Critically examine the various models how consumers make choices, and how these are leveraged to market products and services

Critically examine the various models how consumers make choices, and how these are leveraged to market products and services.

There are many choice models and strategies as there are consumers. It is very much dependent on consumers’ goals, alternative available and criteria they consider meaningful, and how they combine cognitions and feelings to make decisions. There are three common choice models which are economic, cognition and affective.

Economic models are describe as Utility-maximizing View where consumer decisions made based on realizing the largest net benefit in terms of the exchange resources at issue.

Under the economic models, there are four theories, which are

Expected Utility Theory

Expected Utility Theory assumes decision makers are rational and have complete information; consumers are assumed to have complete information about the probabilities and consequences attached to each   alternative course of action.

Utility Functions

Utility Functions refers to the amount of happiness that a consumer derives from a product or from a product attribute. It is useful in consumer behaviour research because they can be estimated with a method called conjoint analysis. Individual maximizer theory is a weak strategy to adopt in marketing to members of interdependent cultures. Therefore, buyers seek more social information and more likely to be interested in outcomes that produce or reinforce trust and relationships between buyers and sellers

Prospect Theory

 

Prospect Theory examines how consumers value potential gains and losses that result from making choices.

 

The individual’s value function reflects consumers’ anticipation of the pleasure/pain associated with a specific decision outcome. The gains and losses are calculated with respect to some reference point. The value function for gains is quite different than that for losses.

The consumers resist giving up things that they already own which is the endowment effect.

The decision framing which is the manner in which the task is defined or represented.

Importantly, the risk averse versus risk seekers

Satisficing theory

Consumers try to make acceptable rather than optimal decisions. For example, the consumers may choose an alternative that satisfies their most important goals. Other goals might be sacrificed. Satisficing theory is more descriptive of how consumers actually make choices.

Cognitive Model

Cognitive models describe consumers as combining items of information about attributes to reach a decision.  It emphasizes beliefs, rather than emotions or behaviours, as the key determinant of attitudes and behaviours and they assume that consumers make a decision in a thoughtful and systematic way. It is classified as either:

Compensatory: a negative evaluation on one attribute or feature can be offset by a positive evaluation on another feature

Non-compensatory:  a negative attribute rating can eliminate a brand from consideration

Affective Model

 

Consumers make decisions in a more embodied, holistic way than suggested by the cognitive models.  A decision “feels right” or the decision maker has a “gut feeling” about the right choice. 

A particular decision seems to “fit like a glove,” or a purchase is triggered by an embodied evaluation of an object—“this is really me.”

The emotions summarize and capture important aspects of attitudes and behaviors that are hard to put in words but central to making a fulfilling choice. Also, emotions reflect deeply rooted cultural models about what’s appropriate or moral, or may embody feeling we have for other people. 

The various choice models can be leveraged to market products and services by:

Brand loyalty

Brand familiarity

Country of origin

Price-related strategies

Avoiding regret