Buyer decision processes
Encyclopedia
Buyer decision processes are the decision making
processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product
or service.
More generally, decision making is the cognitive process of selecting a course of action from among multiple alternatives. Common examples include shopping
and deciding what to eat. Decision making is said to be a psychological construct. This means that although we can never "see" a decision, we can infer from observable behaviour that a decision has been made. Therefore we conclude that a psychological event that we call "decision making" has occurred. It is a construction that imputes commitment to action. That is, based on observable actions, we assume that people have made a commitment to effect the action.
In general there are three ways of analysing consumer buying decisions. They are:
Nobel laureate Herbert Simon
sees economic decision making as a vain attempt to be rational. He claims (in 1947 and 1957) that if a complete analysis is to be done, a decision will be immensely complex. He also says that peoples' information processing ability is very limited. The assumption of a perfectly rational
economic actor is unrealistic. Often we are influenced by emotional and non-rational considerations. When we try to be rational we are at best only partially successful.
model (He called it the "simple scheme".) in which only one behavioural determinant was allowed in a stimulus-response type of relationship; the multi-variate model (He called it a "reduced form scheme".) in which numerous independent variables were assumed to determine buyer behaviour; and finally the "system of equations" model (He called it a "structural scheme" or "process scheme".) in which numerous functional relations (either univariate or multi-variate) interact in a complex system of equations. He concluded that only this third type of model is capable of expressing the complexity of buyer decision processes. In chapter 7, Nicosia builds a comprehensive model involving five modules. The encoding module includes determinants like "attributes of the brand", "environmental factors", "consumer's attributes", "attributes of the organization", and "attributes of the message". Other modules in the system include, consumer decoding, search and evaluation, decision, and consumption.
es can creep into our decision making processes, calling into question the correctness of a decision. Below is a list of some of the more common cognitive biases.
Decision making
Decision making can be regarded as the mental processes resulting in the selection of a course of action among several alternative scenarios. Every decision making process produces a final choice. The output can be an action or an opinion of choice.- Overview :Human performance in decision terms...
processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
or service.
More generally, decision making is the cognitive process of selecting a course of action from among multiple alternatives. Common examples include shopping
Shopping
Shopping is the examining of goods or services from retailers with the intent to purchase at that time. Shopping is an activity of selection and/or purchase. In some contexts it is considered a leisure activity as well as an economic one....
and deciding what to eat. Decision making is said to be a psychological construct. This means that although we can never "see" a decision, we can infer from observable behaviour that a decision has been made. Therefore we conclude that a psychological event that we call "decision making" has occurred. It is a construction that imputes commitment to action. That is, based on observable actions, we assume that people have made a commitment to effect the action.
In general there are three ways of analysing consumer buying decisions. They are:
- Economic models - These models are largely quantitative and are based on the assumptions of rationality and near perfect knowledge. The consumer is seen to maximize their utility. See consumer theoryConsumer theoryConsumer choice is a theory of microeconomics that relates preferences for consumption goods and services to consumption expenditures and ultimately to consumer demand curves. The link between personal preferences, consumption, and the demand curve is one of the most closely studied relations in...
. Game theoryGame theoryGame theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...
can also be used in some circumstances. - Psychological models - These models concentrate on psychological and cognitive processes such as motivation and need recognition. They are qualitative rather than quantitative and build on sociological factors like cultural influences and family influences.
- Consumer behaviour models - These are practical models used by marketers. They typically blend both economic and psychological models.
Nobel laureate Herbert Simon
Herbert Simon
Herbert Alexander Simon was an American political scientist, economist, sociologist, and psychologist, and professor—most notably at Carnegie Mellon University—whose research ranged across the fields of cognitive psychology, cognitive science, computer science, public administration, economics,...
sees economic decision making as a vain attempt to be rational. He claims (in 1947 and 1957) that if a complete analysis is to be done, a decision will be immensely complex. He also says that peoples' information processing ability is very limited. The assumption of a perfectly rational
Rationality
In philosophy, rationality is the exercise of reason. It is the manner in which people derive conclusions when considering things deliberately. It also refers to the conformity of one's beliefs with one's reasons for belief, or with one's actions with one's reasons for action...
economic actor is unrealistic. Often we are influenced by emotional and non-rational considerations. When we try to be rational we are at best only partially successful.
Models of buyer decision making
In an early study of the buyer decision process literature, Frank Nicosia (Nicosia, F. 1966; pp 9-21) identified three types of buyer decision making models. They are the univariateUnivariate
In mathematics, univariate refers to an expression, equation, function or polynomial of only one variable. Objects of any of these types but involving more than one variable may be called multivariate...
model (He called it the "simple scheme".) in which only one behavioural determinant was allowed in a stimulus-response type of relationship; the multi-variate model (He called it a "reduced form scheme".) in which numerous independent variables were assumed to determine buyer behaviour; and finally the "system of equations" model (He called it a "structural scheme" or "process scheme".) in which numerous functional relations (either univariate or multi-variate) interact in a complex system of equations. He concluded that only this third type of model is capable of expressing the complexity of buyer decision processes. In chapter 7, Nicosia builds a comprehensive model involving five modules. The encoding module includes determinants like "attributes of the brand", "environmental factors", "consumer's attributes", "attributes of the organization", and "attributes of the message". Other modules in the system include, consumer decoding, search and evaluation, decision, and consumption.
Cognitive and personal biases in decision making
It is generally agreed that biasBias
Bias is an inclination to present or hold a partial perspective at the expense of alternatives. Bias can come in many forms.-In judgement and decision making:...
es can creep into our decision making processes, calling into question the correctness of a decision. Below is a list of some of the more common cognitive biases.
- Selective search for evidence - We tend to be willing to gather factsFactsFacts usually refers to the usage as a plural noun of fact, an incontrovertible truth.Facts may also refer to:*Carroll, Lewis, who wrote a poem called "Facts"*FACTS , program produced by Asia Television in Hong Kong....
that support certain conclusions but disregard other facts that support different conclusions. - Selective perception - We actively screen-out information that we do not think is salient.
- Premature termination of search for evidence - We tend to accept the first alternative that looks like it might work.
- Conservatism and inertia - Unwillingness to change thought patterns that we have used in the past in the face of new circumstances.
- Experiential limitations - Unwillingness or inability to look beyond the scopeScopeThe word scope may refer to many different devices or viewing instruments, constructed for many different purposes. It may refer to a telescopic sight, an optical device commonly used on firearms. Other uses of scope or Scopes may refer to:...
of our past experiences; rejection of the unfamiliar. - Wishful thinking or optimism - We tend to want to see things in a positive light and this can distort our perception and thinking.
- Recency - We tend to place more attention on more recent information and either ignore or forget more distant information.
- Repetition bias - A willingness to believe what we have been told most often and by the greatest number of different of sources.
- Anchoring - Decisions are unduly influenced by initial information that shapes our view of subsequent information.
- Group think - Peer pressure to conform to the opinions held by the group.
- Source credibility bias - We reject something if we have a bias against the person, organization, or group to which the person belongs: We are inclined to accept a statement by someone we like.
- Incremental decision making and escalating commitment - We look at a decision as a small step in a process and this tends to perpetuate a series of similar decisions. This can be contrasted with zero-based decision making.
- Inconsistency - The unwillingness to apply the same decision criteria in similar situations..
- Attribution asymmetry - We tend to attribute our success to our abilities and talents, but we attribute our failures to bad luck and external factors. We attribute other's success to good luck, and their failures to their mistakes.
- Role fulfillment - We conform to the decision making expectations that others have of someone in our position.
- Underestimating uncertainty and the illusion of control - We tend to underestimate future uncertainty because we tend to believe we have more control over events than we really do.
- Faulty generalizations - In order to simplify an extremely complex world, we tend to group things and people. These simplifying generalizations can bias decision making processes.
- Ascription of causality - We tend to ascribe causation even when the evidence only suggests correlation. Just because birds fly to the equatorial regions when the trees lose their leaves, does not mean that the birds migrate because the trees lose their leaves.