Consumers Decision-Making

Process
Personal Influence, Diffusion of
Innovation & CB Model
Module 8

In this section
Opinion leadership
Characteristics of an
opinion leader
Applications of opinion
leadership
Other dimensions in
personal influence/
WOM / Opinion
leadership

Diffusion of innovation
Types of innovation
Factors influencing
spread of innovation
Adopter categories vs.
Promotion Strategies
Innovation analysis and
Diffusion Enhancement
Strategies

In this section
Consumer Decision Making
Levels of consumer Decision Making
Models of Consumer Views
Consumer Decision Making Model

Opinion leadership
(WOM communication)

Opinion leadership
The process by which one person
(opinion leader) informally
influences the actions or attitudes
of others who may be opinion
seekers or opinion recipients
Opinion
leader

Opinion receiver

Key characteristics
Between
two or
more
people

Interperso
nal &
informal

Across
mediums
i.e. phone,
mail, chat

Opinion
leadership

None
represents
a
commercial
selling
source

Opinion leadership : Effectiveness

Credibilit
y
Twoway
process

Categor
y
specific

+ve & -ve

informatio
n

Info &
advice

Credibility
Highly credible as they are
seen as being objective
about the product or
service or the advice
Have the best interest of
the opinion seeker in mind.
No compensatory benefits
OL base comments on firsthand experience. Therefore
it reduces risk or anxiety for
OS

Balanced perspective
OLs give both favourable
and unfavourable
information which adds to
their credibility
Consumers tend to
remember ive comments
(more that +ve) and actively
avoid products with -ve buzz
-ve buzz can kill a product.
Windows Vista is a classic
example of ve buzz killing
a product

Information & advice

OLs a source for information as
well as advice.
OLs can give information &
advice on a range of product
or service information
Which of the brands is the
best?
I think as far as atta is
concerned, Aashirwad is the
best nutritionally

Information & advice

How best to use a product?
Vicks added to hot water and
then steamed does wonders for
cold
Where to shop? If plum cakes
is what you want, you should try
Thoms. No one makes plum
cakes like them
Which provides the best
service?
Of all the banks accounts I have,
no one can beat HDFC Bank, more
so on service

Category specific
It is category specific as OLs
specialise in certain product
categories about which they
offer information or advice

Two-way street
One cannot be an opinion
leader about everything in this
world. Opinion leadership is
specific to a category
An OL in a particular situation
may become an OS in another,
even for the same product

Motivations of opinion
leaders
Message
involveme
nt
motivation
s
Social
involvemen
t
Motivations

Motivations
of Opinion
Leaders

Self
improvem
ent
motivation
s

Product
involvemen
t
motivations

Self-improvement
Motivations
Reduce
post
purchas
e
dissona
nce

Gain
Attentio
n/
status

Assert
superiori
ty &
expertis
e

Feel like
an
adventu
rer

Power of
converti
ng
others

Self-improvement
Motivations
Reduce
post
purchase
dissonanc
e

Gain
Attention
/ status

Assert
superiorit
y&
expertise

If an OL has
purchased a
product , he may
want to reassure
himself that hes
made the right
choice by talking up

Being an OL, is a
sure -shot way of
being in the lime
light. You get the
maximum attention
and status as add
ons

Opportunity to also
demonstrate and
assert knowledge
and superiority in a
particular domain

Self-improvement
Motivations
Feel like
an
adventur
er
As an OL you tend to
keep up with
developments in your
specialised area.
Keeping up with the
changes and telling
others feels like an

Power of
convertin
g others

There is a definite thrill

in converting others
by convincing them,
through logical
arguments.

Motivations of opinion
leaders
Message
involveme
nt
motivation
s
Social
involvemen
t
Motivations

Motivations
of Opinion
Leaders

Self
involveme
nt
motivation
s

Product
involvemen
t
motivations

Motivations of opinion
leaders
Product
involvemen
t
motivations
OLs may want to
share their views
with others if they
are pleased or
disappointed with a
product

Social
involvemen
t
Motivations
In this type of
motivation, OLs
share their product
knowledge as
expressions of
friendship & love

Message
involveme
nt
motivation
s
In this case the
message it self may
be so powerful and
alluring that the OL
may want to share
it with others

INTERPERSONAL FLOW OF
COMMUNICATION

Two Step Flow

Ideas flow from mass media to
opinion leaders and from them
to opinion seekers

This theory shows opinion

leaders as direct recipients of
information and they in turn
transmit the same to the
masses

Mass
Media

Opinion
Leaders

Opinion
Seekers

Multi-step Flow
Information & influence is a two
way process and that OL both
influence and are influenced by
OS
First the information flows from
mass media to OL, OS &
information recipients (neither
influence nor are influenced)
In the next step there is
transmission of info & influence
from OL to OS. The 3rd steps
shows transmission from OS to
OL

Mass
Media
Opinion
Leaders

Informatio
n
Receivers

Opinion
Seekers

Advertising designed to drive WoM

Campaigns specifically
designed not only to drive the
basic message, but to build a
buzz
The brief was that consumers
need to remember and talk
about it with their friends :
memorability

Advertising designed to drive WoM

Advertising designed to drive WoM

Advertising designed to drive WoM

WoM can be destructive

One detractor can do as much
damage as 100000 positive
comments
WoM though effective, is
uncontrollable especially where
negative news is concerned

APPLICATIONS OF OPINION
LEADERSHIP

Create
products
with inbuilt
buzz
potential

Strategy
designed to
stimulate
buzz

Creating products with buzz potential

Products with Buzz

All critics hated Dhoom 3, but
despite that it earned 500
crores. Proof that WoM actually
works
This buzz factor increases the
RoI on every rupee spent,
exponentially

Create
products
with inbuilt
buzz
potential

Strategy
designed to
stimulate
buzz

Strategy to create Buzz

The internet has expanded
opportunities for marketers to
generate buzz or WoM
Strategies are being designed
to include Buzz a form of hype
among consumers, a vague but
positive association,
excitement, or anticipation
about a product

Books

Comics

Games

Viral marketing
Any strategy that encourages
individuals to pass on a
marketing message to others,
creating the potential for
exponential growth in the
messages exposure &
influence
Viral marketing is the marriage
of e-mail & word of mouth. It is
called viral as it enables the
message to spread like virus

Marketing through Blogs

The number Internet users
who read blogs has shot up,
with some blogs boasting
thousands, even millions of
daily dedicated readers.

Any process that publicises or

advertises a website,
business, brand or service via
the medium of blogs. This
includes, but is not limited to
marketing via ads placed on
blogs, recommendations and
reviews by the blogger,
promotion via entries on third
party blogs and crosssyndication of information
across multiple blogs

Marketing through Blogs

A nod from a trusted blogger
can result in higher sales.
Popular product reviewers
and critics maintain blogs
where they provide
information about their
experiences with some
products and services

Readers tend to trust these

reviewers and critics more as
they are often unbiased

Marketing through Blogs

The greatest power of blog
marketing comes from the
viral effect of some blog
posts. News travels very fast
via blogs. Readers pick up
interesting stories and blog
about them on other, thirdparty blogs

Their readers in turn spread

the word to others, at very
little cost to the advertiser,
and often has a snowball
effect
While blog marketing is a
great opportunity it can
become uncontrollable once
message starts spreading

DIFFUSION OF INNOVATION

Diffusion of Innovation
The two key concepts we
need to understand are
Diffusion process &
Adoption process

Diffusion of Innovation
Diffusion process is
concerned with the spread of
a new product (innovation)
from its source to the
consuming public
Adoption is the process
that focuses on the stages
through which an individual
consumer passes when
deciding to accept or reject a
new product

Types of innovation
Consumer
Oriented

Firm
Oriented

Innovation
Types
Market
Oriented

Product
Oriented

Firm oriented innovation

This approach treats the
newness of the product from
the company producing or
marketing it
When the product is new to the
company! (it does not matter if
the product is new to the
market place). Copies or
variations of competitive
brands would be innovations
Not particularly useful if the
ultimate buyer is the consumer.
Insular approach

Types of innovation
Consumer
Oriented

Firm
Oriented

Innovation
Types
Market
Oriented

Product
Oriented

Product oriented
Continuo
us
Innovatio
n
Dynamically
continuous
innovation
Discontinuou
s Innovation

Continuous innovation
Involves the introduction of a
modified product rather than a
totally new one

Continuous innovation

Dynamically continuous innovation

They are more disruptive than
continuous innovation but do
not alter behaviour patterns
These innovations have a huge
effect on consumption
practices. They often
incorporate a new technology

Dynamically continuous innovation

Discontinuous innovation
Discontinuous innovations
cause a paradigm shift in
technology and/or the market
structure of an industry
They are entirely new-to-the
world products, made to
perform a function for which no
product has previously existed

Discontinuous innovation
requires a good deal of learning
for the incumbentorganisation
and its network, including the
user
Discontinuous
innovationsdisrupt established
routine and may even require a
very different set of capabilities
and new behaviour patterns

Types of innovation
Consumer
Oriented

Firm
Oriented

Innovation
Types
Market
Oriented

Product
Oriented

Market Oriented Innovation

A market-oriented approach
judges the newness of a
product in terms of how much
exposure consumers have to
the product
A product is considered to
be new if it has been
purchased by a relatively
small percent of the
potential market

A product is considered to
be new if it has been in the
market for a relatively short
period of time
Largely subjective, as it is
dependent on the
researcher to define
penetration or time frame

Types of innovation
Consumer
Oriented

Firm
Oriented

Innovation
Types
Market
Oriented

Product
Oriented

Consumer Oriented
Innovation
New product is any product,
which the consumer judges to
be new. Newness is based on
consumers perception of the
product rather than physical
features or market realities

PRODUCT CHARACTERISTICS WHICH

DRIVE INNOVATION

Relative
Advantage

Observabil
ity

Trialability

Compatibil
ity

Complexit
y

Relative advantage
The degree to which consumers
perceive a new product to be
superior to existing substitutes
is its relative advantage

Rate of adoption of a new

offering depends on its relative
advantage as perceived by its
prospective customers

Compatibility
The degree to which consumers
feel a new product is consistent
with their present needs, values
& practices is a measure of its
compatibility

Complexity
The degree to which a new
product is difficult to
understand or use affects
product acceptance
Easier it is to understand and
use, faster will be the
acceptance
Fear of technological
complexity the biggest
deterrent for among consumers
more so when it comes to
buying hi-tech consumer
products

Trialability
The degree to which a new
product is capable of being
tried on a limited basis
Greater the oppourtunity to try
a new product, the easier it is
for the consumers to evaluate
and adopt it
Frequently purchased
household products tend to
make trial and adoption easier
for consumers through trial
packs, couponing or launch
offers

Observability
Ease with which a products
benefits or attributes can be
observed, imagined or
described to potential
consumers
Easier to observe a tangible
product than an intangible one
like service

ADOPTER CATEGORIES

Follows the.

Adopter categories
Indicates where a consumer
stands in relation to other
consumers in terms of time (or
when the consumer adopts a
new product)
The person first to buy into an
innovation is often an individual
who serves as a bridge to other
groups of people

Adopters categories

Adopter categories
As per the normal distribution
curve, one can conclude that
100% of the target market
eventually will accept the
innovation
This is not true. As very few
products fit the exact needs of
all potential consumers. It
would be wise to add a
category of non-adopters i.e.
people who will never buy into
the innovation

Innovators
Innovators are the first
individuals to adopt an
innovation. Innovators are
willing to take risks, youngest in
age, have the highest social
class,
They also have great financial
liquidity, are very social and
have closest contact to
scientific sources and
interaction with other
innovators.

Innovators
Risk tolerance has them
adopting technologies which
may ultimately fail. Financial
resources help absorb these
failures
Very little, if anything, needs to
be done to, market the
innovation to this segment

Early adopters
This is the second fastest
category of individuals who
adopt an innovation. These
individuals have the highest
degree of opinion leadership
among the other adopter
categories

Early adopters
Early adopters are typically
younger in age, have a higher
social status, have more
financial liquidity, advanced
education, and are more
socially forward than late
adopters.

Early adopters
More discrete in adoption
choices than innovators. Realize
judicious choice of adoption will
help them maintain central
communication position

Strategies to appeal to this

segment include how-to
manuals and information sheets
on implementation. They do not
need information to convince
them to change

Early majority
Individuals in this category
adopt an innovation after a
varying degree of time. This
time of adoption is significantly
longer than the innovators and
early adopters.

Early majority
Early Majority tend to be slower
in the adoption process, have
above average social status,
contact with early adopters,
and seldom hold positions of
opinion leadership in a system

Strategies to appeal to this

segment include success stories
and evidence of the
innovation's effectiveness

Late majority
These individuals approach an
innovation with a high degree
of skepticism and after the
majority of society has adopted
the innovation

Late majority
Late Majority are typically
skeptical about an innovation,
have below average social
status, very little financial
liquidity, in contact with others
in late majority and early
majority, very little opinion
leadership

Late majority
Strategies to appeal to this
segment include information on
how many other people have
tried the innovation and have
adopted it successfully

Laggards
Are the last to adopt an
innovation. Unlike other
categories, individuals in this
category show little to no
opinion leadership. These
individuals typically have an
aversion to change-agents and
tend to be advanced in age.

Laggards
Laggards typically tend to be
focused on "traditions", likely to
have lowest social status,
lowest financial liquidity, be
oldest of all other adopters, in
contact with only family and
close friends
Strategies to appeal to this
segment include statistics, fear
appeals, and pressure from
people in the other adopter
groups

Choosing & Consuming

CONSUMER DECISION MAKING

Decision
In the most general terms, a
decision is a selection of an
option from two or more
alternative choices
For a person to make a
decision, a choice of
alternatives must be available

Decision
When there is no alternative
and the person is forced to
make a purchase or take a
particular action then this
single no-choice does not
constitute a decision. This is
also referred to as Hobsons
Choice

Decision making
Decision making is a time
consuming & exhausting
process as the person has to
weigh the pros & cons of all
alternatives
However not all decisionmaking situations require the
same amount of extensive
research or analysis

Decision making
Some decisions are more
important than others and the
amount of effort we put into
each, therefore differs

Sometimes decisions can be

taken almost instantaneously
and automatically based on
very little information

Decision making process

Problem
Recognition

Information
Search

Result

Alternatives
Evaluation

Product
Choice

Levels of Consumer Decision Making

Extensiv
e
problem
solving

Limited
problem
solving

Routinis
ed
respons
e
behavio
ur

Extensive problem solving

It is a big decision to be taken
and the eventual decision is
seen to carry a fair degree of
risk
Consumer collects as much
information as possible from
memory as well as external
sources
Consumers also need to
develop evaluation criteria to
judge brands. Based on this
they need to collect large
amount of information on

Limited problem solving

Involved internal and limited
external search

Consumer need to set simple

rules to evaluate key features
and little post-purchase
evaluation

Routinised problem solving

Comes into play when
consumers have to buy
brands which they have
purchased in the past
Repeat purchases based on
habits or routines and
involves little or no
information seeking
Consumers are brand loyal
and buy automatically and
unconsciously

Examples
Routinise
d

Limited

Extensive

Approaches : Characteristics
Characteristic
s

Routinised

Limited

Extensive

Purchase
Involvement

Low

Medium

High

Problem
Recognition

Automatic

Semi-Automatic

Complex

Info Search &

Eval

Minimal

Limited

Extensive

Post-Purchase
Issues

Negligible

Limited

Complex

Routinised vs Complex
Routinised
Little / no information
processing
Frequently purchased
products
Lower priced products
Low involvement
levels

Complex
Extensive information
processing
Infrequently
purchased products
Higher priced products
High involvement
levels

Marketing implications
Routinised

Complex

Extensive distribution
Little service required
Promotions important
Personal selling : Minimal
Advertising : reminder
medium
High price sensitivity

Selective distribution
Service required
No role for promotions
Personal selling :
Maximum
Advertising : Information
dissemination
Low price sensitivity

4 VIEWS OF DECISION MAKING

` of decision making
Economi
c View

Emotion
al View

Consum
er
Decision
Making
Cognitiv
e View

Passive
View

Economic view
Accordingly to this view, in a
world of perfect competition,
consumer has been
characterised as making
rational decisions. This means
that
: are aware of product
They
options
Capable of ranking each,
benefit-wise
Identify the best option from
Consumers
never have all the
these
info. or adequate degree of
involvement to make the
perfect decision

Economic view
The Economic View is
unrealistic as:
People limited by existing
skills & habits
People are limited by their
existing values & goals
People are limited by the
extent of their knowledge
Consumers operate in an
imperfect world where they
do not maximise their
decisions based on pricequality or price-value or
marginal utility

Economic view
Consumers tend to settle for
a compromised outcome

The Economic View is

rejected as it is too idealistic
& simplistic

Views of decision making

Economi
c View

Emotion
al View

Consum
er
Decision
Making
Cognitiv
e View

Passive
View

Passive view
The passive view is quite
opposite to the rational
economic view
Consumers are essentially
submissive to the promotional
efforts of the companies
In this view, consumers are
seen as impulsive and
irrational buyers who are
willing to be manipulated.
Still relevant in categories
which require hard-core
personal selling, where there

Passive view
This view fails to recognise
that consumers play an equal
and dominant role in buying
seeking info, selecting the
best etc etc
This view also negates all
that we have learnt till date
i.e. motivation, selective
perception, learning,
attitudes, opinion leadership
etc which clearly suggest
that consumers rarely get
manipulated

Views of decision making

Economi
c View

Emotion
al View

Consum
er
Decision
Making
Cognitiv
e View

Passive
View

Cognitive view
This model showcases
consumers as a thinking
problem solver
Consumers are receptive or
searching for products which
will fulfill their needs or enrich
their lives
In this context, consumers
are seen as info processors.
Processing of info leads to
preferences and ultimately to
an action

Cognitive view
This view also recognises that
consumers are unlikely to get
all possible info
Instead the consumers stop
collecting information when
they realise that they have
the necessary information to
make a satisfactory choice

Cognitive view
The cognitive view describes
consumers as someone who
falls between economic and
passive views
This view recognises that
consumers cannot get all the
information to make a
perfect choice, but seek
information enough to make a
satisfactory choice

Views of decision making

Economi
c View

Emotion
al View

Consum
er
Decision
Making
Cognitiv
e View

Passive
View

Emotional view
While we may not like to
admit it, all of us associate
emotions, joy, happiness, love,
with certain purchase
In fact, to a large extent, it is
these emotions which are not
only involving but drive
purchases
Most of our purchases are
made on an impulse or an
whim or just because we
were emotionally disturbed

Emotional view
When an emotional purchase
decision is made, there is less
emphasis on search for
information and more
emphasis on current mood
This does not mean that
emotional decisions are not
rational. I deserve it is a
perfectly good and rational
reason to buy a product

Emotional view
Emotion is a response to a
particular environment,
whereas a mood is an
unfocused, pre-existing state;
already present at the time a
consumer experiences a
marketing stimulus

Emotional view
Mood is lower in intensity and
longer lasting. They are not
directly linked to action

Emotional view
Mood is important in decision
making as it impacts when
consumers shop, where they
shop and if they shop alone or
with others. Retailers attempt
to create a particular mood
even though consumers enter
a store with a pre-existing
mood

CONSUMER DECISION MAKING MODEL

Decision Making Model

Finally we come to decision
making. This model sums up
all that we have learnt over
the last few months
This model reflects the
thought process of the
cognitive (problem-solving)
consumer and to some degree
the emotional consumer

This is not exhaustive, as no

model can capture the
complexities of decision
making. It does capture and
harmonise concepts into one
model
There are 3 major
components in this model :
Input, process & output

Input

Process

Output

Input

Input
External influences which
serve as sources of
information and influence the
consumers product related
values, attitude and
behaviour
Input factors
The marketing efforts of the
company
Non marketing socio cultural
influences

Marketing efforts
The marketing efforts are
direct efforts to reach, inform
& persuade consumers to buy
its products
Product : The product,
packaging, SKUs &
guarantees
Promotions : Mass media,
direct marketing, personal
selling etc
Pricing policy
Place : Distribution channels

Sociocultural Inputs
Sociocultural environment
exerts a major influence on
buying behaviour of
consumers
Family, friends, the Internet,
articles, culture, subculture,
social class, are low key, but
actually high impact
influences. Culture and
society subtly tell us that it is
right or wrong

Process

Process
Process part of the model is
concerned with how
consumers make decisions
Psychological issues
(motivation, perception,
learning personality &
attitudes) affect decision
The
act of decision making
making
spans 3 stages : Need
recognition, pre-purchase
search & evaluation of
alternatives

Need
Recogniti
on

Pre-purchase
Search

Evaluation of
alternatives

Need recognition
The recognition of a need is
likely to occour when a
consumer is faced with a
problem
There are two different need
or problem recognition styles.
Actual state and desired
state

Actual state
Actual state types are people
who feel that they have a
problem as their product fails
to perform satisfactorily

Desired state
Desired state types are
people for whom the desire
for something new may
trigger a need

Need
Recognition

Prepurchase
Search

Evaluation of
alternatives

Pre-purchase search
Begins when a consumer
believes that the need can be
satisfied with the purchase of
a product
Normally, past experiences
provide adequate information
to make a choice
However, when consumer has
no experience, extensive
search of the environment is
initiated for info on which the
choice can be based

Pre-purchase search
The consumer searches his
memory / past experiences
before searching for info from
external sources
The greater the relevancy of
past experience the lower the
dependency on external
sources
Risk another factor. High risk
products call for extensive
info search. Low risk products
call for basic or limited search

Pre-purchase search
Quantum of search depends
on the category. Certain
categories demand lower
level of search and certain
categories are searched more
deliberately

Need
Recognition

Prepurchase
Search

Evaluatio
n of
alternativ
es

Evaluation of alternatives
While evaluating alternatives
consumers use two types of
information

List of brands or the evoked

set
Criteria to evaluate each
brand

Evoked set
Also called the Consideration
set
In the context of consumer decision
making evoked set refers to specific
brands (or models) a consumer
considers in making a purchase
within a particular product category
From a marketing perspective, it is
critical that the brand get into the
evoked set of the consumer and stay
there by being relevant

Evoked set

Criteria to evaluate brands

Criteria used by consumers to
evaluate brands in the
evoked set is expressed in
terms of attributes
Clever marketers at times
force consumers to evaluate
product based on criteria
which favours them

Output

Post
Purchase purchase
behaviour evaluatio
n

Trial
Purchase

Purchase
Behaviour
Long term
commitme
nt
purchase

Repeat
Purchase

Trial purchase
When the product is
purchased the first time, it is
in smaller quantity and this is
called trial purchase
It is an exploratory purchase
where the consumers
evaluate the brand, as they
are uncertain about it.
Evaluation is done across all
possible dimensions or
parameters

Repeat purchase
A repeat purchase means that
the product meets with the
consumers approval and that
he / she is willing to use it
again & in larger quantity
Approval in trial phase means
that the brand is more than
satisfactory or better than
other brands
Repeat purchase is closest to
brand loyalty as it contributes
to stability for the company &
in market

Long term commitment purchase

Trial, in some cases is not
possible. Consumer moves
directly from evaluation to
long term commitment, with
no trial
Cars, consumer durables, real
estate buys are examples of
this

Purchase
behaviour

Post
purchase
evaluatio
n

Post purchase evaluation

Role of post purchase
evaluation is to eliminate post
purchase dissonance. This is
done by looking at stimulus
which endorse their choice
Level of post purchase
analysis depends on product
& experience acquired in
using the product
Actual performance =
expectation
Actual performance <
expectation
Actual performance >

Performance = Expectation
Resetting
of
expectatio
n
Performan
ce
matches
expectatio
n

Satisfaction

Neutral
feeling
Restart
eval
process.
Choose a
new brand

Satisfaction

Performance < Expectation

Performan
ce lower
than
expectatio
n

Dissapoint
-ment

Restart
eval
process.
Choose a
new brand

Satisfaction

Performance > Expectation

Performan
ce greater
than
expectatio
n

Satisfaction

Reduced
consumer
experiment
-ation

Brand
loyalty

END OF MODULE