In what ways do consumers stray from deliberative, rational decision making.

Moderating effects on consumer decision making -

1. Low involvement consumer decision making process

Elaboration likelihood model

Central route

Attitude formation provokes more thought.Rational consideration

Peripheral route

Attitude formation provokesless thought.Eg; celebrity endorsement, credible source , etc.

2. Variety seeking buying behavior

Focus on variety and brand switching.

Market leaders encourage habitual buying.

Behavioral decision theory

and Behavioral economics -

Decision Heuristics

1. Availability heuristic - Consumers base their prediction on quickness with which a particular example of an outcome Comes to mind.

2. Representative heuristic – Predictions based on how representative or similar the outcome is to other examples.

3. Anchoring and adjustment heuristic – Initial judgement is arrived at andthen adjusted based on additional information.

Framing –

It is the manner in which choices are presented toand seen by the decision makers.

Mental Accounting –

It is the tendency to categorize funds or items of value even though there is no logical basis

Prospect theory

Consumer tendto segregate gains.

Consumer tend to integrate gains

Consumer tendTo integrate Smaller losses to larger gains

Consumers tend to segregateSmall gains from large gains

Created by Yash Shah , Sardar Patel College of Engineering, During an internship withProf. Sameer Mathur, IIM Lucknow.

www.IIMInternship.com