eLearning Sessions

After completing this chapter, you should be able to:

1. Explain the difference between consumer cognitions, affect, and behavior and describe their role in decision making.
2. Discuss theories that are applied to attitudes and attitude formation, and describe the role of attitudes in consumer behavior.
3. Talk about competing hierarchy of effects models, as they related to attitude formation.
4. Distinguish between awareness, knowledge, liking, preference, behavioral intentions, and behavior in consumer decision making.
5. Describe the influence involvement in consumer choice.
6. Explain the concept of quick choices and the difference between the central and the peripheral routes to persuasion.
7. Discuss the multiattribute model of consumer choice and the elaboration likelihood model of persuasion.
8. Outline the strengths and weaknesses of the Fishbein models of attitudes.
9. Describe other choice models, including expected utility theory, satisficing decisions, consumer heuristics, and prospect theory.

• Consumers make choices every day. Some brand choices consumers make are relatively simple and in other situations consumers make brand choices that require extensive information search and require difficult choices. How do consumers cope with the decisions they must make? In this chapter, we discuss two broad, approaches for thinking about the choices that individual consumers make; Consumer Attitudes and Attitude Models and Models of Consumer Choice. Throughout the chapter, there is an emphasis on understanding how individual consumers make decisions. Attitudes are key internal factors that shape individual consumer choices and these are discussed at length in the following section.

• We introduce the concept of attitude as a way to summarize consumers' thoughts, feelings, and actions.
• Attitude models provide a description of how consumer information processing (including cognitions and emotions) influence consumer choice processes.
• Some of the attitude models discussed include the standard hierarchy, the low-involvement hierarchy, the experiential hierarchy, the Fishbein multi-attitude model, and the Elaboration Likelihood Model. A theory is a kind of model, as both theories and models attempt to provide a coherent account of how the world works.
• The attitude theories that are discussed in this chapter include the functional theory of attitudes, self-perception theory, social judgment theory, balance theory, and the theory of cognitive dissonance.

1. Attitudes: A Summary of Consumer Thoughts, Feelings, and Actions
• Attitudes are important because they reflect what consumers think and feel. They also can be used to explain what consumers intend to do. That is, attitude models help to describe how consumers make choices. The thinking portion of an attitude is called cognition. The feeling or hedonic portion relates to emotion.
• The term attitude is widely used in common speech (see Consumer Chronicles 13.2). Here, we limit the definition of attitude to a consumer's overall, enduring evaluation of a concept or object, such as a person, a brand, a service. An attitude is not fleeing; it is an orientation that lasts over time. An attitude is general in that it summarizes consumers' evaluations over a wide range of situations. Anything toward which one has an attitude is called an attitude object (A_o).
• Attitudes are a product of information acquisition. That is, attitudes are learned beliefs, feelings, and reaction tendencies. Beliefs are thoughts linking an object to some feature or characteristic. Feelings refer to the emotional reaction associated with using some object. Reaction tendencies are a disposition towards action. A reaction tendency is equivalent to a behavioral intention.
• Attitudes help consumers make many kinds of choices. Some of these choices are relatively minor (e.g., what to have for lunch), while others are quite important (e.g., what college to attend).
Attitude in Common Speech (50.0K)
2. Why Are Attitudes Formed?
• The functional theory of attitudes explains the role of attitudes in guiding and shaping social behavior. In other words, this theory attempts to explain why attitudes form. The functional theory describes where attitudes come from by understanding the human motivation for forming attitudes
• Four major functions of attitudes are discussed here: utilitarian, value expressive, ego defensive, and knowledge. Each of these functions can be viewed as a kind of appeal that marketers can make to consumers via advertising and promotional messages.
• The utilitarian functionis based on rewards and punishments. This concept is similar to operant conditioning, where consumers learn through repetition and the consequences that follow stimuli. Following this process, there is a tendency for consumers to develop attitudes that lead towards perceived rewards and avoid any perceived punishments.
• The value-expressive function refers to a consumer's central values or self-concept. In many cultures, including the US and Western Europe, consumers attempt to project their self-concept to the external world. They also form value-expressive attitudes so as to express their values to the external world through product consumption.
• In a Western cultural context, the ego-defensive function of attitude serves to protect the person from threats or internal feelings of threat. Through ego-defensive attitudes, consumers strive to realize personal goals and images. Many personal hygiene ads appeal to the ego-defensive function and promise protection both from embarrassing conditions (e.g., body odor) and from the internal states that might follow from these threats (e.g., feelings of social rejection and unpopularity).
• The knowledge functionrefers to the need for order, meaning, and structure.
• An attitude can serve more than one function; but, typically, one function will dominate. If marketers can understand the dominant function that a product serves, then they can create brands that better satisfy consumers, and they can design promotional campaigns that communicate these functions to consumers.
3. Cognition, Affect, and Behavior
• Attitudes have three components: cognition, affect, and behavior. Re-arranging the first letters of these terms, researchers identify the "ABC" model of attitudes. In this model, cognitionrefers to the beliefs a consumer has about an attitude object. Affectrefers to the way a consumer feels about an attitude object. Behavior involves the person's "intentions to do" something with regard to an attitude object. Attitudes are thought to influence behavior; but the term's "attitude" and "behavior" are not synonymous. In fact, they are distinct processes.
• The relative importance of the three components of an attitude varies. What matters to consumers depends in part upon their level of motivation. It also depends upon the stimulus object, whether it's a product, service or experience.
• What is the relationship between affect, behavior, and cognition? A hierarchy-of-effects model provides a way to explain the relative impact of these three components.
• Three competing hierarchy-of-effects models are discussed here: a) the standard hierarchy of effects, which emphasizes a problem-solving process; b) the low-involvement hierarchy of effects, which is based on consumer experiences, good or bad; and c) the experiential hierarchy of effects, which emphasizes emotional responses.
1. The Standard Hierarchy
• The standard hierarchy is shown in Exhibit 13.1. According to this model, consumer responses come in the following order-cognition, affect, then behavior (or learn-feel-do, as the sequence is sometimes phrased). In the marketplace, inputs to the consumer include elements of the marketing mix (e.g., promotions, price information), along with environmental factors (e.g., communications from competitors, economic trends). In the standard hierarchy, cognition is the first kind of consumer reaction to an external stimulus.
• Cognitions are divided into two components - awareness and knowledge.
• Following the cognitive evaluation of the stimulus object, consumers experience affective reactions. Again, these come in two varieties - liking and preference - with preference indicating a greater degree of consumer commitment than liking.

Three Hierarchy of Effects Models (50.0K)

• The evoked set is the set of brands that a consumer would consider purchasing.
• According to the standard hierarchy, behavior follows affect. In other words, behaviors are formed by attitudes. Intention to buy is a kind of probability, and this consumer intention is considered to be a kind of attitude since it exists only in the consumer's mind and not in the observable world.
• Marketing managers are interested in purchases, which accumulate to create sales levels and market shares. From a consumer perspective, outputs could include satisfaction levels and word of mouth.
• The standard hierarchy assumes that consumers are rational processors of information. They form beliefs, attitudes, and intentions that causally determine consumer choices (e.g., brand selections) and behavior.
• Marketing communications in some cultural environments relies more heavily on the standard hierarchy than on others.
2. The Low-Involvement Hierarchy
• The low-involvement hierarchy shares some elements in common with the standard hierarchy, but it specifies that consumer responses occur in a different order.
• Cognition comes first in the persuasion process; but behavior comes next. Affect comes last in the chain and is influenced by behavior. Affect and emotion emerge in response to consumption experiences. The low-involvement hierarchy is sometimes called the learn-do-feel sequence.
• As the name suggests, this model applies to low-involvement purchase situations where both motivation and perceived risk are low. Low-involvement choice process makes sense when the product is inexpensive. Thus, in low-involvement situations, a main objective of promotional campaigns is to capture consumer attention. Once attention is captured, crucial information can be communicated in order to induce trial. Exhibit 13.2 shows a model of quick choices that explains low-involvement purchase behavior.
Quick-Choice Model (50.0K)
• Note that there is no role for emotion or affect in the quick choice model. Ideas (cognition) are followed almost immediately by behaviors. Certainly, this kind of model is useful for explaining the kinds of impulse purchases that take place in check-out lines or in response to behaviorally oriented ads where impulsive behavior ("I just couldn't resist") like eating at McDonald's. For these kinds of low-involvement or impulse purchases, a thorough evaluation of the brand and purchase come later on in the process (following the consumption experience). Affect comes last in the hierarchy of consumer responses.
3. The Experiential Hierarchy
• The experiential hierarchy stresses the importance of consumers' emotions. Sometimes, consumers buy things just because they like them.
• In contrast to the low-involvement hierarchy, the experiential hierarchy describes a situation where consumers are often highly involved in decision-making. However, consumers don't seem to follow the step-by-step process that is implied by the standard hierarchy. Instead, they evaluate the overall stimulus and make a decision.
• Although the experiential hierarchy is sometimes referred to as the do-feel-learn sequence, these kinds of consumer choices prove more difficult to de-compose into individual stages than is the case with products that are purchased following the standard hierarchy.
• Some authors argue that another hierarchy of effects sequence works in the Asian context, specifically, Japan. Here the sequence is feel-do-learn. The purpose of Japanese marketing communication is to please the consumer and to build "dependency" (amae) on the firm.
4. Attitude toward the Ad and Attitude toward the Store
• When consumers make decisions, they form attitudes about brands and attitudes about products.
• Consumers form attitudes towards the advertisements that they see. These are called attitudes toward the ad (A_ad) and are defined as a predisposition to respond in a favorable or unfavorable manner to a particular advertising stimulus during a particular exposure occasion. What this means is that ads have entertainment value. Positive feelings are generated by an ad, and consumers experience a variety of emotional responses when they are exposed to ads.
• Determinants of A_ad include attitude toward the advertiser, evaluation of the ad execution itself, the mood evoked by the ad, and the degree to which the ad affects viewers' arousal levels. It is generally agreed that commercials have the potential to stimulate at least two kinds of positive emotions: pleasure and arousal. Negative emotions (such as intimidation) are also possible. Mood-management theory assumes that consumers strive to eliminate or at least diminish bad moods and perpetuate good ones by selecting appropriate media.
• Consumers can also have attitudes toward the stores they visit.
5. How Attitudes Are Formed and "Learned"
• Attitudes can form through a variety of processes. In particular, attitudes can be formed following the learning patterns including classical conditioning and instrumental conditioning. As discussed below, there are important links between the learning theories and the attitude formation processes. In addition, attitudes are formed through one of three related processes: a) compliance; b) identification; and c) internalization.
• Some attitudes are formed following a process of compliance that is related to instrumental conditioning. In this case, attitudes are formed to gain reward or avoid punishment. To some extent, the compliance explanation for attitude formation is consistent with operant conditioning. Consumers shape their behavior so as to respond to rewards and punishments in the marketplace.
• Attitudes also form through a process of identification, which is also related to instrumental conditioning. Here, attitudes are formed so as to allow the person to "fit in" or to be similar to others.
• Attitudes can also be learned through a complex cognitive process.
• When attitudes are internalized, typically through a more complex process than mere conditioning, they become a part of a person's value system. In these instances, attitudes are strongly held and difficult to change.
6. The Relative Strength of Attitudes
• Attitudes are not all of equal strength. Some attitudes are backed up by strongly held beliefs and are not easily changed. Other attitudes are not so strong.
• The strength of an attitude is also influenced by a consumer's level of commitment to an attitude.
• In general, the degree of commitment is related to level of involvement with the attitude object.
7. The Importance of Consistency and Cognitive Dissonance
• The desire for consistency is a strong human motivation. Consumers strive to attain consistency between their attitudes. According to the principle of cognitive consistency, consumers strive to maintain harmonybetween their thoughts and behaviors. That is, people will adjust beliefs and/or attitudes in order to maintain consistency. Alternatively, they will adjust their behaviors to maintain balance with their attitudes.
• An internal state of cognitive dissonanceresults when there is a discrepancy between behavior and attitude. According to the theory of cognitive dissonance, consumers will actively seek to resolve or reduce this discrepancy. In other words, people seek to reduce dissonant behavior or feelings.
• As illustrated in Consumer Chronicles 13.3, cognitive dissonance is a state of psychological discomfort that is caused by a dis-equilibrium between cognitive elements. In this sense, cognitive elements are defined as "any knowledge, opinion, or belief about the environment" or about one's behavior. When a consumer experiences dissonance, there is a strong motivation to re-establish balance. That is, consumers change their attitudes so that they are consistent with their public behavior (or vice versa). Of course, in some cultures consistency between attitudes and behavior is not very important and having consistent attitudes and behaviors is also not important.
Cognitive Dissonance Melanies New Refrigerator (50.0K)
8. Self-Perception
• Self-perception theory provides another way to explain dissonance effects. This theory describes how people observe their own behavior and use theseobservations to shape their attitudes. This theory seems especially relevant to the low-involvement hierarchy, where consumers derive an attitude (or affect) after they have engaged in some behavior.
• Self-perception theory explains the effectiveness of some sales techniques. One such method is the foot-in-the-door technique, which advises that a salesperson should first ask a prospect for a small favor. Once that favor is granted, the salesperson can then proceed to ask for something larger (i.e., the sale).
9. Social Judgement
• Social judgment theory stipulates that people understand the world by matching up new stimuli with information that is already stored in memory. In this sense, social judgment theory is similar to self-perception theory.
• Under social-judgment theory, a consumer's initial attitude acts as a frame of reference. New information is categorized in terms of this existing standard.
• By following this existing standard, consumers can judge the new information to be acceptable or unacceptable. Marketing communications that are judged to be reasonably similar to pre-existing information are readily accepted. Marketing communications that are perceived to contrast with pre-existing information are rejected. This latter phenomenon is known as the contrast effect. Here, the contrast is between two bits of information - one that is in the environment and one that is in memory.
10. The Importance of Balance
• Balance theory describes how consumers evaluate elements that belong together. In balance theory, consumer perceptions are classified as either positive or negative. Perceptions are altered to make them consistent.
• This theory describes elements in the environment as appearing in groups of three. Each triad contains: 1) a consumer and her perceptions; 2) an attitude object (such as a brand); and 3) some other person.
• Celebrity endorsers are prominently featured in advertising. For instance, it is estimated that advertisers pay more than 550 million dollars a year to famous athletes to endorse their products. Advertisers are hoping that, by using celebrities in their ads, they can convince target consumers to change their attitudes about advertised brands.
11. Multi-Attribute Attitude Models
• Attitude models have been developed to specify and explore the different elements that affect attitude. Multi-attribute attitude models explore the many attributes that might influence a consumer's decision-making process. In a marketing context, these models specify that consumers' attitudes about brands depend on the beliefs they have about the group of brand attributes. That is, consumers evaluate brands by considering the many attributes that make up a brand.
• In general, multi-attribute models consist of three important elements: 1) attributes, characteristics of the attitude object; 2) beliefs, cognitions' about the specific attitude object; and 3) importance weights, reflecting the priority consumers place on the object.
• In a marketing context, attributes are product or brand characteristics.
• A belief is a state of knowledge. Awareness and unawareness represent the extremes of a belief.
• Importance weights describe the priority that consumers give an attribute.
• Multi-attribute models are important because they explicitly recognize that consumers face tradeoffs. One kind of tradeoff involves time use. Mulit-attribute models try to take into account these trade-offs that consumers' face when they make choices in the marketplace.
1. The Basic Fishbein Model of Consumer Choice
• The Fishbein model is an example of a popular multi-attribute model that is frequently applied in marketing research. This model measures 1) "salient beliefs, 2) object-attitude linkages, and 3) evaluations of each of theimportant attributes. Martin Fishbein's first, basic formulation of an attitude was:

ch13Sigma (2.0K)

where:
A_o is the attitude toward an object,
B_i represents the strength of the belief that attribute "i" is related to the object,
a_i is the value (or importance) of this attribute to the consumer,
and n is the number of salient attributes.

• In a marketing context, the beliefs are usually measured with respect to product attributes. For example, consumers might be asked to indicate their beliefs about how effective Pantene shampoo is at fighting tangles (a product attribute). Continuing in a marketing context, "value" is frequently measured as "attribute importance." For instance, consumers would be asked to indicate how important it is that their shampoo fight tangles (attribute importance).
• In plain words, the Fishbein model says that attributes are a sum of beliefs and their evaluations. In a marketing context, the beliefs are about attributes. The evaluations are importance ratings for the attributes.
• There are several strategic applications of the Fishbein model. For instance, organizations can attempt to capitalize on relative advantages that they have in the marketplace. Promotions can be used to strengthen belief in the linkage between an attribute and a brand.
• Communications can also be used to add a new attribute to consumers' consciousness. Influencing competitors' belief ratings is another advertising or positioning tactic that is related to the Fishbein model.
2. The Extended Fishbein Model
• The extended Fishbein model is called the theory of reasoned action. Recognizing that social pressure can have a strong influence on behavior expands the initial Fishbein model. The model can be represented as:

BI = f (A, NB_s x MC, NB_p)

B = f (BI, EE)

where,
B = Behavior,
A = Attitude,
NB_s = Social Normative Beliefs,
MC = Motivation to Comply,
NB_p = Personal Normative Beliefs,
BI = Behavior Intention, and
EE = Judged Influence of Extraneous Events

• The model implies that behavioral intention can be predicted from knowledge of consumers' attitudes, social beliefs, and personal beliefs. In turn, behavior is predicted for knowledge of behavioral intentions and the judged influence of extraneous events. In this model, "social normative beliefs" attempt to capture expectations of peer groups, friends, and family.
• Motivation to comply reflects how strongly a person feels that he/she must comply with the wishes of other people he/she knows.
• The extended Fishbein model attempts to take into account the influence that other people can have on our behavior. We don't always make choices just to please ourselves. We also try to please other people whom we know and cherish. In some instances, these social influences can be as strong or stronger than the personal reasons that we have for making choices.
• The model also tries to take into account the influence of extraneous events on individual choice. Extraneous events could include such things as time pressures, technological constraints, competitive promotions, and/or economic constraints.
3. Limitations of the Fishbein Model
• There are certain obstacles to predicting behavior via the extended Fishbein model. For example, the model was designed to deal with actual purchase behavior not outcomes of behavior (such as consumption or word of mouth). In addition, some outcomes are beyond the consumer's control. That is, behavior is not always intentional. Impulse action is not explained in a convincing way by the Fishbein approach. Many times, consumers' direct, personal experience has a stronger influence than any other elements (e.g., attitudes that result from exposure to company-sponsored communications).
• Consumer's attitudes are always evolving. When market researchers attempt to track attitudes over time, they must try to take many snapshots, not just a few. Attitudes change to reflect new realities in the marketplace. They change to reflect new consumer experiences and beliefs. And they vary situationally. As implied by the hierarchy models discussed above, variations in involvement levels may result in the activation of different cognitive processes with different behavioral results.
12. The Elaboration Likelihood Model of Persuasion
• Persuasionrefers to an active attempt to change individual attitudes. The elaboration likelihood model (ELM) has been proposed to explain how persuasion works. The model is diagrammed in Exhibit 13.4. The ELM describes how individual consumers' process new information via different routes, depending on the personal relevance of this information. When consumers are highly involved, the central route to persuasion is dominant. In the central route to persuasion the consumer determines if the message is relevant. The person will actively think about the arguments presented and generate either positive (cognitive reactions) or negative (counter arguments) responses. This route usually involves processing information via the traditional hierarchy of effects. That is, the rational, cognitive arguments presented in the message are quite important and the consumer evaluates these arguments carefully.

Elaboration Likelehood Model of Persuasion (50.0K)

• When consumers are exposed to new information under conditions of low involvement, the peripheral route to persuasion dominates. In the peripheral route, consumers are not so motivated to think about the main message arguments. Instead, they rely on other cues to "evaluate" the message.
• Crucial variables in the ELM include a) message-processing involvement (high or low), and b) argument strength (strong or weak). The model predicts which kind of arguments (strong or weak) will be more persuasive under different involvement situations. Under high involvement, consumers are highly motivated to process the main message and to pay attention to strong arguments. Under low involvement, consumers are not involved with the decision situation, so they are not motivated to process the main message and they are not influenced as much by strong messages. Instead, weak messages (i.e., peripheral cues) are more persuasive than strong message arguments.
• Two examples are presented here to illustrate the ELM. The first, presented in Consumer Chronicles 13.4, shows a high-involvement situation in which the main message and strong arguments are the main persuasive elements in the choice situation. The second example, in Consumer Chronicles 13.5, describes a low-involvement situation in which peripheral cues are more influential in guiding consumer choice.

High-Involvement Persuasion (50.0K)

Low-Involvement Persuasion (50.0K)

• The elaboration likelihood model and the multi-attribute models of attitudes upon which it is based, represent a psychological approach to analyzing how consumers acquire, organize, and use information to assist in choice behavior. An underlying assumption is that consumers want to solve problems and choose rationally. Under this assumption, choice models do not take symbolic, hedonic and aesthetic motives into account.
• How people acquire, organize, and use information is related to the type of information they are used to processing. People in interdependent relatively homogenous cultures are used to processing indirect communication, symbols and signs. People in individualistic, heterogeneous cultures like the United States for example, are used to processing direct communication such as words and explanations.
• Differences in how people are used to processing information should affect marketing communications. The ELM and the hierarchy of effect models described earlier deal poorly with these cultural differences in information processing.
• Another problem with the ELM and hierarchy models is their emphasis on the individual as an information processor. The problem becomes clear in highly interdependent cultural contexts.
• Marketing communications in this cultural context cannot persuade individuals directly. Instead, products and marketing communications must adapt to group influence, defining groups rather than the self.
• Different models of information processing are needed to understand persuasive processes and decision-making in a global marketplace.
13. How Consumers Respond to Persuasion Attempts
• The persuasion knowledge model posits that consumers develop knowledge about persuasion and use this knowledge to respond to persuasion experiences. Persuasion knowledge includes consumers' theories about persuasion and beliefs about marketers' motives, strategies and tactics. It also includes information about ways to respond to or counteract persuasion attempts and the effectiveness and appropriateness of persuasion tactics.
• Persuasion knowledge is not a schema but a loose set of beliefs about persuasion that may be accurate or inaccurate. People's persuasion knowledge is constantly changing and of course depends on the kinds of persuasion consumers encounter in their social environment, consumers' developmental stage (children have different knowledge than adults), and the persuasion attempts to which they have been exposed.
• The persuasion knowledge model can supplement the elaborate likelihood model by explaining when and why such things as celebrity endorsers, lengthy claims or claims accompanied by statistics will be interpreted as tactics and what types of inferences and evaluations these tactics call to mind. Marketers need to keep in mind consumers' persuasion knowledge and how it affects the interpretation of persuasion attempts.
14. Predicting Consumer Behavior
• Marketing managers are interested in attitudes because attitudes are predictive of behavioral intentions. That is, if a consumer has a favorable attitude toward a brand, then that consumer will have a higher probability of purchasing that brand. Unfortunately, behavioral intentions are not the same as behaviors. In brief, knowledge of consumer attitudes doesn't always help us to understand or predict consumer behavior. There are many environmental variables (e.g., competitors, promotions, distribution breakdowns, and situational factors) that can influence consumer choice at the point of purchase, even when consumers' prior probabilities for purchasing a particular brand are high. In addition, some kinds of attitudes are linked only indirectly to consumer choice.
• Cultures affect behavior intentions. Cultures vary in the extent to which people make definite concrete plans. They also differ in the extent to which they believe their own actions will produce definite results.

• How do consumers make choices? How do they decide which services or brands to purchase or what retail outlets to patronize? To some extent, there may be as many choice models or strategies as there are consumers. We attempt to identify patterns and to group consumers into overall patterns. In the following sections, we discuss other choice models, including Expected Utility Theory, Consumer Heuristics including Satisficing Decisions, and Prospect Theory.

1. Expected Utility Theory
• Economics provides a model of consumer decision-making. This model is called expected utility theory. It assumes that decision-makers are rational and that they have complete information. That is, consumers are assumed to have complete information about the probabilities and consequences attached to each alternative course of action. They are expected to understand this information and be able to calculate the advantages and disadvantages of each alternative. Finally, consumers are supposed to compare these calculations and select the course of action that maximizes expected utility. Thus, consumers make choices in a manner that maximizes a utility function, subject to the constraints of time, money and income, information, and technology.
• People are most likely to have well-articulated preferences when they are familiar and experienced with the choice problem, and rational choice theory may be applicable in such situations. Industrial purchasing processes may sometimes correspond to the model. But individual consumers and households rarely act in the ways that are assumed by expected utility theory. Information about alternatives is often missing or uncertain. Perception is selective. Memory is imperfect and biased. Consumers do not have unlimited time and energy to make choices. They don't want to spend all of their waking hours making consumer purchases. Thus, bounded rather than complete rationality characterizes most of us (at best!), when we make decisions. And situational factors may intrude. Thus, expected utility theory is more an idealized model than a description of how consumers actually make market choices. Nonetheless, utility theory has adapted in marketing to provide descriptions of consumer utility for specific attribute levels. These descriptions take the form of utility functions.
1. Utility Functions
• An example of a utility function is shown in Exhibit 13.5. Here, utility refers to the amount of happiness that a consumer derives from a product or from a product attribute. The amount of utility is plotted on the y-axis in Exhibit 13.5. The amount of an attribute present is plotted on the x-axis.

Utility Curve for Almonds in Candy Bar (50.0K)

• The shape of most utility functions is an inverted U, which implies that consumer utility increases through the low range of an attribute, but then comes to a peak at some moderate range.
• Utility functions are useful in consumer behavior research because they can be estimated with a method called conjoint analysis. There are many ways of administrating this method. One way is to ask consumers to rank order a series of brands, all in the same product category. As shown in Good Practice 13.1, each candy bar in the conjoint study can be represented by a profile. Good Practice 13.1 shows four different profiles with five candy bar attributes: amounts of almonds, amount of chocolate, amount of sugar, number of calories, and price.

Conjoint Profiles Data Collection Task for Constructing Utility Functions (50.0K)

• Imagining the consumer as an individual utility maximizer is a weak strategy to adopt in marketing to members of interdependent cultures in the Asian NICs or in most developing countries. Buyers in these cultures will seek out more social information and are more likely to be interested in outcomes that produce or reinforce trust relationships between buyers and sellers.
2. Constructive Choice Process
• Two human characteristics -bounded rationality and limited processing capacity-have led many researchers to believe that consumers construct most reasonably complex or novel choices as situations demand. People often lack well-defined preferences; instead they construct them as needed. Consumers use constructive choice processes because they bring multiple goals to their consumer decisions. Furthermore, rather than adopting one invariant approach to solving choice problems, consumers use a variety of approaches, again often developed on the spot. Consumers may also develop representations of the decisions they face on the spot by structuring or restructuring the information they consider.
• Consumer decision making processes may change as consumers learn more about their options during the decision making process. Preferences will often be context dependent. Nevertheless, we can describe some of the ways consumers make decisions, and some circumstances in which these choice processes apply.
• Two traditional ways to describe how consumers make choices is to divide them into compensatory and non-compensatory models. In compensatory models, consumers assess the importance of each brand or product attribute and assign a subjective value to each attribute level. Then, consumers consider the alternatives multiplying each attribute's subjective value by its importance weight and adding across these sums to obtain an overall value for each brand or product option. A brand may be low on attribute; but it may be chosen anyway as long as it is very satisfying on another important attribute. The second attribute "compensates" for the low rating on the first attribute. This model of choice closely resembles the multi-attribute model.
• Not all attributes are treated equally. For example, consumers seem to be more resistant to trading off some quality to get a better price than accepting a higher price to get better quality. Unfortunately, we do not know too much about the limits on attribute trade-offs and certainly less about this cross-culturally.
• Product rating schemes offered in magazines like Consumer Reports in the US or Products in Japan, by prestigious testing services like StiftungWarentest in Germany, and by some electronic agents of web sites invite and assist consumers to engage in compensatory decision-making. Compensatory models are relatively effortful to use and hence consumers are more likely to use them as the desire for making good choices increases. Hence, consumers may use compensatory models for highly involving, highly risky or emotionally important choices. Product rating guides help to simplify the process for consumers.
1. Consumer Heuristics
• A heuristicis a general "rule of thumb" that consumers use to simplify a decision task. A heuristic is a sort of short cut. A variety of non-compensatory decision models illustrate the idea of consumer heuristics. In one variety of heuristics, non-compensatorydecision models,a low rating on a single attribute can eliminate a brand from consideration. In this case, high ratings on other attributes do not "compensate" for low ratings on the first attribute.
• Non-compensatory models are likely to be used in many simple and low involvement consumer decisions because they offer shortcuts and reduce cognitive effort. However, they are likely to be used in very important choices as well, but for different reasons.
2. Satisficing Decisions
• Consumers often make purchase decisions in situations where information about some alternatives is not available. In some instances, consumers may have information about an attribute, but they don't know what it means.
• To provide a description of this kind of real-life decision-making, Nobel Prize winning economist Herbert Simon proposed the idea that people satisfice rather than optimize when they are making decisions. In satisficing decisions, consumers choose an alternative that satisfies their most important goals. Other goals might be sacrificed.
• In most circumstances, expected utility theory represents an "ideal" model of consumer decision making, while satisficing theory is more descriptive of how consumers actually make choices.
3. Elimination by Aspects
• Another kind of non-compensatory consumer heuristic is to eliminate some options, based on a single attribute.
• Under this elimination by aspects decision strategy, a consumer could reject alternatives by starting with the most important attribute, but this does not have to be the case. A consumer could also start with any random attribute, rather than starting with the most important. Elimination is a consumer choice strategy that is adopted to deal with the information overload that exists in many markets.
• When decision makers apply the conjunctive rule, they eliminate any alternatives that fall outside certain predefined boundaries. The conjunctive rule is also an example of satisficing rather than optimizing.
4. Inference Making
• Inference making is another kind of consumer short cut. It enables consumers to make a choice without complete information by generalizing from the information they know.
• Inference making illustrates how a consumer constructs preferences as needed rather than applying a stable set of well-defined preferences.
5. List Making
• List Making is another simplification strategy that consumers use. When following this method, consumers have already made detailed selections, even before arriving at the store. A list becomes a kind of script. It tells the consumer what to do, what paths to take at the store or at the Web site.
• A list can contain products or brand names, but it can also contain attributes. Such list making implies that a compensatory strategy (rather than a non-compensatory strategy) is being employed. That is, list making helps consumers to make difficult trade-offs between a relatively large set of attributes.
6. Relational Heuristics
• Others to whom one is accountable may evaluate consumer decisions. This is often true in households and businesses, but also in interdependent cultures in the NICs or the less affluent world that devalue individualism.
• Accountability and the need to justify decisions effects how consumers make them. In some situations, people cope with accountability by deferring to the preferences of those to whom they are accountable (elders, spouses, co-workers). Or they may simply choose the status quo option.
• If the preferences of others are not known or powerful justifications for decisions are required, we might expect consumers to use more elaborate compensatory decision-making strategies. They may search for good reasons to use as justifications for decisions. In this situation, the decision-maker might compare the relative advantages and disadvantages of an option to those of other options in a particular background context. This comparison provides the name relational heuristic to the choice process. The weightings for relative advantages of different attributes of the options considered will reflect the background context, including perhaps notions about others' preferences.
3. Prospect Theory
• Prospect theory builds on the notion that consumers have to give up something in order to get something back in the marketplace. Prospect theory proposes that people's decisions are based on how they value the potential gains and losses that result from making choices. This theory is based on the individual's "value function" (see Exhibit 13.6). This function reflects consumers' anticipation of the pleasure or pain associated with a specific decision outcome. The gains or losses are calculated with respect to some reference point.
• A crucial aspect of prospect theory is that the value function for gains is quite different than the "value function" for losses. As shown in Exhibit 13.6, the value function for gains appears above the horizontal axis. This gain function is concave and not so steep. In contrast, the loss function lies below the horizontal axis. It is convex and steeper than the corresponding loss function.
• Because the value function for losses is steeper than the function for gains, losses "loom larger" than gains. What this means in practical terms is that consumers resist giving up things that they already own. This phenomenon is called the endowment effect. When consumers are asked to name a selling price for something they already own, they often require much more money than they would pay to own the very same item.

A Value Function Gains and Losses (50.0K)

• Prospect theory predicts that preferences will depend on how a problem is framed. If the reference point is defined in a way that the outcome appears to be a gain, then decision-makers will be risk averse. In contrast, if the same outcome appears to be a loss, then decision-makers will be risk seekers. Marketers sometimes make use of consumers' differing perceptions about gains and losses.
• Another application of Prospect theory is revealed in retail pricing. In general, it is more effective for retailers to promote cash discounts than to implement a policy of surcharges for customers who choose to use credit cards. Consumers perceive cash discounts to be gains (money retained). In contrast, surcharges are perceived as out-of -pocket losses. Even though the pricing structure may be the same, consumers will strive to avoid the surcharges, which are viewed as losses. Prospect theory also explains the retailing tactic of including "suggested retail prices" on merchandise. Consumers use "suggested retail prices" to form a "reference point." Given this reference point, sale prices will seem like "savings."
• There are limits associated with prospect theory. First, many positive consumer experiences do not involve receiving anything. A second problem with Prospect theory is that it assumes that outcomes can be scaled along a single metric, such as monetary rewards or the risk of a disease (a potential loss). For situations when consumers are forced to make trade-offs between two or more attributes, multi-attribute models are more appropriate than prospect theory. When such trade-offs are made among attributes, there is not necessarily an optimal solution. That is, there may be more than one type of value that a consumer derives from a positive outcome. Prospect theory doesn't provide a way to explain how consumers make trade-offs when more than one attribute is involved.