Consideration set June 9, 2007Posted by jyu in Qualifying.
Consideration set is the subset of brands that consumers evaluate when making a purchase decision. A consumer has a limited information processing abilities and limits the comparison to a subset of brands that is termed as consideration set.
In the frequent purchased product category such as groceries, consumers mostly face information overload and may engage in strategies to minimize the cost of information search (utility comparison or cost-benefit trade-off). Also, frequent purchased products are charaterized by frequent price promotion of varying depths of discounts; a consumer faces significant uncertainty about the prices of brands. Consumers may limit their attention and evaluation to a subset of available brands to simlify the purchase decision.
Literatures with the notion of limited consumer search:
1. Bucklin and Latin (1991): Proposed a two-stage model of consumer brand choice that explicitly models two types of shopping behavior, namely, planned and unplanned purchases. For unplanned purchases, consumers are influenced by marketing-mix variables, while for planned purchases, consumers do not process in-store marketing mix information and hence are not influenced by POS.
2. Murthi and Srinivasan (1999): Proposed a habitual evaluation and extensive evaluation model of brand choice and observe that there is considerable evidence that search cost substantially reduces the extent of evaluation of product category information. Some key insights derived from the model include: (a) marketing inputs do not always influence consumer choice (more than 40% of purchase occasions unaffected), (b) unobserved factors explain more variance than that of combined effet of observables, (c) HH and trip charachteristics affect the extent of evaluation (homemakers, weekday/weekend shopping, education, etc.) (d) Last purchase (BLP, SLP) affect HE more and the same applies to long-term loyalty (BL, SL) on EE.
Criticisms of previous framework:
–Assume consideration set for a consumer remains stable through the consumption history. (not stable and influenced by situational factors)
–Assume consumers use all the relevant information about all the brands in the product category on all the purchase occasions. (perfectly informed about price and marketing mix variables and arrived choice decision by utility comparison acros all the brands)
3. Metha, Rajiv, and Srinivasan (2003): Proposed a structural model that takes consumer price uncertainty into account and conceptualize the set of brands that consumer selects to sample the posted prices on any particular purchases occasion as the consumer’s optimal consideration set. Also, consumers are uncertain about hte quality of the brands in the product category, and they update their beliefs through consumption experience in a Bayesian fashion. After making the optimal consideration set choice, the consumer selects the brand that yields the highest expected surplus.