DB compensatory decision making bias

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Chapter 9

Judgment and Decision Making

Based on Low Consumer Effort

Shortcuts in Making Low-Effort Judgments

A heuristic is a “rule of thumb” to simplify things

Representativeness heuristic: Comparing a stimulus with the category prototype/exemplar

Availability heuristics: Basing judgments on events that are easier to recall

Base-rate information

Law of small numbers

Availability Heuristics

Base-rate Heuristics – We base our judgment on information that is memorable or the most dramatic.

Do weight loss pills work for most people?

Will this exercise machine make me happy?

This judgment is not based on actual or typical results, but is based on the results that are the most striking

Unconscious Low-Effort Decision Making

You may make a decision without being consciously aware of how or why you are doing so. Example?

Use of all senses

Environmental stimuli

Automatic goal-relevant behavior

Conscious Low-Effort Decision Making

Low-effort vs. High-effort decision making

Hierarchy of effects

Thinking > feeling > behaving

Passive/incidental learning

Post-purchase

Thinking > behaving > feeling

Simplifying strategies

Optimizing

Satisfice

Simplifying Strategies

Satisficing – When a consumer is willing to accept “good enough” rather than the “best.”

Low-involvement consumer look for ways simplify or reduce effort required for purchase decision

Choice tactics – quick and easy rules of thumb (heuristics) that guide purchase decision.

Consumer Learning Process

How Consumers Learn to Apply Choice Tactics

Choice tactic: simple rule of thumb consumers use to make low-effort decisions

Consumers may learn choice tactics via: Operant Conditioning: behavior is ƒ(previous actions & reinforcements or punishments obtained from these actions)

Reinforcement

Punishment

Repeat purchase

Choice = Product Dependent

Simplifying Strategies in Low Elaboration Contexts

Recall, in low effort contexts (e.g., beverage) consumers apply different choice tactics than in high effort contexts (e.g., new car)

Simplifying strategies: When MAO is low, consumers are motivated to simplify the cognitive process with heuristics

How a message is framed influences how consumers react

Choice Tactics

1. Performance-related

2. Habit

3. Brand loyalty

4. Price

5. Normative influences

6. Feelings/affect

7. Variety seeking

(note, you may recognize these in the left box of the consumer-learning process figure shown prior)

1. Performance as a Simplifying Strategy

Performance-related tactics: when the outcome of the consumption process is positive reinforcement

Can be an overall evaluation of performance, or focused on a specific attribute or benefit

Quality

Important features/benefits

Sales promotions

2. Habit as a Simplifying Strategy

Having a habit (e.g., in the grocery store) is a simplifying strategy

Habits can make life simpler & or more manageable

Habit—repeat purchase, shaping

Little/no information sought

Little/no evaluation of alternatives

Promotion/distribution policies

Marketing to Habitual Purchasers of other Brands

3. Brand Loyalty as a Simplifying Strategy

Brand/Multibrand Loyalty

Purchase pattern + commitment to brand

Cognitive lock-in

Resistant to competitive efforts

Quality/Satisfaction

Quality for Brand Loyalty

4. Price as a Simplifying Strategy

Marketer Side Price Considerations:

Coupons

Price-offs

Rebates

Two-for-ones

Savings must be:

at or above the just noticeable difference

within zone of acceptance

Special pricing must not be used too often or risk of dilution

Consumer Side

Price Considerations:

Zone of acceptance

Price perceptions

Deal-prone consumers

Price consciousness is not static

Pricing Strategies -Value

Value – Two ways to provide value: 1) Lower price for same benefits 2) Provide more or better benefits for same price

Example – Orange Juice & Orange Juice with Calcium. Digiorno – is it just like delivery?

Pricing Strategies –Special Pricing

Special Pricing – usually a temporary lowering of price.

Sale: The price is simply lower than normal

Rebate: The price is the same and the consumer is required to take action to receive money back after purchase

Coupon: Price is lowered when coupon is offered by consumer, usually at time of purchase.

Dangers of Special Pricing

If sale is offered too much consumer no longer views it as special pricing.

Coupons tend to create coupon addicts or simply lowers price for existing customers.

Rebates may not be effective for consumer who feel they won’t use them.

Everyday Low Pricing (EDLP) Wal-Mart coined the term to reduce problems of special pricing.

Pricing Perceptions

When the largest denomination changes consumer views this as a larger price difference than lower denominations.

Example: $5.00 to $4.99 is perceived to be larger drop in price than $5.02 to $5.00.

Some research has shown that consumers respond favorably to odd pricing such as $9.87 or $7.63 versus $9.90 or $7.60.

Pricing

Zone of Acceptance – a range of prices that are acceptable for products. Too high or too low and consumers feel value is compromised.

Variability in Price perception – Economy affects our view of prices. Is $3.85 a good price for a gallon of gas?

5. Normative Influences as a Simplifying Strategy

Others can influence consumers’ low-elaboration decision making

Normative Influences

Direct

Vicarious

Indirect

6. Feelings/Affect as a Simplifying Strategy

Affect: low level feelings

Think of a brand you just like, & you don’t really know why.

Affect does not necessarily result from a conscious recognition of need satisfaction

Affect is weaker than attitude

Affect referral: the “how do I feel about it heuristic”

Affect is often generated from brand familiarity

The mere exposure effect

Visual attributes

Co-branding

7. Decision Making Based on Variety-Seeking Needs

Variety-seeking needs (e.G., In soft drinks)

Satiation/boredom

Optimal stimulation/sensation seekers

Vicarious exploration

Buying on impulse/impulse purchases

Intense feeling

Disregard negative consequences

Euphoria/excitement

Conflict between control vs. Indulgence

What impacted your last impulse purchase?

Variety Seekers