Buyer decision process

The buying decision process is the decision-making process used by consumers regarding market transactions before, during, and after the purchase of a good or service. It can be seen as a particular form of a cost–benefit analysis in the presence of multiple alternatives.^[1][2]

Common examples include shopping and deciding what to eat. Decision-making is a psychological construct. This means that although a decision can not be "seen", we can infer from observable behaviour that a decision has been made. Therefore, we conclude that a psychological "decision-making" event 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.

Nobel laureate Herbert A. 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 limited. The assumption of a perfectly rational economic actor is unrealistic. Consumers are influenced by emotional and nonrational considerations making attempts to be rational only partially successful.

Stages

The stages of the buyer decision process were first introduced by John Dewey in 1910. Later studies expanded upon Dewey's initial finding. Engel, Blackwell and Kollat in (1968).^[3]

Consumers shopping at London's Burlington Arcade engage in a variety of recreational and functional purchasing activities - from window shopping through to transporting their purchases homewards

• Problem/Need Recognition - Recognize what the problem or need is and identify the product or type of product which is required. Page text.^[4]
• Information Search - The consumer researches the product which would satisfy the recognized need.^[4]
• Evaluation of Alternatives - The consumer evaluates the searched alternatives. Generally, the information search reveals multiple products for the consumer to evaluate and understand which product would be appropriate.^[4]
• Purchase Decision - After the consumer has evaluated all the options and would be having the intention to buy any product, there could be now only two things which might just change the decision of the consumer of buying the product that is what the other peers of the consumer think of the product and any unforeseen circumstances. Unforeseen circumstances for example in this case could be financial losses which led to not buying of the product.^[4]
• Post Purchase Behavior - After the purchase the consumer may experience post purchase dissonance feeling that buying another product would have been better. addressing post purchase dissonance spreads good word for the product and increases the chance of frequent repurchase.^[4]

These five stages are a framework to evaluate customers' buying decision process. While many consumers pass through these stages in a fixed, linear sequence, some stages such as evaluation of alternatives may occur throughout the purchase decision. ^[5] The time and effort devoted to each stage depends on a number of factors including the perceived risk and the consumer's motivations. In the case of an impulse purchase, such as the purchase of a chocolate bar as a personal treat, the consumer may spend minimal time engaged in information search and evaluation and proceed directly to the actual purchase.^[6]

The rise of digital media and social networks is changing the way that consumers search for product information

Evaluation of alternatives

Shoppers inspect the quality of fresh produce at a market in Jerusalem.

At this stage, consumers evaluate different products/brands on the basis of varying product attributes, and whether these can deliver the benefits that the customers are seeking.^[6]  This stage is heavily influenced by one's attitude, as "attitude puts one in a frame of mind: liking or disliking an object, moving towards or away from it".^[6]  Another factor that influences the evaluation process is the degree of involvement. For example, if the customer involvement is high, then he/she will evaluate a number of brands; whereas if it is low, only one brand will be evaluated.

Customer involvement	High	Medium	Low
Characteristics	High	Medium	Low
Number of brands examined	Many	Several	One
Number of sellers considered	Many	Several	Few
Number of product attributes evaluated	Many	Moderate	One
Number of external information sources used	Many	Few	None
Time spent searching	Considerable	Little	Minimal

Models of buyer decision-making

Making a few last minute decisions before purchasing a gold necklace from a Navy Exchange vendor

There are generally three ways of analysing consumer buying decisions:

• Economic models - largely quantitative and are based on the assumptions of rationality and near perfect knowledge. The consumer is seen to maximize their utility. See consumer theory. Game theory can also be used in some circumstances.
• Psychological models - 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 - practical models used by marketers. They typically blend both economic and psychological models.

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 univariate 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.

Some neuromarketing research papers examined how approach motivation as indexed by electroencephalographic (EEG) asymmetry over the prefrontal cortex predicts purchase decision when brand and price are varied. In a within-subjects design, the participants were presented purchase decision trials with 14 different grocery products (seven private label and seven national brand products) whose prices were increased and decreased while their EEG activity was recorded. The results showed that relatively greater left frontal activation (i.e., higher approach motivation) during the predecision period predicted an affirmative purchase decision. The relationship of frontal EEG asymmetry with purchase decision was stronger for national brand products compared with private label products and when the price of a product was below a normal price (i.e., implicit reference price) compared with when it was above a normal price. Higher perceived need for a product and higher perceived product quality were associated with greater relative left frontal activation.^[10]

For any high-involvement product category, the decision-making time is normally long and buyers generally evaluate the information available very cautiously. They also utilize an active information search process. The risk associated with such decision is very high.^[11]

Cognitive and personal biases in decision-making

It is generally agreed that biases 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 facts 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 scope 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.

Neuroscience

Neuroscience is a useful tool and a source of theory development and testing in buyer decision-making research. Neuroimaging devices are used in Neuromarketing to investigate consumer behaviour.^[12]

See also

• Advertising management
• Brand
• Brand awareness
• Cognition
• Consumer behaviour
• Consumer choice
• Cost–benefit analysis
• Group process
• Marketing management
• Product management
• Product life-cycle management (marketing)

References

Bibliography

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• Henderson, John C., and Paul C. Nutt. "Influence of Decision Style on Decision Making Behavior." Management Science. 26.4 (1980): 371-386.
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• Bettman, James R. (1979). "An Information Processing Theory of Consumer Choice." Addison-Wesley Educational Publishers.
• Yang, Haiyang and Ziv Carmon (2010), "Consumer Decision Making," in Jagdeth Sheth & Naresh Malhotra (eds.), Wiley International Encyclopedia of Marketing, New York: Wiley.
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• Nicosia, F. (1966) Consumer Decision Processes, Prentice Hall, Englewood Cliffs, 1966.
• Pittenger, David J. "The Utility of the Myers-Briggs Type Indicator." Review of Educational Research. 63:4 (1993): 467-488.
• Simon, H. (1947) Administrative behaviour, Macmillan, New York, 1947, (also 2nd edition 1957).
• Volkema, Roger J., and Ronald H. Gorman. "The Influence of Cognitive-Based Group Composition on Decision-Making Process and Outcome." Journal of Management Studies. 35.1 (1998): 105-121.