External Factors That Influence Consumer Decision-Making Process - Coursework Example

Consumer Decision Making – External Factors Name Institution Name Course Name and Code Date Executive Summary The current marketplace is full of stiff competition among the market players; the indulgent of the consumer has been found to be the only way for marketers increase their market share. This can only be achieved by understanding consumer desires and preferences; however, consumer preferences are desires are constantly changing with regard to the changes in factors such as their demographics and lifestyles. It is important to note that, there are different factors that influence consumer decision-making process including internal and external factors. This paper discusses the external factors that influence consumer decision-making process. In this regard, the external factors that are widely discussed in the paper include culture, subculture, demographics, opinion leaders, reference groups, family and social status. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Consumer Decision Making Process 5 Need Recognition 5 Information Search 5 Evaluation of Alternatives 6 Final Purchase 6 Post-Purchase Evaluation 6 External Factors that Affect Consumer Decision Making 6 Culture 7 Subculture 8 Opinion leaders 10 Demographics 10 Reference Groups and Membership Groups 11 Social Status 14 Family 15 Conclusion 17 References 18 Introduction The consumer purchasing decision-making process is influenced by factors that are outside their reach or control but have both indirect and direct impact on how they live and what they consume. It has been established that consumers are obligated with the need to make decisions with regard to products and services they consume on daily basis (Reid & Bojanic, 2009). Consumer decision-making processes are those activities undertaken by consumers with respect to a potential market transaction before, during and after the final purchase of a product or service. It is regarded as a cognitive process of choosing a course of action from among various alternatives (Wolf, 2013). This might involve understanding why customers make specific purchasing decisions, the factors that influence customer purchases, and above all, the changing factors within the society. Generally, consumer behaviour can be referred to as the buying characteristics of the final consumer (Kumar, 2009). Accordingly, it is a study that is focused on understanding persons, groups, and organizations as well as the activities and processes employed in the selection, securing, and disposing products and services, experiences and ideas to achieve the needs and impacts that the aforementioned processes have on consumer and the society at large (Sumathi & Saravanavel, 2009). Consumer decision is influenced by both internal and external factors; the external influences may include things such as culture, subculture, household structure, and groups that an individual associates with. In marketing, the aforementioned factors are referred to as external influences/factors given the fact that the source of influence are outside the individual rather than internal. In the current market setting, consumers are faced with a myriad array of product selection coupled with stiff competition among the market players (Batra, Kazmi & Batra, 2009). Given this understanding, it is extremely essential for business companies to understand consumer behaviour for them to be profitable and successful in the end. Some researchers have established that both internal and external factors are interconnected and work in unison to help the consumer in his decision making process (Bell, 2008). This paper discusses the external factors that influence consumer decision-making process (Sokolowski, 2013). In this regard, the paper will describe consumer decision-making process as well as external factors including culture, subculture, opinion leaders, demographics, reference groups, social status, family and marketing activities. Consumer Decision Making Process Consumer decision-making process is the core characteristic of consumer behaviour. This process takes place in five stages, which are essential for the consumer in making his/her final purchase on a subconscious or conscious level. These stages include: Need Recognition Problem or need recognition usually happens when the consumer sees or realizes a significant difference between the current situations and the desired or ideal state (Close, 2012). This stage demands that marketers create the need based on the different variables. This can be achieved through advertisements. Information Search This is the process where consumers do an extensive survey of their environment with regard to their current need in order acquire relevant and suitable data to make realistic choices (Batra, Kazmi & Batra, 2009). Marketers can use opinion leaders, reference groups, seminars, TV shows and meetings to give information about the products they are offering (Gerber & Bothma 2008). Evaluation of Alternatives This stage is a stage where the consumer must make a choice based on the available alternatives. For instance, the product alternatives an individual considers comprise of their evoked set. Marketers are said to like their products in evoked set of consumers (Bourlakis & Weightman, 2008). Final Purchase After the evaluation of alternatives, the consumer then decides to make the actual purchase; buying the product/service that best meets his/her needs. Post-Purchase Evaluation This involves all consumers’ activities as well as experiences that follow after purchase. The final outcome of using the purchased product and this may include satisfaction and/or dissatisfaction. External Factors that Affect Consumer Decision Making Understanding consumer behaviour involves both understanding of internal and external factors that affect consumer decision-making process. This section using different examples wholly discusses the external variables that affect consumer behaviour. For instance, culture, subculture, family, reference groups, social status, opinion leaders, demographics, and marketing activities are extensively discussed. Culture Culture is defined as the complex whole, which comprises of beliefs, law, art, customs, and morals together with any other capability acquired by humans as a member of the society. Culture is a core aspect of each society and has massive influence on ones wants and behaviour (Batra, Kazmi & Batra, 2009). The influence of culture of consumer decision varies from country to country and thus it is important for marketers to be careful in analyzing cultural differences with regard to regions and countries (Funk, 2008). It has been established that culture influence consumer decisions through norms and values established within that society. Culture is the broadest environmental factor that influences consumer behaviour. Culture is also passed down from one generation to another through family or religious institutions; it is inculcated. It is also important to note that as culture evolves it can be associated with benefits of a product or brand with new values and/or the product may be changed to gratify societal values. Characteristics of Culture i. Culture is invented: for instance, culture cannot be regarded as something that exists and just waiting to be discovered. Members of a given society are responsible for inventing their own culture (Batra, Kazmi & Batra, 2009). ii. Culture is learnt: it is not a biological feature or instinctive. Culture is learnt and the process of learning culture starts at a tender age in life and the learning itself is largely by social interaction among friends and families. iii. Culture is shared: it is shared by large groups of people for example religion and language iv. Culture satisfies needs; it offers direction, order and guides members of the society in all phases of life through providing approved and trusted ways of meeting their physiological, social and personal needs. v. Cultures are similar but different: different cultures have certain similarities; some elements are common in all cultures such as dressing, and cooking. vi. Culture is not static: it changes gradually and continuously; the change may be slow or rapid. Culture affects consumer behaviour and thus it is important for marketers to come up with marketing strategies that meets the cultural requirements of the market within the company operates (Batra, Kazmi & Batra, 2009). For example, McDonald uses specific marketing strategies for each market. In France, McDonalds operate under the brand McBaguette offering French baguette and Dijon mustard; in India McDonald’s uses chicken Maharaja Mac and Masala Grill Chicken coupled with Indian spices in order to meet the customers’ cultural settings. Accordingly, in Japan McDonald’s offer Mega Teriyaki Burger having teriyaki sauce and/or Gurakoro, which has macaroni grating and croquettes. In Muslim countries, on the other hand, McDonald’s are certified as halal and hence they do not offer food products with bacon and pork in order to be accepted within the societal cultural settings. Subculture This is a segment of the larger culture; it exists within the culture sharing a set of values, meanings or activities that differ in certain respects from those of the original or overall culture. It is a distinct culture group existing within a layer of a complex society and is an identifiable segment with respect to values, customs and beliefs (Batra, Kazmi & Batra, 2009). The analysis of subcultures enables the marketing team within the company to focus on values, beliefs, and customers common to members of a specific group and make them desirable target for unique marketing attention. It is a relevant unit of analysis particularly in marketing research. Subcultures are associated with transferring their values and beliefs from generation to generation. Examples of subcultures Category Subculture Regional Marathi, Gujarati, Punjabi Geography South Indian, East Indian, North Indian Age Children, teenagers, Youth, professionals Elderly people 50 plus Caste Christians, Muslims, Hindu Geographical regions as well as religions have been established as essential in subculture formation. For examples, the preferences of people living closely together can be different. Persons living in different regions have different sub-cultural values, social structures and attitudes of members of other subculture (Kurtz & Boone, 2008). Subcultures are largely considered marketers as the basis for market segmentation in order to communicate specific values a product or service to a specific market segment. For example the ethnic cosmetics segmentation, these cosmetic products are meant for customers with African, Arabic, and/or Indian skin pigmentation. Opinion leaders These are those individual who in any given environment have the capacity to exert personal influence. For instance, they have the highest potential to influence others by word-of-mouth communication given the fact that other people seek information and advice from them. Following this comprehension, opinion leaders can positively or negatively influence consumers towards a given product or service (Batra, Kazmi & Batra, 2009). From a marketing point of view, opinion leaders are those people who have used the product by themselves. For example, young consumers often seek assistance of opinion leaders in their purchase. They are people with massive influence on others; have in-depth expertise in a given area and they are always sought for help in consumer decision making. They are also trusted and unbiased having an extensive social network of family, friends and co-worker who are essential in information disbursement (Schmid, 2011). These individuals are useful in marketing activities. For this reason, marketers can identify key opinion leaders and work to attract them. Celebrity endorsement of products can highly influence many customers to purchase that product; opinion leaders in general have a profound impact on the success of a product. For example, Pepsi Company used Shaquille O’Neal to endorse Pepsi because the company felt that he represented teenage spirit. Demographics Age and life cycle stage is another external factor that influences consumer decisions. People are known to buy or consume different goods and services over their lifetime. At different ages, people have different taste in food, furniture, clothing, and other recreational activities. Transition in one’s life includes things such as marriage, childbirth, relocation, illness, career change, and/or widowhood (Batra, Kazmi & Batra, 2009). All these life transitions come with or give rise to new sets of needs. The consumer has been found not buy the same products or services in his/her lifetime. Consumer values, lifestyle, activities, environment, hobbies together with his habits evolve over time. For instance, the consumer can change his/her diet from unhealthy products such as fast foods during his early years of life to a healthy diet during his mid-life which is then transformed to low cholesterol diet in his later life in order to avoid health issues. Accordingly, the factors influencing the consumers buying decision may also change; for instance, for 25 year olds, the social value of the brand highly influences their decisions as compared to the 65 year olds. Similarly, the family lifecycle of the consumer has potential impact on his values, buying behaviour, and lifestyle with regard to whether he/she is married, single, and in a relationship with kids. Additionally, the region where he/she lives including the kind of city or town he/she lives in (Sarangapani, 2009). For this reason, marketers are tasked with identifying, understanding, measuring and analyzing the criteria and personal factors that influence the purchasing behaviour of their customers. Reference Groups and Membership Groups Human beings are social beings who are characterized by their involvement in groups. A group represents two or more people sharing a set of values, norms, and/or beliefs and above all, they interact in order to accomplish either individual or mutual goals. Experts in marketing have established that most of consumer behaviours occur in group setting (Batra, Kazmi & Batra, 2009). The norms of a group cover all the important aspects for group functioning and thus breaking these rules can result into penalties (Ramesh, 2008). The level of influence that a group has on an individual depends on the attitude towards the group such as pride and status, nature of the group; cohesion, interaction frequency, and exclusive membership; and the nature of the product including visibility and uniqueness. A reference group is regarded as the group that is used as a comparison point for a person in developing either specific or general attitudes, values and/or particular guides for behaviour. From a marketing perspective, reference groups are regarded as those groups, which serve as points of reference for a person in his purchase and consumption decisions. Reference group values are used by individual consumers to make purchase decisions. Nature of reference groups Norms; these are rules and standard behaviour that are accepted in that group Values; the shared beliefs among group members Socialization; the process through which new group members learn the group system Status; the achieved or ascribed position than an individual holds Power; the level of influence a group has on its members Roles; the functions that a person holds in a group Types of reference groups A person can belong to a reference group such as the family and hence would be said to be part of a membership group. Accordingly, this same person may also aspire to belong to a football club and thus can be said to belong to an aspiration group. The following are types of reference groups: Primary informal group; this include peer group, family and friends Primary formal group; working colleagues, business groups Secondary informal groups; sports group, women kitty party Secondary formal group; are not so cohesive but do frequently meet Disclaimant group is a group that an individual can be part of but rejects the group values. Consequently, a person can regard the membership to a given group undesirable and decide to avoid it. This kind of groups are generally referred to as dissociative groups The influence level of reference group on an individual varies on individuals and groups; however, it is generally shows common consumption trends with regard to members of the same group (Batra, Kazmi & Batra, 2009). When marketers understand the specific features of a group including their values, lifestyle, and mindsets allows them to develop marketing messages that particular group. Reference groups influence the perception that one has on himself together with his behaviour. Accordingly, an individual can be influenced by a group to which he/she does not belong yet but aspires to be part of; aspirational group. In order for a reference group to influence consumer behaviour it must have the following roles The initiator: someone who proposes or suggests purchasing a product or service The influencer: an individual whose point of view has massive influence on the buying decision. The person may be one of the group members or an outsider like a renowned celebrity whom the group members rely on. The decision maker: the individual who chooses which product or service should be bought. The buyer: the person who will actually buy the product; the consumer. Marketers largely rely on or target opinion leaders to be the initiators or influencers; spread the use and purchase the company’s products in a given social group. For example, Pepsi Company used Shaquille O’Neal to endorse Pepsi because the company felt that he represented teenage spirit. Social Status This is a division of members of the society into a hierarchy of distinct status classes whereby the members of each class have relatively similar status and members of all other classes have either more or less status. Social class is commonly measured in terms of relative wealth, prestige and power (Batra, Kazmi & Batra, 2009). This form of social stratification and/or class structure has been in existence in all societies across the history of man. The consumer social class is often refers to his/her standing in the society. Consumer social class is usually determined by various variables including income, education, and occupation. Income is regarded as an important indicator of social class; however, the relationship is not perfect given the fact that social class is also determined by other factors including place of residence, world-view and cultural interests. The Social Class Category Social Class Life-Style Orientation Purchasing Tendencies Upper class Graceful living Good taste Good things in life Individual expression Interest in arts and culture Quality merchandise Expensive hobby and recreation equipments Travel Art Middle Class Respectability Conformity Social esteem Items in fashion Items related to self presentation Nice clothing and home items Working Class Fun oriented Focus on possessions Work related life Newest appliances Sporting events Food items Lower class Close family relationships Not interested in world affairs Neighbourhood oriented Readily available products Status symbols The individual’s position within his/her family, country club, work, and group friends describes his social class or status. The social role in this perspective is the attitudes and activities that a person is supposed to have and do with regard to his/her profession together with his/her position at work, and family and the expectations of those who surround him/her (Batra, Kazmi & Batra, 2009). The social status on the other hand tends to reflect the rank and level of importance of his/her role in the society. Social status and role ultimately influence the consumer behaviour together with his/her purchasing decisions particularly for visible products such as cars and houses (Huddleston, 2011). For example, a consumer may buy a Porsche car not only because of the quality of the car but also the external impression of social success that the car represents. In the same line of discussion, Company CEOs and Presidents, sports celebrities and actors are viewed by the society to belong to the upper class of the society and hence their lifestyle and types of products they purchase must fulfil this perception (Batra, Kazmi & Batra, 2009). For instance, a CEO driving a Volkswagen Golf would be viewed by less by customers or business than if he/she is a Mercedes Benz or any other luxury car. Given this understanding, marketers create images associated with their brands and which reflect an important social status or role. It is important to note that, the above described influence and behaviour is found across every level and for every role and social status. Family This is a group of two or more people related by birth, marriage and/or adoption and residing together. Household on the other hand is a family and any other unrelated people living together and consuming food or other commodities from a common source such as a kitchen. It is essential to note that all families are households but all households are families (Batra, Kazmi & Batra, 2009). Studies have found out that a person’s immediate family members have massive influence on his or her purchase decision. In general, a family consists of parent, children, spouse, grandparents and relatives (Blythe, 2013). Accordingly, whatever an individual take from his/her parents becomes his/her culture and also what he/she sees from childhood is transformed into his habit or lifestyle. The family has been found to be the most significant reference group and is also the basic consumption unit for a wide variety of consumer goods. Functions of the family Provide economic well being Emotional support Provide suitable life style Teach interpersonal skills Teach religious values, moral, as well as ethical values. Family life cycle Stage Description Income Expense Bachelor Young, single and Read More