-a) Types of Consumer Decisions (Continuum of buying decision behavior – from low purchase involvement to high purchase involvement)

Habitual Decision Making/Routine Response Behavior – The consumer makes a choice with

minimal conscious effort. The decision to purchase is routine and automatic. No time is wasted on decision making.

Limited Problem Solving – The consumer uses simple rules and broad guidelines to make a decision. The decision to purchase is often influenced by in-store displays and is thus made in the store.

Extensive Problem Solving – The consumer makes a decision after collecting as much information as possible on the alternatives, and each alternative is carefully assessed as per the desired attributes for the product.

b) Limited vs. Extended Problem Solving (Table 1)

Characteristic Limited Extended

– Motivation Low risk

Less expensive

Needed for a short time High risk

More expensive

Needed for a long time

– Information Search Internal sources

Limited external sources Internal sources

External sources

– Alternative Evaluation Few attributes

Simple decision rules

Few alternatives Many attributes

Complex decision rules

Many alternatives

– Purchase Decision No dissonance

Limited evaluation Dissonance

Complex evaluation

a) Steps in the model of rational decision making:

i – Define the problemiv – Generate alternatives

ii – Identify decision criteriav – Rate each alternative on each criterion

Iii – Weigh the criteriavi – Compute the optimal decision

-40640099060

b) b) Stages in consumer decision making:

Problem recognition – This happens whenever a consumer sees a significant discrepancy between his actual state of affairs and his ideal state of affairs. This must be enough to awaken the decision making process in order to eliminate the discrepancy.

Information search – At this stage the consumer surveys his environment for appropriate information to make a rational decision. There are 4 types of searches: pre-purchase, ongoing, internal and external. Pre-purchase involves exploring the market for particular information. Ongoing involves browsing the market for fun so as to stay up-to-date with it. Internal is the search of one’s own memory for information on product alternatives. External is the use of outside sources such as friends and advertisements to gain information on product alternatives.

Evaluation of alternatives – This involves the application of evaluation criteria to the determinant attributes of each alternative in order to make the final decision on which product to buy.

Product choice – At this stage the consumer considers which brand of the product to purchase and at which store to purchase the product. Some of the influencing factors are convenience, promotions, discounts, advertising, location, service, reputation and satisfaction, quality, selection and price.

Outcomes/Post-purchase evaluation – Consumers continuously assess a product after it has been purchased. The overall attitude or opinion of a consumer towards his purchase is what determines consumer satisfaction or dissatisfaction, and is influenced by consumer expectations versus product performance (Neal, Quester and Hawkins, 2005).

3) Types of perceived risk:

Monetary risk: This type of risk is perceived by those of low income who want to own an expensive product. For example if Jane wants to be driving a car she may fear not being able to afford the gasoline for its use or being able to pay for its insurance afterward.

Functional risk: This type of risk is perceived by practical everyday users of a product. For example if John wants to be able to access the internet via his phone he may be concerned that the phone he buys may not be able to support high-speed internet access.

Physical risk: This type of risk is perceived by the elderly or those of poor health. For example if Jim has arthritis but needs to buy a lawnmower for his overgrown and untidy lawn he may be afraid of worsening his arthritis from the constant use of the lawnmower.

Social risk: This type of risk is perceived by individuals who are insecure or unsure of themselves or have inferiority feelings for themselves. For example if Judy wants to buy a pair of shoes that she feels comfortable walking in she may be fear being ridiculed by her friends for wearing those shoes because they are of an unrecognized brand.

Psychological risk: This is the uncertainty a consumer may feel that they will not be happy or satisfied with the purchase of a product. For example Joseph may feel that if he buys a particular type of fridge he will end up polluting the environment because the refrigerator contains small amounts of CFC (Solomon, 2009).

4) Choosing familiar brand names (Loyalty/Habit)

Zipf’s Law as applied to consumer behavior (Solomon, 2009) – People change from their preferences for a favorite brand, and then they literally may never change their minds in the course of a lifetime. Thus brands that dominate their markets are as much as 50% more profitable than their nearest competitors.

Consumers when they are deciding on purchasing a product often go for one bearing a particular brand name. This is sometimes based on brand loyalty and at other times is out of habit of purchasing a particular brand. Inertia is the term used to describe the consumer habit of buying a particular brand simply because it takes less time and effort to do so. Brand loyalty, on the other hand, is the consumer habit of repeatedly purchasing a product of a certain brand when accompanied by a positive attitude towards that brand. Brand loyalty exists when a consumer is satisfied with a product of a particular brand since they have never been let down by it (Solomon, 2009). When deciding on what brand of product to buy, consumers use various decision rules ranging from simple to complex. These rules include: lexicographic rule, elimination-by-aspects rule, conjunctive rule, disjunctive rule and compensatory decision rule. The conjunctive rule is applied when a consumer is willing to consider any brand that meets the minimum on each important evaluation criterion. The disjunctive rule is applied when a consumer is willing to consider any brand that meets the minimum on any important evaluation criterion. With the elimination-by-aspects rule the consumer selects the brand that has an important attribute no other brand has. According to the lexicographic rule the consumer goes for the brand which ranks highest on his most important criterion. In the compensatory decision rule the consumer decides on the brand which scores highest on all important evaluation criteria (Neal, Quester and Hawkins, 2005).

5) a) Marketing implications for:

Problem recognition:

– responding to consumer problem, that is reacting to a recognized and active consumer problem to bridge the gap between the desired and current state

– activating problem recognition, that is making the consumer aware of an inactive problem

– influencing the size of the discrepancy between a consumer’s actual state and his ideal state

by altering the ideal state or by altering his perceptions to his actual state.

– responding to consumer problem recognition

1. Timing problem recognition, for example in winter and colds, pharmaceuticals can respond by ensuring ready supply of over-the-counter medications

2. Suppressing problem recognition – to avoid upsetting habitual buyers or to anticipate and counter negatives

– measuring problem recognition: surveys and focus groups, activity analysis, product analysis, problem analysis; human (non-marketing) factors research, human emotion research

Purchasing process:

– Use of surrogate indicators such as price and brand name as indicators of quality

– assessing and reacting to the immediate emotional response of the consumer

– targeting consumer’s dominant decision rule and developing a strategy that strengthens the brand’s position within that rule

Brand-image advertising, brand-availability advertising

more exclusive distribution

Location analysis, high service

offering discounts, promotional deals

– Use of celebrity endorsement to promote brand name

– Use of product information to sway consumer decision, for example color of product

– Distribution of products in key outlets

– Programs to strengthen existing outlets

– store/retail outlet advertising

– Appropriate pricing, price specials

– Yellow pages listing

– Cooperative advertising

– Customer-sales personnel relationship

– simplifying purchase process

Post-Purchase evaluation:

– countering post-purchase dissonance

– influencing product usage

– employing product disposal strategies such as recycling, trade-ins and second hand markets

– Building on consumer satisfaction

– Relationship marketing and rewarding loyal customers

– Use of appealing and unique packaging

– creating reasonable expectations of the product and maintaining consistent quality so as to fulfill those expectations

-offering personalized post-purchase customer care service

– augmenting product with extra benefits

– Volume and frequency rewards

– measuring customer satisfaction by focus groups and surveys

b) Compensatory decision rule – Consumer assesses all brands in terms of every relevant criterion and then settles for the brand which scores the highest. For example when purchasing a computer, to select the brand that scores highest overall across all relevant criteria

Non-compensatory decision rule – Positive evaluation of an attribute in a brand does not compensate for negative evaluation of another attribute in the same brand, for example the Lexicographic rule – when purchasing a computer, to choose the brand that scores highest on the most important criterion(Schiffman, Kanuk & Wisenblit, 2009).

6) Business to Business (B2B) and Business to Consumer (B2C) Marketing – here the decision making process lies within the business supplying the product (Schiffman et al, 2009).

– The business has to identify the consumer’s problem and act on it by providing a suitable product to match the consumer’s need

– It has to determine the source preferred by the consumer for searching for information and use these to market its product

– It has to sway the consumer’s decision by providing a product with the best possible attributes

– Once the product has been sold it must ensure that it provides excellent customer care to promote customer satisfaction and brand loyalty

Business to Business (B2B) decision making process:

– Dealing with a business as a customer is different from dealing with a human being

– Factors such as store selection may not be relevant

– Information search is significant stage to focus on – advertising through yellow pages and on the internet, making product more visible

– important to focus on purchase process also – simplify purchase process by reducing paperwork involved, providing for credit facilities, ensuring there are no stock-outs, discounts for bulk purchases, promotional deals, providing for transport, airfreight and shipping etc

– Face-to-face or business meetings may be needed, or need to send sales representatives to meet with supplies manager

– Post-purchase follow-up, allowing for return of products if found defective, ensuring enough stock in case of a follow-up order

References

Solomon, R. (2009). Consumer Behavior: Buying, Having and Being (8th Edition). New Jersey: Prentice Hall. Print.

Neal, Quester and Hawkins (2005). Consumer Behavior: Implications for Marketing Strategy (4th Edition). McGraw-Hill Irwin: Queensland. Print.

Schiffman, L., Kanuk, L. & Wisenblit J. (2009). Consumer Behavior (10th Edition). Prentice Hall. Print.