Internal Factors Affecting the Decision Making Process of a Consumer - Coursework Example

Internal Factors Affecting the Decision Making Process of a Consumer Name Institution Introduction From the economic point of view, a consumer is a person, a group of people or an organization that become the final user of a good or a service produced in system, particularly a social one. The aim of every consumer is to derive the maximum satisfaction and/or utility from the goods or service and therefore is very keen when making purchases on such products. It is important to note that in every market, the societal beliefs and practices are very important in shaping up the quality, marketability and other characteristics of a product in the market. Therefore, every product in the market is produced by the producers who are well aware of the consumer tastes and preferences in the product market. The main focus is the choices that the consumer make based on his or her preference of the good or service. In this case, the consumer is perceived to be very rational and makes an informed decision based on the value he or she associates with the product. The purpose of this study is to determine the internal factors that influence the consumer when making purchase decisions in the market. In this case, using insurance policies as the service, the main scope of the paper is to come up with reliable information based on the available consumer theories to analysis the circumstances that makes one consumer to decide on buying a product or not Consumer theory Consumer behavior is the study of how consumer purchases of products and services are influenced by one factor or another. It includes the analysis of the cognitive interactions and other environmental factors that consumers encounters in the process of exchange of gods and services. In addition to that, the behaviors form the basis of making a decision by the consumer in purchase, usage or disposal of the commodity or the product (Green, 1976). There are also various theories and models that attempt to explain consumer behavior and decision making process. Consumer theory tries to intertwine the rationality of the consumer in making the rational consumption decisions with the preferences, satisfactions, and the constraints that may determine the consumer’s spending pattern. In the process of discussing the factors that influence the decision making process of the consumer in the market, it is important to analyze the consumer theory in order to exclusively address the consumer problem in the market. After depicting the consumer as rational, it is important to note that any decision that will be made by the consumer will be driven by the aim of achieving the maximum satisfaction out of the product (Hall, 2010). According to the utility theory, the amount of satisfaction the consumer gets from consuming a product is a subject to the some constraints and indifference. The decision to buy the insurance policies is often influenced by a number of factors that pertain to the individual consumer. They include needs and motivation, personality and self concept, perception about the insurance, consumer learning and involvement, and consumer attitude development and change. The marketers of these insurance services must be very vigilant in terms of how the avail the insurance information to the intended customers. One of the basic understandings about the insurance policies is that they are determined by their covers, premiums and other relevant principles of insurance. However, the service's marketing mix elements; marketing strategy (segmentation, targeting and positioning) is of great impacts towards the consumer decision-making process of buying these insurance services. Factors that influence the consumer’s decision making The consumer aims at maximizing his or her satisfaction from the product based on what they know, think, see or have been told. Most decisions arise from what they believe about the product, a fact which makes them become brand loyal to some products over the others. These are majorly the internal factors which make a consumer to behave in certain ways as discussed below. Personality and self concept According to Hall (2010), personality and the self concept have some psychological background of the consumer that normally dictates how an individual respond to their surroundings. Notably, consumers’ personalities often reflect unconscious motives underlying purchasing decisions. The adventurous characteristics of human beings normally take its toll in effecting personality and thus consumer behavior. People will always try new products and services, (products /brands), aspects of materialism (value placed on buying and owning products/brands), self-consciousness (the degree of pressure for conformity), need for cognition (the degree to which a consumer likes to think). In addition to people, brands can also have personalities. Consumers are often likely to choose and buy brands whose personality reflects their own in order to indentify themselves with the brand and justify buying decision (Hoyer, & McInnis, 2001). Consumers also make decisions to buy a particular service that supports their self concept. According to Hoyer, & McInnis (2001), insurance policies have great protective background that enhances not only investment confidence but also self-confidence. Many people insure themselves, their properties, a well as their investments to present an idealized reality of modern life and with the associated risks. Govers (2005) states that tastes and preferences would be influenced when their self concept is inconformity with product personality. Customers will always want to buy products that portray their personalities. Although marketers cannot change consumers’ personalities to conform to their products and services, if they know which personality characteristics influence specific consumer responses, they can attempt to appeal to the relevant traits inherent in their target group of consumers. Insurance companies marketing strategies tend to appeal to the consumer’s personality, self concept needs, and the need to secure and or insure risks. These preferences will dictate their purchase behaviors considering that m insurance marketing strategies of companies selling insurance policy products target these people of all ages, income, cultural and religious association, and all kinds of people and situations that may be exposed to risks. Consumer perception When a consumer recognizes the need for a particular insurance policy product, his or her behavior is influenced by his or her perception of the product. Because all people have their subjective way of forming perceptions, different people can have different kind of perceptions of the same product or service (Taylor, & Lee, 2007).Therefore consumer perceptions of price, quality and value of a product is more important than reality because perceptions are what actually affect a consumer’s behavior. Perceived quality is the consumer’s judgment about the products excellence and superiority. It may be different form the actual or objective quality. Consumers are likely to purchase products that they perceive to be of good quality and shun those of low quality. In the insurance industry, companies try to gain a competitive edge by purporting to provide quality products with great insurance covers and at low as well as relevant premiums. The mentioned factors form the basically perceived quality of the policies and are key in the marketing strategy of companies. Perceived premium is also important in determining the purchasing decisions of the consumer. Premium is what the consumer gives up or sacrifices periodically in order to obtain the service when the particular risk occurs. Thus, all together there are four basic types of costs. The monetary value of a product is often considered as the main cost. It may be perceived very differently by different consumers depending on their income level, personal budget and other demographic and psychographic variables (Taylor, & Lee, 2007). Most consumers also calculate the time used to learn about a product or travel to purchase it as well as time spent in a store as being part of the costs included in a product. People often demand for a service not because of their main function but for their subjectively perceived value. It does not mean that the service’s basic function is not important, but that the role of service exceeds its service limits (Schiffman, & Kanuk, 2008). According to Schiffman, & Kanuk {2008), consumers buy products and services because they think that those products or services are going to help them in reaching a certain value-added goal. For example, some people get into the insurance agreement with the insurance firms in order to spread their risk, normally determined as risk aversion, or to prepare for the unknowns of the future. The continuous advertising and provision of a range of products by insurance companies is a way of market positioning to influence the perceptions of the consumers. The public relations exercises and social responsibilities initiatives are also part of a wider market positioning plan of the companies to influence consumer perceptions. The attempt by insurance companies to explain the risks components of life and in business is also part of the marketing positioning strategy to ensure that they control and influence the consumers’ positive perceptions of their products. Consumer needs and motivation The aim of marketing activities is to meet and satisfy consumer needs and wants. The insurance services and products serve to meet a specific need that is inherent in the life of the consumers. This need provides intrinsic motivation to purchase a particular insurance product. The motivation comes from the confidence one get by being insured or from the sense of satisfaction in paying better premiums for the insurance policies. The pricing and market segmenting of insurance products is mostly aimed at the various needs and motivations of various groups of populations. Therefore in positioning their products, insurance products companies attempt to target and market some products as meeting specific needs of the consumer. Consumer learning and involvement According to Solomon (2006)), the subliminal conditioning can motivate consumers to purchase a particular product. Solomon (2006) argues that the involvement in this case refers to the level of perceived personal importance or interest evoked by a stimulus within a specific situation. The definition implies that aspects of the person, the product and the situation merge to determine the consumer’s motivation to process product related information. When the purchase of a product is important to the individual, he or she will pay attention and will process more information related to the product in order to satisfy his or her need (Solomon, 2006). A person may not bother to pay attention to the information he or she does not consider relevant to satisfying a specific need. A consumer with an interest in insurance products may spend time reading literature and information on insurance principles either in magazines or online while another may not give much thought to the information. Involvement can be seen as the motivation of a consumer to process information. When consumer’s involvement in a certain product increases, people devote more attention to advertisements related to the product, exert more cognitive effort to understand these ads, and focus their attention on the product-related information in them (Solomon, 2006). Consumers who encounter positive reinforcement when purchasing a product or service are more loyal than those receiving the product or service itself as the only positive reinforcement. Hence promotions and extra services offered to consumers influence their decision making process of choosing to buy or use a particular product. Consumers' decisions are strongly affected by the information presented and how willing and able perceivers are to process that information. For instance, it matters whether information about a given product uses images or words, general versus detailed statements, or emotional versus factual content (Kramer & Yoon, 2007). Conclusion Life is full of risks and at the same time full of decisions to make. In other words, human behavior is normally surrounded by choices. A number of models have been designed to determine the ultimate choice of the consumer in the market aspect which involves making decision. However, the fundamental understanding of the consumer’s rationality through the ability to make critical decisions gives the consumer the power to come up with his or her optimal choice. Such decision making is always accompanied with complexities and they make the consumer to behave in a particular way which is common amongst all the consumers. The marketers, producers or sellers must be familiar with these behaviors in order to determine how perfect to maximize their sales and profit. At the same time, consumers are often faced with some constraints, which can be income, pride, among others, but at the end, the choice of the product that he or she will make, will go along way satisfying his or her utility. Insurance services are very critical in presenting an escape plan for the risky environment that the modern societies live in. the choice and therefore the decision to purchase these insurance policies remains within the influence of the insurance companies and the consumers. References: Deaton, A., & Muellbauer, J. (2000). Economics and consumer behavior. Cambridge: Cambridge University Press. Engel, J. F., Kollat, D. T., & Blackwell, R. D. (2008). Consumer behavior. New York: Holt, Rinehart, and Winston. Green, H. A. (2006). Consumer theory (Rev. ed.). London: Macmillan. Hall, R. E. (2010). 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