Understanding Consumer Behavior - Case Study Example

UNDERSTANDING CONSUMER BEHAVIOR CASE OF ELECTRO STORE International Advanced Diploma in Business MAY 26, CONTENT Introduction…………………………………………………………………………………. 3 Answer to Task l………………………………………………………………………………3 Answer to Task 2……………………………………………………………………………. .5 Answer to Task 3………………………………………………………………………………5 Answer to Task 4………………………………………………………………………………6 References…………………………………………………………………………………… 7 UNDERSTANDING CONSUMER BEHAVIOR Introduction The Electro Store has been experiencing a downturn of sales since 2009 up 2010. It could not be said that they are not lacking in their marketing and advertising campaigns because their campaigns are recognized and were given awards, but for some reasons, their potential customers do not turn to buyers. While competitors threw in more efforts in training their sales personnel, the Electro Store management thinks training of personnel is just a waste of time and money. Further, management still holds the view that the man of the house still makes the purchasing decision. This is the stance of management ever since. Taking into consideration the fast changes in the environment and technology, should this view still remain? TASK 1. Any marketing plan should begin with consumer and satisfying its wants because that is the only justification for the existence of a store, the Electro store for that matter. Electro Store should be able to understand the consumer’s needs, wants, desires, preferences, beliefs and other odd behaviors in order to win the customer. It is therefore the responsibility of Electro store to learn as much as possible these factors of potential customers. There are sociological factors that influence household purchasing decisions; these are cohesion, adaptability and communication. Cohesion is defined as the emotional bonding between family members. It measures how close to each other feel on an emotional level. It reflects a sense of connectedness to or separateness to other family members. Buying decisions are greatly influenced by the member of the family. There is no question that the bulk of household purchases are made by women, but major decisions like buying a car, appliances, or real property are jointly done by the husband and wife, and sometimes with consultation with children. A joint decision only shows cohesiveness of the family. Therefore when the buying decision is done the family as a group – the role of the marketers is to target the family through their marketing campaigns. Adaptability is described as the ability of the family to change its power, role, relationships, and relationship rules in response to situational and developmental stress. The degree of adaptability shows how well a family can meet the challenges presented by the situation. These challenges can come from reference groups that have the potentials of influencing behavior. Reference groups are groups of individuals that one interacts often. Examples are friends, family relatives, and co-workers. They have the potentials of influencing behavior. For example, if the product is visible like car, shoes or dress, then the influence of the reference group is high. Opinion leaders are also an added example of a reference group because they can easily persuade action. Therefore, family decisions may be a response to influence and as consequence adapts to the stimuli. Communication refers to variable affecting household decisions. It is a discussion that could move into two dimensions. This may be a positive or negative discussion. In cases of major decisions, the marketer should be able to communicate with the family to understand the family’s needs. TASK 2 Spouses have differing roles in buying decisions. It could be “Autonomic” wherein decisions are specifically done by the female or male; husband dominated when the husband is seen as head of the family and makes all purchases; wife dominated, which is the inverse of husband dominant situation; and, joint roles where decisions are done by both. The roles of spouses are influenced by several factors. Studies show that the extent of their joint buying decision is influenced by education, occupational prestige, and employment status (Hempel, Donald, 1975). It can also exist with age, years of marriage, stages of family life circle, and its “connectedness” to social network. Hempel showed an evidence that roles are related to perceptions, expenditures and satisfaction, sex and culture. However, age, marriage, occupational status is “inversely related” to the husband’s dominance of buying decisions, while education, husband’s occupational status and family income are positively correlated with husband’s dominance of role. Study also shows that the best predictor of roles is the ratio of husband and wives occupational status. For example, while both are busy accumulating information on the item to be purchased, the wife’s idea is about color (sex) while husband is concerned with the timing of the purchase (expenditures). This findings might affect Electro Shop because of their belief that buying decisions are all done by male. Some businesses specifically target the males (as in Electro Shop) or females alone based on generalizations. TASK 3 Customer insight means: A deep understanding of customer needs and the drivers of customer behavior at a level well beyond what customers are able to articulate themselves (Innovation Point). Developing customer insight consists of strategies that is composed of critical lag and propensity modeling. Critical lag allows a business to deliver specific customer communication having analyzed and understood the individual customers purchase patterns, which then helps to increase customer loyalty and improve customer relation Propensity modeling is knowing what, when, and how to offer to customer. This model allows management to use research data about how customers purchase, and thus predict their future purchase. Customer insight can greatly assist Electro Shop to turn potential customers into buyers because it will lead to opportunities that is linked to their needs and behaviors. Understanding the customer’s needs is one way of developing customer and will turn them into buyers. It is the foundation for “customer-inspired innovation”. TASK 4 Electro Shop should change its view that training is just a waste of money and is no longer needed. Customer relations Management (CRM) is the best kind of training needed which is along within terms of Customer Insight. Training keeps the staff knowledgeable on their most valuable clients, find out what their needs are, and their motivations in purchasing. Knowing these factors, the company can then customize their products to meet customers’ needs and drive impact. Understanding information technology is the second training need as there will be a requirement for developing a network of information. Changes needed are requiring the sales staff to go beyond the corners of the store and build business, getting, growing and keeping customers away from competitors. Peppers & Rogers Group suggested a customer based strategy that is built around IDIC methodology. (Identify, Differentiate, Interact, and Customize). Based on IDIC model, management should train sales employees to identify their customers, differentiate them according to their needs, interact with their customers and customize its services or products according to meet customers’ needs. Employees should be trained to establish a data base system that includes information such as name, address, and preferred method of contact; method of purchase; purchase history, the amount spent, type of merchandise, frequency of purchase, and preferences such as colors, fabrics and measurements. This is called profiling. It is used to develop loyal customer base. When you know more of the customers they are “locked in” and a long relationship is developed. Because of this relationship, it becomes difficult for the customer to change to competitor. Conclusions: Advanced environmental technologies are overtaking Electro Store thereby declining its competitiveness and sales. It is high time that its time to stop its views in generalizing that man dominates purchasing decisions because today women have stepped up their roles in the family. Women assume dual roles; they work for employment and take charge of the household. In these dual roles, no doubt many purchasing decisions are done by women because of individual financial freedom, and other factors like sex, education, age and culture. But when it comes to major buying decisions, the role is assumed by both. Major decisions in the past are dominated by male, but today, major decisions are joint, and sometimes affected by the ratio of income. If the man is earning more, then it becomes a determinant factor in major buying decisions like buying a real property because by then, man assumes responsibility of paying. The management At this point, management should also change its position in looking at training as a waste of time. They should consider training as an investment on human personnel that would eventually benefit the company. Training personnel on customer insight and turning the information into opportunity for change is the better alternative to turn potential customers into buyers. This maybe the time that that the Electro Shop change marketing strategy and take into considerations above findings. They may have to change their services and/or products as a strategy to adopt to the situation. References Hempel, Donald J. Family Role Structure and Housing Decisions. Advances in Consumer Research. Vol. 2, 1975. Pages 71-80. Innovation 360 Institute. Customer Insights Workshop viewed 25 May 2012 http://i360institute.com/customer-insights/, Michel, Lane. (2003) Using Customer Insight to Build Competitive Advantage. Peppers & Rogers Group .Carlson Marketing Group of Company. . Read More