Week 5 Lecture 9 Fall 2010

8/7/2019 Week 5 Lecture 9 Fall 2010

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Strategic Marketing: IndividualDecision Making

Week 5: Lecture A


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Strategic Marketing

Decision-Making Process


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Perspectives on Decision Making Rational perspective

Integrate as much information as possible with whatthey already know about a product: Economics ofinformation

Weighpluses and minuses of each alternative utilitarian approach

Rewards exceed the costs

Arrive at a satisfactory decision

Marketing managers need to carefully analyze as tohowdo consumers obtain information, make beliefsand what criteria they use to assess each of thesteps to make a decision.


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Strategic Marketing

Perspectives on Decision Making

Behavioral Influence Perspective

Sometimes we buy on impulse Store promotion

we assess the amount ofcognitive effort andchoose the strategy to best suited to the level ofeffort it requires

Experiential Perspective

Sees Gestaltor totality of the product or serviceappeal whole is greater than the sum of its parts

no single quality of the product determines the decision

there are emotional elements involved; no rationality


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TYPES OF CONSUMERBEHAVIOR

Continuum of Decision Making


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1. Problem Recognition

Occurs when consumer seesdifference between current state andideal state

Need recognition: actual state movesdownward

Running out of a product, buying adeficient product,

Opportunity recognition: ideal statemoves upward

Exposed to different/better qualityproducts (standards of comparison)


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1. Problem Recognition


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2. Information Search

Consumers need information to solveproblem

they survey the environment for appropriate datato make reasonable decision

Pre-purchase search vs. ongoing search


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2. Information Search

Consumers need information to solve problem

Types of Information Search

Prepurchase versus Ongoing Search

Prepurchase Search Ongoing Search

Determinants Involvement withpurchase

Involvement with product

Motives Making better purchasedecisions

Bank of information

Fun and Pleasure

Outcomes Increased Knowledge

Increased satisfactionwith the purchase

Increased Knowledge

Future buying efficiencies

Increased impulse buying


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Internal vs.External Search

Internal search Scanning memoryto assemble

product alternative information

External search Obtaining information from ads,

retailers, catalogs, friends, family,neighbors,people-watching,Consumer Reports, etc


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Deliberate versus Accidental Search

Directed learning:

existing product knowledge obtained frompreviousinformation search orexperience of alternatives

Incidental learning:

mere exposure over time to conditioned stimuli andobservations of others; we may not need the product yet


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Do Consumers Always Search Rationally?

Some consumers avoid external search, especially withlittle time to do so and with durable goods (e.g. autos)

Symbolic items require more external search

mostly asking peers opinions

Brand switching: we select familiar brands when decisionsituation is ambiguous

may have 4-5 brands on the list even if the current brand satisfies

them


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Do Consumers Always Search

Rationally? (Contd)

Variety seeking:

Trying new t

hings

unpredictabilitycan be rewarding


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Biases in Decision-Making Process Consider a following scenario:

You have scoreda free ticketto a major footballgame. At the last minute a sudden snowstorm makesgetting to the stadium somewhat dangerous. Would u go?

What if you had handsomelybought the ticket?

Would u go?

sunk cost fallacy

Mental accounting: framinga problem in termsofgains/losses influences our decisions


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Biases in Decision-Making Process Loss Aversion is another bias

For many people losing moneyis more unpleasantthan gaining moneyispleasant

Option 1: You are given $30 and a chance to flip acoin. Heads u win $9, tails u lose $9: safe bet or gamble?

Option 2: You get $30 outright or accept a coin flipthat will win you either $39 or $21:safe bet or gamble?

Prospect theory:

risk differs when consumer faces options involving gainsversus those involving losses especially when it becomespersonal


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Perceived Risk

Belief that product can havenegative consequences

Expensive, complex, hard-to-understand products

Product choice is visible toothers (risk ofembarrassment for wrongchoice)

Risks can be objective(physical danger) andsubjective (social

embarrassment).


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Perceived Risk


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3. Identifying AlternativesAll potential Alternatives

(Brands/Products)

Awareness/ Evoked Set

Alternative the consumer is aware of

Unawareness Set

Alternatives the consumer is unaware

Consideration

Set

Alternatives givenconsideration

Inert Set

BackupAlternatives

Inept Set

AvoidedAlternatives

Specificalternativepurchased

Alternativeconsidered but not

purchased


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Product Choice: SelectingAmongAlternatives

Decision rules guiding our choices can rangefrom very simple and quickstrategies tocomplicatedprocesses requiring much attention.

Consumers generally face new products with amyriad of features Feature Creep

Proliferation ofGizmos is counter-productive

Research has found that a large number of features frustrateconsumers and they end up with much simpler products

Read: As I see it pg. 368


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Evaluative Criteria

These are the dimensions consumers use tojudge the merits of competing options.

Functional Attributes

Is this jeans durable, comfortable and stylish Experiential Attributes

Will this jeans make me fill with pride and social approval?

Criteria

criteria on which products differ carry more weightin thedecision process rather than in ways they are similar

marketers educate consumers about (or even invent)determinant attributes

Pepsis freshness date stamps on cans


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Evaluative Criteria

INVIGORATING


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Evaluative Criteria

These are the dimensions consumers use tojudge the merits of competing options.

Criteria Consumers renewed interest in the ethical and sustainable

marketing entails that organizations reputation can be adeterminant attribute.

Product: Ingredients

Pricing: price fixing, price discrimination

Anti-competitive practices: these include but go beyond

pricing tactics to cover issues such as manipulation of loyaltyand supply chains.

Packaging: Recyclable

Advertisements: Comparative ads, subliminal messages,products regarded as immoral or harmful

Children and marketing: marketing in schools, kidsvertising


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Evaluative Criteria

In order for a marketer to effectively recommenda new decision criterion, it should convey twopieces of information:

point out that there are significant differences amongbrands on the attribute

Provide a decision making rule, such as if (deciding

among competing brands)then (use the attributeas a criterion)


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Heuristics: Mental Shortcuts

Mental rules-of-thumb that leadto a speedydecision

Examples: higher price = higher

quality, buying the same brand your

mother bought

Can lead to bad decisions due

to flawed assumptions(especially with unusuallynamed brands) and may lead tocognitive dissonance


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Relying on a Product Signal

Product signal: observable product attributesthat communicate underlying qualities

Clean and shiny car = good mechanical condition

Even though this means that they drive away in a clean,shiny clunker


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Relying on a Product Signal

when consumers have incomplete information,they often base their judgments on theirbeliefs

Covariation: perceived associations among

things/events

Product type/quality and country of origin Well-known brands must be good!

Judging product quality by the length of time the companyhas been in business

Coffee? Salmon? Olives? Dates? Shoes?


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Market Beliefs

Consumerassumptions about companies,products,and stores that become shortcuts for decisions

Price-quality relationship: we tend to get what we pay for

Other common marketing beliefs (see Table 9.3 for full list):

All brands are basically the same; may be they are counterfeits

Larger stores offer better prices than smaller stores

Items tied to giveaways are not a good value!


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Choosing FamiliarBrand Names

Zipfs Law: our tendency to prefer a number onebrand to the competition Brands that dominate the market are sometimes 50% more

profitable than their nearest competitors

Consumer Inertia: the tendency to buy a brand outof habit merely because it requires less effort Consumers will change their mind if they find something

cheaper right incentive unfreezing the habit

Brand loyalty: repeat purchasing behaviorthatreflects a conscious decision to continue buying thesame brand


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Decision Rules Noncompensatory decision rules when we feel that a

product with a low standing on one attribute cantcompensate for this flaw by doing betteron anotherattribute

Types of non-compensatory decision rules:

Lexicographic rule: consumers select the brandthat is thebeston the most important attribute

determinant to second, third and fourth and so on.

Elimination-by-aspects rule: the presence of the single mostimportantattribute determines the product choice.

Conjunctive rule: entails processing by brand instead

if a brand meets minimum cutoff attributes ok

failure to meet the cutoff points will lead to delay in purchase


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Decision Rules (cont.)

Compensatory decision rules: give a producta chance to make up for its shortcomings

Types of compensatory decision rules: Simple additive rule: the consumer merely chooses

the alternative that has the largest number of positiveattributes

Weighted additive rule: the consumer also takes intoaccount the relative importance of positively ratedattributes, essentially multiplying brand ratings byimportance weights


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Decision Rules

Attribute Importance(1-10)

BrandA(1-10)

Brand B(1-10)

Performance 7

Durability 6Reliability 7

Style 9


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Case Questions: Western Fitness

Q 1: What Problems or issues does Andrea have to work with?

Q 2: How would u define Quality, Quantity, Delivery, Service andPrice as per the case study? What is important to fitness classparticipants? What is important to Western Fitness in this regard?

Q 3: Which issues or challenges would u like to solve right away?How?

Q 4: Does making class size smaller makes sense?

Q 5: What is Campus recreation doing to keep participant toinstructor ratios down

Q 6: Looking into the survey results; what are participants really

looking in for a class? Q 7: What is the purpose of participant survey? what could be the

flaws?

Q 9: What should be the action plan?

Documents

Week 5 Lecture 9 Fall 2010