MKTG CHAPTER. Lamb, Hair, McDaniel. Consumer Decision Making. Designed by Amy McGuire, B-books, Ltd. Prepared by Dana Freeman, B-books, Ltd.

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1 Lamb, Hair, McDaniel Designed by Amy McGuire, B-books, Ltd. MKTG 6 CHAPTER Consumer Decision Making Prepared by Dana Freeman, B-books, Ltd.

2 Consumer Behavior Consumer Behavior Processes a consumer uses to make purchase decisions, as well as to use and dispose of purchased goods or services; also includes factors that influence purchase decisions and the product use.

3 Why understand the consumer? Consumer product and service preferences are constantly changing Marketing managers must carefully study how the consumer behaves as it relates to their product/service Understanding how a consumer makes a purchase can help develop a desirable marketing mix Product Price Promotion Placement

4 Consumer Decision-Making Process Consumer Decision-Making Process A five-step process used by consumers when buying goods or services.

5 Consumer Decision-Making Process Need Recognition Cultural, Social, Individual and Psychological Factors affect all steps Information Search Evaluation of Alternatives Purchase Postpurchase Behavior Marketing

6 The Case of Buying a New Car Ms. Goodman has been teaching at City College for ten years. She commutes every day, (and two times on Monday), from North Bay. She currently owns a Buick convertible which gets horrible gas mileage. (too cold to drive in SF with the top down) The lease is up on her car in one month, and she has decided it is time to get a new one. Debbie, her running buddy, suggested that she consider a hybrid, because they get great gas mileage. Her husband thinks it is time to drive something more practical and can hold her three boys.

7 Need Recognition Need Recognition Result of an imbalance between actual and desired states. Want The new way that a consumer addresses the need

8 Need Recognition Triggered when a consumer is exposed to either an internal or external stimulus Present Status Preferred State Marketing helps consumers recognize an imbalance between present status and preferred state.

9 Internal Stimuli Occurrences you experience I m hungry I m thirsty My socks are not white I m getting married I have a cold NEEDS My 16 year old just got a drivers license and wants the car External Influences from the outside Package Design Ads/brand name Recommendation from a friend Friend recommendations Car dealerships in the mall Online search Trend toward driving an electric car

10 Need Recognition Lease is up Gas Mileage Room for the three boys Never have the top down Image Cost

11 Recognition of needs and wants When a current product isn t performing properly When the consumer is running out of a product When another product seems superior to the one currently used

12 After recognizing a need, customers search for information

13 Information Search Two sources to search for information Internal Information Search External Information search

14 Internal Search Recall information stored in memory Scanning one s memory to recall previous experiences with products or brands. Sufficient for frequently purchased products. Knowing enough about the product/service to feel confident in purchase decision

15 External Search When past experience or knowledge is insufficient Risk of making a wrong purchase decision is high Personal sources, such as friends and family. Public sources, including various product-rating organizations such as Consumer Reports. Marketer-dominated sources, such as advertising, company websites, and salespeople

16 Information Search Internal Information Search Hondas and Toyotas get great gas mileage Prius has a new roomy model (because my friend drives one) Nissan Leaf I have heard advertised Lease another convertible for a good deal Been in Debbie s Honda hybrid Insight is nice Tesla would give me the image I m looking for External Information Search Educate about hybrid/electric cars Consumer reports source Internet has a ton of information about hybrids Ask Charlie, because he drive an electric Start paying attention to hybrid car ads/showroom

17 External Information Searches Need Less Information Need More Information Less Risk More knowledge More product experience Low level of interest Confidence in decision More Risk Less knowledge Less product experience High level of interest Lack of confidence

18 Evaluation of Alternatives to Make a Choice

19 Evoked Set Evoked Set Group of brands, resulting from an information search, from which a buyer can choose Need Recognition Cultural, Social, Individual and Psychological Factors affect all steps Information Search Evaluation of Alternatives Purchase Postpurchase Behavior

20 Evaluation of Alternatives and Purchase Evoked Set Analyze product attributes Use cutoff criteria Purchase! Rank attributes by importance

21 Analyzing Product Attributes The goal of the marketing manager is to determine which attributes have the most influence on a consumer s choice and design a marketing mix that stresses those attributes to the consumer. Fuel Efficiency Size/horsepower Performance Entertainment features Navigation features Safety Appearance & Comfort Reliability Affordability Energy Efficiency Versatility Pro-environmentalist

22 Analyze Product Attribute Attribute Rank Scale 1-10 Size/Horsepower Performance Entertainment Navigation Reliability Safety Affordability Energy Efficiency

23 Use Cut-Off Criteria Gas mileage (60 MPG) Size Cost (under $40,000) Reliability Entertainment features Cute and Sporty Navigation features Environment

24 Ranking of attributes by importance 1. Gas mileage 2. Sporty & cute 3. Size 4. Navigation features 5. Entertainment features

25 Toyota`s hybrid market has been segmented according to the buyers behavior Buyers who are pro environmentalists Buyers who want great gas mileage - -an estimated 50 miles per gallon. Sexy, cute, sporty, fun

26 Marketers job: determine product attribute analysis

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38 Billboard

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40 Prius Driving Blog & News

41 PriusChat

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43 Travie McCoy

44 Instagram mom

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46 Purchase

47 Purchase To buy or not to buy... Ultimately, the consumer has to decide whether to buy or not buy.

48 Purchase 1. Whether to buy 2. When to buy 3. What to buy (Product type and brand) 4. Where to buy (type of retailer, specific retailer, online or in store) 5. How to pay

49 When buying products, customers expect certain outcomes from the purchase

50 Cognitive Dissonance Cognitive Dissonance Inner tension that a consumer experiences after a recognizing an inconsistency between behavior and value or opinions.

51 Consumers can reduce dissonance by: Seeking information that reinforces positive ideas about the purchase Avoiding information that contradicts the purchase decision Revoking the original decision by returning the product Marketing can minimize through: Effective Communication Follow-up Guarantees Warranties

52 When buying products, customers expect certain outcomes from the purchase

53 Types of consumer buying decisions Customer Involvement

54 Consumer Buying Decisions and Consumer Involvement Routine Response Behavior Limited Decision Making Extensive Decision Making Less Involvement More Involvement

55 Routine Response Behavior Little involvement in selection process Frequently purchased low cost goods May stick with one brand Buy first/evaluate later Quick decision

56 Limited Decision Making Low levels of involvement Low to moderate cost goods Evaluation of a few alternative brands Short to moderate time to decide

57 Extensive Decision Making High levels of involvement High cost goods Evaluation of many brands Long time to decide May experience cognitive dissonance

58 Continuum of Consumer Buying Decisions

59 Five factors determining the level of involvement 1. Previous experience with the product 2. Interest 3. Perceived risk of negative consequences 4. Financial risk 5. Social risk 6. Psychological risk 7. Psychological visibility

60 Not All Involvement Is The Same Product Involvement Situational Involvement Shopping Involvement Enduring Involvement Emotional Involvement

61 High Involvement Extensive and informative promotions Highlight benefits and advantages for owning the product Explain uses, customizable, unique Low Involvement Remember consumers may not know they need, until in the store In-store promotions important Package design eyecatching, easy to read, recognized Coupons, cent-off deals, 2- for-1 to incent trial Marketing strategy varies according to the level of involvement with the product.

62 Exhibit 6.4 Factors That Affect the Consumer Decision Journey LO 5 Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 63

63 Subculture and Social Class LO 6 Subculture: Homogeneous group of people who share elements of the overall culture as well as cultural elements unique to their own group Social class: Group of people in a society Considered nearly equal in status or community esteem Regularly socialize among themselves both formally and informally Share behavioral norms Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 64

64 Exhibit 6.5 U.S. Social Classes LO 6 Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 65

65 Impact of Social Class on Marketers LO 6 Social class indicates which medium to use for advertising Knowing what products appeal to which social classes help marketers determine where to best distribute their products Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 66

66 Social Influences LO 7 Reference groups Opinion leaders Family members Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 67

67 Exhibit 6.6 Types of Reference Groups LO 7 Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 68

68 Individual Influences LO 8 Gender Age Life cycle Personality Self-concept Lifestyle Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 71

69 Psychological Influences LO 9 Perception Motivation Learning Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 72

70 KEY TERMS Consumer behavior Value Perceived value Utilitarian value Hedonic value Consumer decisionmaking process Need recognition Want Stimulus Internal information search External information search Nonmarketing-controlled information source Marketing-controlled information source Evoked set (consideration set) Cognitive dissonance Involvement Routine response behavior Limited decision making Extensive decision making Showrooming Culture Subculture Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 73

71 KEY TERMS Social class Reference group Primary membership group Secondary membership group Aspirational reference group Norm Nonaspirational reference group Opinion leader Socialization process Separated self-schema Connected self-schema Personality Self-concept Ideal self-image Real self-image Perception Selective exposure Selective distortion Selective retention Motive Maslow s hierarchy of needs Learning Stimulus generalization Stimulus discrimination Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 74

72 SUMMARY Consumers follow the consumer decisionmaking process while making a purchase Consumer decisions fall under a continuum of three categories Marketers are reconceptualizing the consumer decision-making process Consumers seek out the opinions of others to reduce their search and evaluation effort Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 75

73 Copyright 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG11 CH6 76

74 End

75 Culture and Values Culture Set of values, norms, attitudes, and other meaningful symbols that shape human behavior and the artifacts, or products, of that behavior as they are transmitted from one generation to the next.

76 Culture is... Pervasive Functional Learned Dynamic 5

77 Subculture Subculture A homogeneous group of people who share elements of the overall culture as well as unique elements of their own group.

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79 Social Class Social Class A group of people in a society who are considered nearly equal in status or community esteem, who regularly socialize among themselves both formally and informally, and who share behavioral norms.

80 Social Class Measurements Occupation Income Education Wealth Other Variables

81 The Impact of Social Class on Marketing Indicates which medium to use for advertising Helps determine the best distribution for products

82 Factors that Affect Consumer Decision-Making Process Social Influence Reference Groups Opinion leaders Family Cultural Factors Culture & Values Subculture Social Class Individual Factors Gender Age and family life cycle stage Personality Self-concept Lifestyle CONSUMER DECISION- MAKING PROCESS Psychological Factors Perception Motivation Learning Beliefs & Attitudes

83 Social Influences Reference Groups Opinion Leaders Family Members

84 Reference Group Reference Group A group in society that influences an individual s purchasing behavior.

85 Types of Reference Groups Reference Groups Direct Faceto-Face membership Indirect Nonmembership Primary: small, informal group Secondary: large, formal group Aspirational Group that someone would like to join Nonaspirational Group with which someone wants to avoid being identified

86 Reference Groups - Direct

87 Indirect- nonmembership

88 What Makes UGG Boots so popular?

89 Influences of Reference Groups They serve as information sources and influence perceptions. They affect an individual s aspiration levels. Their norms either constrain or stimulate consumer behavior.

90 Opinion Leaders Opinion Leaders An individual who influences the opinion of others.

91 Opinion Leaders are the first to try new products and services out of pure curiosity. can be challenging to locate. Marketers are increasingly using blogs, social networking, and other online media to determine and attract opinion leaders. 6

92 Family Initiators Purchase Process Roles in the Family Influencers Decision Makers Purchasers Consumers

93 Opinionated Mom

94 Individual Influences Gender Age Life Cycle Personality Self- Concept Lifestyle 7

95 Age and Family Life Cycle Stage Consumer tastes in food, clothing, cars, furniture, and recreation are often age related. Marketers define target markets according to life cycle stages such as young singles or young married with children. 7

96 Personality, Self-Concept, and Lifestyle Personality combines psychological makeup and environmental forces. Human behavior depends largely on self-concept. Self-concept combines ideal self-image real self-image. 7

97 Psychological Influences Perception Motivation Learning Beliefs & Attitudes 8

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99 104 Perception Selective Exposure Selective Distortion Selective Retention Consumer notices certain stimuli and ignores others Consumer changes or distorts information that conflicts with feelings or beliefs Consumer remembers only that information that supports personal beliefs 8

100 Marketing Implications of Perception Important attributes Price Brand names Quality and reliability Threshold level of perception Product or repositioning changes Foreign consumer perception Subliminal perception 8

101 Types of Learning Experiential Conceptual An experience changes behavior Not learned through direct experience 8

102 Individual Influences on Consumer Buying Decisions Identify and understand the individual factors that affect consumer buying decisions