Unit 2

Consumer Decision Making

 What is a Consumer Decision?
In the most general terms, a decision is the selection of an option
from two or more alternative choices

A consumer decision refers to the entire process a person goes

through when choosing to buy a product or service, from
recognizing a need to evaluating their satisfaction after the
purchase
A consumer decision exists, only
when there are alternatives to
choose from (e.g., buy vs not
buy, brand X vs Y). If no
alternatives exist and the
consumer is forced into one
option, it’s a ‘Hobson’s Choice’
— not a true decision
Quick Activity
• One recent Hobson’s Choice you faced as consumers
• One recent real decision with multiple alternatives
Levels of Consumer Decision Making
How complex a consumer’s decision-making is depends on:
• Clarity of criteria → How well-defined are their selection
standards?
• Availability of information → How much do they know about each
brand?
• Breadth of choice set → How many brands are actually being
considered?
 Decision Making Roles
Decision-making roles in consumer behavior describe the different
functions individuals play when a purchase is made

The significance and involvement of these roles can vary depending

on the nature of the purchase
• Low-involvement purchases: one person might take on all roles, and the
decision is often quick and habitual
• High-involvement purchases: For significant purchases, multiple
individuals typically fill different roles, leading to a longer decision
process involving research and comparison
Think of the last family purchase you made
Who made the decision?
Share the process
 Decision Making Roles
• Initiator → Starter
Example: Child asks parents for a new gaming console
• Gatekeeper → Filter
Example: Parent controls what brands the child can explore
• Influencer → Persuader
Example: Friend recommends PlayStation over Xbox
• Decider → Authority
Example: Parent decides which console to buy
• Buyer → Purchaser
Example: Parent goes to the store/online to place the order
• User → Consumer
Example: Child uses the gaming console
 Models of Consumers
Models of Consumers refers to a general view or perspective as to
how (and why) individuals behave as they do

We will examine models of consumers in terms of the following four

views:
1. An Economic View
2. A Passive View
3. A Cognitive View
4. An emotional View
 Economic View
Consumers are rational decision-makers who systematically evaluate
alternatives to maximize utility and minimize costs

Key Assumptions Limitations

• Perfect information availability • Assumes consumers have
• Rational comparison of complete information
alternatives • Ignores emotional and social
• Price-driven decision making factors
• Utility maximization focus • Overlooks impulse purchases
• Logical evaluation process • Doesn't account for brand
loyalty beyond rational factors
 Passive View
Consumers are vulnerable recipients of marketing efforts, easily
influenced by advertising and promotional activities
Key Assumptions Limitations
• Limited resistance to marketing • Underestimates consumer
messages intelligence and awareness
• Susceptible to persuasive • Ignores active information
advertising seeking behavior
• Passive information processing • Doesn't explain repeat purchase
• External influence drives patterns
behavior • Overlooks consumer resistance
• Minimal active decision-making to marketing
 Cognitive View
Consumers are active information processors who think, learn, and
make deliberate decisions based on knowledge and experience
Key Assumptions Limitations
• Active information seeking and • May overestimate consumer's
processing processing capacity
• Learning from experience • Doesn't fully account for
influences future decisions emotional and unconscious
• Problem-solving approach to factors
consumption • Assumes consumers always
• Memory and knowledge affect have time and motivation to
choices process information
• Systematic evaluation of • May not explain habitual or
alternatives routine purchases
 Emotional View
Consumers are emotionally driven decision-makers whose feelings,
moods, and desires significantly influence their purchasing behavior
Key Assumptions Limitations
• Emotions drive purchase • May underestimate rational
decisions decision-making capabilities
• Feelings override rational • Doesn't explain all consumer
considerations behaviors (especially routine
• Mood affects shopping behavior purchases)
• Emotional associations with • Cultural differences in emotional
brands matter expression affect applicability
• Subconscious desires influence • May not account for learning and
choices experience factors
• Four teams, each representing one consumer model:
• Team Economic (rational decision-makers)
• Team Passive (influenced by marketing)
• Team Cognitive (active information processors)
• Team Emotional (feelings-driven)
• Each team has 10 minutes to prepare arguments for why THEIR
model best explains this decision
• 2-minute presentations per team
• Open floor debate for 8-10 minutes where teams can challenge
each other
• Class voting on most convincing argument (not their own team)
 Need Recognition
• Difference between a consumer’s current state of affairs and
some state the consumer desire
 Information Search
• Prepurchase Search
• Ongoing Search
• Deliberate search
• Accidental Search
 Information Search Process

Initiation Selection Exploration Formulation Collection Presentation

 Information Search Process-Example
Stage 1 INITIATION

Consumer Situation: Priya realizes her current laptop is too slow

for MBA coursework and data analysis software.
• Feelings: Frustrated with current device, anxious about making
wrong choice
• Thoughts: "I need to research laptops, but there are so many
options"
• Actions: Starts discussing laptop needs with friends, begins to
think about requirements
Stage 2 SELECTION

Consumer Situation: Decides to focus her research on "laptops for

MBA students under one lakh rupees"
• Feelings: Optimistic after narrowing research focus, ready to start
gathering information
• Thoughts: Weighs research criteria - performance specs,
portability, battery life, budget constraints
• Actions: Sets information search parameters, asks MBA seniors
for their experiences
Stage 3 EXPLORATION (The Difficult Stage)

Consumer Situation: Researches multiple brands and reads about MacBook,

ThinkPad, Dell Inspiron, HP Spectre
• Feelings: Increasingly confused and overwhelmed - conflicting reviews,
contradictory advice
• Thoughts: "Each source says something different, I don't understand these
technical specifications"
• Actions: Reads countless reviews, compares specification sheets, watches
comparison videos
• Key Insight: More information increases uncertainty - she becomes more
confused, not clearer
Stage 4 FORMULATION (Turning Point)

Consumer Situation: Through her research, she realizes she needs to

focus on "lightweight laptops optimized for business applications and
presentations"
• Feelings: Information search becomes clearer, confidence in
research direction increases
• Thoughts: Forms specific research focus - prioritizes portability and
Office compatibility over gaming features
• Actions: Refines search criteria to focus on business-oriented laptops
Stage 5 COLLECTION

Consumer Situation: Systematically gathers detailed information

about shortlisted laptop models
• Feelings: Confident in research approach, engaged in the
information gathering
• Thoughts: Seeks specific data on battery life, weight, processor
performance for business tasks
• Actions: Collects detailed specs, reads professional reviews,
seeks hands-on experiences from users
Stage 6 PRESENTATION

Consumer Situation: Synthesizes all research into clear

understanding and recommendations
• Feelings: Satisfaction with thorough research process, clarity
about options
• Thoughts: Can articulate pros and cons of different models,
understands trade-offs
• Actions: Creates mental summary of findings, can explain
research conclusions to others
Information Search Process Mapping
Imagine you are buying a gym membership
Apply the Information Search Process
Identify what you would feel, think, and do at each stage
Work individually for 10–12 mins, then form groups of 4–5 to
compare answers.
Each group presents highlights for 1–2 stages.
At which stage do you personally feel most stuck as a consumer?
Why?
 Evaluation of Alternatives
When evaluating potential alternatives, consumers tend to use two
types of information:
1. List of brands (or models) from which they plan to make their
selection (the evoked set)
2. Criteria they will use to evaluate each brand (or model)
 Evaluation of Alternatives
Evoked Set
Specific brands (or models) a consumer considers in making a
purchase within a particular product category

Inept Set
Brands (or models) the consumer excludes from purchase
consideration as they are felt to be unacceptable

Inert Set
Brands (or models) the consumer is indifferent toward
The Evoked Set as a Subset of All Brands in a Product Class
 Criteria Used for Evaluating Brands

The criteria consumers use to evaluate the alternative products that

constitute their evoked sets usually are expressed in terms of
important attributes
 Consumer Decision Rules
(also referred to as heuristics, decision strategies, and information-
processing strategies)

These rules reduce the burden of making complex decisions by

providing guidelines or routines that make the process less taxing
Do we perform complex mental calculations every time we make a
purchase decision?
No!!

We often use other decision rules to simplify our choices

We fall back on heuristics, or mental rule of thumbs to make a

speedy decision
 Heuristics: Mental Shortcuts
• Market beliefs (Higher-priced products are higher-quality
products)
• Buying the same product, we bought last time
• We rely on product signals (a visible element that communicates
some underlying quality: like country of origin, something that
looks good must be of good quality)
• Choosing familiar brands because of habit
• Brand loyalty
 Decision Rules We Use When We Care
1. Compensatory Decision Rules
1. Simple additive rule
2. Weighted additive rule
2. Non-compensatory Decision Rules
1. Conjunctive
2. Disjunctive
3. Lexicographic
 Compensatory Decision Rules
• Giving a product a chance to make up for its shortcomings

• Simple additive rule: choosing the alternative that has the largest
number of positive attributes

• Weighted additive rule: taking into account the relative

importance of positively related attributes, essentially multiplying
the brand ratings by importance weights
 Non-Compensatory Decision Rules

• Used when people are less familiar with a product category or are
not very motivated to process complex information

• Eliminating all options that do not meet some basic standards

 Conjunctive Decision Rule
• Establishing a separate, minimally acceptable level as cut-off for
all important attributes

• If a brand or a model falls below the cutoff point on any attribute,

option is eliminated from further considerations

• It is particularly useful in quickly reducing the number of

alternatives to be considered
 Disjunctive Decision Rule
• The consumer establishes a separate, minimally acceptable cut-
off level for each attribute

• If an option meets/exceeds the cut-off established for any one

attribute it is accepted

• The consumer is willing to accept a high score on any single

attribute as a way to choose a product, even if it's weaker in other
areas
 Lexicographic Decision Rule
• Involves selecting the brand that is the best on the most important
attribute

• If two or more brands are equally good on that attribute, then

comparison is made on the second most important attribute

• The selection process goes on until the tie is broken

 Hypothetical use of decision-making rules in making a decision to purchase a smartphone

Decision Rule Mental Statement

Compensatory Rule I selected the smartphone that came out best when I balanced the good
ratings against the bad ratings
Conjunctive Rule I selected the smartphone that had no bad features

Disjunctive Rule I picked the smartphone that excelled in at least one attribute

Lexicographic Rule I looked at the feature that was most important to me and chose the
smartphone that ranked highest
Affect Referral Rule I bough the brand with the highest overall rating
 Applying Decision Rules
In applying decision rules, consumers may at times attempt to
compare dissimilar (non comparable) alternatives.
Eg: buying a raincoat or a new overcoat

In such situations, a consumer might weigh the alternatives in

terms of which alternative would offer more pleasure or which, if
either, is more of a “necessity”
 A Series of Decisions
In reality, a purchase can involve a number of decisions

Example: when purchasing an automobile, consumers are involved

in multiple decisions (foreign v/s domestic, dealer, financing, etc)
 OUTPUT
The output part of the consumer decision-making model concerns
two closely associated kinds of post-decision activity:

Purchase behavior

Post-purchase behavior
 Purchase Behavior
Consumers make three types of purchases:
1. Trial Purchases
2. Repeat Purchases
3. Long-term commitment purchases
 Post-Purchase Evaluation
Three possible outcomes of these evaluations:
1. Neutral feeling
2. Positive disconfirmation of expectations (satisfaction)
3. Negative disconfirmation of expectations (dissatisfaction)
 Cognitive Dissonance
Term coined by Leon Festinger in 1957

It is said to occur in consumer decision-making when there is a

discrepancy between the decision-making process and the final
choice of the brand made by the consumer

It applies to high-involvement products, especially those involving

self-esteem and social visibility
Post-purchase Dissonance: Satisfaction to Retention to Repeat Purchases
 Consumer Value
Consumer value is a customer's perceived worth of a product or
service, determined by the benefits they receive compared to the
costs they incur (monetary, time, energy)

This value is subjective, as it varies among individuals based on

their unique needs, preferences, and expectations