Concepts Of Consumer Decision Making For MBAs

Q. Discuss the factors that can influence consumer decision-making?
Ans: Consumer decision making is influenced and shaped by many
factors and determinants that fall into three categories:

a. Individual differences
b. Environmental influences
c. Psychological processes.

a. Individual Differences
There are five major categories of individual differences, which
affect behaviour, viz.
(a). Demographics, psychographics, values and personality:
The decision processes and buying behaviour gets very much affected by how people differ. These variables include what has come to be known as psychographic research to probe into those individual traits, values, beliefs, and preferred behaviour patterns that correlate with behaviour in market segments.
(b). Consumer resources: Each person brings three primary
resources into every decision-making situations:
(1) time,
(2) money, and
(3) information reception and processing capabilities or attention.
Generally there are distinct limits on the availability of each, thus requiring some careful allocation.

(c). Motivation: Psychologists and marketers alike have conducted a wide variety of studies to determine what takes place when goal-directed behavour is energized and activated.
(d). Knowledge: Knowledge is defined as information stored in memory. It encompasses a vast array of items such as the availability and characteristics of products and services; knowledge and information to consumers so as to assist them with decision-making, especially in extended problem solving.
(e). Attitudes: Behaviour is strongly influenced by attitudes toward a given brand or product. An attitude is simply an overall evaluation of an alternative, ranging from positive to negative. Once formed, attitudes play a directive role on future choice and are difficult to change.

b). Environmental Influences:
The decision process behaviour of consumers is also influenced by environmental factors which include culture, social class, family, personal
influence and situation.

(a). Culture: Culture refers to the values, ideas, artifacts, and other meaningful symbols that help individuals communicate, interpret, and evaluate as members of society.
(b). Social class: Social classes are divisions within society that comprise individuals sharing similar values, interests, and behaviours. the types of beverages served, the make and style of car driven, the kind of food liked, and the styles of dress preferred.
(c) Family: Since the field of consumer research was founded, the family has been a focus of research. the family often is the primary decision making unit, with a complex and varying pattern of roles and functions..
(d). Personal influence: As consumers, those with whom we closely associate perceived pressures to conform to the norms and expectations provided by others-seeking and taking their counsel on buying choices, observing what others are doing as information about consumption choices, and comparing their decisions to those of others.
(e). Situation: Behaviours change as situations change. Sometimes these changes are erratic and unpredictable, such as job layoff, and at other times, they can be predicted by research. Situation is treated as a research variable in its own right.
c. Psychological Processes:
At the end, those who wish to understand and influence consumer behaviour must have a practical grasp of three basic psychological processes:
(a). Information processing: Communication is a bottom line marketing activity. Therefore, consumer researchers have long been interested in discovering how people receive, process, and make sense of marketing
communications.
(b). Learning: Anyone attempting to influence the consumer is trying to bring about learning, the process by which experience leads to changes in knowledge and behaviour.
Learning theory is relevant, especially for those products and services bought on the basis of relatively little reflection and evaluation.
(c). Attitude and behaviour change: Changes in attitude and
behavour are an important marketing objective that reflects
basic psychological influences and have been the subject of
decades of intensive research.


Q: Discuss the Types of decision behaviour?
Ans: Sometimes consumers undertake a complex decision process
requiring substantial amounts of time and energy.
In situations in which consumers are making a decision for the first time,
actions must be based on some form of problem solving. When this process is very complex, it is called extended problem solving (EPS).

Limited problem solving (LPS), however, represents a lower degree of complexity.
At the lowest end of the continuum stands what is known as routinised
response behaviour (RRB)

Initial Purchase
We will now distinguish these three major types of buying
behaviour:
(1) Routinised response behavior (RRB)/ Habitual buying
behavior: This is the simplest type of behaviour. This occurs when the consumer already has some experience of buying and using the product. Usually, this kind of behaviour is adopted for the purchase of low cost,
frequently used items The degree of involvement in buying such
products is low.
In such a case, the marketer has to ensure two tasks:
(a) The marketer must continue to provide
satisfaction to the existing customers by maintainingquality, service and value.
(b) He must try to attract new customers by making use of sales promotion techniques like points of purchase displays, off-price offers, etc., and also introduce new features to the products.

(2) Limited problem solving (LPS)/ Dissonance reducing
buying behavior: In this type of buying behavior, the
consumer is familiar with the product and various brands
available, but has no established brand preference. Here the
buyer is more complex as compared to routine buying
behavior because the consumer is confronted with an
unfamiliar brand in a familiar product class.
Limited problem solving also takes place when a consumer encounters an unfamiliar or new brand in a known product category.
The housewife, who buys refined vegetable oil, on her next visit to the
market, sees a new brand of oil, Saffola. Apart from buying a new brand, this brand of oil also claims the unique attribute of being low in cholesterol.
(3) Extensive problem solving (EPS)/Complex buying behavior: This buying is referred to as a complex buying behavior because the consumer is in an unfamiliar product class and is not clear about what criteria to consider for buying. Extensive problem solving occurs when the consumer is encountering a new product category. He needs information on both the product category as well as the various brands available in it. This kind of decision is the most complex type.

Repeat Purchases
Most purchases are repeated over time. When repeat purchases occur, there are two possibilities:
(a) repeated problem solving, and
(b) habitual decision-making.
(a) Repeated Problem solving: Repeat purchases often require continued problem solving. Several factors including dissatisfaction with a previous purchase resulting in a brand switch or retail stock outs when the retailer
doesn’t have product available can lead to this outcome.
(b) Habitual decision making: Habitual takes different
forms, depending on the decision process followed in the
initial purchases:
· Brand loyalty/Company loyalty: Consumers have certain
expectations about the products they buy and the retailers
from whom they buy.
·
Inertia: There are certain categories of products in which
there is limited brand loyalty, for instance toothpaste.
Where any degree of loyalty does not exist, it mostly
consists of several brands, all of which are about equal.
Buying habits of this type are based on inertia and are
unstable.

Q: Describe the factors, which influence the degree of active
Reasoning in process of decision making?
Ans: There are three factors, which influence the degree of active
reasoning that is undertaken by the consumer in his process of decision-making. These are:
i. Involvement
ii. Alternative differentiation, and
iii. Time pressure

i. Involvement:
Involvement is the level of perceived personal importance and/or interest evoked by a stimulus within a specific situation.

When a product is perceived to be of great importance to the customer, such as personal clothing, or its purchase involves a great deal of money risk such as jeweler, car, house, company shares, the level ofinvolvement in making the decision is likely to be very high. personality or their purchase involves small amounts of money or the risks associated with them is not high, Some of them are as under:
(i). Personal factors: The degree of involvement is
higher when the outcome of the decision affects the person
directly. Personal factors include self-image, health, beauty,
or physical condition. it is strongest when the product or service is perceived as enhancing self image.
When that is the case, involvement is likely to be enduring and no function as a stable trait, as opposed to being situational or temporary

(ii). Product factors: Products or brands also become
involving if there is some perceived risk in purchasing and
using them.
Many types of perceived risks have been identified, including physical (risk of bodily harm), psychological (especially, a negative effect on self-image), performance (fear that the product will not perform as
expected), and financial (risk that outcomes will lead to loss of earnings).

(iii). Situational factors: Situational or instrumental involvement includes factors such as whether the product is purchased for personal use or as a gift, and whether it is consumed alone or with others.
Situational involvement changes over time: it may be strong on a temporary basis and wanes once purchasing outcomes are resolved.

ii. Alternative Differentiation: When the consumer perceives that the
various alternatives which are available are very different from one another in terms of their features and benefits offered, he is likely to spend more time in gathering information about and evaluating these different features.
iii. Time pressure: When you are under pressure to make a
decision, you cannot afford to spend a long time finding
out about the various products or brands.