2: Decision Making

Question 1

What are the 6 Stages of Decision Making?

Answer 1

1. Problem Recognition
2. Information Search
3. Evaluation of Alternatives
4. Product Choice
5. Product Consumption
6. Post-Consumption Evaluation

Question 2

How can the marketer influence problem

recognition?

Answer 2

• Social Norms & Cultural Mores

- Tactics to promote Problem Recognition:

Question 3

Problem Recognition: Which works best for Educate?

Answer 3

• Products that are complex, novel, risky, or durable

Question 4

Problem Recognition: Which works best for Remind?

Answer 4

- Products that are common, well-understood, or
frequently bought (non-durables)

Question 5

Problem Recognition: Which works best for Exaggerate?

Answer 5

• Products that are not risky or where problem is

underestimated by consumer

Question 6

Three basic factors that impact amount of

search:

Answer 6

• Optimizer or satisficer?
• Consumer expertise
• Product risk

Question 7

Information Search: Optimizing versus Satisficing?

Answer 7

Optimizers search much more
- Do consumers optimize or satisfice?
- Depends on both the importance of the purchase
to the consumer (high involvement) and their
belief that there is one BEST choice

Question 8

Information Search: How expertise impacts search?

Answer 8

Internal
- memory of own experiences, beliefs
External
- magazines, salespeople, opinion leaders, word-of-mouth

Question 9

Information Search: Four reasons why experts search more?

Answer 9

1) Economic model of search
\+ More benefits, fewer costs
2) “Knowing what you don’t know”
3) Consumption vocabulary
\+ More external search
4) Experts can do more internal search

Question 10

Information Search: How does product risk influence search?

Answer 10

Perceived Risk
- Consumers search more when the purchase
decision is seen as risky
- 5 Types of Product Risk: Monetary, Functional,
Physical, Social, and Psychological Risk
- Marketers can increase the perception of risk
- What firms want to increase search?

Question 11

Evaluation of Alternatives: Can you influence the consideration set?

Answer 11

part-list cuing effect

Question 12

Evaluation of Alternatives: Evaluative Criteria

Answer 12

• the dimensions used to judge and compare products
• just a subset of all possible dimensions
• consumer uses those that are salient

Question 13

Evaluation of Alternatives: Point of purchase

Answer 13

displays to educate consumers about key attributes

Question 14

Product Choice?

Answer 14

• Choice of option with highest utility

- Decision Framing – perceived utility

Question 15

Prospect Theory: Framing & Loss Aversion

Answer 15

-Prospect theory relies on this
value function which shows a
differential approach to valuing
gains and losses.
-Thus, framing is the way in which
a person defines a choice as a
gain or a loss.

Question 16

Prospect Theory: 4 Principles of Mental Accounting (Thaler)

Answer 16

1. Segregate gains
2. Integrate losses
3. Segregate a small
   gain from a larger loss
   (silver lining effect)
4. Integrate a small loss
   into a larger gain
   (income tax effect)

Question 17

Prospect Theory: Framing in choice…

Answer 17

Sure Thing Bias: The human tendency to
OVERWEIGHT “sure things.”
- Example: Probabilistic Insurance
- 99% à 100%
- 80% à 81%

Question 18

Prospect Theory: Framing in choice

Answer 18

• FRAMING uses the
  human tendency to
  be sensitive to
  losses.

Question 19

Post-Consumption Evaluation

Answer 19

• “Buyer’s Remorse”
  Reactance
  Cognitive Dissonance & CD Reduction

Question 20

Cognitive Dissonance:- What is dissonance?

Answer 20

-Dissonance Reduction Processes
Even-handed before, biased after
Bias? Inflate the good, ignore the bad

Question 21

How can managers facilitate reduction?

Answer 21

How can managers facilitate reduction?
 Small good things
 Mini-cooper example
 Don’t ask for an evaluation (right away)
 Land Rover example