Lecture 4

Question 1

What are the different type of risk when making a decision?

Answer 1

1. Monetary

The money you spend in buying (or owning) the product=
* Relatively costly purchases (e.g., cars)
* Things you will pay for over time (e.g., pets)

2. Physical

Risks related to your physical body, health, and wellbeing

• Things related to our wellbeing (e.g., drugs, medical treatment) or the wellbeing of loved-ones (e.g., car seats)

3. Social

Risks related to your social status, or friendships

• Things that other people see you consume that might affect you socially (e.g., jewelry, clothing, sports equipment)

4. Psychological

Risks related to self-esteem and confidence

• Products that might make you feel bad if they don’t work (e.g., fitness regimes, wrinkle creams, GRE-prep books)

5. Functional

Risks related to the performance of the product and it’s ability to meet the need

• Subscriptions to internet services, cell phones, insurance policies

Question 2

What are the factors that lead to high/low involvement decisions? What should you focus on to sell these products?

Answer 2

Everyday decision: little or no conscious effort (ex.: buying a soft drink with lunch), automatic.
Often same brand out of habit and convenience. Low cost and minor risk.
Sensible to promotions, availability (things that facilitates purchases). Give more visibility (ex.: gum is beside the cashier).

High involvement decisions: risky, costly, highly visible to others, high consequences. Sensitive to return policies or satisfaction guarantees that reduces the perceived risk of the purchase.

Question 3

Describe the consumer decision process (decision lifecycle).

Answer 3

1. Need recognition
   - the gap between the current state and the desired state
   - two types: new need and upgraded/iterated need
2. Information search
   - sources of information: product usage/sampling, online reviews, editorial content, emails/newsletters, websites, social media, word of mouth, etc.
3. Evaluation of alternatives
   - search versus choice
   - consideration set: brands (and products) already known to the consumer as well as those that emerge for the external information search, that are evaluated before a purchase
4. Purchasing decision
   - determinant attributes: aspects of the product that differentiate it from other products and are used in decision making
   - models of decision making: compensatory models (weights pros and cons) and non-compensatory models (check list for criteria, if not met -> out)
5. Post-purchase evaluation
   - expected disconfirmation theory (satisfaction après l’achat en fonction des attentes)
   - expectation management
   - loyalty

Question 4

What are the different influences on the decision lifecycle?

Answer 4

1. Internal influences

• Central psychological processes
  (motivation, perception, knowledge, emotions, attitudes)
• Psychographic variables
  (identity and self-concept, values, lifestyle)

2. External influences

• Reference groups
  (information, normative and comparative influence)
• Culture and subcultures (generations, ethnic groups, etc.)

3. Contextual influences

• Mood
• Time available
• Physical and social environment
  (where are you? who are you with?)

4. Marketing tactics (marketing mix)

• Price, product, place, promotion