement; not problem specific, long-term search, search itself is sometimes the consumption activity- Internal vs. External Search- Internal: Uses experiences and beliefso Brands: Consideration set – based on prototypical brand/familiarityo Attributes: Accessibility and salience o Evaluations/experiences- External: Magazines, salespeople, word of mouth; consumers engage in surprisingly little external searcho High MAOo Pre-purchase search: stems from problem recognitiono Ongoing search: Enduring involvemento Amount of external search goes from very little for people with little prior knowledge toa lot of external search with middling amounts of prior knowledge to very little external search for those with high prior knowledge - Amount of Search influenced by:- Involvement and opportunity- Consumer expertise- Product risk- Search goals- Confirmation Bias – Tendency to interpret, seek out, and create information that confirms our beliefs- Behavioral Confirmation – Self-fulfilling prophecy; behaving in ways that elicit the outcome we expect (phone study)High-Effort Decision Making - Evaluative vs. Determinant Criteria - Evaluative – Attributes, features, or potential benefits that consumers consider when evaluating possible solutions to a problem- Determinant – Evaluative criteria most carefully considered and directly related to the actual choice that is made- Features vs. Benefits - Features are performance characteristics- Benefits are perceived favorable outcomes that result from the presence of a particular feature- Compensatory Models – Good attributes can make up for bad; greatest number of positive featureso Multi-attribute model – rate importance of each attribute then rate each brand’s performance on that attributeo Additive Difference – Compare brands two at a time, take ratings and subtract 1 brand from the other and reject the brand with the lower total- Non-Compensatory Models – Reject negative featureso Elimination by Aspects – Compare brands on an attribute chosen probabilistically; more importance means it’s more likely to be picked; reject alternatives that don’t meet the minimum standardo Conjunctive – Set a minimum acceptable cutoff level for each attribute; select the brand that meets the minimumo Disjunctive – Set an acceptable standard (usually higher than a minimum level) for each attribute; choose the first alternative that meets this standard on one attributeo Lexicographic – Choose the brand that performs best on the most important attribute- When are different models used? - Number of alternatives- Marketers can structure info the way they want consumers to process them; we process info the way it is displayedFirst consideration set -> Non-compensatory methods -> reduced consideration set -> compensatory method -> choiceLow-Effort Decision Making - Heuristics – Resource saving rules of thumb; low MAO for low-effort decision making - Reinforcement – leads to continued use of heuristics - Complexity – More choices lead to increased interest; limited choices increased sales/satisfaction; dependent on satisficing/optimizing attitudes- Different Heuristics o Availability – Relying on readily available knowledge rather than examining other alternativeso Representativeness – Evaluation of an item/event is affected by the resemblance of that item/event toits category; people overestimate the importance of how well someone represents a categoryo Anchoring-and-Adjustment – Initial and often irrelevant starting points for estimations; people tend to under-adjusto Compromise Effect – Intermediate brands seem like “safe bets” to consumerso Asymmetric Dominance – Specific change in choice between 2 options, when a 3rd is present; 3rd option is dominated by only 1 of current options; “decoy effect”o Defaults – Consumers anchor on defaultso Framing – How you frame a question or statement affects people’s preference- Heuristics in Consumer Choice o Affect – “How do I feel about it?”o Normative – Choose what others are usingo Variety-Seeking – Choose something newo Habit – Choose what you normally chooseo Price – Choose the least/most expensive Behavioral Finance - Inertia – State of imbalance between the ideal state and the actual state- Anticipated Regret - - Constructive Preferences and Price- Economics: Preferences are fixed- Marketing: People often construct their preferences between alternatives on the spot- Value is subjective and relative - Prospect


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Pitt BUSMKT 1441 - Problem Recognition

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