Consumer decisions can seem mysterious. Last week, I wrote at length about consumer behavior. How do we understand why consumers do what they do? Nowhere is consumer behavior more important than the decision-making process itself. After all, knowing how people make decisions will make your small business thrive!
The very first post on this blog was Small Business Marketing 101: What is Marketing and Why Does it Matter? In it, I describe the AIDA model, which stands for Attention, Interest, Desire, and Action. It describes the states of mind that your potential customers go through when pondering various consumer decisions. For marketers, we talk about lead generation, opt-in incentives, and other neat buzzwords. We don’t often enough talk about the experience as the customers feel it.
That’s why today, we’ll be talking about the consumer decision process at length, following this outline:
The Context Around Consumer Decisions
- Consumer Decision Factors: the Ones Customers Realize & the Ones They Don’t
- Are People Really Rational?
- Roles in the Decision-Making Process
- What Does This Mean for Product-Market Fit?
The Consumer Decision Process
- The First Step is Realizing You Have a Problem
- The Hunt Begins: Seeking Information
- Evaluating Alternatives
- The Moment You’ve Been Waiting For: The Consumer Decision
- Pride and Regret: The Post-Purchase Evaluation
Customer Affect, or How Our Emotions Make Consumer Decisions for Us
- The Information Search Experience
- Choice: Powerlessness vs. Confusion
- Customer Experience
- Customer Satisfaction
The Context Around Consumer Decisions
Consumer Decision Factors: the Ones Customers Realize & the Ones They Don’t
When talking about consumer behavior last week, I borrowed from a book I really liked – Thinking Fast and Slow. The book, by Nobel-prize winner, Daniel Kahneman, explains how we use two modes of thought. He describes them as System 1 and System 2. To greatly simplify, System 1 is fast, automatic, and instinctual. Likewise, System 2 is slow, deliberate, and rational. You need both to make it in this world. We use both to make decisions.
As a marketer, you need to be able to communicate on two levels. You need to talk to System 2 by making a great product. People want to be proud of their consumer decision. You don’t want them to regret buying your product. Don’t discount System 1, though. Speak to your users by using the right packaging, the right price point, the right website layout, the right writing, and other “unimportant” details.
Are People Really Rational?
No. People are not rational, no matter what economists tell you.
A lot of researchers, academics, and well-read folks like to imagine the world as full of people who make decisions based on reason. The truth is that a lot of people use System 1 to make big decisions about cars, houses, and other major expenses when they ought to use System 2. So it goes.
Hey, we can’t judge, either! You can’t always make the perfectly rational decision all the time. It would take too much time. You’d never get anything done.
Roles in the Decision-Making Process
In this research paper written by John R. Rossiter and Larry Percy in1985, Rossiter and Percy posit that there are five roles that go into consumer decisions. In the decision-making process, you can be one or more of the following:
- You could be the initiator, or the person who suggests a brand or product. I could say “have you thought about T-Mobile lately?” That’s neither a positive nor negative statement, but simply one that mentions T-Mobile.
- Instead, you may be the influencer, a person who recommends a brand or product. If your friend said to you, “hey, you should really check out this great blog called Marketing is the Product,” they are the influencer. They are also a great friend.
- The decider is the one who chooses to make the purchase. If a teenager says to their dad, “I really want the new Samsung phone – can I buy it?” Then the dad is the decision maker.
- The one holding the wallet is the purchaser. If the teenager then goes to the nearest Best Buy and buys the phone, he or she is the purchaser.
- Lastly, the user is the one ultimately using the product. Your company decides which computers to buy, the purchaser places the order, and you are the user.
When you make a decision entirely on your own, you may be all five roles simultaneously. You may look online for reviews for a gift, making you the decider-purchaser but not the user, initiator, or influencer.
What Does This Mean for Product-Market Fit?
Because people are not truly rational in the consumer decision process and because people play multiple roles, this impacts how product-market fit works too. You may imagine the perfect product for a certain target market as one which has the most utility. After all, the most useful products are sure to ultimately come out on top in the end in the market.
Unfortunately, this is not the case. You need to be able to speak to people the way they wish to be spoken to in order for them to make a consumer decision which favors you and your small business.
The principle of “speak to people the way they wish to be spoken to” is further complicated by the presence of decision-making roles. The decider-purchaser is making a choice based on what a different user will want, based on the recommendation of an influencer, and at the behest of an initiator.
The decider-purchaser is guessing and assuming a lot! if you want to see an example of how this can play out unexpectedly, go to a family Christmas where someone gets a disappointing gift. Think about how that consumer decision, despite disappointing the user, achieved some baseline level of product-market fit in order to be purchased.
The Consumer Decision Process
The First Step is Realizing You Have a Problem
When marketers think about why consumer decisions are made, we think in terms of problems and solutions. Consumers identify problems and we help them fix them with solutions from the marketplace. Until a consumer becomes aware of a problem, we can’t sell them anything. It’s like trying to sell ice in the Arctic. There’s no need.
Sometimes consumers solve problems using careful deliberation. This involves doing research and using all their System 2 faculties to make the best decision. A lot of times, this is what people do for expensive purchases. Other times, consumers make snap judgments or buy something they already have – a purely System 1 decision.
How do consumers become aware of their problems? Wikipedia does a really good job of spelling out the common possibilities, which I’ll paraphrase here:
- A consumer runs out-of-stock and needs to buy more of what they already have. I did that when I ran out of milk today.
- A consumer makes a regular purchase and doesn’t put a lot of thought into it. For a period of 9 months or so, I did this every morning in the cafeteria of a place I worked. I needed my 20 oz. fresh coffee!
- Dissatisfaction sets in and a consumer decides they need something new. After years of driving a beater Ford Escort, a friend of mine bought a new car. His ’96 Ford Escort still worked…but it was a ’96 Ford Escort.
- A new need or want surfaces and a consumer’s lifestyle changes. Many college students experience this for the first time when it’s time to buy textbooks!
- You might buy a related product. A couple of years ago I installed a new car radio. I later bought an iPhone cable so I could charge my phone while driving, where that wouldn’t have previously been possible.
- Then there’s market-induced problem recognition. Someone is exposed to marketing materials, and they become convinced they have a problem that needs to be solved. When you’re starting your business and initiating contact with people, you’ll be causing this to happen.
- Lastly, innovative new products or categories can cause people to realize they have an unmet need or a better way of filling a need.
For a small business to survive, you need to be addressing the specific problems of a specific market. This means achieving the fabled product-market fit I keep talking about. You also need to speak to people the way they wish to be spoken to. As you can see from problem recognition, you need to use your communication to make them realize they have a problem you can fix.
A Caution on Inventing Problems
To be extra clear, when I say “make them realize they have a problem,” you can also use that to mean “make them realize something can be better.” Sleazy marketers invent problems where none exist. Great marketers listen attentively and find ways to make life better for their customer before the customer even knows how to articulate their needs.
The Hunt Begins: Seeking Information
When you’re looking to make a major purchase, you often start by doing some research. This is called the information search. The information found during the search makes a big difference in the ultimate consumer decision.
Often, before even searching for more data, a consumer will think about brands or products that they already know about. The brands and products remembered without any help are called the evoked set. It’s usually not more than five. Consumers who seek to make serious decisions supplement their evoked set by doing research online or by asking other people.
Information used to be harder to get a hold of than it is now. Thank you, Internet! What this means for you as a marketer is that the evoked set usually isn’t as important as the consideration set, or the number of brands consumers are interested in after research. Yet to get into that consideration set, you still need to be very active in making sure you’re visible online and – if applicable to your business or industry – offline.
If you want to get a sense of how brands and products are added to the evoked set, look at the diagram below. Every dot represents a way you – or someone you work(ed) with – can reach out to the customer. This is what moves brands from the unknown to the consideration set, and – if your product is really great – the evoked set for future purchases.
After people gather information and before they make their ultimate consumer decision, people evaluate different alternatives. Mentally, your customers are doing various cost-benefit analyses, even if they wouldn’t exactly say those words.
There are two kinds of benefits your product, service, and/or brand can provide. There are functional benefits and psycho-social benefits. To understand these, recall System 1 and System 2 thinking. System 1 is intuitive and snappy, whereas System 2 is careful and calculating. System 2 is concerned with functional benefits and System 1 is concerned with psycho-social benefits.
Functional benefits, for lack of a better word, are “real” benefits. My Toyota Camry can get me from point A to point B without burning a lot of gas. The trunk has a lot of space, so I can put groceries in it. The color is white so it won’t get so hot when I park it directly in the sunlight.
If I bought a Lexus ES300, though, I’d receive essentially the same car. Yes, it’s true that the Lexus ES300 is a great and reliable car with lots of good features. However, it doesn’t necessarily have a functional value of nearly $16,000 greater than the humbler Toyota Camry. I’d feel cool and people would treat me differently if I drove the Lexus, though, so there is a psycho-social benefit. For many people, that is well worth $16,000 and often more. Brand image is very powerful like that!
The Moment You’ve Been Waiting For: The Consumer Decision
After searching for information and evaluating the benefits and costs of different brands, one is finally ready to make their consumer decision. At this point, you’ve got two really important concepts that you need to understand: purchase intent and purchase.
Think back to the AIDA (Attention, Interest, Desire, Action) model for a moment. Purchase intent is desire. The consumer says “I want to buy this.” Maybe they don’t have the money, maybe they’re holding back because they are a financial ascetic like Mr. Money Mustache. Or maybe, just maybe, they truly are ready to buy, your product/service would be tremendously helpful to their day-to-day life, and they just need your help.
Creating desire is hard, so closing the sale at this point is a downhill run. That doesn’t mean you can slack off, though. You need to incentivize them to purchase somehow. That can involve using a call-to-action – a strong message intended to get people to do something you want them to do.* Those asinine department store sales where everything is 40% off from the moment it comes off the truck? That is also incentivization – that’s called “scarcity attraction.”
Pride and Regret: The Post-Purchase Evaluation
Once you make the sale, you’re not off the hook! For one, you probably have a returns process and you probably provide customer service. Even if you didn’t, though, you want people to make return purchases. That’s why the post-purchase evaluation needs to work in your favor.
Thinking back to the department store example, the “40% off the moment it’s off the truck” is also an insurance policy against buyer’s remorse. You know how the cashier takes your receipt and says you saved $101.95 on two T-shirts and a pack of socks? It’s a subtle way of telling you that you’re smart and your decisions were well made. (Though I use it as an example, I don’t endorse “40% off the moment it’s off the truck” followed by “you saved this much.” I think it’s deceptive.)
In most situations, though, nobody immediately addresses your post-purchase feelings. You may experience post-decision dissonance next time you buy something. That’s an MBA phrase that refers to when you feel anxious and doubt yourself after buying something. Consumers in this situation may ask their friends if it was a good decision. Of course, you as the marketer, may also be able to help through various post-purchase communications.
Customer Affect, or How Our Emotions Make Consumer Decisions for Us
This is likely no surprise to you, but our consumer decisions are often made emotionally. You can’t entirely eliminate System 1 thinking from your decision-making process. Nor, frankly, would you want to. Marketers use the phrase customer affect to describe the way people feel when they’re going through the consumer decision-making process. Let’s talk about the various things that can alter customer affect.
The Information Search Experience
People are better at researching when they’re feeling excited. I am excited when I write these posts, which makes going through Google Scholar and Wikipedia much easier. If I didn’t care, it would be harder. Likewise, after getting off the phone with an unnamed cell phone company, I was so frustrated that I couldn’t compel myself to write because research felt too hard.
On top of that, people in a good mood tend to interpret information in a more Pollyanna way. People in a bad mood tend to think people are out to screw them over. This, combined with the ability to do research in the first place, is really important for you as a small business marketer. You likely rely on new leads, so you need people to be in a good mood when searching for information.
Sadly, as you are not an empath, you cannot change people’s emotions directly. You can, however, make sure that your part in the information search experience is a good one. Don’t make the information search itself hard! Your website needs to be easy to use, and you need to do whatever is in your ability to rank well where it counts. That could mean Google or an industry-specific forum. When talking to people in person, you need to be very clear, honest, and open.
People aren’t rational, but they’re not dumb. People very reasonably get frustrated when an information search is too hard. Frankly, it’s reasonable to interpret it as a warning sign that the information found would not be favorable to your business.
Choice: Powerlessness vs. Confusion
Customer affect changes the way we make choices, too. As you might expect, happier people tend to make more impulse buys than sad people. The opposite can also be true depending on the product. For example, when your willpower is depleted and you’re in a bad mood, you’re more likely to eat sweets.
There is another important take away here: decision fatigue. Too many choices is really frustrating. When we have to make too many choices or choices between too many alternatives, we get sloppy. Even judges become inconsistent in their sentencing when they get tired. Yikes!
Have you ever gone to the store and seen 20 types of shampoo and had no idea what to buy? That’s because the sheer amount of decision-making you have to do to buy shampoo is overwhelming. It’s too much stimulation! This is such an important issue that high achievers like Barack Obama, Mark Zuckerberg, and Steve Jobs streamlined their wardrobes so their minds would be free for bigger decisions later in the day.
You, as a small business marketer, should take away from this one simple thing. Reduce the number of decisions your customers have to make when shopping with you. If you have a whole bunch of products and services, present recommendations before you give them the full menu. If they really feel like doing all the homework and going beyond your recommendations, then more power to them!
It’s no surprise to anyone who’s ever worked in a call center, but customers in a bad mood are harder to please. That’s why call center folks are so relentlessly polite no matter how abusive you are to them. Their bosses know that the customer experience changes the bottom line because it turns consumer decision-making against the business!
It goes one step deeper. If customer affect changes the way that people view the information search, make choices, and perceive their customer experience; that all adds up to one conclusion. People’s moods from the very beginning affect how satisfied they are with the product or service. You’re not fully in control. You just do what you can to make the experience a pleasant one.
Naturally, the way that people feel before they see an advertisement can affect how they perceive the advertisement. That ultimately may change their consumer decision. Remember: people make decisions primarily on how they feel, not on facts and figures. If you are a small business marketer, understand that if you can put people in a good mood through advertising, then do it!
Understanding how consumers make decisions is a complex discipline. Our emotions and our context directly affect our decisions before we even make them. When we’re making decisions, we consciously and unconsciously consume information in a wide variety of ways. The more you understand the decision-making process and why people do what they do, the more effective your marketing will be.
Do you have a question about consumer decisions? Ask below in the comments 🙂
*The blue box below this footnote is a call-to-action for a community I run for small business owners and marketers like you. It’s helpful, it doesn’t cost money, and you should check it out!