CONSCI 3930 Exam 3 Chapter 8 Decision Making Rational Perspective in this view we calmly and carefully integrate as much information as possible with what we already know about a product weigh the pluses and minuses and then make a satisfactory decision This traditional perspective relates the economics of information approach to the search process assumes we collect just as much data as we need to make an informed decision Implies that marketing managers should carefully study steps in decision making to understand how consumers obtain information how they form beliefs and what criteria they use to make decision Purchase Momentum when our initial impulse purchases actually increase the likelihood that we will buy even more instead of less as we satisfy our needs Example going on spending sprees Research shows that people differ in terms of their Cognitive processing style o Some of us tend to have a Rational system of cognition that processes information analytically and sequentially using rules of logic o Others rely on an Experiential System of Cognition that processes info more holistically and in parallel Behavior Influence perspective managers and marketers focus on peripheral cues such as an attention grabbing package rather than factual details When we buy something on an impulse because it looks cool low involvement Experiential Perspective stresses the Gestalt or totality of the product or service Marketers need to assess consumers affective responses to products or services and then develop offerings that create a positive emotional response Researchers think of decision making on a continuum on one end there is Habitual Decision Making and on the other end there is Extended problem solving but most decisions fall in the middle with Limited Problem Solving Habitual Decision Making Choices we make with little to no conscious effort In these decisions we minimize the amount of time and energy spent on making decisions Limited Problem Solving usually more straightforward and simple in these instances we re not nearly as motivated to search for information or evaluate alternatives rigorously Extended Problem Solving decisions that involve this correspond most closely to the traditional decision making perspective High risk involvement extensive search etc Steps in the decision making process Problem Recognition When we experience a significant difference between our current state of affairs and some state we desire must solve problem to get from here to there o Need Recognition actual state declines o Opportunity recognition ideal state moves upward Information Search we survey the environment for appropriate data to make a reasonable decision Also recognized as Prepurchase search o Ongoing Search constantly looking at the market and options o Internal vs External Search internal we scan our memory banks external use google o Deliberate vs Accidental Deliberate on a previous occasion we ve already searched for relevant information Accidental mere exposure over time to conditioned stimuli and observations of others Stage 3 Evaluation of Alternatives o Evoked Set the alternatives in which a consumer knows about o Consideration set the ones that the consumer actually considers Do we always search rationally o Maximizing Solution seeking the absolute best result o Satisficing solution tries to yield an adequate decision we will o This perspective is called happily settle because we lack time or resources Bounded Rationality have huge implications for marketing and retailing strategies these two extremes o Sisyphus Effect maximizers are so thorough they don t use past experiences to make decisions instead they start from scratch o Variety Seeking the desire to choose new alternatives over more familiar ones influences us to switch from our favorite products to ones we like less o Variety Amnesia marketer can counteract variety seeking with this by prompting them to recall the variety of alternative items they have consumed in the past Biases in decision making example price Anchoring Judgments based on a number you have been exposed to Loss Aversion emphasizing losses more than gains Framing the way we pose a problem Mental Accounting analyses of people s responses to this situation and to other similar puzzles illustrate principles of mental accounting Sunk Cost Fallacy we are reluctant to waste something we have paid for Hyperopia medical term for people who have farsighted vision Prospect Theory describes how people make choices defines utility in form of gains or losses Perceived Risk belief that there may be negative consequences if you use or don t use a product or service Monetary Risk buyers most sensitive to this are those with little income and wealth Purchases most subject to risk are high ticket items that require substantial expenditures Functional Risk function or meeting the need Practical consumers are most sensitive Products whose purchase and use require the buyer s exclusive commitment are most sensitive risk capital consists of alternative means of performing the Physical Risk those who are elderly ill frail are most sensitive Mechanical electrical goods drugs medical treatment and food and beverages are most sensitive capital consists of self esteem and self confidence those who are Social Risk insecure and uncertain are most sensitive Socially visicle or symbolic goods are most subject to social risk or attractiveness to peers are most sensitive Expensive personal luxuries that may engender guilt durables and services whose demands self discipline or sacrifice are most sensitive consiss of affiliations and status those lacking self respect Physiological risk Categorization of Products Consumers employ a knowledge structure to categorize products Superordinate level CHAPTER 10 Roles in Collective Decision Making Initiator Gatekeeper Buyer User Influencer Determines whether the idea is good or bad pass on to buyer Organizational Decision Making Organizational Buyers purchase goods and services on behalf of companies B2B Organizations What influences Organizational Buyers Internal Stimuli you yourself are a very frugal spender you internalize this use your own internalizations when buying External Stimuli The organization you work for hands you a large budget purchase nicer items than you normally would Cultural Factors Types of Purchase Buyclass Theory organizational buying decisions divided into three types ranging from most to least complex Straight