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The Consumer Decision Process

Dr. Rohit Vishal Kumar

Xavier Institute of Social Service

From the book: “Consumer Behaviour” 10/e

R.D. Blackwell, P.W. Miniard and J.N. Engel

Covers Chapters: 3, 4, 5, and 6

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The Consumer Decision Process Also known as the EKB (Engell, Kollat and Blackwell) Model Seven major stages of consumption

Need Recognition

Search for Information

Pre-Purchase Evaluation of Alternatives

Purchase

Consumption

Post Consumption Evaluation

Divestment

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How the CDP Model is Used? Identify relationships between variables that affect consumer decisions Identify topics for additional research Develop and Implement Marketing Mix Strategies

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Factors influencing the Process: Individual Factors:

Demographics & Psychographics Personality Consumer Resources Motivation Knowledge Emotions

Environmental Influences Culture, Sub-Culture and Social Class Family Group Influences Situational Behaviours

Psychological Influences Information Processing Perception and Learning Attitude and Behaviour Change

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Types of Decision Process (1/2) Extended Problem Solving (EPS)

The decision process is detailed and rigorous Time taken is extremely long All 7 stages of CDP are likely to be followed

Midrange Problem Solving (MPS) The decision process is detailed but not so rigorous Time taken is fairly long All 7 stages of CDP may not be followed

Limited Problem Solving (LPS) The decision process is quick Time taken is short All 7 stages of CDP are likely not to be followed

Personal InvolvementRisk of Product Purchase

High Medium Low

EPS MPS LPS

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Types of Decision Process (2/2) Habitual Decision Making:

Brand Loyalty High involvement with the brand No incentive to change until compelling evidences dictate otherwise

Inertia Low involvement with product / brand Purchase is habitual in nature Change can occur with little incentive

Impulse Purchase Sudden and spontaneous desire to act accompanied by urgency State of psychological disequilibrium Minimal Objective Evaluation, emotions dominate A lack of regard for consequences

Variety Seeking Seeking change / excitement for no known cause Extremely brand disloyal

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Stage 1:Need Recognition

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What is need recognition? Need recognition occurs when there is a discrepancy between the actual

state (consumer’s current situation) and desired state (the situation the consumer wants to be in)

Importance of Need Recognition Reveals market segment with unsatisfied desires Reveals barriers to success Provides the starting point for a new business

Types of Need Recognition Generic Need Recognition:

Occurs when the need for an entire product family is stimulated EG: Need to have milk or milk products

Selective Need Recognition: Occurs when the need for a specific brand within a product category (selective

demand) is stimulated EG: Will have Amul’s Toned Milk

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Stage 2:Search for Information

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What is Search? Search represents the motivated activation of knowledge stored in

memory or acquisition of information from the environment about potential need satisfiers

Types of Search Process: Internal Search:

When memory is searched for a solution to the problem If internal search fails, external search is undertaken

External Search: Occurs when we collect information from the marketplace Pre-Purchase Search

When the external search is motivated by an upcoming purchase decision

On-Going Search Information is acquired on a relatively regular basis regardless of purchase need

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Conducting External Search External Search Set:

Those choice alternatives that a consumer gathers information during pre-purchase search

Apply a Funnel Search Strategy

Total Set

Awareness Set

Consideration Set

Choice Set

Decision

Retrieval Set

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Where we get Information? Personal Source

Opinion Leaders Sales Personnel Other Shoppers Family & Friends Co-Workers & Colleagues

Impersonal Source Product Labels Store Signage Point-of-Purchase Materials Internet Forums Advertising Catalogues Magazines Television and Radio Websites

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Stage 3:Pre-Purchase Evaluation

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Evaluation of Alternatives From Retrieval Set, a consumer narrows down his choice by evaluating

alternatives before purchase

Evaluation Strategies: Relying on pre-existing evaluation

Occurs when consumer already have information stored in their memory Branding very important in developing pre-existing evaluation

Construction of new evaluation Categorization Process:

Evaluation of choice alternatives depends on particular category to which it is assigned Brand Extension is a strategy under the categorization process

Piecemeal Process: A evaluation is derived from consideration of alternatives advantages and disadvantages

along important product dimensions

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Piecemeal Process Products are broken down into set of features Feature by feature comparison takes place The minimum acceptable feature performance is known as a “cut-off” Is of two types:

Non-Compensatory Strategy Lexicographical Strategy Elimination by Aspect Strategy Conjunctive Strategy

Compensatory Strategies Simple Additives Weighted Additives

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Lexicographical StrategyAttribute Importance Brand A Brand B Brand C Brand D

Taste 1 5 5 4 5

Price 2 4 3 5 2

Nutrition 3 3 3 1 5

Convenience 4 2 3 3 5 1: Poor 2: Fair 3: Good 4: Very Good 5: Excellent

Brands are compared on the most important attribute If one brand is perceived superior on this attribute the brand is selected Else the next most important attribute is taken up

1st Comparison : On Taste { A, B, D } 2nd Comparison : On Price { A }

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Elimination by Aspect StrategyAttribute Importance Brand A Brand B Brand C Brand D

Taste 1 5 5 4 5

Price 2 4 3 5 2

Nutrition 3 3 3 1 5

Convenience 4 2 3 3 5 1: Poor 2: Fair 3: Good 4: Very Good 5: Excellent

Brands are compared on the most important attribute If one brand is perceived superior on this attribute the brand is selected Else minimum acceptable cut-offs are imposed and the process repeated

Suppose the minimum acceptable cutoff Taste is “Very Good” and on Price it is “Excellent”

1st Comparison : On Taste { A, B, C, D } 2nd Comparison : On Price { C }

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Conjunctive StrategyAttribute Importance Brand A Brand B Brand C Brand D

Taste 1 5 5 4 5

Price 2 4 3 5 2

Nutrition 3 3 3 1 5

Convenience 4 2 3 3 5 1: Poor 2: Fair 3: Good 4: Very Good 5: Excellent

Minimum acceptable cut-offs are imposed on all attributes Brand failing to meet the cutoff are rejected

Suppose the minimum acceptable cutoff on all attributes is “Good” 1st Comparison : { B }

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Simple Additive StrategyAttribute Importance Brand A Brand B Brand C Brand D

Taste 1 5 5 4 5

Price 2 4 3 5 2

Nutrition 3 3 3 1 5

Convenience 4 2 3 3 5 1: Poor 2: Fair 3: Good 4: Very Good 5: Excellent

Attribute ranks are added up and the brand with the highest rating selected

Brand A : 14 Brand B : 14 Brand C : 13 Brand D : 17

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Weighted Additive StrategyAttribute Importance Brand A Brand B Brand C Brand D

Taste 1 5 5 4 5

Price 2 4 3 5 2

Nutrition 3 3 3 1 5

Convenience 4 2 3 3 5 1: Poor 2: Fair 3: Good 4: Very Good 5: Excellent

Attribute ranks are weighted with importance added up and the brand with the highest rating selected

This process is similar to multi-attribute modeling

Brand A : (1x5 + 2x4 + 3x3 + 4x2) / (1+ 2 + 3 + 4) = 3.00 Brand B : (1x5 + 2x3 + 3x3 + 4x3) / (1+ 2 + 3 + 4) = 3.20 Brand C : (1x4 + 2x5 + 3x1 + 4x3) / (1+ 2 + 3 + 4) = 2.90 Brand D : (1x5 + 2x2 + 3x5 + 4x5) / (1+ 2 + 3 + 4) = 4.40

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How good are we at evaluation? Pathetic at rational evaluation of products Largely we tend to equate quality with price Lack of knowledge is the prime culprit Marketers can modify “cues” / “signals” by advertising or promotions

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Exercise Groups to Present: A and B Have a Power-Point presentation ready (4-5 pages) The groups would be called to present in the class Evaluation will be out of 15 marks

Question A

Interview three students and identify three recent instances when they engaged in Extended, Midrange and Limited Problem Solving. What factors were common to decision making?

Question B

What sources of information would be used by students while making the purchase of the following items: Laptops, Scooty or Motorcycles and Valentine Day Cards. Are there individual differences. How can the Valentine Day Card Manufacturer bridge these differences. [Interview 3-5 students to get the answers]

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Stage 4:Purchase

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Purchase Decisions Whether to Buy ?

“To buy or not to buy” – that is the question When to Buy ?

Occasion of purchase What to Buy ?

Product type and Brand Where to Buy ?

Retail and Store Decisions How to Buy ?

Payment related decisions

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Types of Purchase Fully Planned Purchase

Both the product and the brand are chosen in advance Partially Planned Purchase

Intent to buy the product exists but brand choice is deferred until shopping Unplanned Purchase

Both the product and brand are chosen at the point of sale Mostly impulse purchase Need triggered by point of purchase display Accounts for 54% – 68% of items purchased in USA

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Why People Shop? Personal Motive

Role Playing Diversion Self Gratification Learning about new trends Physical Activity Sensory Stimulation

Social Motive Social Experience outside home Peer Group attraction Status and Authority Pleasure of Bargaining

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The Retail Store Choice (1/3) Store Image:

The overall perception of a store

Determinants of a Retail Success / Failure Location

Perceived vs. actual time taken to reach store Ease of parking Quality and Presentation of Merchandising Checkout Procedures

Nature and Depth of Assortment Depth, Breadth and Quality of Assortment

Price Importance of price depends on the nature of buyers Customers may think of price as “total price” in terms of all retail activities Consumers react to short term change in price

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The Retail Store Choice (2/3) Determinants of a Retail Success / Failure (Contd…)

Advertising and Promotion Image Advertising:

used to form store level expectation Big Bazar – “isse sasta aur accha kuch nahin”

Information Advertising Used to form product level expectation Big Bazar – Buy products Rs. 500 and 5 kg Atta free

Sales Personnel The interaction point between the consumer and the company Perceived knowledge and expertise Perceived trustworthiness Customer Knowledge Adaptability

“In Service Marketing Sales Personnel Play a Key Role”The interaction between a sales personnel and the customer is known as

sales encounter or service dramaturgy

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The Retail Store Choice (3/3) Determinants of a Retail Success / Failure (Contd…)

Services Offered Self Service, Ease of Merchandise Return Home Delivery, Credit System etc.

Physical store Attributes Color, Layout, Washrooms, Ambience, Music etc. of the store Also referred to as “store atmospherics” Creates a “gestalt” for store recognition

Store Clientele What kind of people patronize the store

POP Material: Old Methods still popular – pop, banner, festoons etc. E-Theatre, d-POP, Computer Enhanced Merchandising, Digital Self Service

Customer Logistics Is the speed and ease with which customers move through retail and shopping

process Focuses on in-store experience of shopping and checking-out

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Types of Retailing Changing Retail Landscape:

Location Based Retailing: Value Oriented Retailing

Hyper-markets : Typically greater than 1,50,000 sq. ft. Category Killer : Hyper-markets with restricted product line Big-Box Stores : Hyper-markets selling to wholesale purchasers

Shopping Malls Mom-n-Pop Stores (Kirana stores)

Direct Marketing: Refers to strategies used to reach customers outside the store

Direct Selling : face-to-face contact between sales person and customer away from a store Catalog Selling : Sales using mail based catalog system (Burlington) Tele-Marketing : Sales using telephones. Inbound Telemarketing refers to use of a toll-free

number to place orders directly

Internet Based Marketing

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What People Spend in Purchase Money Budget

Consumers spend money for purchase Time Budgets

Consumer Spend Time during purchase Paid Time: is the time for you get paid i.e. office hours Discretionary Time: is the leisure time Non-Discretionary Time: is the obligated time

Physical Obligation: spend on taking care of self needs (sleep, hair cut etc) Social Obligation : spend on socialization Moral Obligation : spend on ethical aspects

How consumers use time is referred to as their “time-style” Cognitive Budgets

Consumers are exposed to a lot of stimulus during shopping Can lead to limited attention span

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Stage 5:Consumption

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What is Consumption? Consumption is the act of using the acquired product

Market segmented in to 2 types on the basis of consumption: Non User User

When is the product consumed? Where is the product consumed How is the product consumed? How much of the product is consumed?

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When does Consumption Occur? Refers to the time of consumption Consumption and Purchase need not occur simultaneously

Consumption occurs with reference to: Time of the day

I eat egg only at breakfast Occasion or Celebration

Mutton is consumed every Sunday Season

Mango’s are consumed during summer Norms

Suit and Tie are expected dress of an executive Without any reason (“Compulsive Consumption”)

Estimated 10% of product purchased is not consumed

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Where does Consumption Occur? Sales are sensitive to the place of consumption In-home consumption Out-of-home consumption

Typically more of any product is consumed out-of-home

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How is the Product Consumed? A product can be consumed in many ways

Straight Consumption: Product is consumed without any modification EG: Rice consumed at Dinner

Modified Consumption: Product is consumed with some modification EG: Rice is mixed with mutton to create Biryani

Ingredient Consumption: Product is consumed after using it as an ingredient in another product EG: Rice is crushed to make a new product Dosa

Innovative Consumption: Product is consumed in an entirely new way EG: Washing Machines are used to make lassi at Dhabas in Punjab

Increasing Consumption is a key strategy in Igor Ansoff’s Product-Market Strategy Matrix

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How much is consumed? Consumption depends on various factors

Judgment about the container in which the product is consumed Judgment about how much will be needed in the future Presentation of the product Sensory aspects of the product

Markets can be segmented on how much is consumed: Heavy Users Medium Users Light Users

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Stage 6:Post Consumption

Evaluation

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What is it? Post consumption evaluation (PCE) refers to the experiences, feelings

and satisfactions that a consumer feels after or during the consumption of a product or a service

PCE normally starts simultaneously with the consumption May be formed even when the product is not consumed fully

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Post Purchase Dissonance Refers to the doubts that the consumer has – regarding the correctness

of purchase – after the purchase has been made

The intensity of dissonance is governed by: The degree of commitment of the decision The importance of decision to the consumer The difficulty of choosing amongst the alternatives The individuals normal tendency to experience anxiety

Post Purchase Dissonance occurs because No product can offer everything that a consumer wants Consumers have to choose between alternatives Some trade-off is involved in purchase

“Consumption Guilt” a related aspect in which the consumer feels guilty after making a purchase

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Consumer Satisfaction Refers to whether the consumption of the product meet the expectation

from the product or not:

Product Performance >> Customer Expectation : Delight

Product Performance > Customer Expectation : Pleasure

Product Performance = Customer Expectation : Satisfaction

Product Performance < Customer Expectation : Dissatisfaction

Product Performance << Customer Expectation : Divorce

Divorce can lead to: Regret:

Occurs when consumer believes that alternative course of action was a better choice

Rage: Occurs when consumer are extremely upset

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Why is Satisfaction Important ? It influences Repeat Buying It shapes word-of-mouth communications It converts satisfied user to brand promoters Satisfaction lowers consumers price sensitivity Dissatisfaction can lead to complaints and lawsuits It ultimately affects shareholder value

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Reasons for Dissatisfaction Core Service Failure : 44%

Mistakes, billing errors etc that harm a consumer Service Encounter Failure: 34%

Inability of service employees to deal with customers properly Price Failure: 30%

High price, price increase, unfair trade practices, deceptive pricing Inconvenience: 21%

Inconvenient locations, hours of operation, waiting time etc. Response to Service Failure: 17%

Failure to respond, negative response etc Ethical Problems: 7%

Dishonest behaviour, unsafe and unhealthy practices etc

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Dissatisfaction Responses Take No Action:

Less favorable attitude Take Action:

Complaint to store or manufacturer Stop Buying the brand Warn Friends and relatives Complaint to private or governmental agencies Initiate Legal Action

Damages caused by dissatisfaction can be controlled by:Relationship Marketing & Consumer Loyalty Programs

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Stage 7:Divestment

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Divestment Package Divestment:

Store for future use Use for Original Purpose Use for New Purpose Throw away as garbage or litter

Product Divestment: Recycle Throw away as garbage or litter Exchange or trade-in Sell to end user, middlemen Give away as gift

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Exercise Groups to Present C and D Have a Power-Point presentation ready (4-5 pages) The group would be called to present in the class Evaluation will be out of 15 marks

Question C

Visit two retail stores selling the same type of merchandise and prepare a presentation on their use of POP displays. Explain reasons for difference if any

Question D

Design a consumer loyalty program for a restaurant of your choice. Explain how it will help reduce dissonance and dissatisfaction