Decision: Choose Canon. Decision: Choose Epson. Rate My Professors

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1 Why Study Problem Recognition? Some Problems and Solutions Market offerings are responses to consumer problems, whether real or unreal. Of importance is the consumer s perceived difference between a desired and actual state. Marketers Can Influence? What consumers see as problems. What consumers see as possible solutions. Consumers search for solutions. My car is not fast enough! Buy a faster car. Buy a car that looks faster. I am going bald! Get hair implants. Wear a hat. I am not cool. Buy trendy clothes. Get drunk and smoke. Ideal State Actual State Where we want, or think we want, to be. Based on: Simple expectations. Aspirations. Moderated by: Culture. Life Changes: Promotion, birth of child, etc. Where we are now. Based on: Basic Consumer Needs. Simple Physical Factors: Depletion and wear-out. Product malfunctions. External Stimuli: Advertising and reminders. Comparison to others; peer pressure.

2 Creating Problems for Consumers Create New Desired State: Fashion (ever-changing). Software. Create Actual State Dissatisfaction: Fear of crime: Buy club, guns, pepper spray, alarms. Fear of aging: Buy healthcare products. Join a gym. Buy anti-aging aging cream. How Consumers Search for Information INTERNAL: Searching information from memory Purchase Decision EXTERNAL: Acquire information from outside sources Internal Search (Passive) Definition: Searching for information from memory. Effort depends on importance, motivation, and experience. Biased by (among other things): Confirmation Bias: Seeking or interpreting information in a way partial to one s own expectations or beliefs. Mood: Frame of mind towards an object. External Search (Active) Types: Prepurchase: in response to problem recognition. Ongoing: on regular basis. Sources of Information: Retailers, media, interpersonal, independent, and experience. Internet: Search Advertising Display/Banner Ads. Classifieds.

3 Global Internet Statistics Perceived Costs and Benefits of Consumer Search Guide Search Effect Regions Population Internet Usage Penetration Percent Growth of World Usage 2007 Africa 933,448,292 32,765, % 3.0% 625.8% Asia 3,712,527, ,392, % 35.6% 240.7% Europe 809,624, ,722, % 28.6% 197.6% Middle East 193,452,727 19,382, % 1.8% 490.1% North America 334,538, ,057, % 21.2% 114.7% Latin America/Caribbean 556,606,627 88,778, % 8.1% 391.3% Benefits Obtained: Financial Gratification Physical Product Costs of Search: Expenses Stress Time Activities Missed Benefits vs. Costs (Worth it?) YES NO Continue Search Terminate Search Oceania / Australia 34,468,443 18,430, % 1.7% 141.9% WORLD TOTAL 6,574,666,417 1,093,529, % 100.0% 202.9% Brand Consideration Sets Awareness Set: Brands the consumer is aware of through recall or from searching. Evoked / Consideration Set: Brands the consumer might consider purchasing. Inert Set: Brands the consumer feels indifferent about. Inept Set: Brands the consumer does not want. How Do Consumers Choose After Recognizing a Problem? Brands found accidentally Unknown brands Inept Set (unacceptable) All brands in product class Brands found through search Awareness Set Inert Set (indifference) Known brands Brands recalled from memory Evoked Set (consideration) Unrecalled brands Choice

4 Alternative Evaluation Consumers compare and contrast different solutions to the same problem. Often based on quick processing: Heuristics. Other times requires effortful processing: Compensatory. Non-compensatory. Low Effort Decision-making: Heuristics Mental shortcuts for quick decision. Often based on: Price. Brand Reputation. Normative Influences. Product Features / Presentation: Used car example. Encouraging Heuristic Purchases Point-of-purchase displays. Reduced prices. In-store coupons or specials (e.g., loyalty cards). Multiple-item item discounts. Packaging. Demonstrations or free tasters (experiential). Salespeople: Empathy. Perspective Taker. High Effort Decision-making: Evaluative Attributes Evaluative Attributes: Means by which consumers compare product classes, brands, vendors, etc. Tangible Attributes: Based on things such as price, color, size, shape, and performance. Intangible Attributes: Benefits based on things such as brand image and ownership feelings.

5 Compensatory Rules Simple Additive: Total scores on all product attributes for each alternative and the highest score wins. Assumes all criteria of equal valuation. Weighted Additive: Assign relative weight to each product attribute based on perceived importance and then multiply the score by the weight to arrive at a weighted score, then sum scores and highest score wins. Simple Additive and Weighted Model Examples Epson Canon Decision: Choose Canon Weight (1-5) Epson Canon Price Weight Processor Battery Life After Sales Support Display Quality TOTAL Decision: Choose Epson Non-compensatory Rules Disjunctive: Decide which attributes are or are not determinant and then establish a minimum score for each one. Meet minimum in or do not and out. Example - Selecting a Course: Important attributes: Cuteness of the professor. Easiness of the class. Establish a minimum for each: Have a chili pepper. At least 3 / 5 easiness. Rate My Professors Non-compensatory Rules Conjunctive: Consider all attributes as determinant and then establish a minimum acceptable score for each. Meet all minima in otherwise out. Example - Selecting a Course: Establish a minimum for all attributes: Have a chili pepper. At least 3 / 5 easiness. At least 4 / 5 overall quality.

6 Non-compensatory Rules Lexicographic: Rank each attribute in order of importance. Compare alternatives using most important attributes with highest score winning. If tie for high score, subsequent most important attributes evaluated until winner emerges. Example - Selecting a Course: Most important attribute = easiness = enroll. Evaluative Attributes Typically consumers use from 4-6 criteria: Increased importance and product experience result in a greater number of criteria used. Increased importance results in fewer acceptable alternatives. Criteria may be used in combination. Evaluative Attributes (Cont.) Evaluative Attributes (Cont.) Use of price varies by product category. Price can give sense of value regardless of product quality (e.g., $1,000 suit). Price can give sense of quality regardless of product quality (e.g., wine research). Acceptable price is influenced by past purchases: Arbitrary Price Coherence. Coherent Price. Discount Range: Reciprocal Altruism. Brand Reputation: Brand names may serve as an indicator of quality and/or consistency of satisfaction, thereby lessening risk. Country-of-Origin: Globalization has resulted in the growing importance of product origin as a signal for quality and status (e.g., luxury goods).

7 Anti-Nationisms Defined a predisposition to hostility toward the XX and XX s society, a relentless critical impulse toward XX social, economic, and political institutions, traditions, and values... (Hollander 1992). an unfavorable predisposition towards XX, which leads individuals to interpret XX s actions through pre-existing existing views and negative stereotypes, irrespectively of the facts which may or may not affect political [or consumer] ] behavior. (Meunier 2005). Forms of Anti-Nationisms Structural: long-term sentiment that is rooted in major ideological, cultural, and religious differences. Difficult to address due to the nature of the differences and that the feelings are often heavily engrained in the psyche of the people having developed over a long period of time. Particularistic: relatively short-term term sentiment which is reactive to a specific event. More easily addressed as feelings have had little time to fester. Some Sources of Anti-Nationisms Business Impacts Foreign Policy: people either disagree with it or do not identify with it. Effects of Globalization: people exploited by global expansion. Cultural Pervasiveness: many feel global cultures promote values that are in conflict with local norms. Hatred of the political establishment. Just Because. Boycotts (active and passive). Erosion of Brand Power. Weakened Trade Position. Inability to Recruit Workers. Increased Security. Loss of Market Share: Competitor Opportunities.

8 Responses to anti-nationisms Direct and Collateral Brand Damage Government involvement. Businesses playing down their national roots. Businesses distancing themselves from government policy. Rational v. Irrational Decisions Consumers are not always rational. Examples: Arousal Study. Credit Study. Free Study. Credit Study Neoclassical economics assumes consumers make rational decisions. Price is assumed to serve as a rationalizing signal. Research using experiments and FMRIs found: Consumer behaviour has piggybacked on ancestral neural circuits regarding reward anticipation and hazard avoidance. Consumers do not weigh present utility against future alternatives, as assumed by neoclassical economics. Research postulates that credit modulates behaviour: Cognitively switches the con side of the purchase to a pro. Credit makes an irrational purchase a seem rational.