Buyer decision processes

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, 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 theory. Game theory 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 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.

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 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.

General model

A general model of the buyer decision process consists of the following steps:
# Need recognition;
# Search for information on products that could satisfy the needs of the buyer;
# Alternative selection;
# Decision-making on buying the product;
# Post-purchase behavior

There are a range of alternative models, but that of AIUAPR, which most directly links to the steps in the marketing/promotional process is often seen as the most generally useful [http://futureobservatory.dyndns.org/9432.htm] ;

* AWARENESS - before anything else can happen the potential customers must become aware that the product or service exists. Thus, the first task must be to gain the attention of the target audience. All the different models are, predictably, agreed on this first step. If the audience never hears the message they will not act on it, no matter how powerful it is.

* INTEREST - but it is not sufficient to grab their attention. The message must interest them and persuade them that the product or service is relevant to their needs. The content of the message(s) must therefore be meaningful and clearly relevant to that target audience's needs, and this is where marketing research can come into its own.

* UNDERSTANDING - once an interest is established, the prospective customer must be able to appreciate how well the offering may meet his or her needs, again as revealed by the marketing research. This may be no mean achievement where the copywriter has just fifty words, or ten seconds, to convey everything there is to say about it.

* ATTITUDES - but the message must go even further; to persuade the reader to adopt a sufficiently positive attitude towards the product or service that he or she will purchase it, albeit as a trial. There is no adequate way of describing how this may be achieved. It is simply down to the magic of the copywriters art; based on the strength of the product or service itself.

* PURCHASE - all the above stages might happen in a few minutes while the reader is considering the advertisement; in the comfort of his or her favourite armchair. The final buying decision, on the other hand, may take place some time later; perhaps weeks later, when the prospective buyer actually tries to find a shop which stocks the product.

* REPEAT PURCHASE - but in most cases this first purchase is best viewed as just a trial purchase. Only if the experience is a success for the customer will it be turned into repeat purchases. These repeats, not the single purchase which is the focus of most models, are where the vendors focus should be, for these are where the profits are generated. The earlier stages are merely a very necessary prerequisite for this!

This is a very simple model, and as such does apply quite generally. Its lessons are that you cannot obtain repeat purchasing without going through the stages of building awareness and then obtaining trial use; which has to be successful. It is a pattern which applies to all repeat purchase products and services; industrial goods just as much as baked beans. This simple theory is rarely taken any further - to look at the series of transactions which such repeat purchasing implies. The consumer's growing experience over a number of such transactions is often the determining factor in the later - and future - purchases. All the succeeding transactions are, thus, interdependent - and the overall decision-making process may accordingly be much more complex than most models allow for. [http://futureobservatory.dyndns.org/9432.htm]

in all four dimensions. In each category, 83% of E-I types, 89% of S-N types, 90% of T-F types, was 10.8 points better and for groups with the same personality dimensions was 4.4 points better than individuals (Volkema 114-16). Working in groups with a variety of people composed of multiple personalities and cognitive styles, often produces a better outcome in decision making rather than individually.

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.
* 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.
* Selective perception - We actively screen-out information that we do not think is salient.
* 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.

ee also

*Cognition
*Group process

References

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*Cheng, Many M., Peter F. Luckett, and Axel K. Schulz. “The Effects of Cognitive Style Diversity on Decision-Making Dyads: An Empirical Analysis in the Context of a Complex Task.” "Behavioral Research in Accounting". 15 (2003): 39-62.
*Gardner, William L., and Mark J. Martinko. “Using the Myers-Briggs Type Indicator to Study Managers: A Literature Review and Research Agenda.” "Journal of Management". 22.1 (1996): 45-83.
*Henderson, John C., and Paul C. Nutt. “Influence of Decision Style on Decision Making Behavior.” "Management Science". 26.4 (1980): 371-386.
*Kennedy, Bryan R., and Ashely D. Kennedy. “Using the Myers-Briggs Type Indicator in Career Counseling.” "Journal of Employment Counseling". 41.1 (2004): 38-44.
* Myers, I. (1962) "Introduction to Type: A description of the theory and applications of the Myers-Briggs type indicator", Consulting Psychologists Press, Palo Alto Ca., 1962.
* 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.