Cite 3 peer-reviewed, scholarly, or similar references according to APA guidelines.
Include a title slide, a references slide, and speaker notes.
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9 Decision Making
Chapter Objectives
When you finish reading this chapter you will understand why
Richard has had it! There’s only so much longer he can go on watching TV on his tiny, antiquated set. It was bad enough trying to squint at The Walking Dead. The final straw was when he couldn’t tell the Titans from the Jaguars during an NFL football game. When he went next door to watch the second half on Mark’s home theater
9-1 The three categories of consumer decision making are cognitive, habitual, and affective. 9-2 A cognitive purchase decision is the outcome of a series of stages that results in the selection of one product over competing options. 9-3 We often rely on rules-of-thumb to make routine decisions. 9-4 The way information about a product choice is framed can prime a decision even when the consumer is unaware of this influence.
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setup, he finally realized what he was missing. Budget or not, it was time to act: A man has to have his priorities.
Where to start looking? The web, naturally. Richard checks out a few comparison-shopping websites, including pricegrabber.com/ and bizrate.com. After he narrows down his options, he ventures out to check on a few sets in person. He figures he’ll probably get a decent selection (and an affordable price) at one of those huge “big box” stores. Arriving at Zany Zack’s Appliance Emporium, Richard heads straight for the Video Zone in the back; he barely notices the rows of toasters, microwave ovens, and stereos on his way. Within minutes, a smiling salesperson in a cheap suit accosts him. Even though he could use some help, Richard tells the salesperson he’s only browsing. He figures these guys don’t know what they’re talking about, and they’re simply out to make a sale no matter what.
Source: Stefanocapra/Fotolia
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Richard examines some of the features on the 60-inch flatscreens. He knew his friend Evey had a set by Prime Wave that she really liked, and his sister Alex warned him to stay away from the Kamashita. Although Richard finds a Prime Wave model loaded to the max with features such as a sleep timer, on-screen programming menu, cable-compatible tuner, and picture-in-picture, he chooses the less expensive Precision 2000X because it has one feature that really catches his fancy: stereo broadcast reception.
Later that day, Richard is a happy man as he sits in his easy chair and watches Sheldon match wits with Leonard, Howard, and the others on The Big Bang Theory. If he’s going to be a couch potato, he’s going in style.
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What’s Your Problem?
Richard’s decision represented his response to a problem. In fact every consumer decision we make is a response to a problem. Of course, the type and scope of these problems varies enormously; our needs range from simple physiological priorities such as quenching thirst to whether we will spend our hard-earned money on a television to abstract intellectual or aesthetic quandaries such as choosing a college major—or perhaps what to wear to that upcoming Bruno Mars concert.
Because some purchase decisions are more important than others, the amount of effort we put into each differs. Sometimes the decision-making process is almost automatic; we seem to make snap judgments based on little information. At other times it resembles a full-time job. A person may literally spend days or weeks agonizing over an important purchase such as a new home, a car, or even an iPhone versus a Samsung Galaxy.
We make some decisions thoughtfully and rationally as we carefully weigh the pros and cons of different choices. In other cases we let our emotions guide us to one choice over another as we react to a problem with enthusiasm, joy, or even disgust. Still other actions actually contradict what those rational models predict. For example, purchase momentum occurs when our initial impulse purchases actually increase the likelihood
The three categories of consumer decision making are cognitive, habitual, and affective. OBJECTIVE 9-1
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that we will buy even more (instead of less as we satisfy our needs); it’s like we get “revved up” and plunge into a spending spree (we’ve all been there!).
Hyperchoice: Too Much of a Good Thing!
Given the range of problems we all confront in our lives, clearly it is difficult to apply a one-size-fits-all explanation to the complexities of consumer behavior. Things get even more complicated when we realize just how many choices we have to make in today’s information-rich environment. Ironically, for many of us one of our biggest problems is not having too few choices, but rather too many.
This condition of consumer hyperchoice forces us to make repeated decisions that may drain psychological energy while decreasing our abilities to make smart choices. A study conducted in a grocery store illustrates how having too much can handicap our thought processes. Shoppers tried samples of flavored fruit jams in two different conditions: in the “limited choice” condition they picked from six flavors, whereas those in the “extensive choice” group saw 24 flavors. Thirty percent of consumers in the limited group actually bought a jar of jam as a result, and a paltry 3 percent of those in the extensive group did.
Part of what we’re going to discuss in this chapter already is familiar ground to you. In Chapter 4 we reviewed approaches to learning that link options to outcomes, where over time we come to link certain choices to good or bad results. In Chapter 5 we talked about affective decision making; how our emotional responses drive many of our choices. And, in
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Chapter 8 we reviewed three hierarchies of effects, or the sequence of steps involving thinking, feeling, and eventually doing. These ideas really relate to types of decision making because they remind us that depending on the situation and the importance of what we’re dealing with, our choices can be dominated by “hot” emotions, “cold” information processing, or even “lukewarm” snap decisions. Figure 9.1 summarizes the three “buckets” of consumer decision making.
Figure 9.1 The Three “Buckets” of Consumer Decision Making
Researchers now realize that decision makers actually possess a repertoire of strategies. The perspective of constructive processing argues that we evaluate the effort we’ll need to make a particular choice and then tailor the amount of cognitive “effort” we expend to get the job done. When the task requires a well-thought-out, rational approach, we’ll invest the brainpower to do it. Otherwise, we look for shortcuts such as “just do what I usually do,” or perhaps we make “gut” decisions based on our emotional reactions. In some cases, we actually create a mental budget that helps us to estimate what we will consume over time so that we can regulate what we do in the present. If the dieter knows he will be chowing down at a big BBQ tomorrow, he may decide to skip that tempting candy bar today.
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Self-Regulation
Each of us fights a constant battle to control our desires, whether these involve splurging on expensive clothes or treating ourselves to fattening snacks. Many factors, both internal (for example, will-power) and external (for example, peer pressure), help to determine whether or when we give in. Even something as innocent as checking your Facebook page can make you lose control! Recent research implies that when you focus on what your close friends post, this makes you feel better. This momentary boost in self-esteem we get in turn prompts us to lose self-control and engage in impulsive behaviors such as binge eating and even reckless spending that lowers credit scores.
The buckets of decision making we just described don’t necessarily work independently of one another. Think for example about Orlando, a 28-year- old marketing manager who has decided to embark on a weight-loss program. The pressure is on to drop the pounds before he marries Amanda this summer. Orlando knows he needs a plan if he has any chance to succeed.
A person’s efforts to change or maintain his or her actions over time, whether these involve dieting, living on a budget, or training to run a marathon, involve careful planning that is a form of self-regulation . If we have a self-regulatory strategy, this means that we specify in advance how we want to respond in certain situations. These “if-then” plans or implementation intentions may dictate how much weight we give to different kinds of information (emotional or cognitive), a timetable to carry
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out a decision, or even how we will deal with disruptive influences that might interfere with our plans (like a bossy salesperson who tries to steer us to a different choice).
Orlando may engage in cognitive decision making as he carefully selects a diet and perhaps compiles a list of foods he will “ban” from his kitchen. In addition, he may have to recognize that he has a behavioral pattern of snacking on junk food in the mid-afternoon whether he’s really hungry or not. Simple, but powerful, behavioral cues in the environment like that Snickers bar sitting on his coworker Arya’s desk can lead us to quick and sometimes rash actions (how will Orlando explain the “disappearance” of that candy bar to Arya?) He may also have to recognize that some emotional “triggers” set him off so when his boss yells at him his first response is to reach for the sweets to cheer himself up.
Orlando may have to “argue” with himself as he weighs the long-term benefits of a successful diet against short-term temptations. In some cases, this involves some creative tinkering with the facts—for example, consumers engage in counteractive construal when they exaggerate the negative aspects of behaviors that will interfere with the ultimate goal. Orlando may inflate the number of calories in the snack to help him to resist its lure. He may even go public with his weight loss plan by posting his weekly weigh-in on a phone app like DietBet so that others can watch his progress—and even bet on his success or failure.
A recent study shed some light on why our efforts to self-regulation get stronger or weaker over time as we progress toward a goal – and especially why what starts out as an exciting quest turns into a painful slog even though we’re getting closer to the objective. The researchers distinguished between two types of motivation: (1) Promotion motivation encourages people to focus on hopes and aspirations, while (2) Prevention motivation instead focuses on responsibilities and duties
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as it prompts people to think about avoiding something negative. We referred to these strategies as “approach” and avoidance” when we talked about learning in Chapter 4 . As they predicted, individuals tend to be more promotion-motivated in earlier stages of goal pursuit and become more prevention-motivated as goal attainment draws near. The researchers speculate that when we are in the early stages of attaining a goal, we compare our progress with where we started, so we are optimistic. But after we reach the midpoint, we switch our reference to the end goal we’re striving for—and thus focus on our shortcomings instead. Their advice: In the early stages, focus on how attaining the goal will help you to achieve things you hope for (such as a healthy body). Then when you’re in the home stretch, focus on how getting to your goal will help you to fulfill your responsibilities. And, make a list of things “not to do” to stay on course. Finally, reward yourself with a break from something you don’t enjoy when you’re making progress so long as it doesn’t short-circuit your efforts (e.g., no congratulatory margaritas if you’re trying to get sober).
In recent years, researchers and marketers have become more aware of the role they can play in changing consumer behavior by helping people to regulate their own actions. This help may take the form of simple feedback like a phone app for dieters or perhaps a wearable computing device like the Fitbit that tells you how many steps you take in a day (and how many more you should take). These applications provide a feedback loop to help with self-regulation. The basic premise is amazingly simple: Provide people with information about their actions in real time, and then give them a chance to change those actions so that you push them to improve. A common feedback loop we increasingly see on highways comes from those “dynamic speed displays” that use a radar sensor to flash “Your Speed” when you pass one. This isn’t new information; all you have to do is look at your speedometer to know the same thing. Yet on average these displays result in a 10 percent reduction in driving speed among motorists for several miles following exposure to the feedback loop.
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The Tangled Web Does seeing “beach bodies” on Instagram lead people to make foolish purchases? In a study, overweight people who saw a thin person were more likely to purchase a more expensive product and take on credit card debt than were normal weight participants. The researchers explain that exposure to images like this reminded these people that they are not good at inhibiting their impulses—so this realization loosened the purse strings. To add insult to injury, the thin images didn’t have to be of people—even seeing pictures of thin Coke bottles made the subjects reach for pricier products!
Now, the bad news: As any frustrated dieter knows, self-regulation doesn’t necessarily work. Just because we devise a well-meaning strategy doesn’t mean we’ll follow it. Sometimes our best-laid intentions go awry literally because we’re too tired to fight temptation. Research shows that our ability to self-regulate declines as the day goes on. The Morning Morality Effect shows that people are more likely to cheat, lie, or even commit fraud in the afternoon than in the morning. Scientists know that the part of the brain they call the executive control center that we use for important decision making, including moral judgments, can be worn down or distracted even by simple tasks like memorizing numbers. As one researcher nicely put it, “To the extent that you’re cognitively tired, you’re more likely to give in to the devil on your shoulder.”
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Other studies show that, ironically the act of planning itself can undermine our ability to attain goals. When a person is not happy with his or her progress toward a goal like weight loss, the act of thinking about what he or she needs to do to improve performance can cause emotional distress. This angst in turn results in less self-control. And, when people are able to easily recall prior instances when they were able to exert self- control, they are more successful at the present task. On the other hand, when they recall times that resulted in failure, they’re more likely to indulge again. As we saw in the last chapter’s discussion of attitudes and behavior, “the road to hell is paved with good intentions!”
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Cognitive Decision Making
Traditionally, consumer researchers approached decision making from a rational perspective . According to this view, people calmly and carefully integrate as much information as possible with what they already know about a product, painstakingly weigh the pluses and minuses of each alternative, and arrive at a satisfactory decision. This kind of careful, deliberate thinking is especially relevant to activities such as financial planning that call for a lot of attention to detail and many choices that impact a consumer’s quality of life. When marketing managers believe that their customers in fact do undergo this kind of planning, they should carefully study steps in decision making to understand just how consumers weigh information, form beliefs about options, and choose criteria they use to select one option over others. With these insights in hand, they can develop products and promotional strategies that supply the specific information people look for in the most effective formats.
A cognitive purchase decision is the outcome of a series of stages that results in the selection of one product over competing options.
OBJECTIVE 9-2
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Dynamic speed displays provide a feedback loop to help drivers regulate their speed. Source: cre250/Fotolia
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Steps in the Cognitive Decision-Making Process
Let’s think about Richard’s process of buying a new TV that we described at the beginning of the chapter. He didn’t suddenly wake up and crave a new flatscreen. Richard went through several steps between the time he felt the need to replace his TV and when he actually brought one home. We describe these steps as (1) problem recognition, (2) information search, (3) evaluation of alternatives, and (4) product choice. Of course, as we saw in Chapter 4 , after we make a decision, its outcome affects the final step in the process, in which learning occurs based on how well the choice worked out. This learning process in turn influences the likelihood that we’ll make the same choice the next time the need for a similar decision occurs. And so on and so on. Figure 9.2 provides an overview of this decision- making process. Let’s briefly look at each step.
Figure 9.2 Stages in Consumer Decision Making
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Step 1: Problem Recognition Ford’s plan to promote its Fusion hybrid model focused on people who aren’t thinking about buying a new car—at least not right now. Its TV commercials target what the auto industry terms the “upper funnel,” or potential buyers down the road. Ford’s research found that a large number
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of U.S. drivers are still unaware of the Fusion. The company is confident that it can close sales if and when customers decide to buy a new car. But, its weak spot is to get people into the frame of mind where they want to do that. To create desire where none yet exists, visitors to a special website entered to win a trip and a new Fusion. Ford publicized the sweepstakes on Twitter and Facebook; during the first two weeks of the promotion, almost 70,000 people requested more information about the car.
Problem recognition occurs at what Ford terms the upper funnel, when we experience a significant difference between our current state of affairs and some state we desire. As we noted at the beginning of the chapter, this problem requires a solution. A person who unexpectedly runs out of gas on the highway has a problem, as does the person who becomes dissatisfied with the image of his car, even though there is nothing mechanically wrong with it. Although the quality of Richard’s TV had not changed, he altered his standard of comparison, and as a result he had a new problem to solve: how to improve his viewing experience.
Figure 9.3 shows that a problem arises in one of two ways. The person who runs out of gas experiences a decline in the quality of his actual state (need recognition). In contrast, the person who craves a newer, flashier car moves his ideal state (opportunity recognition) upward. Either way, there is a gulf between the actual state and the ideal state. Richard perceived a problem because of opportunity recognition: He moved his ideal state upward in terms of the quality of TV reception he craved.
Figure 9.3 Problem Recognition: Shifts in Actual or Ideal States
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Step 2: Information Search Once a consumer recognizes a problem, he or she needs the 411 to solve it. Information search is the process by which we survey the environment for appropriate data to make a reasonable decision. You might recognize a need and then search the marketplace for specific information (a process we call prepurchase search). However, many of us, especially veteran shoppers, enjoy browsing just for the fun of it or because we like to stay up to date on what’s happening in the marketplace. Those shopaholics engage in ongoing search. As a general rule, we search more when the purchase is important, when we have more of a need to learn more about the purchase, or when it’s easy to obtain the relevant information.
Does knowing something about the product make it more or less likely that we will engage in research? The answer to this question isn’t as obvious as it first appears: Product experts and novices use different strategies when they make decisions. “Newbies” who know little about a product should be
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the most motivated to find out more about it. However, experts are more familiar with the product category, and thus they should be better able to understand the meaning of any new product information they might acquire.
So, who searches more? The answer is neither: Search tends to be greatest among those consumers who are moderately knowledgeable about the product. Typically we find an inverted-U relationship between knowledge and search effort, as Figure 9.4 shows. People with limited expertise may not feel they are competent to search extensively. In fact, they may not even know where to start. Richard, who did not spend a lot of time researching his purchase, is typical. He visited one store, and he looked only at brands with which he was already familiar. In addition, he focused on only a small number of product features.
Figure 9.4 The Relationship Between Amount of Information Search and Product Knowledge
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Because experts have a better sense of what information is relevant to the decision, they engage in selective search, which means their efforts are more focused and efficient. In contrast, novices are more likely to rely on the opinions of others and on “nonfunctional” attributes, such as brand name and price, to distinguish among alternatives. Finally, novice consumers may process information in a “top-down” rather than a “bottom- up” manner; they focus less on details than on the big picture. For instance, they may be more impressed by the sheer amount of technical information an ad presents than by the actual significance of the claims it makes.
Any trial lawyer will tell you never to ask a question of a witness unless you already know what he or she will answer. Consumers too like to consult reliable sources that tend to tell them what we want to hear. We can see that the search process isn’t perfect, so there’s always some bias in terms
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of what we get when we cast our nets. This is true whether we’re asking people we know for advice, or trolling online.
The internet puts an almost limitless supply of information at our fingertips —at least in theory. The reality often is quite different. Rather than taking advantage of many sources that may provide us with a range of opinions or options when we want to make a decision, sophisticated algorithms insure that we only access content that reinforces what we already think we know. A filter bubble occurs when the broadcast media, websites, and social media platforms we consult serve up answers based upon what they “think” we want to see. For example, we get personalized Google search results and a Facebook news stream that’s based upon sites we’ve clicked on in the past, our browsing history, and our physical location. This means we’re far less likely to be exposed to conflicting viewpoints, so we each live in a “bubble” of our own making. Conservatives who watch Fox News religiously will see stories that confirm their beliefs, while their liberal counterparts get the same assurance from MSNBC. Thus what starts as a search for the best information upon which to base our decisions may end in a self-fulfilling prophecy where we only read and see content that confirms what we thought all along.
Step 3: Evaluate Alternatives Much of the effort we put into a purchase decision occurs at the stage where we have to put the pedal to the metal and actually choose a product from several alternatives. This may not be easy; modern consumer society abounds with choices. In some cases, there may be literally hundreds of brands (as in cigarettes) or different variations of the same brand (as in shades of lipstick).
Ask a friend to name all the brands of perfume she can think of. The odds are she will reel off three to five names rather quickly, then stop and think
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awhile before she comes up with a few more. She’s probably familiar with the first set of brands, and in fact she probably wears one or more of these. Her list may also contain one or two brands that she doesn’t like; to the contrary, they come to mind because she thinks they smell nasty or are unsophisticated. Note also that there are many, many more brands on the market that she did not name at all.
If your friend goes to the store to buy perfume, it is likely that she will consider buying some or most of the brands she listed initially. She might also entertain a few more possibilities if these come to her attention while she’s at the fragrance counter (for example, if an employee “ambushes” her with a scent sample as she walks down the aisle).
We call the alternatives a consumer knows about the evoked set and the ones he or she seriously considers the consideration set . Recall that Richard did not know much about the technical aspects of television sets, and he had only a few major brands in mind. Of these, two were acceptable possibilities and one was not.
For obvious reasons, a marketer who finds that his brand is not in his target market’s evoked set has cause to worry. You often don’t get a second chance to make a good first impression; a consumer isn’t likely to place a product in his evoked set after he has already considered it and rejected it. Indeed, we’re more likely to add a new brand to the evoked set than one that we previously considered but passed over, even after a marketer has provided additional positive information about it. For marketers, a consumer’s reluctance to give a rejected product a second chance underscores the importance of ensuring that it performs well from the time the company introduces it.
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Net Profit As the old saying goes, “If it sounds too good to be true, it probably is.” When we check out online reviews of a product and they’re all glowing, we tend to be a bit suspicious. It’s actually more effective for a review to include some negative reviews—if shoppers think they’re irrelevant. Why? We usually assign a lot of weight to negative information because we expect it to be more diagnostic than sugar-coated comments. So, when we encounter bad stuff but we don’t feel it’s very helpful, we still feel that we have more complete information about the product, and thus we’re comfortable that we can make a wise choice.
Step 4: Product Choice Once we assemble and evaluate the relevant options in a category, eventually we have to choose one. Recall that the decision rules that guide our choices range from simple and quick strategies to complicated processes that require a lot of attention and cognitive processing. Our job isn’t getting any easier as companies overwhelm us with more and more features. We deal with 50-button remote controls, digital cameras with hundreds of mysterious features and book-length manuals, and cars with dashboard systems worthy of the space shuttle. Experts call this spiral of complexity feature creep . As evidence that the proliferation of gizmos is counterproductive, Philips Electronics found that at least half of the products buyers return have nothing wrong with them; consumers simply couldn’t understand how to use them! What’s worse, on average the
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buyer spent only 20 minutes trying to figure out how to use the product and then gave up.
Why don’t companies avoid this problem? One reason is that we often assume the more features the better. It’s only when we get the product home that we realize the virtue of simplicity. In one study, consumers chose among three models of a digital device that varied in terms of how complex each was. More than 60 percent chose the one with the most features. Then, when the participants got the chance to choose from up to 25 features to customize their product, the average person chose 20 of these add-ons. But when they actually used the devices, it turned out that the large number of options only frustrated them; they ended up being much happier with the simpler product. As the saying goes, “Be careful what you wish for.”30
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As feature creep becomes more of a problem, just providing clear instructions to users is a major “pain point” for many manufacturers. Source: supercavie/Shutterstock.
Marketing Pitfall Product labels assist us with problem solving, but some are more useful than others. Here are some examples of the not-so-helpful variety:
Instructions for folding up a portable baby carriage: “Step 1: Remove baby.” On a Conair Pro Style 1600 hair dryer: “WARNING: Do not use in shower. Never use while sleeping.” At a rest stop on a Wisconsin highway: “Do not eat urinal cakes.” On a bag of Fritos: “You could be a winner! No purchase necessary. Details inside.” On some Swanson frozen dinners: “Serving suggestion: Defrost.” On Tesco’s Tiramisu dessert (printed on bottom of box): “Do not turn upside down.” On Marks & Spencer bread pudding: “Product will be hot after heating.” On packaging for a Rowenta iron: “Do not iron clothes on body.” On Nytol sleeping aid: “Warning: May cause drowsiness.”
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Step 5: Postpurchase Evaluation Another old saying goes, “the proof of the pudding is in the eating.” In other words, the true test of our decision-making process is whether we are happy with the choice we made after we undergo all these stages. Postpurchase evaluation closes the loop; it occurs when we experience the product or service we selected and decide whether it meets (or maybe even exceeds) our expectations. We’ll take a closer look at that in the next chapter.
When all is said and done with the transaction, is the customer always right? Not anymore. Today, postpurchase evaluation is just starting to work both ways. In the process called social scoring , both customers and service providers increasingly rate one another’s performance. Have you ever written a negative review of your Uber driver or a server at a restaurant? A heads up: While we’re busily documenting our interactions with salespeople and other service providers, they’re returning the favor. People who work in small businesses have always been aware of problem customers who drop in periodically to torment them. But now, at least in theory, a salesperson or other service provider at any kind of organization large or small can grade your behavior. And the icing on the cake is that they can share these scores with others. It’s no longer only Santa who knows if you’ve been naughty or nice.
At platforms like Airbnb and Uber, users get a rating each time they patronize the service. It’s no surprise that according to Lyft and Uber drivers, failure to leave a tip is a sure-fire road to a dismal evaluation. For your future reference, these are some other behaviors that will make or break a five-star rating straight from the mouths of operators:
“Don’t puke in or ruin the car.”
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“The most common reason for a lower passenger rating is making us wait after we arrive to pick you up. If you’re ready to go at the curb when we arrive, it means a lot.” “Rude passengers immediately get four stars. Depending on the level of rudeness, their rating can go down to one star.” “Passengers get a one-star ding for everything they mess up, like not being ready, slamming doors, or being impolite.” “I will deduct points for rude behavior or illegal activities. I will also deduct points for passengers who leave garbage in my car.”
This is not just FYI stuff; a bad rating can prevent you from booking rooms or rides down the road. Uber and Lyft share rider ratings with other drivers, who may choose not to pick up a passenger with an unsavory record. Open Table bans people from using its service if they have missed too many reservations. At Airbnb, you sometimes have to make the case for your worthiness to stay at a guesthouse. The application process feels a bit like getting a surprise inspection visit from a social worker when you’re trying to adopt a child.
This new transparency may disrupt not only the service economy—it also can obliterate the traditional power disparity between buyer and seller. Suddenly, the user has to play nice and think about how today’s nasty behavior will influence tomorrow’s reputation. So far it doesn’t seem that service businesses have thought much about the potential impact of this reverse rating process, but it could be just a matter of time before overly demanding patients need to locate doctors who will agree to put up with them, customers who like to yell at repairmen have no one to fix their leaking toilets, and perhaps even students who email their professor at 2:00 a.m. with urgent questions about assignments that were due two weeks ago get banned from registering for classes (okay, that last one is a fantasy of mine that I just threw in there).32
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Neuromarketing
Is there a “buy button” in your brain? Some corporations, including Google, CBS, Disney, and Frito-Lay, have teamed up with neuroscientists to find out. Neuromarketing uses functional magnetic resonance imaging (or fMRI), a brain-scanning device that tracks blood flow as we perform mental tasks to take an up-close look at how our brains respond to marketing messages and product design features. In recent years, researchers have discovered that regions in the brain, such as the amygdala, the hippocampus, and the hypothalamus, are dynamic switchboards that blend memory, emotions, and biochemical triggers. These interconnected neurons shape the ways in which fear, panic, exhilaration, and social pressure influence our choices.
Scientists know that specific regions of the brain light up in these scans to show increased blood flow when a person recognizes a face, hears a song, makes a decision, or senses deception. Now they hope to harness this technology to measure consumers’ reactions to movie trailers, automobiles, the appeal of a pretty face, and even their loyalty to specific brands. DaimlerChrysler took brain scans of men as they looked at photos of cars and confirmed that sports cars activated their reward centers. The company’s scientists found that the most popular vehicles—the Porsche- and Ferrari-style sports cars—triggered activity in a section of the brain they call the fusiform face area, which governs facial recognition. A psychiatrist who ran the study commented, “They were reminded of faces when they looked at the cars. The lights of the cars look a little like eyes.”
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A study that took brain scans of people as they drank competing soft-drink brands illustrates how loyalty to a brand affects our reactions, even at a basic, physiological level. When researchers monitored brain scans of 67 people who took a blind taste test of Coca-Cola and Pepsi, each soft drink lit up the brain’s reward system. The participants were evenly split as to which drink they preferred—even though three out of four participants said they preferred Coke. When told they were drinking Coke, the regions of the brain that control memory lit up, and this activation drowned out the area that simply reacts to taste cues. In this case, Coke’s strong brand identity trumped the sensations coming from respondents’ taste receptors.
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Neuromarketing techniques rely on sophisticated devices like the fMRI to understand how our brains respond to marketing messages. Source: James Steidl/123RF.
In another application, Frito-Lay gave electroencephalograms (EEGs), which measure fluctuations in the electrical activity directly below the scalp, to test subjects to learn how they respond to Cheetos cheese puffs. Researchers reported that people had a powerful reaction to the orange residue of cheese dust the snack leaves on their hands; one account described this as “a sense of giddy subversion that consumers enjoy over the messiness of the product.” Frito-Lay went on to develop an advertising campaign it called “The Orange Underground”; the edgy Cheetos mascot Chester Cheetah encouraged people to commit subversive acts with the product. In one spot, a guy sitting on a plane sticks Cheetos up the nostrils of his snoring seatmate. Do not try this at home!
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Online Decision Making
With the tremendous number of websites and apps available and the huge number of people who spend big chunks of their day online, how can people organize information and decide where to click? A cybermediary often is the answer. This term describes a website or app that helps to filter and organize online market information so that customers can identify and evaluate alternatives more efficiently. Many consumers regularly link to comparison-shopping sites, such as Bizrate.com or Pricegrabber.com, for example, that list online retailers that sell a given item along with the price each charges. Directories and portals, such as Yahoo! or The Knot, are general services that tie together a large variety of different sites. Forums, fan clubs, and user groups offer product-related discussions to help customers sift through options. Intelligent agents are sophisticated software programs that use collaborative filtering technologies to learn from past user behavior to recommend new purchases. When you let Amazon.com suggest a new book, the site uses an intelligent agent to propose novels based on what you and others like you have bought in the past.
What’s the most common way for us to conduct information search today? Google it, of course! Although there are other search engines out there such as Microsoft’s Bing, Yahoo! or even YouTube (which is the world’s second largest engine after Google), Google’s version of the software that examines the web for matches to terms like “home theater system” or “tattoo removal services” is so dominant—with 96 percent of the world’s mobile search market—the name has become a verb. However, even a giant
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like Google can’t rest on its laurels because changes in how we search will probably reduce our reliance on search engines. Increasingly consumers bypass Google as they go directly on their smartphones or tablets to apps like Yelp to read and write product reviews.
However, as anyone who’s ever googled knows, the web delivers enormous amounts of product and retailer information in seconds. The biggest problem web surfers face these days is to narrow down their choices, not to beef them up. In cyberspace, simplification is key. Still, the sad reality is that in many cases we simply don’t search as much as we might. If we google a term, most of us are only likely to look at the first few results at the top of the list.
Indeed, that’s one reason why search engine optimization (SEO) is so important today; this term refers to the procedures companies use to design the content of websites and posts to maximize the likelihood that their content will show up when someone searches for a relevant term. Our goal is to persuade people to access our content. Just like an expert fisherman chooses his spot and carefully selects the right lure to catch a fish, SEO experts create online content that will attract the attention of the search algorithms, or mathematical formulas, that companies like Google use to determine which entries will turn up in a search. The algorithm will hunt for certain keywords, and it also will consider who uses them. For example, if a lot of influential people share an entry, the formula will weight it more.
Can you imagine choosing a restaurant before you check it out online? Increasingly many of us rely on online reviews to steer us toward and away from specific restaurants, hotels, movies, garments, music, and just about everything else. A survey of 28,000 respondents in 56 countries reported that online user ratings are the second-most trusted source of brand information (after recommendations from family and friends). We usually
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put a lot of stock in what members of our social networks recommend. Unfortunately, user ratings don’t link strongly to actual product quality that objective evaluation services like Consumer Reports provide. And, there’s evidence that mobile reviews may be less helpful than desktop reviews, even when the same reviewer writes both. Comments posted via mobile devices are more emotional and more negative.
Regardless of their accuracy, customer product reviews are a key driver of satisfaction and loyalty. Another advantage these reviews provide is that consumers learn about other, less popular options they may like as well, and at the same time products such as movies, books, and CDs that aren’t “blockbusters” are more likely to sell. At the online DVD rental company Netflix, for example, fellow subscribers recommend about two-thirds of the films that people order. In fact, between 70 and 80 percent of Netflix rentals come from the company’s back catalog of 38,000 films rather than recent releases.
This aspect of online customer review is one important factor that’s fueling an important business model called the long tail . The basic idea is that we no longer need to rely solely on big hits (such as blockbuster movies or best-selling books) to find profits. Companies can also make money if they sell small amounts of items that only a few people want—if they sell enough different items. For example, Amazon.com maintains an inventory of 3.7 million books, compared to the 100,000 or so you’ll find in a large retail store like Barnes & Noble. Most of these stores will sell only a few thousand copies (if that), but the 3.6 million books that Barnes & Noble doesn’t carry make up a quarter of Amazon’s revenues! Other examples of the long tail include successful microbreweries and TV networks that make money on reruns of old shows on channels like the Game Show Network.
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How Do We Put Products into Categories?
Consumers are in the middle of a love affair with yogurt, and recently popular varieties like Greek yogurt do well among people who crave healthy, filling snacks. Now we see other offerings that allow people to drink their yogurt in the form of smoothies, kefir, and other blends that blur the lines among beverages, desserts, snacks, and even supplements like probiotics. How can consumers make sense of these new products?
Remember that when consumers process product information, they don’t do it in a vacuum. They evaluate its attributes in terms of what they already know about the item or other similar products. A person who thinks about a particular 35-mm camera will most likely compare it to other 35-mm cameras rather than to a disposable camera. Because the category in which a consumer places a product determines the other products he or she will compare it to, the way we classify a brand in our minds plays a big role in how we evaluate it. A recent study that examined how consumers use calorie information demonstrates why the categories we use to define products are important. When people saw menus that listed the calorie count of individual items, they chose more dietetic items. However, when the lower calorie items were grouped into a single “low-calorie” category on the menu, diners actually selected them less frequently. The researchers explain that consumers have negative associations with low-calorie labels, so they’re more likely to dismiss these options in the early stages of the decision process. As a result individual items are less likely to make the
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cut into diners’ consideration sets, so ironically this menu information results in fewer healthier choices overall.
Consumers cognitively represent product information in a knowledge structure . This term refers to a set of beliefs and the way we organize these beliefs in our minds. These structures matter to marketers like Stonyfield, Green Valley, and Trader Joe’s that sell yogurt-related items because they want to ensure that customers correctly group their products. Typically, we represent a product in a knowledge structure at one of three levels. To understand this idea, consider how someone might respond to these questions about an ice cream cone: What other products share similar characteristics, and which would you consider as alternatives to eating a cone? These questions may be more complex than they first appear. At one level, a cone is similar to an apple because you could eat both as a dessert. At another level, a cone is similar to a piece of pie because you could eat either for dessert and both are fattening. At still another level, a cone is similar to an ice cream sundae—you could eat either for dessert, both are made of ice cream, and both are fattening. Figure 9.5 depicts these three levels.
Figure 9.5 Levels of Categorization
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It’s easy to see that the foods a person associates with the category “fattening dessert” influence his or her decision about what to eat after dinner. The middle level, or basic level category, is typically the most useful for classifying products. At this level, the items we group together tend to have a lot in common with each other, but still permit us to consider a broad enough range of alternatives. The broader superordinate category is more abstract, whereas the more specific subordinate category often includes individual brands. Of course, not all items fit equally well into a category. Apple pie is a better example of the subordinate category “pie” than is rhubarb pie, even though both are types of pies. This is because it’s more prototypical, and most people would think of apple as a pie flavor before they thought of rhubarb. In contrast, true pie experts probably know a lot about both typical and atypical category examples.
Product categories are the building blocks of a market, but sometimes companies like to play with them; they create new ones when they introduce hybrid products that feature characteristics from two distinct domains. Thus, we have the crossover utility vehicle (CUV) that mixes a passenger car and a sport utility vehicle (SUV) and the huge “athleisure” fashion phenomenon that fuses styles from athletic apparel and leisure apparel to yield an army of Lululemon-clad yoga buffs. And, let’s not even talk about the “cronut” craze (a combination croissant and donut) that started with a New York bakery and made its leap to national stardom courtesy of Dunkin’ Donuts.
Strategic Implications of Product Categorization The way we categorize products has a lot of strategic implications for marketers. That’s because this process affects which products consumers will compare to our product and also the criteria they’ll use to decide if they like us or the other guys.
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Position a Product.
The success of a positioning strategy hinges on the marketer’s ability to convince the consumer to consider its product within a given category. For example, the orange juice industry tried to reposition orange juice as a drink people can enjoy all day long (“It’s not just for breakfast anymore”). However, soft-drink companies attempt the opposite when they portray sodas as suitable for breakfast consumption. They are trying to make their way into consumers’ “breakfast drink” category, along with orange juice, grapefruit juice, and coffee. Of course, this strategy can backfire, as Pepsi- Cola discovered when it introduced Pepsi a.m. and positioned it as a coffee substitute. The company did such a good job of categorizing the drink as a morning beverage that customers wouldn’t drink it at any other time, and the product failed.
Identify Competitors.
At the abstract, superordinate level, many different product forms compete for membership. The category “entertainment” might comprise both bowling and the ballet, but not many people would substitute one of these activities for the other. Products and services that on the surface are quite different, however, actually compete with each other at a broad level for consumers’ discretionary dollars. Although bowling or ballet may not be a likely tradeoff for many people, a symphony might try to lure away ballet season ticket holders by positioning itself as an equivalent member of the superordinate category “cultural event.” We’re often faced with choices between noncomparable categories, where we can’t directly relate the attributes in one to those in another (the old problem of comparing apples and oranges). When we can create an overlapping category that encompasses both items (e.g., entertainment, value, usefulness) and then rate each alternative in terms of that superordinate category comparison, the process is easier.
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This ad for Sunkist lemon juice attempts to establish a new category for the product by repositioning it as a salt substitute. Source: Courtesy of Sunkist Growers.
Create an Exemplar Product.
As we saw with the case of apple pie versus rhubarb pie, if a product is a really good example of a category, then it is more familiar to consumers and they more easily recognize and recall it. The characteristics of category exemplars tend to exert a disproportionate influence on how people think of the category in general. In a sense, brands we strongly associate with a category get to “call the shots”: They define the criteria we use to evaluate all category members.
Locate Products in a Store.
Product categorization also can affect consumers’ expectations regarding the places where they can locate a desired product. If products do not clearly fit into categories (e.g., is a rug furniture?), this may diminish our ability to find them or figure out what they’re supposed to be once we do.
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For instance, a frozen dog food that pet owners had to thaw and cook before they served it to Fido failed in the market, partly because people could not adapt to the idea of buying dog food in the “frozen foods for people” section of their grocery stores.
Evaluative Criteria When Richard looked at different television sets, he focused on one or two product features and completely ignored several others. He narrowed down his choices as he only considered two specific brand names, and from the Prime Wave and Precision models, he chose one that featured stereo capability. Table 9.1 summarizes the attributes of the TV sets that Richard considered. Now, let’s see how a comparison of these attributes can alter Richard’s choice of a specific brand depending on the rules he uses to consider them.
Table 9.1 Hypothetical Alternatives for a TV Set
Brand Ratings
Attribute Importance Ranking
Prime Wave
Precision Kamashita
Size of screen 1 Excellent Excellent Excellent
Stereo broadcast capability
2 Poor Excellent Good
Brand reputation 3 Excellent Excellent Poor
Onscreen programming
4 Excellent Poor Poor
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Cable-ready capability
5 Good Good Good
Sleep timer 6 Excellent Poor Good
Evaluative criteria are the dimensions we use to judge the merits of competing options. When he compared alternative products, Richard could have chosen from among many criteria that ranged from functional attributes (“Does this TV come with remote control?”) to experiential ones (“Does this TV’s sound reproduction make me imagine I’m in a concert hall?”).
Another important point is that criteria on which products differ from one another carry more weight in the decision process than do those where the alternatives are similar. If all brands a person considers rate equally well on one attribute (e.g., if all TVs come with remote control), Richard needs to find other reasons to choose one over another. Determinant attributes are the features we actually use to differentiate among our choices.
Marketers often educate consumers about which criteria they should use as determinant attributes. For example, consumer research from Church & Dwight indicated that many consumers view the use of natural ingredients as a determinant attribute. As a result, the company promoted its toothpaste made from baking soda, which the company already manufactured for Church & Dwight’s Arm & Hammer brand.50
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Product authenticity has become a determinant attribute for many consumers. Source: CarmenKarin/Shutterstock.
The Power of Authenticity Keep it real! Today one of the most important determinant attributes for many consumers – especially younger ones—is authenticity. In one survey of American shoppers, 94 percent of respondents said they would be more loyal to brands that practice transparency in terms of where they source their raw materials, while 56 percent claim that brand transparency would make them “loyal for life.”51
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Consumers today often want to know just where the things they buy came from. The J. Peterman Company clothing catalogs tell stories about the apparel they sell, and upscale grocery stores such as Whole Foods provide great detail about the specific farms where produce and meat were raised. So, product authenticity increasingly has become a determinant attribute. Researchers claim that although authenticity can be a hard concept to pin down, it seems to be composed of three attributes: heritage, sincerity, and commitment to quality. That explains why many companies like to tout their “authentic” story; for example New Balance describes its Maine factory like this: “Built in 1945, the Depot Street building is the workplace of almost 400 associates. Each pair of shoes they produce is a proud work of craftsmanship that carries a little bit of the long history that is the town and its people.”
One of the biggest authenticity success stories is Chobani Greek yogurt. This attribute has been key to Chobani’s success in positioning itself as an alternative to mainstream yogurt brands. Consumers love the rags-to-riches story about an entrepreneur who bought an old Kraft Foods plant in New York State and created a brand new product that is less fattening than other alternatives. That story has been repeated thousands of times by the media, resulting in free advertising worth more than $3 million. Indeed, people loved the story so much that many of them learned to like the yogurt despite the taste, which is sourer than they’re used to. Greek yogurt now accounts for more than a third of all yogurt sales in the United States.
Archrival Yoplait (owned by mega-company General Mills) countered with various attempts to sell its own version of Greek yogurt, but consumers weren’t having it. Now, General Mills is taking a different tack: Yoplait scoured its French history and discovered its own story: For centuries (or so the story goes), French farmers have made yogurt by putting milk, fruit, and cultures into glass jars and then setting them aside. So Yoplait tweaked its recipe and began buying glass jars for its new brand of Oui
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yogurt. According to a company executive, “ . . . the simplicity of this idea, that this is a French method, coming from a French brand, with a French name, that’s authenticity.”
Yoplait’s new yogurt brand emphasizes cultural authenticity. Source: Image courtesy of Yoplait USA.
Decision Rules
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Under conditions of high cognitive involvement, people tend to think carefully about the pros and cons of various options, almost like a computer that would follow a somewhat complicated formula to make a decision. This is a compensatory rule ; it allows a product to make up for its shortcomings on one dimension by excelling on another. There are two basic types of compensatory rules:
1. The simple additive rule leads to the option that has the largest number of positive attributes. A person may use this process when it’s difficult to get more information. It’s not the best solution because some of the attributes may not be meaningful to the customer. Thus, we may be impressed by a brand that boasts a laundry list of features even though most of them are not determinant attributes.
2. A weighted additive rule allows the consumer to take into account the relative importance of the attributes by weighting each one. If this sounds familiar, it should: The calculation process strongly resembled the multiattribute attitude model we discussed in Chapter 8 .
Compensatory rules require the decision maker to carefully consider the attributes of competing options, but we all know that we don’t necessarily do that. When we make habitual or emotional decisions we typically use a noncompensatory rule . This means that if an option doesn’t suit us on one dimension, we just reject it out of hand and move on to something else rather than think about how it might meet our needs in other ways: “I’ve never heard of that brand,” or maybe “That color is gross.”
The lexicographic rule says, “select the brand that is the best on the most important attribute.” If a decision maker feels that two or more brands are equally good on that attribute, he or she then compares them on the second-most important attribute. This selection process goes on
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until the tie is broken. In Richard’s case, because both the Prime Wave and Precision models were tied on his most important attribute (a 60- inch screen), he chose the Precision because of its rating on his second-most important attribute: its stereo capability. The elimination-by-aspects rule is similar to the lexicographic rule because the buyer also evaluates brands on the most important attribute. In this case, though, he or she imposes specific cut-offs. For example, if Richard had been more interested in having a sleep timer on his TV (i.e., if it had a higher importance ranking), he might have stipulated that his choice “must have a sleep timer.” Because the Prime Wave model had one and the Precision did not, he would have chosen the Prime Wave. Whereas the two former rules involve processing by attribute, the conjunctive rule entails processing by brand. As with the elimination- by-aspects procedure, the decision maker establishes cut-offs for each attribute. He chooses a brand if it meets all the cutoffs, but rejects a brand that fails to meet any one cut-off. If none of the brands meet all the cutoffs, he may delay the choice, change the decision rule, or modify the cutoffs he chooses to apply.
If Richard stipulated that all attributes had to be rated “good” or better, he would not have been able to choose any of the available options. He might then have modified his decision rule, conceding that it was not possible to attain these high standards in his price range. In this case, perhaps Richard could decide that he could live without on-screen programming, so he would reconsider the Precision model.
If we’re willing to allow good and bad product qualities to cancel each other out, we arrive at a different choice. For example, if Richard were not concerned about having stereo reception, he might have chosen the Prime Wave model. But because this brand doesn’t feature this highly ranked attribute, it doesn’t stand a chance when he uses a noncompensatory rule.
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Habitual Decision Making
Richard’s meditations about the exact TV to buy probably don’t resemble most of the choices he makes. If he’s anything like most of us, he deals with dozens of decisions every day and he makes most of them almost automatically. “Cream and sugar?” “Fries with that?”
The decision-making steps we’ve reviewed are well and good, but common sense tells us we don’t undergo this elaborate sequence every time we buy something. If we did, we’d spend our entire lives making these decisions. This would leave us little time to enjoy the things we eventually decide to buy. Some of our buying behaviors simply don’t seem “rational” because they don’t serve a logical purpose (you don’t use that navel ring to hold a beach towel).
Habitual decision making describes the choices we make with little or no conscious effort. Many purchase decisions are so routine we may not realize we’ve made them until we look in our shopping carts! Although decisions we make on the basis of little conscious thought may seem dangerous or at best stupid, this process actually is quite efficient in many cases. The journalist Malcolm Gladwell hit the bestseller list with his book Blink, which demonstrated how snap judgments that occur in the blink of an eye can be surprisingly accurate.
We often rely on rules-of-thumb to make routine decisions. OBJECTIVE 9-3
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When a person buys the same brand over and over, does this mean it’s just a habit or is he or she truly loyal to that product? The answer is, it depends: In some cases, the explanation really is just inertia, which means that it involves less effort to throw a familiar package into the cart. Brand loyalty is a totally different story. This describes a pattern of repeat purchasing behavior that involves a conscious decision to continue buying the same brand.
As you might imagine, though both inertia and brand loyalty yield the same result the latter is harder to achieve, but also much more valuable because it represents a true commitment by the consumer. One simple test that may help to tell the difference: If the consumer discovers that a store is out of his or her normal brand, will he or she just choose another one or defer the purchase to find this brand somewhere else? If the answer is “my way or the highway,” that marketer has a loyal customer.
Heuristics: Mental Shortcuts
The default bias we previously described illustrates that we often take the easy way out when we make decisions. Unlike the cognitive decision strategies we’ve already described we use when we want to arrive at the best result possible—a maximizing solution —in fact we often are quite content to exert less mental effort and simply receive an adequate outcome—a satisficing solution . This “good enough” perspective on decision making is called bounded rationality .
We’ve seen that many habitual decisions we make are subject to mental accounting biases. In addition, we often fall back on other shortcuts to simplify our choices. For example, Richard made certain assumptions instead of conducting an extensive information search. In particular, he
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assumed that the selection at Zany Zack’s was more than sufficient, so he did not bother to shop at any other stores.
We refer to these shortcuts as heuristics . These “mental rules-of-thumb” range from the general (“higher-priced products are higher-quality products” or “buy the same brand I bought last time”) to the specific (“buy Domino, the brand of sugar my mother always bought”). Sometimes these shortcuts may not be in our best interests. A car shopper who personally knows one or two people who have had problems with a particular vehicle, for example, might assume that he would have similar trouble with it rather than taking the time to find out that it actually has an excellent repair record. Table 9.2 lists a set of market beliefs that many of us share. Let’s summarize a few of the most prevalent heuristics we commonly use.
Table 9.2 Market Beliefs Source: Data from Calvin P. Duncan, “Consumer Market Beliefs: A Review of the Literature and an Agenda for Future Research,” in
Marvin E. Goldberg, Gerald Gorn, and Richard W. Pollay, eds., Advances in Consumer Research 17 (Provo, UT: Association for
Consumer Research, 1990): 729–35.
Brand All brands are basically the same.
Generic products are just name brands sold under a different label at a lower price.
The best brands are the ones that are purchased the most.
When in doubt, a national brand is always a safe bet.
Store Specialty stores are great places to familiarize yourself with the best brands. But once you figure out what you want, it’s cheaper to buy it at a discount outlet.
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A store’s character is reflected in its window displays.
Salespeople in specialty stores are more knowledgeable than other sales personnel.
Larger stores offer better prices than small stores.
Locally owned stores give the best service.
A store that offers a good value on one of its products probably offers good values on all of its items.
Credit and return policies are most lenient at large department stores.
Stores that have just opened usually charge attractive prices.
Prices/Discounts/Sales Sales are typically run to get rid of slow-moving merchandise.
Stores that are constantly having sales don’t really save you money.
Within a given store, higher prices generally indicate higher quality.
Advertising and Sales Promotion
“Hard-sell” advertising is associated with low-quality products.
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Items tied to “giveaways” are not a good value (even with the freebie).
Coupons represent real savings for customers because they are not offered by the store.
When you buy heavily advertised products, you are paying for the label, not for higher quality.
Product/Packaging Largest-sized containers are almost always cheaper per unit than smaller sizes.
New products are more expensive when they’re first introduced; prices tend to settle down as time goes by.
When you are not sure what you need in a product, it’s a good idea to invest in the extra features, because you’ll probably wish you had them later.
In general, synthetic goods are lower in quality than goods made of naturals materials.
It’s advisable to stay away from products when they are new to the market; it usually takes the manufacturer a little time to work the bugs out.
Covariation A person who sells a used car probably makes sure the car’s exterior is clean and shiny. Potential buyers often judge the vehicle’s mechanical condition by its appearance, even though this means they may drive away
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in a clean, shiny clunker. When we only have incomplete product information, we often base our judgments on our beliefs about covariation —our associations among events that may or may not actually influence one another.
Country of Origin A product’s “address” matters. We Americans like to buy Italian shoes, Japanese cars, and microwave ovens built in South Korea. Consumers strongly associate certain items with specific countries, and products from those countries often attempt to benefit from these linkages. That’s why country of origin (COO) often is an important heuristic. Indeed, marketers often go out of their way to link a brand with a country to capitalize on associations people have with a specific COO: French wines, Italian sports cars, even Häagen-Dazs ice cream with that authentic Danish taste (but actually owned by Nestlé and made in Scandinavian strongholds like New Jersey).
COO effects have a dark side, as well. Ethnocentrism refers to the belief that products from other places are inferior to local versions. This may stem from a person’s fear that imported products are a threat to the domestic economy, or perhaps to a general assumption that one’s own culture produces superior things in general. And, of course there’s the “buy local” movement that emphasizes the desirability of buying products that are made within 50 to 100 miles of the point of purchase in order to minimize the carbon footprint involved in shipping them to stores.
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A Dutch shoe ad reminds us that a product’s address matters. Source: Courtesy of Grey/Copenhagen.
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More generally, we sometimes witness consumer animosity toward a brand due to an intense dislike for the manufacturer. Sometimes this feeling surfaces for political or social reasons: For example, almost half of Canadians say they would boycott products and venues that bear the “Trump” brand, and many stores stopped carrying Ivanka Trump products after the 2016 election. Social media spurs these boycotts, and websites like Grab Your Wallet publish lists of companies that are linked to controversial issues.
Familiar Brand Names In a study the Boston Consulting Group conducted of the market leaders in 30 product categories, 27 of the brands that were number one in 1930 (such as Ivory Soap and Campbell’s Soup) still were at the top more than 50 years later.
Higher Prices Many people assume that a higher-priced alternative is better quality than a lower-priced option. This assumption is often correct; you do tend to get what you pay for. However, let the buyer beware: The price–quality relationship is not always justified.
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AI: Who’s Calling the Shots?
Whether or not you think we’re about to enslaved by robots, there’s no doubt that AI applications will revolutionize how consumers interact with products —and very soon. Innovative companies are already experimenting with AI personal shoppers that can help their customers to decide what to buy. Here are three examples of what’s already here:
Outdoor brand The North Face partners with IBM’s Watson AI platform to use natural conversation and a dialogue-based recommendation engine to help users of the brand’s site pick out the jacket that best fits their needs. A customer simply tells the platform when and where they’d like to use the jacket, and then answers additional questions to refine the results.
AI (artificial intelligence) applications are coming to call centers. Eventually they will be able to diagnose a caller’s personality and match
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him or her with a compatible chatbot in order to insure a smooth interaction. Source: Reprint Courtesy of International Business Machines Corporation, © International Business Machines Corporation.
KFC China teamed up with the huge Chinese search engine Baidu to develop AI-enabled facial recognition checkout. It predicts what menu items customers will order based upon their age, gender, and mood. Over time, the AI will recognize repeat customers and offer them what they ordered on prior visits. Thus a younger male might get a recommendation for a crispy chicken hamburger, while the AI will suggest porridge and soybean milk to a women in her 50s (wow, automated gender stereotyping?). West Elm uses an AI application to generate recommendations for specific furnishing products it sells based upon what a shopper pins to a Pinterest Board. The company also is able to upsell (encouraging customers to buy additional items) due to the suggestions.
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Priming and Nudging
Remember that in earlier chapters we talked about how physical cues “prime” us to react even when we’re not aware of this impact. The sensations we experience are context effects that subtly influence how we think about products we encounter. Here are some examples from consumer research:
Respondents evaluated products more harshly when they stood on a tile floor rather than a carpeted floor. Fans of romance movies rate them higher when they watch them in a cold room (the researchers explain this is because they compensate for the low physical temperature with psychological warmth the movie provides). When a product is scented, consumers are more likely to remember other attributes about it after they encounter it.
Researchers continue to identify factors that bias our decisions, and many of these are factors that operate beneath the level of conscious awareness. In one study, respondents’ attitudes toward an undesirable product—curried grasshoppers!—improved when they were asked to approach it. This physical movement typically links to liking; even our own
The way information about a product choice is framed can prime a decision even when the consumer is unaware of this influence.
OBJECTIVE 9-4
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body movements or other physiological reactions can influence what goes on in our minds. To help understand this process, try to force yourself to smile or frown and then carefully gauge your feelings; you may find that the old prescription to “put on a happy face” to cheer yourself up may actually have some validity.
Often it’s just a matter of framing , or how we pose the question to people or what exactly we ask them to do. For example, people hate losing things more than they like getting things; economists call this tendency loss aversion . In one study, teachers who had the opportunity to improve student performance didn’t make the grade in terms of improved test scores. However, those who got extra money at the beginning of the year and were told they would lose it if their students did not show sufficient progress managed to bring up their scores.
To see how framing works, consider the following scenario: You’ve scored a free ticket to a sold-out football game. At the last minute, though, a sudden snowstorm makes it somewhat dangerous to get to the stadium. Would you still go? Now, assume the same game and snowstorm—except this time you paid a small fortune for the ticket. Would you head out in the storm in this case?
Researchers who work on prospect theory analyze how the value of a decision depends on gains or losses; they identify principles of mental accounting that relate to the way we frame the question as well as external issues that shouldn’t influence our choices, but do anyway. In this case, researchers find that people are more likely to risk their personal safety in the storm if they paid for the football ticket than if it’s a freebie. Only the most die-hard fan would fail to recognize that this is an irrational choice because the risk is the same regardless of whether you got a great deal on the ticket. Researchers call this decision-making bias the sunk-
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cost fallacy : If we’ve paid for something, we’re more reluctant to waste it.
The notion that even subtle changes in a person’s environment can strongly influence the choices he or she makes has emerged on center stage in the study of consumer behavior in recent years. Unlike standard economic theory that regards people as rational decision makers, the rapidly growing field of behavioral economics focuses on the effects of psychological and social factors on the economic decisions we make, and many of these choices are anything but “rational.” Indeed it turns out that it’s quite possible to modify the choices of individuals and groups merely by tinkering with the way we present information to them.
This research holds enormous implications, especially for public policy issues because it turns out the way organizations frame their messages can exert a big influence on the numbers of consumers who will stop smoking, eat healthy foods, or save more money for retirement. There are important ethical issues as well, especially as studies continue to identify ways that organizations including governments and companies can subtly but powerfully influence what we “freely” choose to do.
Much of the emerging work in behavioral economics focuses on the role of priming : Cues in the environment that make us more likely to react in a certain way even though we’re unaware of these influences. A prime is a stimulus that encourages people to focus on some specific aspect of their lives such as their financial well-being or the environment:
A group of undergraduates was primed to think about money; they saw phrases like “she spends money liberally,” or pictures that would make them think of money. Then this group and a control group that wasn’t focused on money answered questions about moral choices they would make. Those students who had been primed to think of money
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consistently exhibited weaker ethics. They were more likely to say they would steal a ream of paper from the university’s copying room and more likely to say they would lie for financial gain. When people see pictures of “cute” products, they are more likely to engage in indulgent behavior such as eating larger portions of ice cream. In a field study in a wine store, researchers played either stereotypically French or German music on alternate days. On the days when French music was in the background, people bought more French versus German wine and the reverse happened on German music days. Follow- up questionnaires indicated customers were not aware of the impact of the music on their choices.
Much of the current work in behavioral economics demonstrates how a nudge —a deliberate change by an organization that intends to modify behavior—can result in dramatic effects. A simple “nudge” that changes how people act is to switch from asking consumers to “opt in” to a program to asking them to “opt out” of a program if they don’t want to participate. In Europe, countries that ask drivers to indicate if they want to be an organ donor convince less than 20 percent of drivers to do so. In contrast, those that require drivers to opt out if they don’t want to be donors get more than 95 percent participation.
This default bias —where we are more likely to comply with a requirement than to make the effort not to comply—can be applied to numerous choice situations. For example, people are more likely to save for retirement if their employers automatically deduct a set amount from their paychecks than if they have to set up this process themselves. It is also how many software companies and social media platforms encourage users to adopt their products and privacy policies (e.g., when you must opt out of Facebook’s right to share your data with others).
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Priming and nudging tactics are increasingly common. In the U.K. there is even a government-affiliated organization called the Behavioural Insights Team—a.k.a. The Ministry of Nudges! In some cases, this approach goes by the more benign name of persuasive design . It can cut both ways, as some companies take advantage of the power of nudges to encourage behaviors we’d rather not do. For example, some organizations use the “sneak into basket” technique, where a retailer automatically adds products —such as a magazine subscription or travel insurance—to consumers’ shopping carts and makes it hard for them to remove the unwanted items. Or, how about the ominous-sounding “roach motel,” where websites sites offer fast-and-easy sign-up processes but make it much more cumbersome for consumers to close accounts (“roaches get in, but they don’t get out”).
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Chapter Summary Now that you have finished reading this chapter, you should understand why:
1. The three categories of consumer decision making are cognitive, habitual, and affective. Consumer decision making is a central part of consumer behavior, but the way we evaluate and choose products (and the amount of thought we put into these choices) varies widely, depending on such dimensions as the degree of novelty or risk related to the decision. We almost constantly need to make decisions about products. Some of these decisions are important and entail great effort, whereas we make others on a virtually automatic basis. Perspectives on decision making range from a focus on habits that people develop over time to novel situations involving a great deal of risk in which consumers must carefully collect and analyze information before making a choice. Many of our decisions are highly automated; we make them largely by habit. The way we evaluate and choose a product depends on our degree of involvement with the product, the marketing message, or the purchase situation. Product involvement can range from low, where purchase decisions are made via inertia, to high, where consumers form strong bonds with what they buy.
2. A cognitive purchase decision is the outcome of a series of stages that results in the selection of one product over competing
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options. A typical decision involves several steps. The first is problem recognition, when we realize we must take some action. This recognition may occur because a current possession malfunctions or perhaps because we have a desire for something new. Once the consumer recognizes a problem and sees it as sufficiently important to warrant some action, he or she begins the process of information search. This search may range from performing a simple memory scan to determining what he or she has done before to resolve the same problem to extensive fieldwork during which he or she consults a variety of sources to amass as much information as possible. The internet has changed the way many of us search for information. Today, our problem is more likely to weed out excess detail than to search for more information. Comparative search sites and intelligent agents help to filter and guide the search process. We may rely on cybermediaries, such as web portals, to sort through massive amounts of information as a way to simplify the decision- making process. In the evaluation of alternatives stage, the options a person considers constitute his or her evoked set. Members of the evoked set usually share some characteristics; we categorize them similarly. The way the person mentally groups products influences which alternatives she will consider, and usually we associate some brands more strongly with these categories (i.e., they are more prototypical). When the consumer eventually must make a product choice from among alternatives, he uses one of several decision rules. Noncompensatory rules eliminate alternatives that are deficient on any of the criteria we’ve chosen. Compensatory rules, which we are more likely to apply in high-involvement situations, allow us to consider each alternative’s good and bad points more carefully to arrive at the overall best choice. Once the consumer makes a choice, he or she engages in postpurchase evaluation to
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determine whether it was a good one; this assessment in turn influences the process the next time the problem occurs.
3. We often rely on rules-of-thumb to make routine decisions. In many cases, people engage in surprisingly little research. Instead, they rely on various mental shortcuts, such as brand names or price, or they may simply imitate others’ choices. We may use heuristics, or mental rules-of-thumb, to simplify decision making. In particular, we develop many market beliefs over time. One of the most common beliefs is that we can determine quality by looking at the price. Other heuristics rely on well-known brand names or a product’s country of origin as signals of product quality. When we consistently purchase a brand over time, this pattern may be the result of true brand loyalty or simply inertia because it’s the easiest thing to do.
4. The way information about a product choice is framed can prime a decision even when the consumer is unaware of this influence. Principles of mental accounting demonstrate that the way a problem is framed and whether it is put in terms of gains or losses influences what we decide. In addition, other cues in the environment—including subtle ones of which we may not even be aware—may prime us to choose one option over another. A prime is a stimulus that encourages people to focus on some specific aspect of their lives. Much of the current work in behavioral economics demonstrates how a nudge—a deliberate change by an organization that intends to modify behavior—can result in dramatic effects.
