Choice Purchase Decision Heuristics and Biases Evaluation of Alternatives Product Consumption Post Purchase Evaluation Consumer Behavior Exam 3 Study Guide Heads it s Pizza Tails it s Hummus Decision Shortcuts and Rules The Decision Making Process Need Information Recognition Search Need Recognition Three Approaches 1 Educate 2 Exaggerate 3 Remind about the problem Information Search Affected by consumer expertise risk perceptions optimizing and satisficing goals Evaluations of Alternatives Part list cuing can manage consideration sets MAAM can determine what criteria to recommend Choice Purchase Product Consumption Affected by framing Prospect Theory Mental Accounting are used to maximize psychological value Post Choice Evaluation Maximize satisfaction by managing expectations attributions and making the process fair Manage cognitive dissonance by making consumers feel good about their purchase Limited Resource Mental Shortcuts Motivated Tactician Theory we have limited cognitive resources that we deploy selectively o We expend cognitive resources depending on the stimulus and our current goals needs motivations Process relevant and surprising stimuli in most detail This leads to the use of heuristics o Heuristic a decision shortcut or rule of thumb for situations where the decision making process doesn t happen Efficient can lead to good outcomes o Cognitive Bias tendency to make systematic errors based on cognitive factors rather than evidence A heuristic becomes a bias when it consistently leads to suboptimal outcomes Mental Rules of Thumb We are most likely to use heuristics when o Making low involvement decisions o Cognitive resources are constrained EX time pressure distraction stress o Status Quo Bias buying familiar brands that work well Idiosyncratic heuristics are unique to us based on our family experiences and knowledge o Confirmation Bias Common Hueristics Biases o Confirmation Bias o Self Assessment Bias Above Average Effect o Attribution Theory Fundamental Attribution Error o Compromise Effect o Asymmetric Dominance Decoy Effect o Availability Heuristic Base Rate Neglect Law of Small Numbers o Representativeness Heuristic o Planning Fallacy o Halo Effect o Endowment Effect o As well as Sunk cost effect Illusion of control Overconfidence False consensus effect Escalation effect Status quo bias Tendency to interpret evidence in an expectation consistent manner o Malleability of Taste Studies Blind Taste Test VS Branded Taste Test Participants evaluated the taste of beer differently when drinking it unlabeled and labeled o Top Down Perception use label to infer what the elements of the object must be Marketing Implications create promote desired labels idea behind branding Self Assessment Bias suggests that consumers and managers overestimate and underestimate their abilities and characteristics in systematic and predictable ways Above Average Effect tendency to see oneself as above average o Strong domains highly desirable ambiguous and where absolute skills are high o EX Majority rate their driving skills decision making skills intelligence and ability to get along with others as above average Below Average Effect tendency to see oneself as below average o Strong domain less central less ambiguous where absolute skills are low o EX Majority rate their juggling skills and ability to play chess below average Marketing Implications identify whether the domain is subject to the below or above average effect and acknowledge that in your marketing o Relate to consumers differently in different domains o EX Auto Repair for Dummies and Finishing School Attribution Theory when a product or service failure occurs consumer evaluations depend on who consumers hold responsible for the negative outcomes Fundamental Attribution Error tendency to look for internal dispositional rather than external situational causes of behavior o Applies only to our attributions of others o When making attributions of our own actions we attribute Successes to internal causes Failures to external causes Marketing Implications o Help consumers make desired attributions Compromise Effect tendency to favor the middle option Stronger with uncertainty lack of expertise Credit the product or service for successes Explain why failures are out of the company s control if appropriate o Marketing Implication ability to manipulate choices by manipulating choice sets Influence what consumers will ultimately buy Compromise Effect in the Pre Class Survey o 35 majority chose the middle option 61 90 minutes o Scale Effects Findings the compromise effect can affect research findings too Asymmetric Dominance Decoy Effect tendency to prefer a good brand even more when an inferior brand is added to the consideration set In a tough choice consumers look for a tie breaker o Tie breaking dimension that is very unequal between focus of decision The inferior brand increases the attractiveness of the target brand making the choice easier o o Differs from Compromise Effect In Asymmetric Dominance one option is clearly dominant by another this isn t true in the compromise effect Marketing Implication context effects manipulate choice by manipulating the choice set Availability Heuristic tendency to base judgments on the ease with which examples come to mind Overestimate the examples that easily come to mind Underestimate the examples that are hard to think of EX more lives are claimed by lightening than tornadoes plane parts falling from the sky than shark attacks and emphysema than homicides Availability Heuristic Base Rate Neglect Tendency to base judgments on events that are easy to recall rather than base rate information o Base rate information an event s frequency of occurrence statistics Odds of winning the PA Mega Millions Lottery is 1 in 259 million o Case Information what we remember vivid accessible info Subway uses Jared as a vivid example so people remember his story and believe Subway is healthy When 1 person wins the lottery Heavy news coverage of Ebola cases make us overestimate the frequency in which one contracts the disease Refrigerator Study participants were given info about refrigerator breakdowns and asked to provide breakdown estimates Condition 1 set of case histories Condition 2 statistics about incidence of breakdowns o Finding participants who saw case histories provided estimates that were 30 higher relative to participants who saw statistical information Availability Heuristic Law of Small