CHAPTER 6 CONSUMER DECISION MAKING

The Importance of Understanding Consumer Behavior

Consumers’ product and service preferences are constantly changing. Marketing managers must
understand these desires in order to create a proper marketing mix for a well-defined market. So, it is
critical that marketing managers have a thorough knowledge of consumer behavior. Consumer behavior
describes how consumers make purchase decisions and how they use and dispose of the purchased
goods and services. It also includes factors that influence purchase decisions and product use.

Shaping Public Policy and Educating Consumers

Understanding consumer behavior can also help the government make better public decisions and aid in
educating consumers against buying and using goods and services that may injure their health or hurt
society. Research on childhood obesity has led to public service advertising campaigns targeted toward
parents to help them plan healthy diets for their children.

The Consumer Decision-Making Process

When buying products, particularly new or expensive items, consumers generally follow the consumer
decision making process. This is a five step process used by consumers when buying goods or services.

1. Need Recognition occurs when consumers are faced with an imbalance between actual and
desired states that arouses and activates the consumer decision making process.
 A want is the new way that a consumer goes about addressing a need.
 Need recognition is triggered when a consumer is exposed to either an internal or an
external stimulus.
 Internal stimuli are occurrences you experience; such as hunger or thirst. External stimuli
are influences from an outside source such as someone’s recommendation of a new
restaurant, the color of an automobile, the design of a package, a brand name mentioned by
a friend or an advertisement on television or radio.
 The imbalance between actual and desired states is sometimes referred to as the “want-got
gap.”
 There is a difference between what a customer has and what he or she would like to have.
This gap doesn’t always trigger consumer action.
 The gap must be large enough to drive the customer to do something.
 A marketing manager’s objective is to get consumers to recognize this want-got gap.
 Advertising and sales promotion often provide this stimulus
 Marketing managers can create wants on the part of the consumer
 A want can be a specific product or it can be for a certain attribute or feature of a product.
 Understanding needs and wants. If marketers don’t properly understand the target market’s
needs, the chances are good that the good or service may not be produced.
2. Information Search. After recognizing a need or want, consumers search for information about
the various alternatives available to satisfy it.
 An information search can occur internally, externally or both.
o In an internal information search, the person recalls information stored in the
memory from previous experience with a product.
o External information search seeks information in the outside environment.
 The extent to which an individual conducts an external search depends on
his or her perceived risk, knowledge, prior experience and level of interest
in the good or service.
 As the perceived risk of the purchase increases, the consumer enlarges the
search and considers more alternative brands.
 A consumer’s knowledge about the product or service will also affect the
extent of an external information search. A consumer who is knowledgeable
and well informed about a potential purchase is less likely to search for
additional information. The more knowledgeable consumers are, the more
efficiently they will conduct the search process, requiring less time to
search.
 The extent of a consumer’s external search is also affected by confidence in
one’s decision making ability. A confident consumer not only has sufficient
 stored information about the product but also feels self-assured about
making the right decision.
 Another factor influencing the external information search is product
experience. Consumers who have had a positive prior experience with a
product are more likely to limit their search to items related to the positive
experience.

Two basic types of external information sources:

 non-marketing controlled information source – not associated with

marketers promoting a product which includes personal experiences (trying
or observing a new product), personal sources (family, friends,
acquaintances and coworkers who may recommend a product or service)
and public sources.
 marketing controlled information source is biased toward a specific product
because it originates with marketers promoting the product. This includes
mass media advertising (radio, newspaper, television and magazine
advertising), sales promotion (contests, displays, premiums, etc.),
salespeople, product labels and packaging and the Internet.
o The consumer’s information search should yield a group of brands, sometimes
called the buyer’s evoked set (or consideration set), which are the consumer’s
preferred alternatives.
 having too many choices can confuse consumers and may cause delay in the
decision to buy or may even cause them not to buy at all.
3. Evaluation of Alternatives. A consumer will use the information stored in memory and obtained
from outside sources to develop a set of criteria. Exposure to certain cues in your everyday
environment can affect decision criteria and purchase.
 One way to narrowing the number of choices in the evoked set is to pick a product attribute
and then exclude all products in the set that do not have that attribute.
 Another way to narrow choices is to use cut offs. Cutoffs are either minimum or maximum
levels of an attribute that an alternative must pass to be considered
 A final way to narrow choices is to rank the attributes under consideration in order of
importance and evaluate the products based on how well each performs on the most
important attributes.
 A different way consumers can evaluate a product is according to a categorization process.
categorization can be very general or can be very specific. These categories are associated
with degrees of liking or disliking.
o When consumers rely on a categorization process, a product’s evaluation depends
on the particular category to which it is perceived as belonging.
o BRAND EXTENSIONS – one product category is extended into other product
categories. It is one way companies employ categorization to their advantage.
4. Purchase. To buy or not to buy. The consumer has to decide whether to buy or not to buy.
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
a. When a person is buying an expensive or complex item, it is often a fully planned
purchase based upon a lot of information
b. A partially planned purchase is when they know the product category they want to buy
but wait until they get to the store to choose a specific style or brand.
c. Unplanned purchase – when people buy on Impulse usually during major shopping
trips.
5. Post purchase Behavior. How well expectations are met determines whether the consumer is
satisfied or dissatisfied with the purchase.
 Price often influences the level of expectations for a product or service.
 An important element of any post purchase evaluation is reduce any doubts in the decision
made. When people recognize inconsistency between their values or opinions and their
behavior, they tend to feel an inner tension called cognitive dissonance.
Types of Consumer Buying Decisions and Consumer Involvement

Consumer buying decisions fall along a continuum of three (3) broad categories:

1. Routine response behavior. Goods and services can also be called low involvement products
because consumers spend little time on search and decision before making the purchase.
 Consumers engaged in routine response behavior normally do not experience need
recognition until they are exposed to advertising or see the product displayed on a store
shelf. Consumers buy first and evaluate later, whereas the reverse is true for extensive
decision making.
2. Limited decision making. This occurs when a consumer has previous product experience but is
unfamiliar with the current brands available.
 It is associated with lower levels of involvement because consumers expend only moderate
effort searching for information or in considering various alternatives
3. Extensive decision making. When consumer buys an unfamiliar, expensive product or an
infrequently bought item.
 This is the most complex type of consumer buying decision and is associated with high
involvement on the part of the consumer.

Factors Determining the Level of Consumer Involvement

The level of involvement in the purchase depends on the following factors:

 Previous Experience: Because of repeated experiences with a product, consumers learn to make
quick choices because of familiarity with the product. They know whether it will satisfy their
needs then they become less involved in the purchase.
 Interest: Involvement is directly related to consumer interests. If a person is highly involved in
bike racing, he will spend more time in evaluating different bikes.
 Perceived risk of negative consequences: As perceived risk in purchasing a product increases,
consumer’s level of involvement also increases. The following are the types of risks:
o Financial risk – exposure to loss of wealth or purchasing power. High risk is associated
with high priced purchases wherein consumers tend to become extremely involved.
Price and involvement are usually directly related. As price increases, level of
involvement also increases.
o Social risks – when consumers buy products that can affect people’s social opinions of
them
o Psychological risks – is consumers feel that making the wrong decision might cause
some concern or anxiety
 Social Visibility: Involvement also increases as the social visibility of a product increases.
Products on social display include clothing (designers/labeled). Items make a statement about
the purchaser so it carries a social risk.

Not All Involvement Is the Same

High involvement means that the consumer cares about a product category or a specific good or service.

 Product involvement means high personal relevance

 Situational involvement means that circumstances of a purchase may temporarily transform a
low involvement decision into a high involvement one
 Shopping involvement represents the personal relevance of the process of shopping
 Enduring involvement represents an ongoing interest in some product or activity. There is often
linkage between enduring involvement and shopping and product involvement.
 Emotional involvement represents how emotional a consumer gets during some specific
consumption activity. Emotional involvement is closely related to enduring involvement because
the things that consumers care most about will eventually create high emotional involvement.

Marketing Implications of Involvement

 For low involvement product purchases, consumers may not recognize their wants until they are
in the store.
 Marketing managers focus on package design so the product will be eye catching and easily
recognized on the shelf
 A good display can explain the product’s purpose and prompt recognition of a want.
  Coupons, cents-off deals and two-for-one offers also effectively promote to low involvement
items.
 Linking a product to a higher involvement issue is another tactic that marketing managers can
use to increase the sales or positive publicity of a low involvement product.

Factors Influencing Consumer Buying Decisions

The following factors may influence consumers in making their buying decisions:

CULTURAL FACTORS. Culture is the essential character of a society that distinguishes it from other
cultural groups. Of all the factors that affect consumer decision making, cultural factors exert the
broadest and deepest influence. It includes:

 Culture and Values

o Culture is the essential character of a society that distinguishes it from other cultural
groups. (values, language, myths, customs, rituals and laws)
o Culture is pervasive. What people eat, how they dress, what they think and feel and
what language they speak are all dimensions of culture
o Culture is functional. By establishing common expectations, culture gives order to
society.
o Culture is learned. They must learn what is acceptable from family and friends.
o Culture is dynamic. It adapts to changing needs and an evolving environment. Rapid
growth of technology in today’s world has accelerated the rate of cultural change.
Entertainment patterns and family communication changed because of television.
o Cultural norms will continue to evolve because of our need for social patterns that solve
problems
o The most defining element of culture is its values
 Value is an enduring belief shared by a society that a specific mode of conduct is
personally or socially preferable to another mode of conduct.
 Customers with similar value systems tend to react alike to prices and other
marketing related inducements
 Values also correspond to consumption patterns. e.g. Americans value
convenience (eat on the go)
o Companies expanding globally need to understand cultures of foreign countries as well.
 A firm has little chance of selling products in a culture that it does not
understand.
 Products have cultural values and rules that influence their perception and use.
 Culture must be understood before the behavior of individuals within the
cultural context can be understood.
 Language is another important aspect of culture that global marketers must
consider. General Motors discovered too late that Nova (the name of an
economical car) literally means “doesn’t go” in Spanish
 Subculture is a homogenous group of people who share elements of the overall culture as well
as cultural elements unique to their own group.
o Within subcultures, people’s attitudes, values and purchase decisions are even more
similar than they are within the broader culture.
o Once marketers identify subcultures, they can design special marketing to serve their
needs.
 Social class is a group of people who are considered nearly equal in status or community
esteem, who regularly socialize among themselves both formally and informally and who share
behavioral norms.
o Social class is typically measured as a combination of occupation, income, education,
wealth and other variables
 Educational attainment seems to be the most reliable indicator of a person’s
social and economic status.
 Marketers are interested in social class for two main reasons.
 First, social class often indicates which medium to use for advertising.
 Second, knowing what products appeal to which social classes can help
marketers determine where to best distribute their products. Affluent
Americans have changed their buying habits since the recession and are
 now willing to spend their discretionary income on travel. They also
think that brands on sale indicates poor quality.

SOCIAL FACTORS sum up the social interactions between a consumer and influential groups of people
such as reference groups, opinion leaders and family members to obtain product information and
decision approval.

 Reference Groups consist of all the formal and informal groups that influence the buying
behavior of an individual. They can be categorized as:
o Direct reference groups - are face to face membership groups that touch people’s lives
directly. They can be:
 Primary Membership Group – includes all groups with which people interact
regularly in an informal, face to face manner, such as family, friends and
coworkers. They may also communicate through mail, text messages, FB, Skype
or other electronic means.
 Secondary Membership Group – less consistently and more formally which
includes clubs, professional groups and religious groups.
o Indirect reference groups – non membership reference groups to which they do not
belong.
 Aspirational reference group – a group a person would like to join and must at
least conform to the norms of that group. Norm consists of the values and
attitudes deemed acceptable by the group.
 Non aspirational reference group or dissociative group – influences behavior
when we try to maintain distance from them. A consumer may avoid buying in
order to avoid being associated with a particular group.
 Opinion Leader is a person who influences or persuade others to purchase goods and services
o Group leader usually an individual included in a reference group
o They are often the first to try new products and services out of pure curiosity.
 Tend to possess more accurate knowledge and to be more innovative
 Because of their willingness to experiment, teenagers are key opinion leaders
for the success of new technologies.
 Family is the most important social institution for many consumers, strongly influencing values,
attitudes, self-concept and buying behavior.
o Family is responsible for the socialization process, the passing down of cultural values
and norms to children.
o Children can have great influence over the purchase decisions of their parents

INDIVIDUAL FACTORS gender, age, family life cycle stage, personality, self-concept and lifestyle

 Gender. Physiological differences between men and women result in different needs, such as
health and beauty products
 Age and Family Life Cycle Stage of a consumer can have a significant impact on consumer
behavior. Consumer tastes in food, clothing, cars, furniture and recreation are often age related.
o Family life cycle is an orderly series of stages through which consumers’ attitudes and
behavioral tendencies evolve through maturity, experience and changing income and
status.
 Young singles spend more than average on alcoholic beverages, education and
entertainment.
 New parents typically increase their spending on health care, clothing, housing
and food and decrease their spending on alcohol, education and transportation.
 After their children leave home, spending by older couples on vehicles,
women’s clothing, health care and long distance calls typically increases.
o Another way to look at the life cycle is to look at major events in one’s life over time.
Life changing events will mean new consumption patterns
 Personality, Self-Concept and Lifestyle
o Personality is a broad concept that can be thought of as a way of organizing and
grouping how an individual typically reacts to situations.
o Self-concept or self-perception – is how consumers perceive themselves.
 Self-concept includes attitudes, perceptions, beliefs and self-evaluations.
 Through self-concept, people define their identity which in turn provides for
consistent and coherent behavior
 o Self-concept combines the ideal self-image (the way an individual would like to be
perceived) and the real self-image (how an individual actually perceives himself or
herself)
 Consumers seldom buy products that jeopardize their self-image
 Many young consumers do not like family sedans like the Honda Accord
or Toyota Camry and say they would buy one for their mom but not for
themselves.

PSYCHOLOGICAL FACTORS determine how consumers perceive and interact with their environments and
influence the ultimate decisions consumer make.

 Psychological influences can be affected by a person’s environment because they are applied on
specific occasions
 An individual’s buying decisions are further influenced by psychological factors:
o PERCEPTION. The world is full of stimuli. A stimulus is a unit of input affecting one or
more of the five senses: sight, smell, taste, touch and hearing.
 The process by which we select, organize and interpret these stimuli into a
meaningful and coherent picture is called as perception.
 Perception is how we see the world around us and how we recognize
that we need some help in making a purchasing decision.
 People cannot perceive every stimulus in their environment. They use
selective exposure to decide which stimuli to notice and which to
ignore. Shape of a product’s packaging such as Coca Cola’s signature
bottle can influence perception. Color can also influence perception.
 Closely related to selective exposure are:
 Selective distortion – occurs when consumers change or distort
information that conflicts with their feelings or beliefs.
 Selective retention – is remembering only information that supports
personal feelings or beliefs.

Marketing Implications of Perception

 Marketers must recognize the importance of cues, or signals in consumers’ perception of

products.
o Marketing managers must first identify the important attributes such as price or quality
that the targeted consumers want in a product and then design signals to communicate
these attributes.
 Use price as a signal to consumers that the product is of higher quality than
competing products.
 Brand names send signals to consumers
 Consumers also associate quality and reliability with certain brand names
 Companies watch their brand identity closely in large part because a
strong link has been established between perceived brand value and
customer loyalty.
o MOTIVATION
 A motive is the driving force that causes a person to take action to satisfy
specific needs
 Maslow’s hierarchy of needs which arranges needs in ascending order of
importance; physiological, safety, social esteem and self-actualization.
 Most basic human needs – the needs for food, water and shelter
(physiological)
 Safety needs – include security and freedom from pain and discomfort
 Social needs - after physiological and safety needs have been fulfilled,
especially love and a sense of belonging become the focus; the need to
belong
 Self-actualization – highest human need. It refers to finding self-
fulfillment and self-expression, reaching the point in life at which
“people are what they feel they should be.”
o LEARNING. Almost all consumer behavior results from learning.
 It is a process that creates changes in behavior through experience and practice.
 Two types of learning:
  Experiential learning – occurs when an experience changes your
behavior.
 Conceptual learning – is not acquired through direct experience
 Repetition is a key strategy in promotional campaigns because it can lead to
increased learning.
 Consumers will learn what their unique advantage is over the
competition.
 Stimulus generalization occurs when one response is extended to a second
stimulus similar to the first.
 Well-known brand name for a family of products because it gives
consumers familiarity with and knowledge about each product in the
family.
 The opposite of stimulus generalization is stimulus discrimination which means
learning to differentiate among similar products
 Product Differentiation – is based on superficial differences
o BELIEFS & ATTITUDES
 A belief is an organized pattern of knowledge that an individual holds as true
about his or her world.
 Consumers tend to develop a set of beliefs about a product’s attributes
and then through these beliefs, form a brand image – a set of beliefs
about a particular brand.
 An attitude is a learned tendency to respond consistently toward a given object,
such as a brand.
 Attitudes rest on an individual’s value system, which represents
personal standards of good and bad, right and wrong.
 Changes in attitude tend to grow out of an individual’s attempt to reconcile long
held values with a constant stream of new information. This change can be
accomplished in three (3) ways:
1. Changing beliefs about the brand’s attributes
* First approach is tur neutral, negative or incorrect beliefs about product
attributes into positive ones.
* Changing beliefs about a service can be more difficult because service
attributes are intangible.
* Image is also intangible and significantly determines service patronage.
2. Changing the relative importance of these beliefs
* Second approach is to modify attitudes to change the relative importance
of beliefs about an attribute
3. Adding new beliefs
* The third approach is to transform attitudes to add new beliefs.