Decision making plays a vital role in day-to-day business; the more information that is available, the more confident people can be in their decisions. The more we understand the conditions of certainty, uncertainty and risk, the more we can reap the benefits of good decision making.
With the amount of uncertainty we have experienced in 2020, are these factors achievable, and how are they impacting your customers’ ability to make choices?
Risk refers to situations in which the decision-maker can estimate the likelihood of alternative outcomes, possibly using statistical methods.
For example, banks have developed tools to assess credit risk, and so reduce the risk that the borrower will not repay the loan. The questions on an application form for a loan enable the bank to assess the risk of lending money to that person (Boddy 2014: 212).
Daft (2014: 286-287) and Boddy (2014: 211-212) argue that certainty means that all of the information the decision-maker needs is fully available.
For example, managers have information on operating conditions, resource costs, or constraints and each course of action and possible outcomes. The decision-makers are fully informed about the costs and benefits of each alternative.
Boddy (2014: 212) says uncertainty means that people know what they wish to achieve, but do not have enough information about alternatives and future events to estimate the risk confidently.
Factors which may affect the outcomes of deciding to launch a new product (future growth in the market, changes in customer interests, competitor’s actions) are difficult to predict.
Ambiguity describes a situation in which the intended goals are unclear, and so the alternative ways of reaching them are equally fluid, leading to stress.
For example, students would experience ambiguity if their teacher created their groups, told each group to complete a project, but gave them no topic, direction, or guidelines.
Ambiguous problems are often associated with rapidly changing circumstances and unclear links between decision elements (Boddy 2014: 212).
Decision Making and Marketing
From a marketing perspective, consider how these factors could impact your clients’ decision making and what you can do to minimise or address them. For example, are there guarantees you make, or can you reduce the perceived risk by offering very customer friendly cancellation policies?
Working through these three criteria might help you to understand the factors preventing your clients from proceeding with you at this time and reduce the impact of these variables.
Boddy, D. (2014). Management an Introduction, 6th ed. Harlow: Pearson
Daft, R. (2014). Management, 12th ed. USA: Cengage Learning