DB compensatory decision making bias

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Chapter 8

Judgment and Decision Making

Based on High Consumer Effort

High-Effort Judgment Processes

Estimation of likelihood

Goodness/badness

Anchoring/adjustment

Imagery

Conjunctive probability assessment

Illusory correlation

Perceived Attribute Correlations: Real and Imagined

Conjunctive probability assessment - Estimate whether two events occur simultaneously

Illusory correlation: Are oranges with big navels really better?

Is there a correlation between behavior and gifts received- or is the relationship illusory?

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Biases in Judgment Processes

Confirmation

Self-positivity—prime

Negativity

Mood

Prior brand evaluations

What past brand experiences have biased your judgment about future brand consumption?

High-Effort Consumer Decisions~1

Deciding which brands to consider

There is a vast menu of choices that you must break down to possible choices

Consideration set (evoke set)

Deciding what is important to the choice

Goals

Time

Framing

Usage-Context

High-Effort Consumer Decisions~2

Deciding what offerings to choose

Thought-based decisions

Brands

Product attributes

Gains & losses

Feeling-based decisions

Appraisals & feelings

Affective forecasts

High-Effort Consumer Decisions~3

Deciding whether to make a decision now

Decision delay

Deciding when alternatives cannot be compared

High-Effort Decision Making Processes

Consideration set

Inept set

Inert set

What are the differences among these sets?

High-Effort Thought-Based Decisions

Cognitive decision-making models

Types of decision processes

Compensatory vs. noncompensatory

Brand vs. attribute

Compensatory brand-processing models

Additive difference model

Compensatory Model

Compensatory Model of Choice – consumers analyze each alternative in a broad evaluative fashion so that high ratings on one attribute may compensate for low ratings on other attributes.

Compensatory Models are generally used in a high involvement purchase decision.

Compensatory Attribute Processing Models

Additive Difference Model

Brands compared by attribute, two at a time

Differences added up as decision maker proceeds by attribute; e.g.:

	Epson	Canon	Diff
Price	3	3	0
Weight	3	4	-1
Processor	5	5	0
Battery Life	1	3	-2
After Sales Support	3	3	0
Display Quality	3	3	0
TOTAL			-3

(Canon is better)

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Evaluative criteria

Epson

Canon

Compaq

Samsung

IBM

Toshiba

Importance

Price

Weight

Processor

Battery life

After-sale support

Display quality

evaluations: 1 = very poor; 5 = very good

Or belief strengths: –3= very weak; +3= very strong if stated in terms of attribute level

(e.g., low price, light weight, long battery life, etc.))

Different Choices, Depending on Different Decision Rules

Decision Rule

Brand Choice

Compensatory

Samsung

Conjunctive

Canon

Disjunctive

Toshiba

Lexicographic

Epson

EBA

Samsung

Compensatory Model:

Score for Samsung Score for Epson

30 * 4 = 120 30 * 5 = 150

25 * 4 = 100 25 * 3 = 75

10 * 2 = 20 10 * 5 = 50

05 * 4 = 20 05 * 1 = 05

10 * 3 = 30 10 * 3 = 30

20 * 5 = 100 20 * 3 = 60

____ ____

390 370

Evaluation

Evaluations of brands as good or bad based on information retrieved from memory or generated through external search.

Importance weights based on needs, values, goals, problem recognition

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Compensatory Models

Help us understand why a decision was made

Can identify strengths and stress in communications

Can identify weaknesses alter product, and communicate changes

Noncompensatory Models

Noncompensatory Models of Choice (Hierarchical) – high ratings on some attributes may not compensate for low ratings on other attributes

Typically lower involvement than compensatory

Noncompensatory Brand Processing Models

Conjunctive Models (Weight on Negative Info)

Minimum cutoffs set for each attribute (reject if below cutoff)

Need additional rule to rule out remaining alternatives (if more than one)

Disjunctive Model (Weight on Positive Info)

Acceptable levels for attributes decided (reject if below cutoff)

Decision based on several, but not all, important attributes

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Noncompensatory Attribute Processing Models

Lexicographic Model

Attributes ordered by importance

If one alternative dominates that attribute, it is chosen; otherwise, proceed to next most important attribute

I want to get brand that does best on attribute(s) most important to me.

Elimination by Aspects

Attributes ordered by importance; alternatives acceptable on first attribute proceed to evaluation on further attributes

I will eliminate any brands with a value of 3 or below, beginning with most important attribute.

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Cognitive Choice Models

Phased Strategy

Phased Strategy – consumers sequentially used two noncompensatory or use a noncompensatory model and then a compensatory approach.

Typically used in a high involvement situation.

Which Models Do Consumer use the Most?

Lexicographic – 60.7%

Multiattribute – 32.1%

Phased – 5.4%

Others – 2.4%

Brand Processing Models

Compensatory Models

Multiattribute models (Theory of Reasoned Action [TORA])

Noncompensatory Models

Conjunctive model

Disjunctive model

What is the main difference between compensatory and noncompensatory models?

Brand vs. Attribute Models

Noncompensatory brand-processing models

Cutoff levels

Models

Conjunctive

Disjunctive

Noncompensatory attribute-processing models

Lexicographic

Elimination-by-aspects

Multiple models

Decisions Based on Gains & Losses

Prospect theory

Losses have more influence than gains

Think-have you ever spent more on gas to “save” on a price?

Consumers have stronger reaction to price increases than price decreases

Endowment effect

Ownership increases value (& loss) associated with an item

This is why the 24 hour test drive of vehicles is often a success

High-Effort Feeling-Based Decisions

Affective decision making: decisions are made in a more holistic manner on the basis of feelings or emotions

What is an example of an affective-based purchase that you have made?

Was it a good purchase in retrospect? Endowment effect

Affective Decision Making

Affective Decision-Making

Appraisal Theory: how your emotions are determined by the way you appraise the situation; explains how & why certain emotions can affect future judgments & choices

Affective Forecasting: you predict how you will feel in the future

Valence

Intensity

Duration

Imagery: you imagine yourself consuming a product or service; a key role in emotional decision making

Stimulating Imagery

Additional High-Effort Decisions

Decision delay

Decision too risky

Decision entails unpleasant task

Decision making when alternatives cannot be compared (noncomparable decisions)

Noncomparable Decisions

Noncomparable Decisions: process of making decisions about products or services from different categories (e.g., weekend entertainment)

Consumers use an alternative-based strategy OR an attribute-based strategy

Two main consumer strategies:

Alternative-Based (top-down processing): overall evaluation, may use pros & cons

Attribute-Based (bottom-up processing): consumers form abstract representations to help them compare options

Contextual Effects on Consumer Decision Making

Consumer characteristics

Task characteristics

Task definition/framing

Presence of a group

Consumer Characteristics Affecting Decision Making

Expertise

Mood

Time pressure

Extremeness aversion

Metacognitive experiences

Task Characteristics Affecting Decision Making

Information availability

Information format

Trivial attributes

Information Availability

Group Decision Making

How does your consumer behavior/decisions change when you are alone vs. with: your friends? parents?

Individual-alone goals

Individual-group goals

Group Context & Decision Making

Self-presentation

Minimizing regret

Information gathering

Goal Classes Affecting Decision Making