NCC5030

Executive MBA Americas

Consumer Behavior
Session 2.5
NCCB 5030-MBQC 831
Gary Orosy

Course Framework

PROD UCT
Marketing
Math SEG MENTATION

PRICE

Marketing TARG ETING

Research
PROMOTION

POSITIONING
Consumer
PLACE
Behavior

PREREQUISITES MARKETING STRATEG Y MARKETING PLAN

What is the study of consumer behavior?

The study of the processes

involved when consumers select,
purchase, use and dispose of
products, services, ideas and
experiences

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Why the psychology of consumer behavior?

Predictable patterns underlie consumer behavior

o Experimental method allows us to isolate cause and effect

Marketers can use these patterns to add customer value

(increase perceived benefits, lower customer costs)

Psychologically and Sociological Underpinnings

Consumer behavior is a hotbed of psychological research as it
ties together issues of communication (advertising and
marketing), identity (you are what you buy), social status,
decision-making, and mental and physical health.

Corporations use findings about consumer behavior to

determine how best to market products; you can put the
information to use in consciously deciding what, when, and why
to buy.

Consumer decision process

NEED
RECOGNITION

INFORMATION
SEARCH

EVALUATION &
CHOICE/PURCHASE

POST-CHOICE
EVALUATION

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Need recognition: Fundamental motives

Self-Actualiz ation
(Self-Fulfillment)

Ego N eeds
(Status , s elf-es teem)
Ps ychogenic
N eeds Social N eeds
(Affection, friends hip,
belonging)
Safety and Security N eeds
(Protection, order, s tability)

Phys iological N eeds

Biogenic
(Food, water, warmth, s helter, s leep, s ex)
N eeds

Need Recognition

How do consumers come to recognize a need?

o Deprivation
o Context
o Product
o Direct highlighting
Word-of-Mouth, social media, advertising,...

Sour ce: van O sselaer & Janiszewski 8

( 2012) , A G oal- Based M odel of Pr oduct Evaluat ion and Choice, Jour nal of Consum er Resear ch

Needs

Commercial 1 Commercial 2 Commercial 3

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Consumer decision process

NEED RECOGNITION

INFORMATION SEARCH

EVALUATION &
CHOICE/PURCHASE

POST-CHOICE
EVALUATION

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Information Search

What options do consumers have?

How do they gather information about

options?

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What Options Do I Have?

Consideration Set Formation

Memory-based
o Hard to recall more than a few options
o Memory interference
Associate need to brand

Stimulus-based
o Many stimuli
Attention-grabbers
e.g., movement, novelty
Needs/goals influence whether customer notices (selective attention)
make relevant

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Movement & Novelty

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Making things novel

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Passing the basketball

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Volkswagen and perception

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Making things novel

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Making things relevant

iBeacon
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Beacons are a retailers best consumer behavior vehicle

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Consumer decision process

NEED RECOGNITION

INFORMATION SEARCH

EVALUATION &
CHOICE/PURCHASE

POST-CHOICE
EVALUATION

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Evaluation of Alternatives

How does the consumer process competitive brand

information and make a final value judgment?

Traditional multi-attribute model: Consumers evaluate

products by weighting beliefs about products attributes
according to importance.
o Gold standard model: what conscious, rational decision
maker would do.

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Example

Consideration set of a consumer in the laptop market:

{Apple, Dell, Toshiba}
Attributes this consumer cares about and their importance:
o Memory 0.20
o Size 0.30
o Brand name 0.10
o Price 0.40
Consumer has beliefs about each brand on each attribute (assume a 10-
point scale)
Consumers evaluation of a product is a weighted average of beliefs about
attributes
o Evaluation of Apple laptop = 0.20* 7 + 0.30* 9 + 0.10* 9 + 0.40* 6
What does this imply for marketing strategies?

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Deviations from Multi-Attribute Model

Non-compensatory models:
Lexicographic
Elimination by as pects Blue Purina Euk a nuba
Buffa lo Dog Chow
Familiarity/ awarenes s
Nutrition 8 7 4
Kibble Size 4 6 8

Its all relative: Context effects

In multi-attribute model, evaluation of product does not depend on other
products
In reality, context matters
Example: Compromis e effect

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Context Effects on Consumer Choice Behavior

Microwave Oven Model % who prefer: % who prefer:

Group 1 Group 2
Panasonic Deluxe - 13
1.1 cubic feet, $199.99

Panasonic Standard 43 60
0.8 cubic feet, $179.99

Emerson 57 27
0.5 cubic feet, $109.00

Compromise Effect, or Extremeness Aversion

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The Compromise Effect

The share of a product is enhanced when it is the intermediate

option in a choice set, and diminished when it is the extreme
option.
Set 1 = {A, B, C}
Low
A
Set 2 = {B, C, D}
B
P C
R
I D
C
E

QU ALITY/ FEATU RES High

Cons ider the s hare of product B (relative to product C) in s ets 1 and 2.

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An Assortment Consistent with a Compromise Structure

So u rc e : Ki v e tz, Ne tze r, a n d Sri ni v as an , Jo u rna l o f Ma rke ti ng Re se arc h, Au gu st 2 00 4 .

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Limitations of the Compromise Effect:

from Upending the Compromise Effect (HBR 2014):

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Consumer decision process

NEED RECOGNITION

INFORMATION SEARCH

EVALUATION &
CHOICE/PURCHASE

POST-CHOICE
EVALUATION

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Post-Choice Evaluation
Did product satisfy initial need?

Did it also satisfy other benefits/goals/needs that came up

during the decision process?

Influence of expectations on post-choice evaluation

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Branding in the Digital Age (HBR 2010)

Traditional view: consumers winnow options from a set of brands,

finally choosing one to buy.
Influence them at consideration stage (create awareness) and
buying stage (point-of-purchase promotions)

Emerging view:

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Buying Process: Customer Decision Journey

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What Marketers Misunderstand About Online Reviews (HBR 2014)

P M O Pur chase
Deci si on

How much does O matter?

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Current topics on consumer behavior

Can products bring happiness?
How did Steve Jobs know what you wanted?
Does one genre of music cause you to spend
more?
Seven reasons why shoppers behave irrationally
Time pressure effects on purchase timing
The effects of smell on purchase behavior
and an ongoing list of topics focused upon
optimizing the drive for demand!
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Caveats and Implications for Marketing

Steps in process are fundamental, but process is almost never as neat as

described here
Shortcuts and iterations

Consumer is not an island

Need to map each group of potential customers decision journey

W here in the proces s do you los e out?

Match tool to task:

U s e s pecific marketing tools for s pecific s tages in decis ion journey

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Consumer behavior takeaways

Understanding our consumers is a key aspect of
developing a good marketing strategy and effective
marketing plan
Consumer decision process involves several steps
but they play out differently for different products and for
different groups of customers (not always as neat as
described)
Consumers are not an island

Need to map decision journeys

Provide right type of information at each step

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