Week 07

Week 07

Consumer Behavior · Davood Wadi, PhD

Consumer Decision-Making Process

A purchase is the last step of a decision that begins long before the checkout.

A long path from a shopper at her open, nearly empty fridge, past a laptop with a magnifier, to a shop counter at the far end. A teal shopping bag stands on the counter beside a payment card: the purchase is only the last step.

What Is Consumer Decision Making?

Consumer decision making is the process by which people identify a need, gather information, compare options, and choose.

  1. Some decisions take weeks of research, such as choosing a university or a car.

    A decision that takes weeks: a wall calendar with three weeks of days crossed off, and beside it a car brochure covered in handwritten notes and underlinings, with a magnifier resting on it.
  2. Other decisions take less than a second, such as picking up the usual brand of milk.

    A decision that takes under a second: a close-up of a fridge door shelf holding a row of milk cartons. A hand lifts the usual carton, washed teal, out of the row without pausing. A stopwatch beside it reads UNDER 1 SECOND.UNDER 1 SECOND
  3. The same consumer can make careful decisions in one category and habitual decisions in another.

    One shopper between two thought clouds. In the left cloud, a car under a magnifier: a careful decision. In the right cloud, the usual carton of milk with a teal tick: a habitual decision.
  4. Today, a consumer can also hand part of the process to an AI agent that searches and compares on the consumer's behalf.

    A shopper speaks a goal, shown as a short list in a speech bubble, to her AI agent, a phone with a sparkle. An arrow runs from the agent to a shelf of three coffee jars under a magnifier; the agent has picked one, washed teal.

The Five Stages of the Decision Process

The traditional model describes decision making as five stages.

  1. Stage 1 is problem recognition. The consumer notices a gap between the current state and a desired state.

    Stage 1, problem recognition: a phone lies with its glass smashed by cracks that run across the screen.
  2. Stage 2 is information search. The consumer looks for information about possible solutions.

    Stage 2, information search: a laptop showing a search box, with a magnifier held up beside it.
  3. Stage 3 is evaluation of alternatives. The consumer compares the options on the attributes that matter.

    Stage 3, evaluation of alternatives: two phones stand side by side, the left with three stars under it and the right with four.
  4. Stage 4 is product choice. The consumer selects one option and buys it.

    Stage 4, product choice: a teal shopping bag stands beside a payment card; the choice has been made and paid for.
  5. Stage 5 is postpurchase evaluation. The consumer uses the product and judges whether it met expectations.

    Stage 5, postpurchase evaluation: a hand holds the new phone in use. Above it, a thought cloud shows the phone she expected. A teal tick between them: the phone met her expectations.

The model assumes a rational consumer. Real consumers often skip stages, repeat them, or move through them in a different order.

Three consumers cross the same stream on five stepping stones, one numbered stone for each stage. The first jumps from stone 1 to stone 4; stones 2 and 3, never touched, are drawn in pencil. The second steps back from stone 3 to stone 2 and crosses it again. The third treads the stones in a different order, 1, 2, 4, 3, 5.123451234512435
Exercise · Put it in order

Follow Ines's laptop purchase through the five stages of the decision process. Put her moments in the order they happen.

Tap a step, then the number where it belongs.

Problem Recognition: The Actual State and the Ideal State

Problem recognition occurs when the consumer sees a significant difference between the actual state and the ideal state.

An instrument with two phones. On the left, in a blush wash, the phone the consumer has: the actual state. On the right, in a sky-washed cloud, the phone she would like: the ideal state, with 1 camera lens. A bracket measures the gap between their levels against a significance mark. Result: no problem recognized.ACTUAL STATEIDEAL STATESIGNIFICANTNO PROBLEM RECOGNIZED

Need recognition happens when the actual state falls. A phone breaks, or the fridge is empty. Marketers can trigger need recognition by reminding consumers that a product runs out or wears out.

Two scenes in which a megaphone calls out a reminder. On the left, toward an almost empty coffee jar; on the right, toward a shoe worn through at the sole.

Opportunity recognition happens when the ideal state rises. A consumer sees a new phone with a better camera and wants it. Marketers can trigger opportunity recognition by showing a better state that the consumer had not imagined.

A shopper looks at a poster of a phone with a large camera lens and bright rays. Her own thought cloud, drawn in pencil, is empty: she had not imagined this better state.
Exercise · Sort into groups

Each card describes a consumer who has noticed a gap between the actual state and the ideal state. Did the actual state fall (need recognition) or did the ideal state rise (opportunity recognition)?

      Tap a card, then tap the group it belongs to.

      Three Levels of Decision Making

      Consumers do not put the same effort into every decision.

      1. Routine response behavior is automatic. The consumer buys the same product with little or no search, such as a favorite toothpaste.

        Routine response: from her front door, a short, straight route leads directly to the usual toothpaste, washed teal, on a store shelf, with no stops on the way.
      2. Limited problem solving uses some search and simple rules. The consumer compares a few options, such as when choosing a new cereal.

        Limited problem solving: from her front door, the route stops and circles once in front of each of three cereal boxes, comparing a few options, and ends at the one she takes, washed teal.
      3. Extended problem solving uses extensive search and careful comparison. It occurs when the purchase is expensive, risky, or rare, such as buying a house.

        Extended problem solving: from her front door, a long route winds past five houses for sale, visiting each in turn, before it ends at the door of the one she chooses, washed teal.

      The level of effort depends on involvement, perceived risk, and past experience with the category.

      Exercise · Which one is it?

      Each case describes one purchase. Which level of decision making is it?

      Every Friday, Aroha takes the same brand of oat milk from the shelf without glancing at the others.

      Which concept does this case show?

      Information Search: Internal and External

      Internal search means looking into memory for what the consumer already knows about the options.

      Internal search: a shopper with her hand at her chin has a thought cloud that holds the brand's badge and four of five stars, what she already knows from memory.

      External search means gathering new information from ads, websites, stores, reviews, friends, and sales staff.

      External search: a shopper stands in the middle with six sources of new information around her, each with an arrow toward her: an ad, a website on a laptop, a shop, a card of star reviews, a friend and a salesperson behind a counter.

      Consumers search more when the purchase is important, the risk is high, and they know little about the category.

      Consumers search less when they are experts, when they are satisfied with their current brand, or when time is short.

      Search has costs. Each extra comparison takes time, money, and mental effort, so consumers stop searching before they have seen every option.

      SIMULATED. A street of eight shops selling the same headphones. 3 of 8 shops visited; prices seen: $118, $109, $112. Money saved against the first price: $9; search cost at $4 a visit: $8. The best place to stop so far is shop 2, marked teal with the price paid there.$118$109$112?????$0$20MONEY SAVED$9SEARCH COST$8SIMULATED
      Exercise · Sort into groups

      Each card describes how a consumer looks for information. Is it internal search or external search?

          Tap a card, then tap the group it belongs to.

          Delegated Search: When an AI Agent Gathers the Information

          Consumers can now delegate information search to an AI agent.

          The consumer gives the agent a goal. The agent looks up product details, compares options, and makes a choice.

          Like a human shopper, the agent often cannot see every detail at once. It has to look up each attribute, and each look-up can cost time or money.

          Researchers can trace which details an agent looks up before it chooses, as consumer researchers have long traced which information human shoppers open before they choose (Wadi & Ma, 2026b).

          A look-up board of two instant coffees, each with three hidden details: dollars, cents and weight. Look-ups are free. 0 of 6 details looked up. No coffee chosen yet. AI agents in the study, with look-ups free, looked up 5.93 of 6 details on average and chose the coffee cheaper per ounce in about 9 of 10 sessions.DOLLARSCENTSWEIGHT??????0 LOOK-UPSAI AGENTSIN THE STUDY5.9OF 6 LOOKED UP9 IN 10 CHOSE THE BETTER DEAL

          When looking up information was free, AI agents gathered the details they needed and rarely chose a worse product (Wadi & Ma, 2026b).

          When each look-up had a cost, agents stopped searching earlier and sometimes chose without the details they needed (Wadi & Ma, 2026b).

          The quality of a delegated decision therefore depends on the information the agent gathers, not only on how well it reasons.

          Knowledge Check

          Dana asks an AI agent to find her running shoes. Each time the agent opens a product page, it is charged a small fee. Which outcome fits what the slide describes?

          The Delegation Instruction: How Specific Is the Goal?

          The instruction the consumer gives the agent defines what a good choice means.

          A vague goal leaves the criterion open, for example "find the best deal on instant coffee."

          A specific goal states the criterion, for example "find the coffee with the lowest price per ounce."

          In one study, one coffee cost $4.99 for 10 ounces and another cost $5.00 for 11 ounces. The $5.00 coffee was cheaper per ounce (Wadi & Ma, 2026b).

          When look-ups were costly and the goal was vague, AI agents often skipped the package weight and more often chose the $4.99 coffee (Wadi & Ma, 2026b).

          When the goal was specific, the agents kept looking up the details needed to compare price per ounce and chose better (Wadi & Ma, 2026b).

          Two instruction cards: a vague goal, find the best deal on instant coffee, and a specific goal, find the coffee with the lowest price per ounce. The vague goal is selected and passed to an AI agent; every look-up costs $10. Gauges show how often the AI agents in the study looked up each detail: dollars 97%, cents 39%, weight 55%. Of ten choices, 7 went to the $4.99 coffee for 10 ounces and 3 to the $5.00 coffee for 11 ounces, the one cheaper per ounce, marked teal. Real data.“FIND THE BEST DEALON INSTANT COFFEE.”“FIND THE COFFEE WITHTHE LOWEST PRICEPER OUNCE.”$10HOW OFTEN THE AGENTS LOOKED IT UPDOLLARS97%CENTS39%WEIGHT55%$4.9910 OZ49.9¢ PER OZ$5.0011 OZ45.5¢ PER OZ

          A consumer who states the criterion that defines a good choice gives the agent a clear objective. An agent cannot pursue an objective the consumer did not state.

          Exercise · Sort into groups

          Each card is an instruction a consumer gives to an AI agent. Does it leave the criterion open (vague goal) or state it (specific goal)?

              Tap a card, then tap the group it belongs to.

              Evaluating Alternatives: From Awareness to Consideration

              Consumers rarely evaluate every brand in a category.

              The awareness set includes all the brands a consumer knows.

              The evoked set includes the brands a consumer recalls from memory when making a decision.

              The consideration set includes the brands the consumer seriously considers buying.

              The inept set includes brands the consumer rejects, and the inert set includes brands the consumer feels indifferent toward.

              Nested sets of brands, each a blob of product packs. The awareness set holds all brands known; inside it the evoked set holds the brands recalled; inside that, the consideration set (teal) holds three brands, the inept set two crossed-out brands and the inert set two plain brands. The three brands in the consideration set were recalled by the consumer from memory.AWARENESS SETEVOKED SETCONSIDERATION SETINEPT SETINERT SET

              A brand that does not enter the consideration set has almost no chance of being chosen. When an AI agent searches, the list it returns can become the consumer's consideration set.

              Exercise · Match up

              Chen is about to buy coffee. Match each set of brands with the part of her thinking it describes.

              Set

              Chen's coffee brands

              Tap a term, then the example it goes with.

              Decision Rules: How Consumers Choose

              Decision rules are the strategies consumers use to choose among alternatives.

              Compensatory rules let a strength on one attribute make up for a weakness on another. A laptop with a weak battery can still win if its screen and price are excellent.

              Noncompensatory rules do not allow this trade-off. A weakness on one important attribute rules the option out.

              The lexicographic rule chooses the brand that is best on the most important attribute. If there is a tie, the consumer moves to the next attribute.

              The elimination-by-aspects rule removes every option that fails a cut-off on an important attribute, such as any flight with more than one stop.

              The conjunctive rule sets a minimum level for every attribute and rejects any option that falls below one of them.

              Five laptops, A to E, scored on price, battery and screen with up to five pips each. Rule: Compensatory. The rule picks laptop A.PRICEBATTERYSCREENA12B11C10D10E11TOTALTOTAL OFALL THREECHOICEA

              Consumers often use noncompensatory rules to narrow the options and then a compensatory rule to choose among the few that remain.

              Exercise · Which one is it?

              Each case describes how a consumer chooses. Which decision rule is it?

              Sofia picks the phone with the best camera, her top priority. Two phones tie, so she takes the one with the better battery.

              Which concept does this case show?

              Discussion: Write the Instruction

              Discussion:

              Think of a product you plan to buy soon. Write the instruction you would give an AI agent to buy it for you. Which attributes and decision rule does your instruction state, and which does it leave for the agent to decide?

              A shopper hands an instruction card to her AI agent. On the card, two lines are written in ink and ticked: they are stated. Two more lines are pencil blanks, left for the agent to decide.