WEEK 2: CONSUMER DECISION PROCESS The Consumer Decision Process (CDP) is a road map of consumer's minds that marketers and managers can use to help guide product mix, communication and sales strategies (ENGEL, KOLLAT & BLACKWELL): Need recognition refers to the buyer's acceptance that the category (a product or service) is necessary to remove or satisfy a perceived discrepancy between the current motivational state and the desired motivational state. Search for information: Types: • Internal: retrieving knowledge from memory or genetic tendencies. • External: collecting information from peers, family and the marketplace. Sources of information: • Marketer dominated: anything the supplier does to inform and persuade • Non−marketed dominated: friends, family, opinion leaders, media, WOM. Information processing: • Exposure * Attention * Comprehension * Acceptance * Retention Pre−purchase alternative evaluation: • Evaluative criteria: standards used to compare different products & brands. • Salient attributes: the most important. • Determinant attributes: details that determine which brand or store consumers choose . Purchase to decide whether to purchase: • Choose one retailer (catalogues, aids on TV) • In−store choices (salespersons, product displays at POP) Post−purchase evaluation: Consumption: the point at which consumers use the product − satisfied? Post−consumption evaluation: possible results: • Satisfaction: consumers' expectations are matched by perceived performance. • Dissatisfaction: experiences and performance fall short of expectations • Post−purchase regret: have I made a good decision? Did I consider all the alternatives? The highest the price, the highest this factor. Variables that shape the decision process: VARIABLES THAT SHAPE THE DECISION PROCESS 1

Individual differences: • demographics, psychographics, values, personality, lifestyle • consumer resources (time, money attention * information reception and processing capabilities) • motivation • knowledge (information stored in memory) • attitudes (overall evaluation of an alternative) Environmental influences: • culture • social class • family (the primary decision−making unit) • personal influences • situation Psychological processes • information processing • learning (process whereby experience leads to changes in behaviour) • attitude and behaviour change • NEED RECOGNITION Need recognition refers to the buyer's acceptance that the category (a product or service) is necessary to remove or satisfy a perceived discrepancy between the current motivational state and the desired motivational state. If the need is not activated, there is no business!. Options to activate it: • Product innovations. • Undermine consumers' perceptions about their actual state. • Advertising (reminding the need). Types of need recognition that can be activated: • Generic need (primary demand): demand for the product or service category as a whole, but it applies to all brands in the category . • Selective need (selective demand): occurs when the need for a specific brand within a product category is stimulated. Purchase motives that can be activated: NEGATIVE PURCHASE MOTIVES Problem removal Problem avoidance Incomplete satisfaction Mixed−approach avoidance Normal depletion

POSITIVE PURCHASE MOTIVES Sensory gratification Intellectual stimulation Social approval −− −−

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Once the need recognition has been activated, the consumer will proceed through the decision process depending on the importance of the need at the time it is activated . Aspects companies must bear in mind in building up competitive maps of consumer research: Degree: how many? Sequence: in what order? Direction: which? • PRE−PURCHASE EVALUATION The alternatives considered during decision making compose the consideration or evoked set (eg: BLs only have that brand in their consideration set). Companies are very interested in gain entry into the consideration set and sometimes it is beneficial for a company that the buyer also considers competitive brands (attraction effect): the attractiveness of a given alternative and its odds of being chosen are enhanced when a clearly inferior alternative is also considered. There are 2 options to evaluate the different choice alternatives: • Rely on pre−existing evaluations: prior consumption of the product leads to the formation of evaluation that is stored in memory. If the relevant evaluations are retrieved during internal search, then each can be compared to determine which considered alternative is most liked (eg: Coke or Pepsi, Mcdonald's or Burger King?). • Constructing new evaluations: in many circumstances consumers may be unable or unwilling to rely on their pre−existing evaluations for making a choice (eg: NCUs). There are 2 basic processes by which consumers can construct evaluations: • Categorisation process: evaluation of a choice alternative depends on the particular category to which is assigned (general product category: motorised forms of transportation; specific product category: Harley Davidson motorcycles). The phenomenon of brand extensions occurs when a well−known and respected brand from one product category is extended into other product categories. • Piecemeal process: an evaluation is derived from consideration of the alternative's advantages and disadvantages along important product dimensions . In choosing the evaluative criteria, consumers use: • Cut−offs (restrictions for acceptable performance) • Signals (product attributes that are used to infer other product attributes * eg: higher prices are often indicators of higher quality). Once the consumer has selected the different choice alternatives, he/she has to apply a decision rule, or evaluation strategies: • Non−compensatory evaluation strategies: a product weakness on one attribute cannot be offset by its strong performance on another attribute (eg: if you reduce the oil and salt in chips to make them healthier, consumers won't buy them): * Lexicographic strategy: brands are compared initially on the most important attribute. The brand perceived as superior is bought.

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* Elimination by aspects strategy: the consumer imposes cut−offs (eg: must be under £2) and if only one brand passes it will be chosen, if more than one pass then the prior strategy will be applied. * Conjunctive strategy: the consumer establishes a set of cut−offs and the brand that meets all the cut−offs will be chosen. • Compensatory evaluation strategies: a perceived weakness of one attribute may be offset by the perceived strength of another attribute: * Simple additive: the consumer simply counts or adds the number of times each alternative is judged favourably in terms of the set of salient evaluative criteria * Weighted additive: the consumer now engages in more refined judgements about the alternative's performance than simply whether it is favourable or unfavourable. These judgements are then weighted by the importance attached to the attributes. • PURCHASE: A) TYPES OF PURCHASE DECISIONS: In the purchase stage, consumers decide whether, when, what, where to buy and how to pay. The decision to buy can lead to 3 different purchasing methods: • FULLY−PLANNED PURCHASE: Both the product and brand are chosen in advance. It is more likely to occur with high involvement. Marketing tactics (sampling of products, price reductions, coupons, POP displays, other promotional activities) put efforts on loyalty. • PARTIALLY PLANNED PURCHASE: Intent to buy the product exists but brand choice is deferred until shopping, when price reductions or special displays and packaging affect. • UNPLANNED PURCHASE: Both the product and brand are chosen at point of sale (in−store marketing strategies) (eg: TPS). Sometimes, timing factors such as seasonality affect the purchase and the marketing mix: * Products: need to be available when customers need them * Promotions must run at the right time. * Price: time also affects price (eg: flights, 7−Eleven) B) STORE IMAGE (RETAIL FACTORS) AND CHARACTERISTICS: To make choices, consumers rely on their overall perception of a store when making choices. The way in which a store is defined in the shopper's mind (functional qualities + psychological attributes) is called store image, and affects the decision of purchase. Determinants of retailer success or failure: • Location: it represents the distance consumers perceive the have to travel to reach and shop at the store and it is influenced by ease of parking, ease of driving, access • Nature and quality of assortment (surtido). • Price: price promotion is not always the best strategy as it only shifts demand from one time period to another for a store (no loyalty). • Advertising and promotion for positioning of the retail brand: 4

• Image advertising: uses visual components and words that help consumers form an expectation about their experience in the store and what kinds of consumers will be satisfied with the store's experience. • Information advertising: provides detail about products, prices, hours of store operation, locations and other attributes that might influence purchase decisions. • Sales personnel: skill levels and motivation are the main factors that make a salesperson effective. The persuasion strategies (used in the transaction relationship are important in the sales success) are: perceived knowledge & expertise; perceived trustworthiness; customer knowledge and adaptability. • Services offered: depending on the type of outlet and consumer expectations, delivery, credit, overall good service. • Store atmospherics (physical store attributes): the physical properties of the retail environment designed to create an effect on consumer purchases. To the marketer, a store atmospherics can help shape both the direction and duration of consumers' attention and increase the odds that a consumer will purchase products that otherwise might go unnoticed: music, elevators, air conditioning • POP displays: POP displays increase the odds of capturing consumers' attention and therefore stimulate purchase and increase sales. This is true especially if we are analysing low−involvement and impulse products because it is a fundamental aspect whether or not consumers are aware of a product's existence, so displays and shelf−position become foremost vehicles to induce purchasing in the store (ENGEL et al refer to it as in−store stimuli). It is important at the exposure step in the psychological process, • Store layout: It is referred to the location of items within the store, related with the size of the outlet and the maximisation of the traffic flow through the store (eg: placing the tills where consumers have to walk as many aisles as possible). • Store atmosphere (environment): aspects that affect the shopper's mood and willingness to visit and linger: lighting, presentation of merchandise, colours, music it can affect either quick or slow purchases • Store clientele: a customer matches one−self image with the rest of buyers in the store, and it can make it to avoid one store or to choose it. • Consumer logistics: it is the speed and ease with which consumers move through the retail and shopping process. It contains 7 primary consumer stages: • Preparation to shop. • Arriving at. • Entering the shop / store. • Movement through the store. • Check−out (pasar x caja) • Travel home and home warehousing • Inventory stock−outs In general, stores are adding technology, personnel and training to increase service and decrease the time consumers spend waiting in the store and at check−out (eg: checkers throughout the store for customers to check prices). • POST−PURCHASE−PROCESS: CONSUMPTION & EVALUATION 5.1 CONSUMPTION The consumption activity needs to cause a feeling in the consumer. Depending on the nature of the 5

consumption experience, companies may find it beneficial to position their products based on the feelings experienced during consumption: • To focus on the positive feelings that consumption provides. • To focus on how the product reduces / eliminates negative feelings. There are 3 types of consumption experiences: • Positive reinforcement • Negative reinforcement • Punishment

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−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−− 5.2 POST−CONSUMPTION (EVALUATION) Customer satisfaction is very important: • It influences repeat buying. • It shapes WOM communications. • Dissatisfaction leads to complaints. • Implications for competitive strategy: by identifying why competitors' customers are dissatisfied, a company can develop a strategy the enables it to steal the business. Moreover, the company can advertise how happy are its customers. Satisfaction depends on a comparison of pre−purchase expectations to actual outcomes resulting on positive disconfirmation (more than expected); negative disconfirmation (less than expected) or confirmation (product's performance = expectations). Companies should DO to keeping customers • Make individualised marketing a reality. • Institute a total quality control policy (TQM). • Introduce an early warning system to identify problems (before loosing the customer). • Build realistic expectations (exaggeration causes unhappiness). • Provide guarantees. • Provide information on product use (to ensure the best possible performance − client is happy − repurchase). • Solicit customer feedback. • Acknowledge, address and rectify consumer complaints (eg: customer services department). • Reinforce customer loyalty (eg: a letter from the insurance company offering special promotions). Advertising, salesperson, web−sites Salient attributes in a car: price, reliability. Determinant attributes: styles, finish of the car. Lifestyle: patterns in which people live and spend time and money. Psychographics is the technique to measure lifestyles 6

An ad of McDonald's can activate the need for burgers in general. Depletion = agotamiento o reducción (Spanish). Eg pre−purchase search: read a automobile magazine because of the forthcoming purchase of a car. Eg on−going search: reading that magazine for their own sake. Eg: in deciding among cars, particular criteria in evaluating choice alternatives can be: safety, price, brand name, COO effect Defer: postergar IB 326 Buyer Behaviour (week 2): Consumer decision process −− page 8 NEED RECOGNITION INTERNAL SEARCH Successful enough?? DETERMINANTS: • Existing knowledge • Retrieval ability NO EXTERNAL SEARCH YES MAKE DECISION PRE−PURCHASE SEARCH (info to purchase) ON−GOING SEARCH (to collect info for future purchases) • Brands • Stores • Attributes • Sources • Time OPERANT BEHAVIOUR ANTECEDENT STIMULI

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PRESENTATION OF POSITIVE REINFORCEMENT POSITIVE REINFORCEMENT REMOVAL OF ADVERSE STIMULUS OPERANT BEHAVIOUR NEGATIVE REINFORCEMENT ANTECEDENT STIMULI PRESENTATION OF ADVERSE STIMULUS OPERANT BEHAVIOUR ANTECEDENT STIMULI PUNISHMENT INDIVIDUAL DIFFERENCES • Consumer resources • Knowledge • Attitudes • Motivation • Personality, values & lifestyles ENVIRONMENTAL INFLUENCES • Culture • Social class • Personal influence • Family • Situation PSYCHOLOGICAL PROCESSES • Information processing • Learning • Attitude & behaviour change NEED SEARCH ALTERNATIVE EVALUATION PURCHASE CONSUMPTION & POST−CONSUMPTION EVALUATION

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