Consumer Decision Making on the Web: A Theoretical Analysis and Research Guidelines

Recent empirical data on online shopping suggests that consumers have the potential to make better quality decisions while shopping on the web. But whether such potential is being realized by most consumers is an unresolved matter. Hence, the purpose of this research is to understand how (1) certain features of electronic environments have a favorable effect on the abilities of consumers to make better decisions, and (2) identify information‐processing strategies that would enable consumers to make better quality decisions while shopping online. A cross‐disciplinary theoretical analysis based on constructs drawn from economics (e.g., time costs), computing (e.g., recommendation agents), and psychology (e.g., decision strategies) is conducted to identify factors that potentially influence decision quality in electronic environments. The research is important from a theoretical standpoint because it examines an important aspect of online consumer decision making, namely, the impact of the electronic environment on the capabilities of consumers. It is important from both a managerial and public policy standpoint because the ability of shoppers to make better quality decisions while shopping online is directly related to improving market efficiency and enhancing consumer welfare in electronic markets.     

Choosing among alternative new product development projects: The role of heuristics

The initial screening decision that marketing managers make is critical. It requires the selection of what innovation project to invest in, which is fundamental to marketing success. However, our knowledge of how managers make these decisions and how this impacts performance is limited. By drawing upon cognitive psychology and the managerial decision-making literature, we address two critical questions. The first question focuses on identifying specific decision-making types (e.g., specific heuristics, intuition) used when making an innovation screening decision. Based on this analysis and prior research, we develop specific decision-maker profiles about how an individual manager decides. The second research question is about connecting these profiles with performance. Specifically, it addresses what the consequences of different decision-maker profiles are on the perceived accuracy and speed of decision-making? Data were collected from 122 senior managers in these industries. We find that when heuristics are used alone, or concurrently with intuition, managers make decisions that are as accurate as when they rely on analytical decision-making. However, the process is significantly faster. The findings provide an important step toward a more comprehensive understanding of decision-making at the front-end of innovation.     

Material Distortion of Economic Behaviour and Everyday Decision Quality

Misleading information and unfair commercial practices have to be viewed against the background of what consumers otherwise do, i.e., what their purchase decisions look like when no misleading information or no unfair commercial practices are in place. This article provides some of this background by studying how consumers sample information when making an in-store purchase decision. This was done by an eye-tracking study which reveals to what extent consumers succeed in purchasing the products that best meet their purchase intentions when only a representative amount of misleading information is present. The study shows that decisions were suboptimal in relation to what the consumers claimed they wanted to purchase. Only in one product category did consumers in this study actually look at products that were slightly better than average, and as a result, they mainly selected products that were just as often poor as good. If the proportion of bad purchase decisions based on misleading information is small enough, perhaps it might be better to direct the authors’ attention to other ways of improving the decision environments that consumers encounter. In addition, the eye-tracking study provides some insight into how consumers sample information when making an in-store purchase decision. The present data show that consumers invested on average of less than 1 s to look at products.     

Recurrent Marketing Decisions: Decision Complexity,Decision Focus,and Firm Performance

In this paper we examine the nature of the decision-making process for recurrent marketing decisions and its effects on firm performance. A conceptual model of recurrent decision-making in a competitive environment is developed and used as a framework for analyzing 96 tactical decisions made by 35 management groups in the last three periods of a management simulation. The decisions were based entirely on a set of decision rules developed by the management groups. The decision rules were coded for whether they were internally or externally focused and how complex their decision process was. These two factors were then used to predict firm performance. There are a number of important results. The greater the uncertainty in the link between a decision variable and its outcome, i) the more likely managers are to prespecify the value of the decision variable rather than construct a decision rule, ii) the less complex the decision rules that are constructed, and iii) the greater the proportion of internally-focused decision rules. In addition, the focus of a decision rule, but not the complexity of the process—independent of the focus—is positively related to performance with firms that focus on both internal and external factors doing best.     

Choice in Interactive Environments

In the early 21st century, firms are thinking seriously and practically about an interactive marketing paradigm—one that integrates mass scale with individual responsiveness. The focus of this paper is on how this interactive environment is changing the customer decision-making process. With the increased amount of information available, the existence of sophisticated decision aids such as intelligent agents, and more latitude in how to interact beyond the basic desktop and laptop computers (e.g., personal digital assistants, cellular phones, tablet computers), customers have more choices than ever about how, when, and how much to interact with companies and each other. In this paper, we attempt to cover a few of the major areas of research on how customers make decisions in these environments.     

A Comparison of Models Describing the Impact of Moral Decision Making on Investment Decisions

As moral decision making in financial markets incorporates moral considerations into investment decisions, some rational decision theorists argue that moral considerations would introduce inefficiency to investment decisions. However, market demand for socially responsible investment is increasing, suggesting that investment decisions are influenced by both financial and moral considerations. Several models can be applied to explain moral behavior. We test the suitability of (a) multiple attribute utility theory (MAUT), (b) theory of planned behavior, and (c) issue-contingent model of ethical decision making in organizations. In an experimental setting, 141 participants traded company shares in a computerized asset market. Over 12 periods, companies varied in morality (i.e., treatment of employees) and in profitability (i.e., expected dividends per share). Participants’ bids and asks for shares were recorded. Results indicate that moral considerations influence investment decisions, controlling for profit. Differences between the three models are discussed.     

Harnessing the wisdom of crowds: Decision spaces for prediction markets

The increased metabolism of business in the modern world has served to heighten both the frequency and the difficulty of organizational decision making. Practitioners and academics are constantly looking for decision-making mechanisms that can be used to address these challenges. One recently emerged mechanism is prediction markets: a group decision-making tool that uses a market mechanism to rapidly aggregate information held by large, diverse groups of participants. Prediction markets have a number of benefits and have been demonstrably successful in a number of contexts; however, it is important to recognize that they are suited to some types of decisions and contexts but not to others. This article examines the benefits of prediction markets and develops a framework that can be used to identify in which situations prediction markets can be profitably deployed within organizations. It also provides a roadmap for practitioners to use to guide their own organizational deployment of prediction markets.     

Social Collective Decision Making among Adolescents: A Review and a Revamp

This article revamps the work of Ward and Reingen ( 1990 ) to examine adolescent normative behavior in a social collective decision‐making group. This is of particular importance as it will enhance an understanding of the youth market both through the social context employed here as well as the social interaction that occurs when adolescent decisions are made. Employing a diachronic qualitative methodology, this research explores collective decisions made by adolescents on a high school prom organizing committee and reveals influencing strategies (e.g., coalition formation, bargaining) as well as approaches to managing conflict and conflict resolution. A model is proposed, which examines the role of both intra‐ and intercoalition formation and subsequent influence on decision making. Identification of conflict resolution strategies (e.g., yielding, dominating, and disassociation), employed at different stages of preparation for this event, are recognized as having both theoretical and practical marketing managerial implications.     

Manipulation in Conditional Decision Markets

Conditional decision markets concurrently predict the future and decide on it. These markets price the impact of decisions, conditional on them being executed. After the markets close, a principal decides which decisions are executed based on the prices in the markets. As some decisions are not executed, the respective outcome cannot be observed, and the markets predicting the impact of non-executed decisions are void. This allows ex-post costless manipulation of such markets. We conduct two versions of an online experiment to explore scenarios in which a principal runs conditional decision markets to inform her choice among a set of a risky alternatives. We find that the level of manipulation depends on the simplicity of the market setting. When a trader is alone, has the power to move prices far enough, and the decision is deterministically tied to market prices or a very high correlation between prices and decision is implied, only then manipulation occurs. As soon as another trader is present to add risk to manipulation, manipulation is eliminated. Our results contrast theoretical work on conditional decision markets in two ways: First, our results suggest that manipulation may not be as meaningful an issue. Second, probabilistic decision rules are used to add risk to manipulation; when manipulation is not a meaningful issue, deterministic decisions provide the better decision with less noise. To the best of our knowledge, this is the first experimental analysis isolating the effects of the conditional nature of decision markets.     

Buyer-Seller Exchange Situations

Abstract

From having focused almost entirely on exchange transactions in consumer goods markets, in the 1970s, academics expanded their analysis to include relational exchanges-in particular business-to-business markets and service markets. The contextual changes of the 1990s (i.e., the explosion of IT and the Internet) resulted in the introduction of relationship marketing as an alternative marketing approach in consumer goods markets introducing the notion of a shift in exchange paradigms. However, in the late 1990s, a number of authors on service marketing (e.g., Liljander & Strandvik, 1995), on business-to-business marketing (e.g., Anderson & Narus, 1999) and on contemporary marketing practices (e.g., Brodie, Coviello, Brookes & Little, 1997) supported the thesis that in many markets the process that actually takes place is one of co-existence of transactional exchanges and relational exchanges. Based on the “pluralistic approach” (Pels, Coviello & Brodie, 1999, 2000), this paper develops four cases that seek to exemplify the different exchange situations that may occur in a given marketplace.     

Decision-Making Strategies for the Choice of Energy-friendly Products

Although energy efficiency of many products has been improving constantly, residential energy consumption is not decreasing as much as desired. Therefore, the goal of the European Union (EU) and many other countries is to promote energy-friendly product choices (i.e., choice of products with low energy consumption). In a purchase situation, consumers are confronted with a wide range of energy-related information that can influence the decision-making process. Understanding how consumers reach a decision based on the information provided and identifying decision-making strategies that are beneficial or destructive in terms of energy friendliness is crucial for the improvement of existing energy-policy measures and, consequently, for the successful achievement of target energy saving goals. This paper provides insights from an exploratory eye-tracking study (N?=?59) investigating consumers’ decision-making process. Participants were required to identify the most energy-friendly television (i.e., the television with lowest energy consumption). Cluster analysis revealed three consumer segments with different decision-making strategies: the energy-directed lexicographic, unsystematic lexicographic, and unsystematic exhaustive strategies. The energy-directed lexicographic strategy resulted in 60% optimal choices in terms of energy friendliness, unsystematic lexicographic in 33%, and unsystematic exhaustive in 38%. No decision-making strategy resulted in 100% optimal choices in terms of energy friendliness. Findings emphasize that lexicographic strategies can successfully identify energy-friendly products when the correct information (i.e., actual energy consumption) is used. However, a lexicographic strategy can be very misleading and result in non-optimal choices in terms of energy friendliness when it is based on ambiguous information (i.e., energy efficiency information) that does not enable a conclusive decision. Further, this paper discusses implications for policy-makers and marketers for the promotion of energy-friendly consumer behaviour.     

Making Decision in Open Communities: Collective Actions in the Public Realm

This special issue is comprised of five articles which explore the modes and forms of decision-making in open communities, i.e. in organizations having loosely coupled, often informal, structures with flexible and permeable boundaries. These communities are emerging in the public realm and performing actions which can be described as a collective. More and more of these organizational environments are perceived to be highly democratic, innovative, and leading to successful social innovations, cohesion processes and governance. The articles represent an attempt to capture the nature of decision environments specific to open communities, and the dynamics of their decisions. The articles discuss characteristics of these communities and how they enable more democratic decisions and, at the same time, identify decision-making constraints that create obstacles for effective collective actions.     

Cognition, Persuasion and Decision Making in Older Consumers

Older adults constitute a rapidly growing demographic segment, but relatively little is known about them within consumer contexts: how they process information, respond to persuasive messages, and make decisions. We discuss extant findings from consumer behavior and related disciplines (e.g., cognitive psychology, neuroscience, social psychology, gerontology) as they pertain to the effects of aging on consumer memory, persuasion and decision The first two authors co-chaired the workshop at the Choice Symposium and made major and equal contributions to this article. The remaining authors were participants in the workshop. They also contributed to this article and are listed in alphabetical order. We wish to thank the editor and Cathy Cole for their helpful comments on the paper. The article, including a more complete list of references, was shortened to meet the page-length constraints of the special issue. The longer version is available upon request from the senior authors.     

Adolescents' perceptions of family communication patterns and some aspects of their consumer socialization

This study examined the effects of family communication patterns (FCP) on adolescent consumers' decision‐making styles and influence in family purchase decisions. Two underlying dimensions of FCP (concept‐orientation and socio‐orientation) were measured separately for mother–child communication and father–child communication and regressed on adolescents' use of the selected decision‐making styles and influence in purchase decisions involving durable products and nondurable products for their own use. Results show that only mother–child communication patterns have significant associations with adolescents' decision‐making styles and family purchase influence. Specifically, mothers' concept‐oriented communication was positively linked to children's use of utilitarian decision‐making styles (e.g., careful and deliberate decision making) and social/conspicuous decision‐making styles (e.g., recreational and hedonic decision making) as well as to children's influence in family purchase decisions involving both durable and nondurable products for themselves. On the other hand, mothers' socio‐oriented communication was linked positively to children's use of undesirable decision‐making styles (e.g., confusion by overchoice) and negatively to children's influence in family purchase decisions. This study also investigated the presence (or absence) of a same‐gender effect in the relationships between parent–child communication orientations and children's consumer socialization outcome. If present, a same‐gender effect would be indicated by a greater influence from the same‐sex parent's communication orientations on the adolescent's decision‐making styles and influence in family decisions relative to that of the opposite‐‐ sex parent's communication orientations. Comparisons of the two gender‐group regression results revealed no systematic pattern that suggests the presence of such an effect. © 2009 Wiley Periodicals, Inc.     

High Stakes Decision Making: Normative,Descriptive and Prescriptive Considerations

This paper reviews the state of the art of research on individual decision-making in high-stakes, low-probability settings. A central theme is that resolving high-stakes decisions optimally poses a formidable challenge not only to naïve decision makers, but also to users of more sophisticated tools, such as decision analysis. Such decisions are difficult to make because precise information about probabilities is not available, and the dynamics of the decision are complex. When faced with such problems, naïve decision-makers fall prey to a wide range of potentially harmful biases, such as failing to recognize a high-stakes problem, ignoring the information about probabilities that does exist, and responding to complexity by accepting the status quo. A proposed agenda for future research focuses on how the process and outcomes of high-stakes decision making might be improved.     

A Dynamic Model of Cross-Category Competition: Theory, Tests and Applications

Recent marketing studies use scanner data to diagnose the influence of a change in a brand's marketing mix on other brands in the same category. A few studies also use scanner data to model inter-category effects between substitutes (e.g., tea and coffee) or complements (e.g., tea and sugar). No study models the dynamic effects of cross-category competition though.We present a dynamic model that shows how different products in a typical market basket influence demand of one another. Empirical tests use single-source, market-level data for ice cream and some substitute and complement categories. On the basis of in-sample fit, out-of-sample forecasts, and formal causality tests, this study demonstrates that the marketing mix decisions for ice cream influence the sales and market shares of ice cream toppings and frozen yogurt. As a check on the predictive validity of the model, model parameters, using 16-month data, predict behavior in the subsequent 3 months.     

A Model for Ethical Decision Making in Business: Reasoning, Intuition, and Rational Moral Principles

How do business leaders make ethical decisions? Given the significant and wide-spread impact of business people??s decisions on multiple constituents (e.g., customers, employees, shareholders, competitors, and suppliers), how they make decisions matters. Unethical decisions harm the decision makers themselves as well as others, whereas ethical decisions have the opposite effect. Based on data from a study on strategic decision making by 16 effective chief executive officers (and three not-so-effective ones as contrast), I propose a model for ethical decision making in business in which reasoning (conscious processing) and intuition (subconscious processing) interact through forming, recalling, and applying moral principles necessary for long-term success in business. Following the CEOs in the study, I employ a relatively new theory, rational egoism, as the substantive content of the model and argue it to be consistent with the requirements of long-term business success. Besides explaining the processes of forming and applying principles (integration by essentials and spiraling), I briefly describe rational egoism and illustrate the model with a contemporary moral dilemma of downsizing. I conclude with implications for further research and ethical decision making in business.     

Marketing performance assessment and accountability: Process and outcomes

Marketing accountability, and how it may be achieved via performance assessment and metrics, have been central topics in both the marketing literature and practice (Katsikeas et al. 2016). Recent developments in digital channels, the accompanying explosion of data and emergence of marketing automation, the globalization of markets, and the rise of customer experience as a key firm priority have further magnified interest in and the importance of understanding how potential marketing outcomes are and can be achieved (CMO Survey, 2021; Mintz et al., 2021). As a result, gaining clarity on how to design and manage performance assessment systems to deal with these issues has never been more important. This paper argues that further progress in this research domain requires a deep understanding of the marketing performance assessment (MPA) process to provide both a catalyst and foundation for the next generation of research. Although there has been considerable research in the areas of marketing metrics and marketing accountability, much less attention has been paid to the MPA process that links them. Yet, the MPA process is essential to successful marketing management. To address this, we first review past research in this broad domain to answer the “Where have we been?” question that identifies theneed for a new conceptual model. Second, drawing on research findings both within the broad MPA domain and allied areas within and outside of marketing, we develop and detail a new conceptual model of the MPA process and use it to identify what really needs to be known but is currently unclear in this domain (i.e., “Where do we need to go?”). Third, we suggest how these areas of needed inquiry may best be investigated (i.e., “How do we get there?”) by identifying new perspectives, theories, data sources, and analysis approaches that may be productively employed in future research.     

Business Marketing Education: A Distinctive Role in the Undergraduate Curriculum

ABSTRACT

By extending their knowledge of markets beyond the consumer-goods domain, by deepening their understanding of how organizations make buying decisions, by strengthening their grasp of cross-functional processes, and by providing them with decision-making skills in this important area of marketing, the business marketing course makes a special contribution to undergraduates and the undergraduate marketing curriculum. Moreover, the content and focus of the business marketing course are closely tied to important themes that are transforming business practice. This article isolates the distinct contribution of business marketing education and examines important trends that are reshaping this domain. The central knowledge areas that comprise the undergraduate business marketing course are detailed and linked to specific course design strategies that can be pursued to strengthen the skill set of marketing students and respond to the needs of important constituents.     

Consumer Decision-making Processes in Mobile Viral Marketing Campaigns

The high penetration of cell phones in today's global environment offers a wide range of promising mobile marketing activities, including mobile viral marketing campaigns. However, the success of these campaigns, which remains unexplored, depends on the consumers' willingness to actively forward the advertisements that they receive to acquaintances, e.g., to make mobile referrals. Therefore, it is important to identify and understand the factors that influence consumer referral behavior via mobile devices. The authors analyze a three-stage model of consumer referral behavior via mobile devices in a field study of a firm-created mobile viral marketing campaign. The findings suggest that consumers who place high importance on the purposive value and entertainment value of a message are likely to enter the interest and referral stages. Accounting for consumers' egocentric social networks, we find that tie strength has a negative influence on the reading and decision to refer stages and that degree centrality has no influence on the decision-making process.