week 5 lecture 9 fall 2010
TRANSCRIPT
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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?