By: Philippe Bisson Waters y Yaneli Cruz Alvarado ITAM
Decision making is a daily and natural activity. The act of buying is one of the many decisions a person faces in life. There is the idea that this decision is rational. To explain this rationality, marketing gurus, like Kotler and Hawkins, among others, have described this process as a sequence of stages an individual goes through when deciding what, where and when to buy.
However, there is evidence that many buying decisions do not follow this logical, reflective and sequential process, but are more irrational than one might think.
Buying Decision Process Buying behavior consists of making a decision about the purchase of a product or service that is needed or desired and which involves having a preference. The act of buying follows the steps below:
Situation of purchase. The buying process starts with a favorable situation. For example, a craving stimulates buying a soda at the movies; the nearly empty gas tank of a car incites the act of going to the gas station; or having a vacation triggers the search for options for relaxation.
Information. Before deciding on a purchase, one seeks information on alternatives to make an informed and reasoned decision. One of the characteristics of the markets today is that more and more information is obtained on the Internet. Moreover, among the most important sources of information are the activities of marketing and advertising companies, recommendations by word of mouth, previous experiences, and opinions of experts on specialized sites.
Alternatives. Once aware of the situation, the consumer will define alternatives that satisfy this need: In the case of a craving in the cinema, one might think of a soda, popcorn, sandwich or other food. In the case of gasoline (what to buy), there are not many options. Perhaps one might think of nearby gas stations (where), while the time (when) is as soon as possible. Finally, in the example of vacations – a decision that can be programmed – the alternatives might be a beach, a cruise or a trip to an archeological site.
Decision factors. In this step one should determine what factors are important in making a buying decision. In the case of vacations, they may be the price, the number of days off, the distance and travel time, tiredness and need for relaxation. With regard to the cinema, one will look at the price, the quantity of the product, if there is a discount or a package deal, or perhaps the previous experiences may be crucial and a selection may be repeated. For the gas station, one will think of the one that is on the way to the office or the one closest to home, although in this case the decision will be almost automatic and most likely based on habit.
Evaluation of alternatives. Each individual is influenced by different factors, which have meaning and importance when evaluating alternatives and selecting the most appropriate or most attractive.
Purchase. Once the buying decision is made, the actual purchase of the product or service occurs.
Post-Purchase Experience. Finally, after having the experience of the product or service, the buyer is either satisfied or not satisfied with his/her decision, which will influence if the purchase is repeated given the same stimuli.
Irrationality in the Purchase Strictly speaking, the decision-making process explains how people buy. However, in reality there are many distractors or cravings that limit the rationality of a purchase. Distractors are situations, also known as “blind spots,” that affect one or more steps of the process and make the consumer buy with a limited perspective. The process is also truncated by cravings, such as heuristic methods, habits or impulses. Figure 1 shows the process and the influence of the distractors and cravings.
Figure 1. Buying decision process.
The figure shows how irrationality pervades consumer behavior. It can happen in trivial or important situations, as we shall see in the following four examples.
To show some irrationality in a trivial purchase, let us take the case of the craving for a soft drink in two scenarios that show how a buying decision can be influenced. In Scenario 1, two sizes of soft drinks are offered at the refreshment stand of the theater. The small size costs 20 pesos and the sales person offers the large size, which is more than twice the size, for only 60 pesos. Given the price difference, few people are interested in the large size, because they think that the price is very high and the amount excessive. The justification for this seems rational. In Scenario 2, three sizes are offered – small, medium and large – with a cost of 20, 55 and 60 pesos. Now the sales person offers the large size with the argument that the difference of 5 pesos between the medium and large size is negligible for the additional amount. This time, the vast majority of customers purchased the large size. Was it a rational decision? It was the same product, the same consumers and the same environment. What was the difference? It was the introduction of the medium size as a point of comparison with the large one. Were the customers rational, following a buying process? No, their decision was an impulsive act triggered by apparent convenience.
In the case of a larger purchase, let us take the example of a new car that an individual wants to replace because he will no longer be able to circulate on a daily basis in a few months. If the consumer feels rational, he asks the opinion of his acquaintances and makes a list of several cars that meet his price range, design and model, that is, cars A, B, C and D. After gathering information from the dealers, he sees the cars, tests them, reads the brochures and instructions. Afterwards, he makes comparisons using the factors he considers important, such as price, performance and comfort. He compares all the data until he decides which is the best choice: car B. Did he buy that car? No, because he suddenly thought about the J model and wanted to go see the dealer. At the end, he bought car Z of the model J. It cost more than the winning option (B), the performance level was lower, and the insurance and services were more expensive. What happened? He had an inspiration, a strong desire, to own a car of the model J, and loved the idea of the image of having it. Was it a rational decision? No. Emotional? Definitely. Irrational? Totally. The heuristic method did not influence his decision. Instead there was a distractor in the last step of the buying decision, which we could call a whim or instinct, that is, a reaction that is difficult to explain rationally.
The third example relates to a situation in which a person makes a rational decision to lose weight. He looks for alternatives (types of diets, exercise at home or in a gym); he gets information on the Internet; he asks his family and visits three gyms. After weighing these alternatives, using criteria such as ease, speed and cost, he decides to follow the diet prescribed by the dietician. A few days later he is in a restaurant with friends and when he chooses whether to eat a salad or a hamburger and fries, he decides on the latter. This situation is known as the dilemma between what one wants and what one should do. Rational or irrational? The decision had a distractor called “craving.”
Finally, the last example has to do with the idea of seizing an opportunity. Take for example seasonal discounts, such as night sales, black Friday and now in Mexico the Buen Fin. It is the same product and the same price, but in a different promotional context. The stimulus is the possibility of taking advantage of an opportunity that is presented in a given and limited time.
Figure 2. Shopping in moments of opportunity.
Conclusion We have seen that consumers do not always follow a rational process in their purchases because distractors may interfere or a decision may be made out of habit, impulse or a heuristic method. For the marketer, more than understanding buyers’ needs it is important to know the distractors and cravings to identify business strategies that consider the irrationality of consumers at the moment they make their decisions. Thus, at the time of purchase, the decision could be more irrational than one might think.
References
Hawkins, Del (2013), Consumer Behavior. Nueva York: McGraw-Hill Irwin
The Moment of Buying: A More Irrational Decision Than It Seems
ITAM
Decision making is a daily and natural activity. The act of buying is one of the many decisions a person faces in life. There is the idea that this decision is rational. To explain this rationality, marketing gurus, like Kotler and Hawkins, among others, have described this process as a sequence of stages an individual goes through when deciding what, where and when to buy.
However, there is evidence that many buying decisions do not follow this logical, reflective and sequential process, but are more irrational than one might think.
Buying Decision Process
Buying behavior consists of making a decision about the purchase of a product or service that is needed or desired and which involves having a preference. The act of buying follows the steps below:
Irrationality in the Purchase
Strictly speaking, the decision-making process explains how people buy. However, in reality there are many distractors or cravings that limit the rationality of a purchase. Distractors are situations, also known as “blind spots,” that affect one or more steps of the process and make the consumer buy with a limited perspective. The process is also truncated by cravings, such as heuristic methods, habits or impulses. Figure 1 shows the process and the influence of the distractors and cravings.
Figure 1. Buying decision process.
The figure shows how irrationality pervades consumer behavior. It can happen in trivial or important situations, as we shall see in the following four examples.
To show some irrationality in a trivial purchase, let us take the case of the craving for a soft drink in two scenarios that show how a buying decision can be influenced. In Scenario 1, two sizes of soft drinks are offered at the refreshment stand of the theater. The small size costs 20 pesos and the sales person offers the large size, which is more than twice the size, for only 60 pesos. Given the price difference, few people are interested in the large size, because they think that the price is very high and the amount excessive. The justification for this seems rational. In Scenario 2, three sizes are offered – small, medium and large – with a cost of 20, 55 and 60 pesos. Now the sales person offers the large size with the argument that the difference of 5 pesos between the medium and large size is negligible for the additional amount. This time, the vast majority of customers purchased the large size. Was it a rational decision? It was the same product, the same consumers and the same environment. What was the difference? It was the introduction of the medium size as a point of comparison with the large one. Were the customers rational, following a buying process? No, their decision was an impulsive act triggered by apparent convenience.
In the case of a larger purchase, let us take the example of a new car that an individual wants to replace because he will no longer be able to circulate on a daily basis in a few months. If the consumer feels rational, he asks the opinion of his acquaintances and makes a list of several cars that meet his price range, design and model, that is, cars A, B, C and D. After gathering information from the dealers, he sees the cars, tests them, reads the brochures and instructions. Afterwards, he makes comparisons using the factors he considers important, such as price, performance and comfort. He compares all the data until he decides which is the best choice: car B. Did he buy that car? No, because he suddenly thought about the J model and wanted to go see the dealer. At the end, he bought car Z of the model J. It cost more than the winning option (B), the performance level was lower, and the insurance and services were more expensive. What happened? He had an inspiration, a strong desire, to own a car of the model J, and loved the idea of the image of having it. Was it a rational decision? No. Emotional? Definitely. Irrational? Totally. The heuristic method did not influence his decision. Instead there was a distractor in the last step of the buying decision, which we could call a whim or instinct, that is, a reaction that is difficult to explain rationally.
The third example relates to a situation in which a person makes a rational decision to lose weight. He looks for alternatives (types of diets, exercise at home or in a gym); he gets information on the Internet; he asks his family and visits three gyms. After weighing these alternatives, using criteria such as ease, speed and cost, he decides to follow the diet prescribed by the dietician. A few days later he is in a restaurant with friends and when he chooses whether to eat a salad or a hamburger and fries, he decides on the latter. This situation is known as the dilemma between what one wants and what one should do. Rational or irrational? The decision had a distractor called “craving.”
Finally, the last example has to do with the idea of seizing an opportunity. Take for example seasonal discounts, such as night sales, black Friday and now in Mexico the Buen Fin. It is the same product and the same price, but in a different promotional context. The stimulus is the possibility of taking advantage of an opportunity that is presented in a given and limited time.
Figure 2. Shopping in moments of opportunity.
Conclusion
We have seen that consumers do not always follow a rational process in their purchases because distractors may interfere or a decision may be made out of habit, impulse or a heuristic method. For the marketer, more than understanding buyers’ needs it is important to know the distractors and cravings to identify business strategies that consider the irrationality of consumers at the moment they make their decisions. Thus, at the time of purchase, the decision could be more irrational than one might think.
References
Hawkins, Del (2013), Consumer Behavior. Nueva York: McGraw-Hill Irwin