Aveneu Park, Starling, Australia

Consumer a product or service (Hogarth 1981),

Consumer decisions are concerned with the processes individuals engage in when purchasing products and services, as well as understanding how and why individuals decide to buy certain products and services over competing ones (Bagozzi et al., 2002, p171). Consumer decision making often occurs before the purchasing or appointing of a product or service (Hogarth 1981), and can also be made regularly overtime; suggesting that individuals may base their decisions on prior product information and experience with the product or service after purchase (Hogarth 1981). Consumer decisions often involve choice, which is usually followed by a set of alternatives containing various attributes (Payne et al, 1991). However many individuals encounter too many alternative choices, which can complicate and turn decision making into a complex process due to ‘competitive pressures. uncertainty of how well the product might perform and value trade-offs’  (Payne et al, 1991). Throughout this essay, I will be discussing how choice overload and choice set, impact consumer decisions. Choice overload refers to the additional choices an individual is faced with, causing their decision making to increase in difficulty, complication, distraction, and in turn; causing a failure to choose (Lipowski 1970). Simon (1955) and Toffler (1970), suggested that choice overload is caused by ‘a scenario in which the complexity of the decision problem faced by an individual exceeds the individual’s cognitive resources’. There has been evidence found in favour of choice overload, displaying its advantages. Research has shown that a variety of choice can contribute to an individual’s control, motivation, satisfaction and increased gratification within the decision making process (Rotter et al 1966) and (DeCharms et al 1968). Greater fulfillment from a large selection has also been found to occur due to providing for every type of customer so their individualistic needs are met (Anderson 2006). Furthermore, large assortments have also shown to increase confidence in final decision making due to having the opportunity to contrast different products or services, this was particularly significant if all the options started as evenly attractive (Eaton and Lipsey 1979) and (Anderson et al 1966).  Therefore, having a variety of choice can have beneficial outcomes for a consumers contentment, peace of mind and justification.On the other hand, there are also disadvantages to having such a wide range of options available. It has been found that having a larger choice decreases motivation (Bell 1982). It also enhances regret and doubt in the final decision, due to apprehensiveness of not choosing another option available (Chernev, 2003). Choice overload can also lower the chance of not meeting the consumers expectations of the products if they are mutually attractive and indistinct from one another. This occurs as the idea of being introduced to a large variety of options is likely to heighten a consumers previous assumptions (Diehl and Poynor 2007). An experiment was developed by Iyengar and Lepper (2000), to contrast the motivations of participants presented with restricted choice and wide-ranging choices. A gourmet grocery store in California was used for exotic jam tasting. As participants encountered the booth, there was either a selection of 6, or 24 flavours of jam. The results found were that the limited choice of flavoured jam was more motivating to consumers, leading to 30% of the participants buying a jar of jam in the limited choice, compared to 3% of those who approached the wide range of jams available. However, 20% more consumers who passed the booth when more jams were displayed actually went up directly to the booth, in contrast to 40% when less jams were displayed. These results suggest that having greater choice is more enticing and attractive to individuals, however, having a too many options can hinder a consumers motivation to purchase the product. The alternative choices that consumers are faced with play a large role in their decision making process; these alternative choices are known as decoys (Wedell and Pettibone, 1996). Decoys impact consumer decisions by introducing preference and favouritism over other current alternative choices (Huber and Puto, 1983). Research has found that there are two categories of decoys. The first category is dominated decoys, for instance, asymmetrically dominated (Huber et al., 1982), and symmetrically dominated  (Wedell, 1991). Both have one characteristic in common; being dominated by more than one alternative, such as containing a feature that is poorer than a feature in another alternative (Jonathan et al, 2000). Nondominated decoys on the other hand, heighten the preference for the chosen alternative outside of domination (Huber & Puto, 1983). This category of decoys are more likely to have smaller effects, and lead decision making by compromise (Simonson, 1989).  These categories are known as dominance heuristics; the effect of averting difficult decision making and choosing the most simple choice that a set has to offer (Simonson and Wedell 1989).  This is evident in the Highhouse study (1996), where participants had to select a job finalist. When the candidates were presented to the participants, two thirds of the participants chose candidate A, out of candidates A, B, and C. Candidate C in the first condition showed scores of a low work rating and a low promotability rating, compared to candidates A and B. In the second condition, two thirds of the participants chose candidate B, as scores for the decoy candidate; candidate C, showed a low work sample rating and a high promotability rating. No participants chose the decoy candidate in either condition. Although candidate C wasn’t chosen in either condition,  candidate C’s characteristics changed the preference for the other two competing candidates, whose characteristics did not change in both conditions. This shows that candidate C was asymmetrically dominated by either candidate A or B, depending on which candidate achieved better than the other. The decoy effect has also been shown in consumers favouritism between products, such as how businesses establish an inferior model to increase product sales (Simonson & Tversky, 1992). Ariely (2008) further showed how The Economist marketers raised sales of a print and internet subscription for $125 compared to an internet only subscription for $69, by offering a third decoy; print subscription for $125. This shows how adding a third option which isn’t as appealing to consumers, can influence consumers decisions over which option they prefer to choose overall. However, experiments used for the decoy effects are not generalisable to real life decision making environments. For example, the Highhouse study (1996) used an unrealistic presentations of different alternatives, whereas in reality, consumers would have a much busier, louder and time pressured environment to make a decision. This study therefore lacks in mundane realism.Furthermore, not only do decoy effects influence a consumers decision, extreme aversion also plays a role. Extreme aversion refers to adding higher priced options to products, in order to encourage consumers to settle for the middle ranging value option. This is supported by Putler, (1992), who found that price fluctuations can have a decoy effect that reflects loss aversion. Kahneman, Knetsch, and Thaler, (1990) tested loss aversion by assigning participants to be either a seller, who were given a mug, or buyers who were not given one. Sellers were asked how much they would be prepared to sell the mug for, and buyers were asked how much they were prepared to pay for the mug. Buyers were willing to pay up to $2.87, but the sellers were asking for $7.12. This can be explained by loss aversion as the buyers view their purchase as a gain and sellers view their mug as a loss. This is in line with Thaler (1980), who described loss aversion as a ‘discrepancy between buying and selling prices’. Overall, it is evident that alternative choices can make the decision process more complicated for consumers. Although the decoy effect and extreme aversion theories display evidence for how alternative choice impact consumers decisions, there are many factors that the theories do not take into consideration when a consumer is making their decision, such as adapting to different environments, the amount of feasible information about the products or services, emotional state and reason for purchase. It is also important to consider an individuals socioeconomic background, as this can also lead to limits in accessibility to various products. Furthermore, besides the research showing a variety of explanations for how alternative choices can influence decision making, a limitation is the research is quite dated. With this in mind, it is important to take into consideration that companies and businesses are constantly developing and introducing new products, and ways of increasing sales. Consequently, this leaves the research to lack reliability. However, the research found for how alternative choices impact consumer decisions can assist future businesses, managers and employees to increase their sales and profit over competitive companies through understanding consumer decision making processes.

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