Decision Making

36 terms by IvoryW1

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Stages of Decision Making

1.) Problem Recognition
2.) Information Search
3.) Evaluation of Alternatives
4.) Product Choice
5.) Outcomes

Common Perspectives of Decision Making

• RATIONAL perspective
• BEHAVIORAL influence perspective
• EXPERIENTIAL perspective

Relationship between type of consumer buying decision & effort

Depending on the type of product the consumer is choosing, they use one of these types of problem solving:
*Extended problem solving
*Limited problem solving
*Habitual decision-making

How & how much do we search?

We search more when purchase is important, expensive, if we have more of a need to learn about the purchase, when there is perceived risk about a purchase, or when it's easy to obtain relevant info. See Information search and types of...

Biases

Affect belief formation surrounding decision-making and include:
1.) Sunk Cost fallacy
2.) Hyperopia
3.) Loss Aversion
4.) Prospect Theory

Heuristics

Mental rules of thumb that enable us to make speedy decisions. We rely on these when limited problem solving occurs prior to making a choice. Examples include...
• Product signals
•Covariation
•Market beliefs
•Country of origin
•Ethnocentrism

Consumer Hyperchoice

Having too many options (product & services) to choose from.

Noncompensatory rules, Types of

When we feel that a product with a low standing on one attribute can't compensate for this flaw even if it performs better on another attribute, we use noncompensatory rules like...
1.) Lexicographic rule
2.) Elimination by aspect rule
3.) Conjunctive rule

Compensatory Decision rules, Types of

These rules give a product a chance to make up for its shortcomings. Consumers who employ these rules tend to be more involved in the purchase, so they're willing to exert the effort to consider the entire picture in a more exacting way.
•Simple additive rule - choosing the alternative that has the largest # of positive attributes.
•Weighted additive rule - assigning importance weights to attributes and multiplying them (like the multiattribute attitude model).

Problem Recognition

How we recognize a problem/need for a product (ex: An upcoming wedding we'll attend, we don't have a dress or suit to wear - this is the problem/product we need) in the decision making process.

Information Search

How we search for info about product choices (For a suit/dress choice, we need to educate ourselves on options, we seek out magazines, style shows online/TV, etc.) in the decision making process. If a product is important/complex/or expensive, we tend to spend more time searching & evaluating it.

Evaluation of Alternatives

How we evaluate alternatives to arrive at a choice in the decision making process: If the product is important/complex/expensive & is something the public at large will see, we spend more time evaluating the alternatives to make the "right" choice.

Product Choice

The array of products and services consumers can choose from in the decision making process.

Outcomes

The choices (products & services we end up purchasing) we make in the decision making process.

RATIONAL perspective

A common perspective of decision making: A view where consumers calmly, carefully integrate as much info as possible with what they already know about a product, weigh the pros and cons of each alternative, then make a satisfactory decision.
*This uses the "economics of information" approach.

BEHAVIORAL influence perspective

A common perspective of decision making. These decisions are made under conditions of low involvement, or they are decisions made on the basis of learned responses to environmental cues (like purchasing on impulse).

EXPERIENTIAL perspective

A common perspective of decision making. These decisions are made with a Gestalt or totality perspective - the consumer is highly involved in decision but cannot explain decision rationally.

Extended problem solving

A process where a consumer uses lot of effort to make a product choice. Decisions involving this kind of process correspond most closely to the Traditional Decision-Making Perspective.
This process is used when the decision relates to our self-concept or the outcome is risky in some way (expense, socially awkward, etc.)

Limited problem solving

A process where a consumer uses a medium amount of effort to make a product choice. Typically this process is simpler or more straightforward than extended problem solving. The consumer is likely to use simple decision rules/shortcuts to choose among alternatives from general guidelines.

Habitual decision-making

A process where a consumer uses a small amount of effort to make a product choice. The consumer typically makes choices with little to no conscious effort, so routine they rely on "automaticity" or choices without conscious control.

Information search

The process by which we survey the environment for appropriate data to make a reasonable decision. There are several types of information searches.
•Pre-purchase search - searching marketplace for specific info
•Ongoing search - browsing the marketplace for fun, extended effort, not short
•Internal search - scanning our own memory to assemble info about product alternatives
•Selective search - focused and efficient efforts
*External search - browsing the marketplace

Noncompensatory rules

These are rules that eliminate alternatives that are deficient on any of the criteria they've chosen.

Compensatory rules

These rules allow us to consider each alternative's good & bad points more carefully to arrive at the overall best choice; they are also more likely to apply in high-involvement situations.

Sunk-cost fallacy

A type of BIAS that makes a consumer who pays for something feel more reluctant to waste it.

Hyperopia

A type of bias that affects people in such a way that they become so preoccupied with the future they can't enjoy the present.

Loss aversion

A type of bias that makes us emphasize our losses more than our gains.

Prospect theory

A type of bias that describes how people make choices by defining utility in terms of gains & losses; we evaluate the riskiness of a decision differently if it's put to us in terms of what we stand to gain rather than what we stand to lose. Or, we value $ differently depending on its source (free $ vs. earned $).

Product Signal heuristic

These infer hidden dimensions of products from attributes we observe; the visible element is a product signal communicating some underlying quality.

Covariation heuristic

When we have incomplete product info, we base our judgments on our beliefs about the associations we have among events that may or may not actually influence one another.

Market beliefs heuristic

Assumptions about companies, products, and stores that aren't necessarily accurate. For example, the snob effect/if the price is higher the product must be better - not proven to be true.

Country of origin heuristic

This can be a determinant as consumers strongly associate certain items with specific countries.

ETHNOCENTRISM heuristic

The tendency to prefer products from one's own culture to those of other nations. For example, the "Buy American" movement.

Lexicographic Rule

A type of noncompensatory rule where selecting the brand that is the best on the most important attribute; tied attributes then spill over to the next attribute until an alternative is eliminated.

Elimination by aspect rule

A type of noncompensatory rule where evaluating attributes (as with the lexicographic method) but imposing specific conditions or cutoff conditions (the TV must have a sleep timer, etc.).

Conjunctive rule

A type of noncompensatory rule where we process product choices by brands vs. attributes.

Economics of Information

We only gather as much data as we need to, form expectations of the value of additional info, and continue to search until the rewards stop outweighing the costs of doing so.

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