CONSUMER DECISION MAKING PROCESS

1. CONSUMER DECISION MAKING PROCESS A Paper Presentation By Momanyi, Joseph Segera

2. TABLE OF CONTENTS • 1, INTRODUCTION • 2, Decision – Making Process • 3, A problem is felt or need identified • 4, Pre-Purchase Activities or Search • 5, Making The Choice • 6, Post Purchase Dissonance • 7, Summary

3. INTRODUCTION • This topic is concerned with the ways consumers approach making purchase decisions. The methods used depend on whether the purchase is a new one or a repeat purchase, whether the product is of low purchase involvement or high purchase involvement (low cost or high cost in monetary terms)

4. Decision - Making Models • John Dewey’s model consist of the following five stages • 1, A problem is felt or need identified, (need recognized) • 2, The problem is located and defined, (Pre-Purchase Activities or Search) • 3, Possible solutions are suggested, (Evaluation and Purchase decisions) • 4, Consequences are considered, (Act of Purchase and consumption) • 5, A solution is accepted (Post Purchase Evaluation)

5. A problem is felt or need identified,(need recognized) • Problem recognition is the first stage in the consumer decision process, and it must occur before decision making can begin. The recognition of a problem is the result of a discrepancy between a desired state and an actual state that is sufficient to arouse and activate the decision process. • The kind of action taken by consumers in response to recognized problems relates directly to the situation, its importance to the consumer, and the dissatisfaction or the inconvenience created by the problem. • Without recognition of a problem, there is no need for a consumer decision. When there is no discrepancy between the consumer's desired state (what the consumer would like) and the actual state (what the consumer perceives as already existing). On the other hand, when there is a discrepancy between a consumer desire and the perceived actual state, recognition of a problem occurs. Any time the desired state is perceived as being greater than or less man the actual state, a problem has been recognized

6. Need Recognition process contd. • At the heart of the problem recognition process is the degree to which a desired condition is out of alignment with an actual condition. Consumer desires are represented as the result of the desired lifestyle of the consumer and the current situation (time pressures, physical surroundings, and so forth). Perceptions of the actual state also vary in relation • to consumer's lifestyle and the current situation.

7. Need Recognition process contd. • THE DESIRE TO RESOLVE RECOGNIZED PROBLEMS • The level of one's desire to resolve a particular problem depends on two factors: The magnitude of the discrepancy between the desired and actual states • The relative importance of the problem. An individual could desire to have a car that averages at least 25 miles per gallon while still meeting certain size and power desires. If the current car obtains an average of 24.5 miles per gallon, discrepancy exists, but it may not be large enough to motivate the consumer to proceed to the next step in the decision process.

8. Need Recognition process contd. • RECOGNITION • A discrepancy between what is desired by a consumer and what the consumer has is the necessary condition of problem recognition. A discrepancy can be the result of a variety of factors that influence consumer desires, perceptions of the existing state, or both. These factors are often beyond the direct influence of the marketing manager. • Marketing efforts such as advertising can also influence problem recognition. There are also uncontrollable factors that affect problem recognition. They relate more directly to problem recognition process.

9. Need Recognition process contd. • FACTORS INFLUENCING THE DESIRED STATE • There are many factors that can affect a consumer's lifestyle and desires. The most important of these factors are: • Culture/Social class • Reference groups • House hold characteristics • Financial status/expectations • Previous decisions • Individual development • Motives

10. Need Recognition process contd. • The situation Culture and social class • Culture/social class provides broad parameters for lifestyle and thus indicate appropriate desired states. Desired clothing, housing, food, transportation, and many other aspects of lifestyle are heavily influenced by culture. In the United States, social class exerts a similar but much less powerful influence. • Reference groups • Exert a major influence on a consumer's lifestyle which in turn can affect desires. This happens to many college students following graduation. In just a matter of days, a student's environment and major point of reference changes from the campus to the corporate environment The conspicuous differences in clothing and behaviour quickly

11. Need Recognition process contd. • Household characteristics • Characteristics such as the number and age of children determine many consumer desires. Changes in house hold characteristics produce changes in lifestyle and dramatic changes in consumer desires. Marriage and divorce creates substantial changes in the desired state for housing, home furnishings, leisure activities, and numerous other products. The birth of a child also alters needs, attitudes, and consumer lifestyles. For example, the addition of a first child often results in recognising a need for greater financial security and subsequently purchasing life insurance to reduce a discrepancy between desired financial security and an existing lack of such security.

12. Need Recognition process contd. • Changes in financial status • Changes in financial expectations can also affect consumer's desired state. A salary increase, large tax return, or anticipation of any of these can cause the consumer to change desires and decide that an existing state is Jess satisfying. For example, anticipated income has been found to have an impact on the timing of automobile purchases. Some automobile retailers take advantage of income tax refunds by advancing a down payment to individuals who have filed a return but have yet to receive the refund.

13. Need Recognition process contd. • A financial loss or a change in economy also can change consumer expectations and lead to problem recognition. In periods of rapid inflation or declining earnings, many households are forced to cut back on extras, such as entertainment, and to purchase lower quality levels of other products, such as food. For example, one survey found that 11% of the respondents were postponing their regular dental check ups, and 16% were postponing needed dental work because of tight finances.

14. Need Recognition process contd • Previous decisions affect problem recognition • The purchase of a car or home may trigger recognition of a need for financing or insurance. The purchase of a plant may lead to a desire for plant food, • Individual development can influence the desired state • It is difficult to separate individual development from associated changes in reference groups, household, lifecycle, and income. For example, with increasing maturity, excitement • and adventure appear to become less desirable.

15. Need Recognition process contd. • Motives • Motives such as those suggested by Maslow and McGuire have a major impact on the desired state. For example, Maslow holds that as a person becomes increasingly hungry,the desired state focuses primarily of being" not hungry". Once hunger is satisfied, higher order motives come to dominate the desired state. • Current situation • An individual's current situation strongly influences the desired condition. An individual with limited time may desire first service, while the same individual with more time may desire friendly service. During cold weather many people prefer hot drinks, while hot weather makes cold drinks more desirable.

16. Need Recognition process contd. • FACTORS INFLUENCING THE ACTUAL STATE • Factors beyond the control of marketers which influence perceptions of the existing state include • Past decisions • Normal depletion • Product/brand performance • Individual development • The efforts of consumer groups and government agencies • Availability of products • The current situation

17. Need Recognition process contd. • Past decisions • Determine one’s existing set of problem solution. A decision to rent rather than purchase a home or car has obvious ramifications of one's existing state with respect to home or car ownership. The sum of one's past consumption decisions (both purchases and non purchases) provides the frame work for the existing state. • Normal depletion • Is the cause of most routine problems as frequently used foods and household items are used up and need to be replaced. Depletion can also be subtle, such as need for an oil change or the replacement of a tire that is beginning to show wear.

18. Need Recognition process contd. • The performance of existing problem solution (product and brands) has an obvious impact on me actual state. Many products must perform on two levels-instrumental and expressive. Instrumental performance relates to the physical or functional performance of the product. If your car or bicycle brakes fail, its instrumental performance is inadequate. Expressive performance relates to the symbolic performance of the product If your car or bicycle does not reflect your desired self-concept, its expressive performance is inadequate.

19. Need Recognition process contd. • Normal process of individual development may alter our perceptions of our existing states. As we grow many of us experience complexion problems, weight problems, and heart and hearing problems. • With increasing concern for consumer welfare, consumer groups and many governmental agencies attempt to cause a particular type of problem recognition among consumers. The goal is to produce dissatisfaction with current solutions that are unhealthy, dangerous, or ecologically unsound. For example, the American Cancer society spends a substantial amount of effort in attempting to create dissatisfaction with the current state of affairs among cigarette smokers.

20. Need Recognition process contd. • The availability of products also affects the actual state. The absence of particular products, lack of awareness of products or brands, or inability to afford certain products affects the existing state. • The current situation has a major impact on perceptions of the actual state. The presence of others, physical conditions, temporal perspective and antecedent state are, in fact, key elements of the actual state. For example, a mood such as depression may initiate a clothing purchase. The problem in this case is an unpleasant emotional state (actual state) which the consumer attempts to resolve by doing something nice for himself or herself (purchasing a personal item)

21. Pre-Purchase Activities or Search • There are three types of decision levels that can be followed under this subtopic: 1. Habitual Decision Making 2. Limited Decision Making 3. Extended Decision Making

22. Pre-Purchase Activities or Search contd. • HABITUAL DECISION MAKING • Habitual decision making in effect involves no decision per se. a problem recognized, internal search (long term memory) provides a single preferred solution (brand), that brand is purchased, and an evaluation occurs only if the brand fails to perform as expected. Habitual decisions occur when there is very low involvement with the purchase and result in repeat purchasing behavior. • A completely habitual decision does not include consideration of the “do not purchase” alternative. For example you might notice that you are nearly out of close-up toothpaste and resolve to purchase some the next time you are at the shop. You don’t even consider not replacing the toothpaste or purchasing another brand. At the shop, you scan the shelf for close up and pick it up without considering alternative brands.

23. Pre-Purchase Activities or Search contd • BRAND LOYALTY • Consumers who are royal to certain product do not follow long pattern of activities to buy. They do not search but look for the most convenient distribution channel. • REPEAT PURCHASES • You may believe that all catsups are about the same and you may not attach much importance to the product category or purchase. Having tried Del Monte and found it satisfactory , you not purchase it using habitual decision making. • You are a repeat purchaser of Del-monte catsup , but you are not committed to it . a competitor could gain your patronage rather easily.

24. Pre-Purchase Activities or Search contd. • LIMITED DECISION MAKING • It cover the middle ground between habitual decision making and extensive decision making. In its simplest form (lowest level of purchase involvement), limited decision making is very similar to habitual decision making. Example, while in a shop you may notice a point- of –purchase display for Jell-O and pick up two boxes without seeking information beyond you memory that “Jell –O tastes good”. • You may have considered no other alternative except possible a very limited examination of a “ for not buy” option. • You may have a decision rule that buy the cheapest brand of instant coffee available. When you run low on coffee (problem recognition), you simply examine coffee prices the next time you are in the shop and select the cheapest brand. • Limited decision making is very common in daily purchases and presents the marketer with a different set of challenges than does habitual making.

25. Pre-Purchase Activities or Search contd • EXTENDED DECISION MAKING • It is the response to a very high level of purchase involvement. Extensive internal and external information search is followed a complex evaluation of multiple alternatives. After the purchase, doubt about its correctness it likely and a thorough evaluation of purchase takes place. • Products such as homes, personal computers, and complex recreational items such tents are frequently purchased via extended decision making.

26. Habitual decision making Limited decision making Extended decision making Limited decision making Internal Limited external Habitual decision making Problem recog. selective External decision making Problem recog. generic Information search Limited external Information search Internal Limited external Information search External Internal Alternative evaluation Few attributes simple Decision rules few altern. Alternative evaluation Many attributes complex Decision rules altern. Purchase Purchase Purchase Post purchase no Dissonance very limited evaluation Post purchase no dissonance limited evaluation Post purchase Dissonance complex Evaluation.

27. Making the Choice • Having gone through the procedures of collecting information, whether by lengthy search or by simply remembering all the necessary facts the consumer will make choice based on collected information. • The product has to be the right for the task and fulfill the manufacturers claims. Allowing the customer to try the product out is good means of reducing the task, so trialability is key issue in this context.

28. POST PURCHASE EVALUATION • This is the evaluation that the consumer does based on the expectation on the performance of the products. • After sales service has a strong role to play here, and ideally there should be some observability in the product if there is to be rapid diffusion of the product to the broader market.

29. SUMMARY • SUMMARY • Consumer decision making becomes more extensive and complex as purchase involvement increases. The lowest level of purchase involvement is represented by habitual decisions: a problem is recognized, long-term memory provides a single preferred brand, that brand is purchased, and only limited post purchase evaluation occurs. As one moves from limited decision making toward extended decision making, information search increases, alternative evaluation becomes more extensive and complex, and post purchase evaluation becomes more thorough.

30. SUMMARY contd.. • Problem recognition involves the existence of a discrepancy between the consumer's desired state (what the consumer would like) and the actual state (what the consumer perceives as already existing). Both the desired state and actual state are influenced by the consumer's lifestyle and current situation. If the discrepancy between these two sates is sufficiently large and important, the consumer will begin to search for a solution to the problem. Before marketing managers can respond to problem recognition generated by outside factors, they must be able to measure problem

31. SUMMARY contd.. • Recognition. Surveys and focus groups using activity, product or problem analysis are commonly used to measure problem recognition. Marketing managers often want to influence problem recognition rather than react to it. They may desire to generate generic problem recognition, a discrepancy which a variety of brands within a product category can reduce; or to induce selective problem recognition, a discrepancy which only one brand in the product category can solve.

32. References 1. Jim BlytheThe essence of consumerBehavior 2. John Dewey, How we think (Boston , MA: D.C. Health & Co. 1910) 3. Raymond A. Bauer, consumer behaviour as a risky taking 4. James F. Engel, Roger D. Blackwell and Paul W. Miniard , consumer behaviour 8th and. 5. Dr. W. Tieng’o Class and lecture notes by UEA Baraton School of Business studies 6. Louris J. Mullins, Management and Organization Behaviour 5th Edition.