HACE 3100 1st EditionExam # 2 Study GuideLecture Series #2 - For Exam #2, covering chapters 4, 6, and 7❖ Consumer Behavior➢ the buying behavior of consumers- the individuals, families, and households, who buy goods/services for personal consumption❖ Buying Process➢ pre-purchase (assessing need, searching for information, evaluating alternatives, selecting)■ the consumer tries to determine how much satisfaction or lack thereof will be derived from a product or service - goal of consumption is to better overall utility■ assessing need (vs. wants): consumers sense discrepancy between current state and desired state● needs and individuals’ relationships with their goods ◆ self concept attachment: products establish user’s identity◆ nostalgic attachment: link to one’s past◆ interdependence: part of daily routine◆ love: product elicits strong emotion■ searching for information: involves sorting behavior in which information is either internally (in your mind) or externally (outside information) accessed ● benefits of information search: lower tag/full price, satisfaction from shopping, knowledge of what is available● costs of information search: time, cost of gas/transportation, cost of getting information, emotional costs● when should one search for more information (information searchrule)?◆ when buying expensive products, or things you will have for a long time◆ when there is a large price dispersion in the market, and when there is a large variation in quality◆ consumers will search as long as costs are less than expected savings from the search (CS < ES)● use rules of thumb instead of searching for information ◆ using seals of approval, buying top of the line merch, buying high priced merch, buying brand names, buying larger sizes because it has a lower unit price, etc.● external search◆ economic theory of choice assumes consumers have perfect information; information makes choice meaningful,and consumers cannot make a good decision unless they have adequate information ◆ challenges to obtaining information➢ number of products overwhelming, time costs are great, goods are complex■ deregulation --> more choices and increased competition■ sign of healthy economy to have larger number of products and services, but diversity may = confusion ■ complex goods make assessment more difficult; new technology = more complex = complex assessment = complex information■ it takes time to find information; opportunity costs and trade offs of time➢ consumers have high expectations, false sense of security■ increased levels of education = consumers who demand more, accurate information ■ consumers assume they are protected in marketplace and do not practice caveat emptor➢ some information is useless or inaccurate■ sometimes information is inaccurate but it is up to consumer to be wary and judge information◆ Consumer information should be➢ objective■ non biased, source of information is not making profit■ Consumer Reports: good source of objectiveinformation, does not accept adverts ➢ valid and credible ■ information comes from credible sources■ research has been done and could be proven to be correct➢ understandable■ consumer has to be able to understand the information given about a product or service (6th grade level) ■ no double speak and shouldn’t be too technical➢ complete■ incomplete info = mislead consumer ■ i.e. only mentioning good points and not negative points➢ up to date■ information should be relevant for now ◆ consumers cannot make wise decisions about goods/services unless they have adequate information ● Types of goods◆ search goods: consumer can gather relevant information before making purchase (i.e. clothes, cars, furniture) ◆ experience goods: consumer obtains information after purchase◆ credence goods: consumer never obtains relevant information; typical consumer doesn’t have expertise to evaluate information about certain goods/services like prescription drugs ● Information and Types of Goods➢ search goods: stores will cluster to lower consumers’ information search costs➢ experience goods: cents off coupons, taste tests, and previews are intended to lower search costs➢ credence goods: the government helps consumers by policing credence goods more than others, i.e. licensing of service providers, drug regulation◆ passive information: encountered when one is doing something else; banner ads, billboards, ads on bathroom doors◆ actively acquired information: information sought for its’ own sake; test driving a car, internet search, reading literature, asking friends■ Evaluating Alternatives ● based on search information, the person weighs alternatives● likes/dislikes; price; availability; service● evaluation procedure depends on the consumer and the buying situation● most buyers evaluate alternatives, each of which is weighted differently ● at the end of this stage, purchase intentions are formed■ selecting● two factors intercede between purchase intentions and actual decision◆ attitudes of other◆ unexpected situational factors➢ buying ■ making the purchase■ ultimately, a choice is made to purchase, including where, when, and how■ which store to patronize? ■ timing matters- post holiday sales■ how to pay for goods?- cash, credit➢ post-purchase■ evaluating: how a consumer feels after the purchase is very important since “post purchase feelings” can stimulate brand loyalty, re-purchases, and word of mouth advertising■ post purchase satisfaction● consumer satisfaction is a function of consumer expectations and perceived product performance● performance < expectations = disappointed● performance = expectations = satisfied● performance > expectations = delighted■ satisfaction is important!● delighted customers engage in positive word of mouth● unhappy customers tell on average 11 other people● it costs more to attract a new customer than it does retaining a new customer● cognitive dissonance is common◆ aka, buyer’s remorse❖ Motivations of Marketers■ maximize consumer awareness■ maximize consumption and loyalty■ maximize consumer satisfaction➢ Successful Strategies: Tools and Techniques■ all marketing strategies have the goal of creating a sustainable competitive advantage for a firm● an advantage where other companies cannot provide the same offering or value➢ Target