1

Consumer Decision Making

• Refers to the thought process of a purchasing decision

• Can be determined by various mental and social factors

• Research helps businesses gain knowledge to provide value to consumers

• Research helps consumers make wise choices

2

Consumer Decision Making Process

• Includes five stages:– need identification – information searching– alternative evaluation– purchase decision – post-purchase evaluation

3

Need Identification

• Occurs when a person recognizes a difference between his or her ideal and actual situation

• Examples include: – recognizing the need of a

formal suit for a job interview– perceiving the need of a

better computer for running a high-demanding software

4

Information Searching

• Involves searching for more information about the product or service

• Includes two methods– internal search– external search

5

Internal Search

• Is based on previous experiences of using the product or service

• Is efficient for frequently purchased items• Examples include:

– buying the same brand of milk – having lunch at the school cafeteria

6

External Search

• Involves searching for outside information to learn about the product or service

• Is often used when past experience is insufficient• Primary sources include:

– personal sources such as friends or family – public sources such as information on the Internet – marketing sources such as advertising and salespeople

7

Alternative Evaluation

• Involves evaluating a product or service based on the consumer’s criteria of meeting the need

• Can be influenced by:– rational reasons

• cost-efficiency • certain attributes of a product

– cognitive impulses • favor of a brand

8

Purchase Decision

• Refers to the actual decision of buying or not buying a product

• Has three possibilities:– item first

• selecting a set of brands and then considering when and where to buy

– outlet first• deciding when and where to buy

and then choosing certain brands– not to purchase

9

Purchase Outlet

• Involves two main considerations:– where to buy, which can be influenced by:

• store atmosphere• quality of service• return policy

– when to buy, which can be influenced by:• discount sales• time pressure• certain holidays

10

Post-Purchase Evaluation

• Involves comparing the product to expectations and deciding whether it is satisfying or dissatisfying

• May leads to:– positive consumer

perceptions – negative consumer

perceptions – repeat-purchase behavior

11

Cognitive Dissonance

• Refers to the post-purchase anxiety caused by the doubt of whether a correct purchase decision has been made

• Can be reduced by:– follow-up calls– extended warranty– post-purchase customer service

12

Consumer Skills• Assists consumers in purchasing the right product to suit their needs

• Helps consumers increase purchasing power

• buying the same product or service for less money

• buying more goods and services with the same amount of money

• buying better quality goods for the same amount of money

13

Smart Shopping• Include three steps:

• identify the needs • what problem are you trying to solve? • how will you use this product and service?

• list the attributes • what functions do you have to have?• what functions would be nice to have but are not necessary?

• compare the items• which item is the most cost‐effective?• how well does each item fit in your budget?

14

Reliable Consumer Organizations• Include:

• Consumers Union• publishes Consumer Reports, an unbiased source of product and service evaluations 

• Underwriter’s Laboratories (UL)• establishes safety standards • gives the UL Seal of Approval to qualified products 

• Better Business Bureau (BBB)• reports consumer complaints• provides consumers news and tips 

15

When Shopping for Food 

• Consumers should read food labels and look for the following information:

• the name of the product • amount of contents • information of the processor, distributor or packer• list of ingredients • the Nutrition Facts panel

16

The Nutrition Facts Panel • Must provide the following information:

• serving size• number of servings • calories per serving • protein per serving (in grams)• carbohydrates per serving (in grams)

17

The Nutrition Facts Panel • Must provide the following information:

• fat per serving (in grams)• fiber per serving (in grams)• sodium per serving (in milligrams)• percent of Daily Value for protein, carbohydrates, fat, cholesterol and certain vitamins and minerals 

18

When Shopping for Clothes

• Consumers should read the following information on clothing labels:• fiber content• care instructions• where the clothing was made

19

When Shopping for Clothes • Consumers should be able to select:

• well‐constructed clothes• attention to detail• well‐fitted• reliable stitching and assembly

• quality fabric clothes• even color throughout• free of snags and pulls• returns to the original shape after being stretched or pulled 

20

When Buying a Used Car• Consumers should:

• find the car’s value• value of a used car can be found at Kelley Blue Book (KBB) or the National Automobile Dealers Association (NADA)

• check the vehicle history report• can be found at CARFAX.com• includes information such as number of previous owners and whether it was salvaged, stolen, recalled or in an accident

21

When Buying a Used Car

• Consumers should:• never sign an “As Is” statement with the dealer• have the financing and loan approvals ready

22

When Buying a New Car• Consumers are suggested to:

• conduct extensive research and know what they want

• put their priorities in order and narrow down choices

• test drive • compare the price at several different places

• plan to negotiate the best price• take financing, warranties and insurance into consideration

23

New Car or Used Car?New Car Used Car

Advantage • Freedom of choice• Better financing 

• Lower cost• Better insurance 

rates

Disadvantage  • More expensive• Higher insurance 

cost

• Unknown problems• Higher financing 

rates• Limited choices

24

When Buying a House• Consumer should:

• conduct extensive research• common sources include real estate agencies, newspaper classifieds, online sources, family and friends, etc. 

• look for government aid• housing aid is provided by federal agencies such the Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD)

25

When Buying a House

• Consumers must:• have the property inspected 

• professional home inspections are required by law in many states• know the laws and regulations of purchasing a home 

• home buyers must have a title search in order to establish a clear claim to ownership 

26

When Renting a House• Tenants must understand:

• renter’s rights• have a safe and healthy environment• have privacy

• renter’s responsibilities• must care for the property • must pay the full rent when due• must obey terms and restrictions in lease 

27

Renting or Buying?• Should be considered based on:

• budget• renters: deposit, monthly rent, utilities and renter’s insurance • buyers: down payment, mortgage, property taxes, utilities and property insurance

• responsibility • renters: greater freedom to move, less responsibility for upkeep• buyers: greater sense of security and stability, freedom to remodel or redecorate 

28

Renting or Buying?Renter Buyer

Payments  • Deposit• Monthly rent• Utilities • Renter’s insurance 

• Down payment• Mortgage• Property taxes 

Utilities • Insurance

Advantages • Greater freedom to move

• Less responsibility for upkeep

• Greater sense of security and stability

• Freedom to remodel or redecorate 

29

Rules for Smart Shoppers • Include:

• learn about the product and service 

• shop around• watch for sales• be aware of hidden costs• read the label• consider the maintenance and warranty

• think before you buy

30

31

COMPLETE THE CONSUMER SKILLS QUIZ ON VISION

References

• http://www‐rohan.sdsu.edu/~renglish/370/notes/chapt05/• http://www.managementstudyguide.com/consumer‐decision‐making‐process.htm• http://www.udel.edu/alex/chapt6.html• http://www.psychologytoday.com/basics/consumer‐behavior• http://www.consumerpsychologist.com/• http://texas4‐h.tamu.edu/files/2012/12/2012‐13_CDM_Best_Consumer_Decision.pdf• http://www.consumerreports.org/cro/index.htm• http://www.carfax.com/entry.cfx

33

AcknowledgementProduction CoordinatorCaroline Huang‐Loggains 

Brand ManagerMegan O’Quinn

Graphic DesignerMelody Rowell

Technical WriterJessica Odom

V.P. of Brand ManagementClayton Franklin

34

Executive ProducerGordon W. Davis, Ph.D.

© MMXIVCEV Multimedia, Ltd.